Treasury Department ureau of Interna Revenue

Interna Revenue uetn

Cumuatve uetn 19 1-2
ULY-D C M R 19 1
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SP CI L TT NTION drected to the cautonary notce on ths page that pub-
shed rungs of the ureau do not have the force and effect
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed case
Treasury Department : : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn 19 1-2
I
ULY-D C M R 19 1
IN T IS ISSU
Pace
Introductory Notes 11
Contents - II
Rungs Nos. 10762-109 3
oard of Ta ppeas 1-25
cess Profts Ta Reguatons 109 , amended . . 26 37
Income Ta
Part I ( . Interna Revenue Code and . 1938
ct) 38 18
Part II (1937 and 1936 cts) 185 197
Part III (1935 and 193 or Pror cts) .... 198 219
mpoyment Ta es 220 2 0
Msceaneous Ta es
state and Gft Ta es 2 1 252
Capta Stock Ta es . . . 253-259
Saes Ta es, Stamp Ta es, etc 260 330
Msceaneous Rungs and Commttee Reports . . . 331-525
Inde 527 537
The rungs reported n the Interna Revenue uetn are for the nformaton of ta payers and ther counse at
showng the trend of offca opnon n the admnstraton of the ureau of Interna Revenue; the rungs other than
Treasury Decsons have none of the force or effect of Treasury Decsons and do not commt the Department to
any nterpretaton of the aw whch has not been formay approved and promugated by the Secretary of the
Treasury. ach rung embodes the admnstratve appcaton of the aw and Treasury Decsons to the entre
stae of facts upon whch a partcuar case rests. It s especay to be noted that the same resut w not neces-
sary be reached n another case uness a the matera facts are dentca wth those of the reported case. s t s
not aways feasbe to pubsh a compete statement of the facts underyng each rung, there can be no assurance
that any new case s dentca wth the reported case. s bearng out ths dstncton, t may be observed that the
rungs pubshed from tme to tme may appear to reverse rungs prevousy pubshed.
Offcers of the ureau of Interna Revenue are especay cautoned aganst reachng a concuson n any case
merey on the bass of smarty to a pubshed rung, and shoud base ther |udgment on the appcaton of a
pertnent provsons of the aw and Treasury Decsons to a the facts n each case. These rungs shoud be used
s ads n studyng the aw and ts forma constructon as made n the reguatons and Treasury Decsons pre-
rousy ssued.
In addton to pubshng a Interna Revenue Treasury Decsons, t s the pocy of the ureau of Interna
Revenue to pubsh | rungs and decsons, ncudng opnons of the Chef Counse for the ureau of Interna
Revenue, whch, because they announce a rung or decson upon a nove queston or upon a queston n regard
to whch there e sts no prevousy pubshed rung or decson, or for other reasons, are of such mportance as
to be of genera nterest. It s aso the pocy of the ureau to pubsh a rungs or decsons whch revoke,
modfy, amend, or affect n any manner whatever any pubshed rung or decson. In many nstances opnons
of the Chef Counse for the ureau of Interna Revenue arc not of genera nterest because they announce no
new rung or no new constructon of the revenue aws but smpy appy rungs aready made pubc to certan
stuatons of fact whch are wthout speca sgnfcance. It s not the pocy of the ureau to pubsh such opnons.
Therefore, the numbers assgned to the pubshed opnons of the Chef Counse for the ureau of Interna
Revenue are not consecutve. No unpubshed rung or decson w be cted or reed upon by any offcer or
empoyee of the ure of Interna Revenue as a precedent n the dsposton of other cases. Uness otherwse
specfcay ndcated, a pubshed rungs and decsons have receved the consderaton and approva of the
Chef Counse for the ureau of Interna Revenue.
UNIT D ST T S GO RNM NT PRINTING OFFIC : W S INGTON : 19 2
or sa by the Superntendent of Documents, Washngton, D. C - - - Sec back of tte for prces
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The Interna Revenue uetn servce for 19 2 w consst of weeky
buetns and semannua cumuatve buetns.
The weeky buetns w contan the rungs and decsons to be
made pubc and a Treasury Department decsons (known as Treas-
ury decsons) pertanng to Interna Revenue matters. The sem-
annua cumuatve buetns w contan a rungs and decsons
(ncudng Treasury decsons) pubshed durng the prevous s
months.
The compete uetn servce may be obtaned, on a subscrpton
bass, from the Superntendent of Documents, Government Prntng
Offce, Washngton, D. C, for 3 per year; foregn, .25. Snge copes
of the weeky uetn, 5 cents each.
New subscrbers and others desrng to obtan the 1919, 1920, and
1921 Income Ta Servce may do so from the Superntendent of Docu-
ments at prces as foows: Dgest of Income Ta Rungs No. 19
(contanng dgests of a rungs appearng n Cumuatve uetns
1 to 5, ncusve), 50 cents per copy; Cumuatve uetns Nos. 1 to 5,
contanng n fu a rungs pubshed snce pr, 1919, to and n-
cudng December, 1921, as foows: No. 1, 30 cents; No. 2, 25 cents;
No. 3, 30 cents; No. , 30 cents; No. 5, 25 cents.
Persons desrng to obtan the Saes Ta Cumuatve uetns for
anuary- une and uy-December, 1921, may procure them from the
Superntendent of Documents at 5 cents per copy.
Persons desrng to obtan the Interna Revenue uetn servce for
the years 1922 to 19 1, ncusve, may do so at prces as foows:
Year
Cumuatve uetn.
Prce,
(cents)
Frst 6 months.
(Second 6 months.
1922
1-1
1-2
0, 30
1923 -
II-
11-2
30, 0
192
III-
III-2
50, 50
1925
I -1
I -2
0, 35
1926
-
-2
0, 30
1927
I-1
I-2
0, 0
1928.
II-1
II-2
35, 50
1929
III-1
III-2
50, 55
1930
I -1
I -2
50, 50
1931
-
-2
65, 30
1932
I-1
I-2
30, 30
1933
II-1
I1-2
30, 50
193
III-1
III-2
50, 60
1935.
I -1
I -2
50, 50
1936.
-1
-2
55, 5
1937
1937-1
1937-2
60. 50
1938.
1938-1
1938-2
60, 50
1939..-
1939-1
1939-2
60
Part 1
50
Part 2
1
19 0.
19 0-1
19 0-2
30, 60
19 1
19 1-1
19 1-2
5, 60
Persons desrng to obtan the servce n dgest form may do so at
prces as foows: Dgest No. 13 (1922-192 ), CO cents; Dgest No. 17
(1925), 25 cents; Dgest No. 21 (1926), 15 cents; Dgest No. 22 (1925-
1927), 35 cents; and Dgest (ncome ta rungs ony, pr, 1919, to
December, 1930, ncusve), 1.50.
nqures n regard to these pubcatons and subscrptons shoud
be sent to the Superntendent of Documents, Government Prntng
Offce, Washngton, D. C.
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INTRODUCTORY NOT S.
The Interna Revenue Cumuatve uetn 19 1-2, n addton to
a decsons of the Treasury Department (caed Treasury decsons)
pertanng to Interna Revenue matters, contans opnons of the
Chef Counse, and rungs and decsons pertanng to ncome, estate,
gft, saes, capta stock, e cess profts, empoyment, soca securty,
and msceaneous ta es, as ndcated on the tte page of ths uetn,
pubshed n the weeky uetns (19 1, Nos. 27 to 52, ncusve) for
the perod uy 1 to December 31, 19 1. It aso contans a cumuatve
st of announcements reatng to decsons of the Unted States oard
of Ta ppeas pubshed n the Interna Revenue uetn Servce
from anuary 1, 19 0, to December 31, 19 1.
Income Ta rungs are prnted n three parts. The rungs n
Part I are prnted as Part I, (Interna Revenue Code) and
(Revenue ct of 1938), the aw headngs correspondng wth the
sectons of the Code and the 1938 ct, respectvey, and the regua-
tons headngs correspondng wth the secton headngs of Reguatons
103 and the artce headngs of Reguatons 101. Rungs under the
Revenue cts of 1937 and 1936 are prnted as Part II, the aw headngs
correspondng wth the secton headngs of those cts and the regua-
tons headngs correspondng wth the artce headngs of Reguatons
9 . Rungs under the Revenue cts of 1935 and 193 or pror cts
are prnted as Part III, the aw headngs correspondng wth the
secton headngs of the Revenue ct of 193 and the reguatons
headngs correspondng wth the artce headngs of Reguatons 86.
Rdngs under Ttes III and I of the Soca Securty ct and
under Subchapters and C, Chapter 9, of the Interna Revenue
Code n force pror to anuary 1, 19 0, are pubshed under artce
headngs of Reguatons 91 and 90, respectvey; rungs under Sub-
chapters and C, Chapter 9, of the Code n force on or after anuary
1, 19 0, are pubshed under the secton headngs of Reguatons 106
and 107, respectvey; rungs under the Carrers Ta ng ct of 1937
and under Subchapter , Chapter 9, of the Code are pubshed under
the artce headngs of Reguatons 100; and rungs under Tte III
of the Revenue ct of 1936 Ta on un|ust enrchment are coded
under the sectons of that ct and the artce headngs of Regua-
tons 95.
R I TIONS.
The foowng abbrevatons are used troughout the uetn:
, , C, etc. The names of ndvduas.
. R. M. Commttee on ppeas and Revew memorandum.
. R. R. Commttee on ppeas and Revew recommendaton.
. T. coho Ta Unt.
. T. . oard of Ta ppeas.
C. . Cumuatve uetn.
Ct. D. Court decson.
C. S. T. Capta Stock Ta Dvson.
C. T. Ta es on mpoyment by Carrers.
D. C. Treasury Department crcuar.
( I)
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rv
m. T. Ta es mposed by the Soca Securty ct, the Carrers Ta ng ct of
1937, and Subchapters , , and C of the Interna Revenue Code.
. T state Ta Dvson.
G. C. M. Genera Counse s, ssstant Genera Counse s, or Chef Counse s
memorandum.
I. R. . Interna Revenue uetn.
I. T. Income Ta Unt.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accordng
to conte t.
Mm. Mmeographed etter.
MS. or M. T. Msceaneous Dvson.
O. or L. O. Soctor s aw opnon.
O. D. Offce decson.
Op. . G. Opnon of the ttorney Genera.
P. T.- Processng Ta Dvson.
8. T. Saes Ta Dvson.
S. Sver Ta Dvson.
S. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton.
S. S. T. Ta es on mpoyment by others than Carrers.
T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . R. dvsory Ta oard recommendaton.
T. D. Treasury decson.
and y are used to represent certan numbers, and when used wth the word
doars represent sums of money.
NNOUNC M NT R L TINO TO O RD OF T PP LS D CISIONS.
Under the provsons of the recent Revenue cts, reatng to ap-
peas to the oard of Ta ppeas, the Commssoner may acquesce
n the decson of the oard or he may, f the appea was heard by
the oard pror to the passage of the 1926 ct, causo to be nsttuted
a proceedng n court for the coecton of any part of a ta determned
by the Commssoner to be due but dsaowed by the oard, pro-
vded that such proceedng s commenced wthn one year after
fna decson of the oard. s to appeas heard by the oard after
the passage of the 1926 ct, the Commssoner may, wthn s months
after the oard s decson s rendered, fe a petton for a revew of
the decson by a Crcut Court of ppeas or by the Unted States
Court of ppeas for the Dstrct of Coumba; however, as to dec-
sons rendered on and after une 7, 1932, pettons for revew must be
fed wthn three months after the decson s rendered. In order
that ta payers and the genera pubc may be nformed as to whether
or not the Commssoner has acquesced n a decson of the oard of
Ta ppeas dsaowng a ta determned by the Commssoner to be
due, announcement w be made n the weeky uetn at the earest
practcabe date. notce that tho Commssoner has acquesced or
has nonacquesced n a oard decson reates, however, ony to the
ssue or ssues decded n favor of the ta payer. Decsons so ac-
quesced n shoud be reed upon by offcers and empoyees of the
ureau of Interna Revenue as precedents n the dsposton of other
cases before the ureau.
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CONT NTS.
Treasury decsons:
5056
5057
5058
M
M
M
M2
M3
506
.5065
sor
5067
M18
51 19
5070
51)71
5072
5073 -
507
5075
5076
5077
5078
5079.
5080
5081
5082
M
508
5085
50 S
5087
5088
5089
.Y O
5091
51192
M
509
6095
5096
5097
5098
6069
5100
5101
5102
5103
S10
5105
Court dvsons:
1521
1522
1523
152
1525
1526
1527
1528
1629
1530
1531
1532
Chef Counse s memoranda
22798
22799
22820
22822
22853
22955
22966
Rung No.
I agc.
19 1-27-10769
139
1911-28-10773
97
19 1-28-10777
166
19 1-28-10778
125
19 1-28-10779
339
19 1-30-1079
256
19 1-30-10795
2(9
19 1-30-10796
338
19 1-32-108O
110
19 1-36-10819
356
19 1-36-10820
362
19 1-36-10821
366
19 1-:; - 0831
315
19 1-39 10 0
256
19 1-39-108 1
326
19 1-39-108(2
1 2
19 1- 0 108 8
336
19 1- I-108 9
3 3
19 1- 0-10860
360
19 1- 1-10863
357
19 1-11-1086
358
19 1- 1-10 60
33
19 1- 1-10861
3
10 1- 0-10851
157
1911- 1-10859
312
19 1- 1-10855
257
19 1- 1-10857
263
19 1- 1-10858
293
19 1- 1-10862
3 6
19 1- 2-10869
331
19 1- 2-10866
38
19 1- 2-10868
1 1
19 1-13-10876
230
19 1- 3-10877
2 3
1911- 3-10878
250
19 1- 3-10879
16
19 1- 3-1088:)
75
19 1- 3-111881
3 0
19 1- -10880
322
19 1- 6-1089
365
19 1- 6-10895
260
19 1- 7-10906
316
19-11- 7-10 17
3 2
19 1- 8-10919
267
19 1- 8-10916
353
19 1-50-10928
302
19 1-50-10929
297
19 1-51-10932
1 7
19 1-52-109 2
131
19 1-62-109 3
151
19 1-27-10767
80
19 1-2 -10771
212
19 1-30-10792
2 6
19 1-30-10790
173
19 1-30-10793
209
19 1- 1-10856
303
19 1-15-10890
180
19 1- 7-10903
306
19 1- 9-1092
189
19 1- 9-10922
292
19 1-61-1093
21
19 1-51-10933
200
19 1-28-10775
213
19 1-29-10783
186
19 1-32-10803
1 9
19 1- 9-10921
126
19 1-3.5-10813
207
19 1-50-10927
308
19 1- 6-10897
103
Rung.
oard of Ta ppeas:
73111
80393
82. 9
80 07
87300
8826
8929
89 22
90713
9071
91107 -
92817
92980
93663
93805
9 9U8
95102
96103
9611
95595
9606
90330
96682
96759
90882
96883
97107
97 39
97718
97835
97838
97837-
97838
97839
978 0
978 1
978 2 -
97908
9801 -
98015
98017
98037
98073
98106
9816
9827
98293
98532
98689
98691
9876
988 -
9S897
99189
99190
99191
99192
99196
99273
99302
99358
99300
99377
99707
99829
99830
99880
99980
99993 -
100098 --
100271
Rung No.
Page.
19 1-38-10827
2
19 1-28-10770
25
19 1-29-10780
2
19 1-28-10770
11
19 1-31-10798
23
19 1-16-10896
3
19 1-33-10805
18
19 1-33-10805
7
19 1- 7-10902
13.2
19 1- 7-10902
13, 2
19 1-27-10762
23
19 1- 6-10896
15.25
19 1-37-10822
, 17
19 1-27-10762
23
19 1-33-10805
18
19 1- 2-10865
19
19 1-38-10827
1
19 1-38-10827
1
19 1-38-10827
18
19 1-29-10780
8.9
19 1-30-10787
21
19 1-3 -10809
16
19 1-28-10770
7
19 1- 7-10902
10
19 1-29-10780
17
19 1-29-10780
17
19 1-52-10936
8
19 1- 6-10896
1
19 1-39-10832
11
19 1- -10882
18
19 1- -10882
16
19 1- -10882
2 .25
19 1- -10882
25
19 1- -10882
1,25
19 1- -10882
2
19 1- -10882
2 .26
19 1- -10882
16.2
19 1-39-10832
10
19 1-39 10832
10,22
19 1-39-10832
11
19 1-39-10832
10,22
19 1-31-10798
13
19 1- -10882
6
19 1-28-10770
1
19 1-37-10822
16
19 1-50-10926
18
19 1-30-10787
12
19 1- 0-108 3
11.23
19 1-39-10832
13
M 1-30-10787
8,20
19 1-37-10822
23
19 1- 0-10813
12
19 1-37-108-22
20
19 1-29-10780
9
19 I-29-1O780
13
19 1-29-10780
7
19 1-29-10780
10
19 1-29-10780
15
19 1-29-10780
10
19 1-29-10780
6
19 1-29-10780
9
19 1- -10882
22
19 1-29-10780
7
19 1- 3-10873
13,2
19 1- 8-10911
20
19 1- 8-10911
2
19 1- -10882
5
19 1-30-10787
25
19 1-38-10827
6
19 1-39-10832
15
19 1-38-10827
19
( )
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I
Rung.
oard of Ta ppeas Con
100371
100
100 5
100526
100552
100503
100612.
1006 0
1006
1006 5
10071 .
100776
10087
100933
100967
101112
10113
10117 .
101189
101190
101236
101237
101312
101321
101335
101336
101 0
101 53
1015 2
101558
101605
101607
101627
101631
101688
101693
101760
101766 --
101786
101820
101883
101891
1011 16
1019 1
101956 ---
101968.
101992
102068
102119
10212
102201
102202
102205
102271
102 21 -
102 70 ---
102 89 -
102559
102578
102675 -
102689
102690 -
10288
102931
102985
1031109
103010
1030 1
103105
103132
103221.
103222
103252
103.355
103 68
103 69
103 70 ---
103 71
103 72
103 73 -
103 7 ---
103558
Rung No.
19 1-38-10827
19 1-38-10827
19 1-3 -10809
19 1-33-10805
19 1-37-10822
19 1-31-10798
19 1-37-10822
19 1-33-10805
19 1-35-10812
35 M2
19 1-10-108 3
19 1-3 -10809
19 1-31-10798
19 1-27-10762
19 1-28-10770
19 1-33-10805
19 1-3 -10809
19 1-3 -10809
19 1- 2-10865
19-11- 2-10865
19 1-28-10770
19 1-28-10770
19 1-37-10822
19 1-39-10832
19 1-27-10762
19 1- -10882
19 1-38-10827
19 1-52-10936
19 1-18-10911
19 1-52-10936
19 1-31-10798
19 1-31-10798
19 1-29-10780
19 1-36-10817
19 1-38-10827
19 1-35-10812
19 1-52-10936
19 1-51-10930
19 1-50-10925
19 1-39-10832
19 1-1 -10882
19 1-30-10787
19 1- 8-10911
19 1-39-10812
19 1-39-10832
19 1-37-10822
19 1- 6-10 96
19 1- 5-10887
19-11- 9-10920
19 1- 5-10887
19 1- 3-10873
19 1- 3-10873
19 1-31-10798
19 1- 7-10902
19 1-32-10801
1911-31-10798
19 1-51-10930
19 1-32-10801
19 1-16-10896
19 1-51-10930
19 1-51-10930
19 1-51-10930
19 1
19 1

1071
19 1-
0-10896
9-10920
3 -10809
3 -10809
19 -3 -a809
19 1- 5-10887
19 1-33-10805
W- 8-10911
19 1-18-10911
19 1-39-10832
19 1- -10882
19 1-29-10780
19 1-29-10780
19 1-29-10780
19 1-29-10780
1911-29-10780
1911-29-10780
19 1-29-10780
19 1-50-10925
Pago.
5.18
6
30
5
13,2
9
13
17. 18
17,25
15
6, 7
2
9
r 2,9,
L15.21
20
26
5
13
12
5
5
13
21
9
2
13
11
9.21
11, 12
.5
6,9
7
2
10
23
1
2
7
20
3
7
21
11
5
1
11
7,8
7,8
2
3.12
20
19
2
15
3,9
11
19,22
19,22
23
19
9
22
22
23
10
3
21
25
6
19
19,2
19,2
18,19,2
19.2
17,2
18.2
19,2
2
Rung.
oard of Ta pwas Con
103767
103835
10SS59
10 238
10 239 -
10 2 .
10 25
10 99
10 573
10 57
10 623
10 62
10 8
105092
10520
10525
105830
Offce decsons (I. T.):
3 86
3 87
3 88 -
3 89
3 90
3 91
3 92
3 93
3 9
3 95
3 96
3 97
3 98
3 99
3500..
3501
3502
3503
350
3505
3506
3507
3508
3509
3510
3511
3512
3513
351
3515
3516
3517
3518
3519
3520
3521
3522
3523
352
3525 --.
Offce decsons ( m. T.):
19 _
20
21
22
23
2
25
Offce decsons (C. 8. T.):
11
12
Offce decsons (3. T.):
919.
920
021
922
923
92
Offce decsons (MS.):
2 1
212
213-
2 .
2 5
2 6
Rung No.
Page.
19 -10S82
19
19 1- 7-10902
12
19 1- -10882
22
19 1- 6-10896
1
19 1- 0-10896
1
19 1-51-10930
17
19 1-51-10930
17
19 1- -10882
10
19 1-61-10930
9
19 1-51-10930
9
19 1-52-10936
6
19 1-52-10936
6
19 1-51-10930
5
19 1- -10882
19,23
19 1- -10882
19
19 1-51-10930
23
19 1-50-10925
2
19 1-27-10763
76
19 1-27-10765
123
19 1-27-10766
15
19 1-28-10771
71
19 1-28-10772
72
19 1-29-10782
177
19 1-29-1078
187
19 1-30-10788
79
19 1-30-10789
153
19 1-30-10791
195
1911-32-10802
107
19 1-33-10806
69
19 1-33-10808
136
19 1-3 -10810
78
19 1-3 -10811
138
19 1-35-1081
209
19 1-30-10S18
89
19 1-37-1082
185
19 1-38-10829
93
19 1-39-10836
72
19 1-39-10833
90
19 1- 0-108
118
19 1- 1-10852
106
19 1- 1-10853
171
19 1- 2-10867
92
19 1-13-1087
90
19 1- 3-10875
120
19 1- -10883
75
19 1-15-10888
91
19 1- 5-10889
172
19 1- 6-10900
200
19 1- 7-10903
153
19 1-17-1090
198
19 1- 8-10912
98
19 1- 8-10913
122
19 1-51-10931
122
19 1-51-10935
1 6
19 1-52-10937
12
19 1-52-10938
162
19 1-52-10939
188
19 1-29-10785
223
19 1-37-10826
221
19 1-39-1083
22
19 1-10-108 5
225
19 1- 1-1086
226
19 1- 5-10891
229
19 1-52-109 0
222
19 1-37-10825
253
19 1-12-10871
255
19 1-38-10830
301
19 1- 2-10872
299
19 1- 5-10892
295
19 1- 5-10893
296
19 1-18-1091
31
19 1- 8-10915
295
19 1-30-10797
369
19 1-35-10815
370
19 1- 0-108 7
371
19 -10885
372
1911- 8-10917
373
19 1-52-109 1
37
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II
c -- - r
Rung.
Rung No.
Pago.
Rung.
Rung No.
Page
Offce decsons (T.):
8
19 1-27-10768
375
M meographs Contnued.
5219
19 1-31-10800
1 0
85
19 1-31-10798
375
52 7
19 1-39-10837
319
86
19 1-35-10816
375
5255
19 1- 2-10870
260
87
19 1-39-10838
376
19 1-50-10926
163
19 1- -1088
19 1- 8-10918
376
376
19 1-37-10823
19 1-38-10828
19 1-39-10835
19 1-39-10839
13
66
Department crcuars:
19 1-33-10806
69
509
368
667 (amended)
/19 1- 0-10898
121
19 1- 0-108 6
19 1- 6-10901
19 1- 7-10908
19 1- 7-10909
377
Mmeographs:
U8 1- 6-10899
19 1-27-1076

11
519
521
80
5202 -
19 1-28-10776
2 1
19 1- 7-10910
52
5213
19 1-29-10781
110
19 1- 9-10923
13
19 1-29-10786
220
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CONT NTS OF CUMUL TI ULL TINS (I. T.) I to 5; S. T. FOR 1920 NT) 1921; INT RN L
R NU 1-1,1-2, -, II-2. m-1, m-2, I -1. I -2. -. -2. I-1. I-2. T -L TI-2. vm-, I-2.
I -1, I -2, -. -2. I I. I-2, II-1, II-2. III-1, III 2, D -1, I -2. 1, -2. 1937-1. 1937-2.
1938-1. 1938-2. 1939-1 (P RT 1 ND P RT 2). 1939-2, 19 0-1. 19 0-2. 19 1-1. ND 19 1-2.
Cumuatve uetn.
Income Ta :
December, 1919 (No. 1)
anuary- une, 1920 (No. 2) .
uy-December, 1920 (No. 3)
anuary- une, 1921 (No. )
uy-December, 1921 (No. 5).-. ---
Saes Ta :
1920 (S. T. 1-20)..
anuary- une, 1921
uy-December. 1921..
Interna Revenue uetn:
anuarv- une, 1922 (No. 1-1)
uy-December, 1922 (No. 1-2)
anuary- une, 1923 (No. II 1) --
uy-December, 1923 (No. II-2) --
anuarv- une, 192 (No. III-)
uy-December, 192 (No. III-2)
anuarv- une, 1925 (No. I -1)
uy-December, 1925 (No. I -2)
anuary- une, 1926 (No. -)
uy-December, 1926 (No. -2)
anuarv- une, 1927 (No. I-1)
uy-December, 1927 (No. I-2)
anuary- une, 1928 (No. II-1)
uy-December, 1928 (No. II-2)
anuarv- une, 1929 (No. III-1)
uy-December, 1929 (No. III-2) .
anuarv- une, 1930 (No. I -1)
uy-December, 1930 (No. I -2).
anuary- une, 1931 (No. -)
uv-December, 1931 (No. -2)
anuarv- une, 1932 (No. I-1).
uy-December, 1932 (No. I-2).
anuarv- une, 1933 (No. II-1)
uy-December, 1933 (No. I1-2)
anuary- une, 193 (No. III-1)
uy-December, 193 (No. III-2)
anuary- une, 1935 (No. I -1)
uy-December, 1935 (No. I -2)
anuarv- une, 1936 (No. -1)
uy-December, 1936 (No. -2)
anuarv- une, 1937 (1937-1)
uv-December, 1937 (1937-2)..
anuary- une, 1938 (1938-1).
uy-December, 1938 (1938-2)
anuarv- une, 1939 (1939-1 Part 1 and Part 2)...
uy-December, 1939 (1939-2)
anuary- une, 19 0 (19 0-1)
uy-December, 19 0 (19 0-2).
anuary- une, 19 1 (19 1-1)_.
uy-December, 19 1 (19 1-2)
Rung Nos.
1-655
656-1033
103 -1368
1369-1710
1711-1996
1-112
113-265
266-356
1-383
38 -665
666-956
957-1276
1277-16 1
16 2-19 9
1950-2251
2252-2523
252 -2813
281 -3026
3027-3291
3292-3557
3558-378
3785- 052
053- 2 8
2 9- 87
88- 683
6S - 887
888-512
5125-5338
5339-5531
5532-5961
5962-6262
6263-6581
6582-6871
6872-722
7225-7563
756 -788
7885-81 9
8150-8 59
8 60-8792
8793-9118
9119-9 2
9 25-965
9655-9896
9897-10126
10127-1030
10305-105 8
105 9-10761
10762-109 3
( III)
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O RD OF T PP LS.
CUMUL TI LIST OF NNOUNC M NTS R L TING TO
D CISIONS OF T UNIT D ST T S O RD OF T
PP LS PU LIS D IN T INT RN L R NU UL-
L TIN S R IC FROM NU RY 1, 19 0, TO D C M R
31, 19 1, INCLUSI .
nnouncements rentnt to the acquescence or non acquesce nee of the Commssoner n
decsons of the Unted States oard of Ta ppeas, as pubshed n the weeky Interna
Revenue uetns from December 22, 192 , to December 31, 1931, Incusve, are prnted n
Cumuatve uetn 2, pages 1-106. Those prnted n weeky uetns from anuary 1, 1932,
to December 31, 1939, ncusve, an pubshed n Cumuatve uetn 1931--2. panes 1-73. The
st beow, therefore, contans ony such announcements pubshed n the weeky uetns
from anuary 1, 19 U, to December 31, 19-11, ncusve.
19 1 52 10936
The Commssoner acquesces n the foowng decsons of the
Unted States oard of Ta ppeas:
Ta myer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
bbott, ohn, e ecutor of estate of Rchard .
Traser 1
cer Reaty Co
dar, Mrs. Cornea, estate of
der, . P ---
ffated nterprses, Inc.2
en, Laura, estate of
mercan Lberty O Co.
mercan Socety of Cnematographers, Inc
nderson, ohn, transferee of estate of Frank O.
urrdge --
pe rewng Co., Inc
ppeby, ohn S.
tantc Land Co., The
ugustus, zabeth G
91958
102119
95 51
97988
96603
89703
98 87
. 98 88
96 11
9333
91977
9 080
100 10
96001
1
. ,
3
1
2
0
3
2
0
11
1
3
0
228
333
38
112
390
721
76
675
9
1109
18
7
1200
1 cquescence reates ony to the oard s mathematca formua for apportonment of the dvdend credt
between the estate and the dstrbutees.
1 cquescence reates ony to the ssue, What amounts consttute reasonabe aowance for servces per-
formed n 1935 and 1936 by the wves of the two prncpa ofcers of the corporaton
state ta decson.
cquescence reates ony to the ssue, Dd the respondent err n ncudng n pettoner s consodated
ncome for 1 32 and 1933, sub|ect to depeton, the sums of 25,727.65, 27, 21.09, and 0, 5.27 whch pet-
toner s affate, the Wofford Producton Co., pud durng sad years to owners of o payment contracts ou
ts Pnkston ease
1 cquescence reates ony to the ssue, Was the sum of 150 whch was added by the Commssoner to
ohn S. ppeby s ncome, ta abe to hm
Rung No. 10936 ncudes a acquescence and nonacquescetce notces pubshed n the Interna
Revenue uetn servce from anuary 1,19 0, to December 31,19 1.
( )
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cqttescences Contnued
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
.
ard et u ., Warner G.1.
aker, Inc., nert
adwn, Frederc .
anfed, T. .
ank of merca Natona Trust Savngs ssoca-
ton, e ecutor of estate of, and trustee of trust
e ecuted by, Wam ohn McGowan 1
ank of merca Natona Trust Savngs ssoca-
ton, trustee of Tonnngsen Trust
ckns, atherne, estate of
ekns et a., Mo W., e ecutors of estate of ath-
erne ekns
echer, arret obrook
enaga et u ., rthur
erks County Trust Co., aeged successor trustee
of Mortgage Trust Certfcate Poo
geow, ce ., e ecutr of estate of erbert M.
geow 7 -
geow, erbert M., estate of
ack, Sr., Chares
ack Motor Co., Inc
enhem Co., Ltd
ohn, Chares .
ondhoders Commttee
ooth, Warren S_.
rggs- an Co
rnk et a., rg C, Trustees of Mnne M Fay
Trusts , , and 3
rtt, Car M
rookman, Murray
uh et u ., Theodore D.
uter et u ., Cooey
Can, mma Wetmuer, e ecutr of estate of
ohn . Can, Sr.
Can, Sr., ohn ., estate of
Cambrdge partment udng Corporaton
97139
92366
9 01
10113
93313
98688
. 99999
100967
99280
87675
87675
9 879
87638
98207
82659
82659
1103558
05830
97232
95026
95953
90 52
mt
90 87
/101336
101883
92562
(98900-
I 98902
99522-
9952
95566
95871
102 89
101760
101330
101330
102205
2
0
55

900
2
769
3
695
3
37
38
60
38
60
2
633
36
838
2
1238
39
635
39
635
5
20
1
300
2
12 8
3
953
0
881
3
8 6
0
89
2
765
3
25
1
557
5
27
5
593
3
1133
3
1133

617
1 Prevous non acquesce nee pubshed n cumuatve uetn 19 1-1, page 12, wthdrawn.
state ta decson.
cqutsccnce reates ony to the ssue. Is the pettoner entted to a deducton of 6,5 6.96 for the year 1937
as and for a debt ascertaned to be worthess and charged off durng that year
cquescence reates ony to the ssue. Was the communty property agreement of December 29, 1931,
effectve wth respect to persona property standng n the name of the decedent at the tme of hs death
Pror nonaeqescenee pubshed n Cumuatve uetn 1939-1 (Part 1), page 0, wthdrawn.
N on acquescence pubshed n Cumuatve uetn 1938-1, page 35, wthdrawn.
Pror nonacquoseence pubshed n Cumuatve uetn 1939-2, page 2, wthdrawn.
cquescence reates on| to the ssue, Where a ta payer ses stock to a trust created by hm for the bene-
ft of hs daughter, does the transacton fa wthn secton 2 (o)6 of the Revenue ct of 193 so that no
deductbe oss resuts
cquescence does not reate to ssue respectng bases for deprecaton of pettoners assets.
cquescence s us to resut ony.
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3
cquesck||ces Contnued.
Tapaycr.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Canco, arry F
Carey-Reed Co.1 - -
Carey Trust (Second)
Carter, Shrey, estate of -- --
Castncr Garage, Lmted -------
Cavett et a., ., e ecutors of estate of W. 1.
aes -
Center Investment Co -
Chamberan et u ., Lowe
Cherokee Co
Chds, ctora
Chds, Wam, estate of
Chrvscr Corporaton - -
Caborne et a., ustn Legh, e ecutors of the
estate of Laura en1
Cohen Sons Co., .
Cohen Testamentary Trust, oe C.
Coumba O Gas Co. -
Combs Lumber Co.
Commonweath, Inc.
Cook Drng Co.
Coedge, Norman
Cooper, ugene ., admnstrator of the estate of
Lews F. Cooper
Cooper, Lews F., estate of -- -
Cooperatve Insurance
Cooperatve Power Pant
Crabb, Doores
Crawford Musc Corporaton
Cresp, Petro
Cumberand Portand Cement Co.
Curts, Lan D., e ecutr of estate of Irwn .
Smth
D.
Daas Tte Guaranty Co.7
Dashe, C. .9
Davdson, Cnton
Davdson, r., Cnton
Davdson, Fora S.
Davson- oseph Campau Reaty C
66150
I 906 1
83936
93611
93917
98502
93208
82350
96 10
93962
102578
102578
97305
89703
97939
96231
9062
915 3
8826
82231
92289
9 088
9 088
95292
95291
95002
85389
88290
103132
1019 1
102271
90 66
75056 ,
/ 93500 1
93503
9350
93502
97366
1
36
1
0
3
0
3
3
1


2
0
2
2
1
1
36
38
0
0
0
1
1
1
0

I
5
0
36
3
3
3
1
713
36
800
7 9
1
12
6
259
1212
1191
1191
795
721
1137
107
38
339
850
291
132
7 9
7 9
1151
11 3
686
28
670
1170
59
1021
313
576
576
576
675
t Pror nonacquescence pubshed n Cumuatve uetn 1939-2. page , wthdrawn.
cquescence s ony as to the ssue. Do certan dvdends decared and credted on the stock of the
Loca udng and Loan ssocaton and made avaabe to the pettoners n anuary, I 35. but apped
by them aganst the purchase of stock n the Loca Federa Savngs and Loan ssocaton nto whch the
budng and oan assocaton was converted, represent ncome n 1935 sub|ect to norma ta and surta
state ta decson.
cquescence does not reate to ssue perunng to aocaton of cost of equpment on the property n
queston.
Prevous nonacquescence puhshed n Cumuatve uetn 1938-1, page 38, wthdrawn.
cquescence reates ony to the ssue whether the far market vaue of future o payments, under the
drng and sae of ease contracts, shoud e ncuded n gross ncome of pettoner for the year 1932. Pre-
vous acquescence pubshed n Cumuatve uetn 1939-2, page 8, affrmed as to ths ssue ony.
T cquescence reates ony to the ssue whether or not pettoner s an nsurance company as that term
Is used n secton 701 (c)2 of the Revenue ct of 193 .
Nonacquescence pubshed n Cumuatve uetn 1937-2. page 36, wthdrawn.
cquescence wth respect to ssue nvovng the ta abty of certan commssons on fe nsurance
contracts s as to resut ony.
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cqotescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Dean, Mason L.1
Dearng, Roy ., estate of3
Dearng, R. ., estate of, and trust estate 1
Dearng, Mrs. R. .
Dearng et u ., Ws R.2
Dearng, Ws R., e ecutor of estate of Roy .
Dearng
Dearng, Ws R, e ecutor of estate and
trust estate of R. . Dearng
DeLong, Davd .s
Deube, George
Dstrct ond Co.
Doenz, nton
Doar, gnes arr
Doar, . arod, estate of
Doar et a., Robert II, e ecutors of estate of .
arod Doar
Donahue, Mrs. esse W.5
Downng et u ., Rchard 8
.
ggerman, Don, e ecutor of estate of mma Frye--
nhorn, Ma 7
more Mng Co., Inc
verson Corporaton 8
qutabe Lfe ssurance Socety of the Unted
States, The 10
state Pannng Corporaton
usts, ugustus .u
vans, Mary .13
wng, Sherman 1
61205
69832
8 195
8 193
8 19
8 196
8 192
. 8 197
8 195
8 193
8 19
10126
92055
950
88970
9 86
93311
97283
98728
97282
98727
97282
98727
92980
99171
101631
73893
96520
93281
31110
332 1
57867
8929
93805
93501
71637
95527
93013
35
86
36
86
36
36
36
3
2
39
1
1
1
1

3

36
2
0
33

3
30
2
0
I Pror nonacquescencc pubshed In Cumuatve uetn 1937-2, page 36, wthdrawn.
Pror nonacqutsconee pubshed n Cumuatve uetn 1938-1, page 39, wthdrawn.
cquescence reates ony to the ssue, Is the 1 ,000 cash receved by the pettoner on February 6, 1936,
from Francs . Lapont a part of the consderaton of the pettoner s mercan roach S Machne Co.
stock
Pror nonacquescencc pubshed n Cumuatve uetn 1939-2, page 7, wthdrawn.
cquescence reates ony to the ssue whether the oard erred n decnng to porm t the Commssoner
to rase an affrmatve ssue, n respect of certan amounts aowed as e penses, by amended peadngs sub-
sequent to the decson of the oard.
cquescence reates ony to the ssue nvovng the deductbty of 95.7 as a bad debt.
Pror nonacquesccnce pubshed n Cumuatve uetn 1938-1, page 0, wthdrawn.
8 cquescence reates ony to tbo ssue nvovng the far market vaue of certan pedged coatera on
the date of ts surrender.
Pror nnnacquescence pubshed n Cumuatve uetn -1, page 31 (1936), wthdrawn.
cquescence reates to a ssues e cept the ssue, May the company, on a cash recepts and dsburse-
ments bass, deduct guaranteed nterest pad In the ta year under settement optons e ercsed by the
benefcary, when such nterest had accrued n pror yearst
II cquescence wth respect to ssue nvovng the ta abty of certan commssons on fe Insurance
contracts s as to resut ony.
11 Pror nonacquesccnce pubshed In Cumuatve uetn rv-2, page 30 (1935), wthdrawn.
18 cquescence reates to a ssues e cept as to the deductbty of attorney s fees and abstract fees n-
curred ncdenta to the estabshment of forfeture of a ease and obtanng repossesson of the eased premses,
u Pror nonacquescencc pubshed n Cumuatve uetn 19 0-2, page 11, wthdrawn.
G
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1
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-
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1
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1

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5
cqr SC NC S Contnued.
Ta vcr.
Docket
No.
oard of Ta ppeas.
oume.
F.
Farmers Unon Cooperatve change
Farre, Robert S
Fay, Mnne M, Trust, , C, and 8 .
Ferree, C. . . - ---
f dety Savngs Loan Co., The
Frst Mortgage onds .
Frst Reaty Corporaton.
Fsh, Isaac, estate of
Ftch, F. W
Feschmann, Raou
Femng, Mrs. nna Maud
Femng- nbe Corporaton
Femng, Wam 5
Fetcher, Lester L., estate of
Fetcher, Thomas L., e ecutor of estate of Lester L.
Fetcher
Foyd, Incorporated
Foreman, Frank C
Forrester o Co
Freedman, Ma .,
Frend et at., Mton ., trustees of estate of enry
Frend
Frend, enry, estate of
Frost Co., G. C, a corporaton T.
Frye, mma, estate of
Fuham, ohn N
Funsten, . M
Furong, ohn T
100552
100139
(98900-
98902
199522-
9952
615 2
101236
101237
90 52
90 86
90 87
101558
96527
933 0
98131
90305
92958
9 690
92959
92957
9 689
10117
10117
99562
93915
937 8
99886
90672
91 15
90672
91 15
100
101631
103252
102068
10 8
G.
G. . R. O Corporaton I 9260
Gardner, . Ws 8 I 92115
2

2
32

0
5
2
3
0
1
1
1


3
0
3
:5
0
0

I


5
0
1
1 Pror nonacquescence pubshed In Interna Revenue uetn 19 1-7, page 1, wthdrawn.
1 cquescence s as to resut ony.
1 Nonacquescence pubshed n Cumuatve uetn I -2, pnee .10 (1935), wthdrawn.
cquescence does not reate to ssue respectng bases for deprecaton of pettoners assets.
cquescence reates ony to the foowng ssues: (a) IMd each of the communtes of ay mbe and
wfe and Wam rmnp, and wfe constructvey receve o payments of 60,8 8,65 and . 3, 01.35, rcs ec-
tvey, for 193 and 1935 from the Femng- mbe Corporaton, and (M was a certan ,000 reservaton n
connecton wth the transfer by Wam Femng n 1936 of a easehod nterest n the Rchter ease,
etc., ta abe to the pettoners
state ta decson.
cquescence reates ony to the Issue, What was the fnr market vaue of an od budng whch was
stuated on the and at the tme of e ecuton of t he ease-, and whch was torn down n connecton wth the
constructon, by the essee, of the new budng
Gft ta decson.
cquescence reates ony to the ssue, If the benefcares of a certan trust be treated as
the gfts made to them gfts of present nterests or future nterests
G
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2
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1
3
-
0
1
-
2
1

2
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3

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6
cqt|escences Contnued.
Ta payer.
Docket
No.
eard of Ta ppeas.
oume.
Garand ot u ., Wam .1
Gayord, Inc., Robert
George ros. Co
Gerber Co., The ohn
German , own Trust Co. et a., trustees u/w of Sarah
. McLean
Gespe, Maud
Gmore, een, estate of, transferee of estate of
Frank O. urrdgc
Grard Trust Co., e ecutor of estate of Frederc .
adwn 3
Graf et u ., erbert R
Graff, verett D
Gravev, as.
Grm, Cfford D
Gruy, oseph, ndependent e ecutor of estate of
Luce Gruy
Gruy, Luce, estate of
Gump, fred S., estate of
Gump et a., Came R., e ecutors of estate of -
fred S. Gump 3
.
aass, Water F., trustee of uron Rver Syndcate.
arkett, mma P
aes, George .
aes, Mrs. Oneta
aes, r., W. T.
aes, W. T., estate of
arden et u ., Fred M.a
arrs Trust Savngs ank et a., e ecutors of es-
tate of Isaac Fsh
arrss, bbene C, estate of
arrss, Robert M., ndvduay and as admnstra-
tor of estate of bbene C. arrss
awaan Trust Co., Ltd., trustee of oe Cohen
Testamentary Trust
eath, arret .5. -
eer, dward . ...
ggns, dus C.7
ggns, ugene
ghand Farms Corporaton 8
/ 935S9
955 7
96953
932 8
101605
101688
98770
93231
10113
/10 623
10 62
92212
100 5
93919
95901
95901
90656
90656
100775
99302
93210
93209
93211
93208
98073
96527
99993
99993
96231
90599
/ 9 79
1 9 795
1015 2
/ 80052
85961
95690
2
3
1
1


13
0

5
0

0
2
2
12
2


0
0
0
0

2


2
38
1

39
2
1 cquescence wth respect to the decson of une 28,19 0 ( 2 . T. ., 32 ), reates to the ssue nvovng
the ta abty of nterest from muncpa bonds ssued under the Caforna Muncpa Improvement Dstrct
ct of pr 20, 1915. cquescence wth respect to the decson of February 27, 19 1 ( 3 . T. ., 731),
reates to the ssue nvovng the ta abty of the ncomo from a certan trust estabshed by the pettoner
for the support of hs wfe, the ony ssue presented at the second hearng and decded party n favor of the
pettoner and party for the respondent.
1 cquescence s as to resut ony.
1 stnte ta decson.
cquescence s ony as to the ssue, Do certan dvdends decared and credted on the stock of the
Loca udng and Loan ssocaton and made avaabe to the pettoners n anuary, 1935, but apped
by them aganst the purchase of stock n the Loca Federa Savngs and Loan ssocaton, nto whch the
budng and oan assocaton was converted, represent ncome n 1935 sub|ect to norma ta and surta
Pror nonacqueseenee pubshed n Cumuatve uetn 1939-1 (Part 1), page 50, wthdrawn.
cquescence reates to the ssue pertanng to the trust for the pettoner s mnor son manue.
1 Gft ta decson.
cquescence reates ony to the ssue, Dd the pettoner reaze ta abe gan as the resut of recevng
an award for compensatory damages
G
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7
cqr sc NC S Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
rsch, L. -
onokaa Sugar Co -
ooper, ames P., estate of 1 1
ooper, Mathde ., admnstratr of estate of
ames P. oowr 1
oover, erbert W.
opkns, Wam R --
ote stora, Inc.
oward, Grace dams, estate of
oward et a., George dams, e ecutors of estate of
Grace dams oward-
uey Pp ardware Co
umme-Ross Fbre Corporaton
umphreys, Murray
unter, C. -
urd Mwork Corporaton
uron Rver Syndcate
yde, Mdred ., estate of
yde, Suffok erks, Marguerte
yde, Ws O., admnstrator of estate of Mdred
yde, W
. yde.
I.
Ide, ohn
Industra Cotton Ms Co., Inc.
Interstate Transt Lnes, Inc
Isand Securtes, Lmted
ackman, D. S.5
ask, Sophe, tradng as Whte ouse akery
efferson Standard Lfe Insurance Co
oe Co
ohnston, . dward
ohnston, L. Mmnaugh
ones, Carre L., estate of 1
ones et a., Cary W
ordan Creek Pacers.
oseph, Wam
ourna Co., The
95782
101358
85776
85776
9097
91753
97230
99851
99851
92801
93077
87899
99191
101956
100775
95182
81 17
. 93257
95182
1013 7
92186
101693
99082
101891
1002 1
89 22
96535
93768
99377
91831
102201
102202
98057
99210
96030
96682
2
3
1
1
2
1
2
2
2
0
0
2



2
0
2
3
3

3

3

1
1
11
1

3
3

ahn, ea .. 73895 36
ahn, Isdor _. 73891 36
ahn, Lenora . 7389 36
aufmann, oe W 95082 1
aufmann, Mdred 95083 1
1 state ta decson.
1 cquescence reates ony to the determnaton of the vaue of the stock of Wam . ooper S Sons
Co. on ugust .3, 1933.
3 cquescence s as to resut ony.
1 cquescence on the foowng ssue s as to resut ony: In determnng the net Income of a trust cur-
renty dstrbutabe to the benefcares, shoud there be ncuded the rent due under a ong-term ease,
the essee havng mproved the premses wth an offce budng whch woud become the essor s property
on forfeture, the trust on the accrua bass havng accrued the rent but aso havng charged t to a reserve
for uncoected rents
1 Gft ta decson.
1 Un|ust enrchment ta decson. cquescence s as to resut ony.
Pror nonacquescence pubshed n Cumuatve uetn 1938-1, page 6, wthdrawn.
G
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n
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a
t
e
d

f
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L

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0
1
3
-
0
1
-
2
1

2
1
:
1
3

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#
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8
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
eer, Charotte
esser O Gas Co
osau Petroeum Corporaton.
Uan Co. . L.1
mbe, ay 2
mbe, Mrs. ema .
eberg, ce G. .
eberg, ce G. ., e ecutr of estate of Robert
. eberg, Sr.
eberg, Sr., Robert ., estate of
nowes, dwn C. F
L.
Lapsey, ames
Laster, Caroyn Faust, transferee
L stcr, . C., transferee
Laster, dward Carro, transferee
Laster Incorporated, . C
Lawrence, Wam amton
Lawson et u ., dward C
Lawson, Roberta C
Leary, Sr., . .5
Lcarv, Myra L.5
Legg, Mdred Sheppard, estate of
Letts, r., rthur
Lew, en
Lpstate et u ., Php arry
Lousana Iron Suppy Co., Inc
Lousve Fre rck Works, Inc., The.
I.urns, enry M
Lyon, Incorporated.
M.
MacConaughey, arry
Macon, Dubn Savannah Raroad Co.
MacPherson, Mae Rccor 7
Madgan et u , . P _
Ma|estc O Corporaton 8
Maery et u ., Otto T.
Maory et a., . ., e ecutors of estate of L.
Maorv
W.
93026
930 1
95760
98691
92956
9 67
92955
9 673
86178
86178
86179
91 95
102201
102202
9771
97716
97713
97 2
10036
99300
99301
768 5
768 6
899 2
92857
96037
93255
97107
100 82
100516
93858
965 6
99832
92052
90592
920S3
/101308
101309
963S0
92373
95595
1
78
1
31
2
69

169
1
9 0
1
9 0
3
277
3
277
3
277
0
860

1105
3
159
3
159
3
159
3
159

128
2
1103
2
1103
3
1206
3
1206
0
1073
1
1172
3
273
3
18

12
3
178

212
2
109
1
08
0
1265
39
739
3
5 9
2
659
2
793

2 9
1 cquescence reates ony to the ssue nvovng the deductbty of contrbutons to the Y. M. C. .
and chamber of commerce.
- cquescence reates ony to the foowng ssues: (a) Dd each of the communtes of ay mbe and
wfe and Wam Femng and wfe constructvey receve o payments of 60,8 8.65 and 53, 01.35, respec-
tvey, for 193 and 1935 from the Femng- mbc Corporaton, and (6) was a certan ,000 reservaton n
connecton wth the transfer by Wam Femng n 1936 of a easehod nterest n the Rchter ease,
etc., ta abe to the pettoners
8 cquescence reates to a ssues e cept that nvovng a bad-debt deducton of 20 .50.
cquescence s as to resut ony.
Pror nonacquescencc pubshed In Cumuatve uetn 1937-1, page 1, wthdrawn.
state ta decson.
Pror nonacquescence pubshed In Cumuatve uetn 1939-2, page 57, wthdrawn.
cquescence reates to a ssues e cept the Issue, Is the pettoner entted to a 1935 oss deducton for
the undeprecated cost of certan casng and other ease equpment whch coud not be removed from a
certan o we whch the pettoner ceased to operate, durng that year, because such operaton had be-
come unproftabe
G
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a
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d

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2
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1
3
-
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1
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2
1

2
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3

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#
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9
cquescknces Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Maory, L. W., estate of
Manufacturers Lfe Insurance Co., The.
Marborough ouse, Inc., et a.1
Marborough Investment Co.1
Marthe, Louse, transferee of estate of Frank O.
urrdge
Martn, Thomas W
Maumee Maeabe Castngs Co., The
Mc pne Land Deveopment Co., Ltd., .
Mc rde, Margaret
McCarthy, mmett .
McCormac, Gertrude ., trustee for . . Mc-
Cormac, r
McCormac, r., . . (trust) -
McDane, C. T
McGowan, Wam ohn, estate of, aso trust e -
ecuted by
Mc nght, fred, admnstrator of estate of Thomas
Spruance
McLean et u ., Marrs.
McLean, Sarah ., trust u/w of
Mceod, eth
McLcod, Mary
Medca Dagnostc ssocaton
Mdand Cooperatve Whoesae, a Cooperatve
ssocaton
Mbank, Dunevy
Mer, uus C
Mmnaugh, ugene
Mooney ectrc Co.8
Monarch Lfe Insurance Co.7
Moock ectrc Suppy Co., The
Morrs Pan Co. of St. oseph, The
Morrson ond Co., Ltd
Morrstown Trust Co., e ecutor of estate of Wam
Chds
Mortgage Trust Certfcate Poo
Morton, rthur F
1 cquescence does not reate to ssue respectng bases for deprecaton of pettoners assets.
1 cquescence reates ony to the credt of 2,500 as head of a famy.
state ta decson.
cquescence reates ony to the ssue, Was (hp communty property agreement of December 29, 1931,
effectve wth respect to persona property standng n the name of the decedent at the tme of hs deathT
1 cquescence Is ony wth respect to the ta abty of the ncome from the wfe s trust.
f cquescence reates ony to tne deductbty n 1936 of the amount pad to the Frst Natona ank of
St. Lous n connecton wth the qudaton of the Frankn mercan Trust Co., such acquescence beng
ony In the resut.
7 Pror nonacquescence pubshed n Cumuatve uetn 1939-1 (Part 1), page 56, wthdrawn.
1611 2 2
95595
908 5
90 52
90 86
90 87
90 52
90 86
. 90 87
93333
93916
100933
99599
101335
101607
93920
93920
99189
100967
9 78
9 820
9 821
77 19
77 20
81391
81392
8680
86805
9 02
103
101688
10 57
10 573
96563
100612
93050
102985
99358
96076
86861
I 87 1
9628
9781
93362
O. Sf
102578
98207

3
0
0
0
0

3


0
0

3
3
1

5
5
2

1
5

2
38
1
2
1
2

2
1
G
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a
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d

f
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L

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g

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Y
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U
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v
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1
3
-
0
1
-
2
1

2
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1
3

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1
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3
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s
s
_
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#
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.10
cquescences Contnued.
Ta payer.
Mott, Dee Furey 1
Myers, George R
N.
Nchos, . C
Ncoa, arry T.2
Norweb, mery May oden s.
O.
Orange Securtes Corporaton
Ortz. ce duPont
O Suvan Rubber Co., Inc. (n dssouton)
P.
Pan- mercan Lfe Insurance Co.5
Parker, . rooks
Parrsh, Percva
Parsons, Regnad
Patton, T.
Peck Peck (New York)....
Peck Peck Corporaton, The
Perkns, Raph 8
Peyton, Mrs. Loe M. Randoph, transferee
Pfeffer. ar
Phney odng Co., Inc
Perce, U. W
Peron udng Trust
Pnkney Packng Co
Pper et u ., T. ugene
Pttsburg Canners, Inc
Punkett, Theodore R
Pontare, Mchae
Porter et a., .1. oward, trustees, dentfed as
Porter Propertes Trustees, Ltd
Porter Propertes Trustees, Ltd
Producers O Corporaton
Pupn, Mchae I., estate of8
R.
Ravenscroft, . F
Regas Reaty Co.10_ --
Retsa Drng Co
Reynods , Inc., R. C.
Docket
No.
71903
9 76
89169
93821
98188
92575
10 99
93159
97399
8 638
101676
103 06
97908
93918
99288
9931
96126
96759
99273
88988
92278
103105
SS )2 I
101766
93560
9 017
83199
95762
95762
93839
92177
99192
911360
95776
97715
9S01
98017
oard of Ta ppeas.
oume.
35
2
2
2
1
5
2
2
38



0
2
2
1


3
1
5
2
5
1
1
35
2
2
3
38

3
2

Page.
1 Nonacquescencc pubshed n Cumuatve uetn 1937-1. page 3, wthdrawn.
2 cquescence reates ony to the ssue, Is the pettoner entted to a deducton of 13,225 as a bad debt
for I e year 1935
3 Gft ta decson.
cquescence reates ony to the ssue, whether the pettoner s entted to any deducton as tbe resut
of the satsfacton of the defct e stng n her husband s brokerage accounts at the end of the year 193 .
I Parta nonacquescence pubshed n Cumuatve uetn 1939-1 (Part 1), page 59, wthdrawn.
cquescence reates ony to the ssue, Was the pettoner entted to a oss on an nvestment of 17,250
n the Fourteenth Carnege Co. for the year 192f
7 Pror nonacquescence pubshed n Cumuatve uetn 1939-2, page 63, wthdrawn.
state a decson.
Pror nonacquescence pubshed n Cumuatve uetn 1939-1 (Part 1), page GO, wthdrawn.
10 cquescence s as to resut ony.
II cquescence reates to a ssues e cept the ssue whether R. C. Reynods, Inc., reazed ta abe gan
upon the purchase of shares of ts own stock and contracts reated thereto n 1935.
G
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e
d

f
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U
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)

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1
3
-
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1
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2
1

2
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3

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_
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#
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11
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Page.
Reynods, Ron C
Rce, ohn Preston 1
Rtche, Montgomery II. ., admnstrator d. b. n.
of estate of Mrs. Cornea dar
Rversde akng Co. ( . . Stockton, D. . .) ..
Robnson, W. C
Rooke, Robert L
Roosevet Investment Corporaton
Rosenau, arret W.
Rosenstock, nna, ndvduay and as e ecutr of
estate of Isaac M. Rosenstock
Rosenstock, Isaac M., estate of
Ross ros. orse Mue Co
Ross, Mary Catherne
Ross, W. R -
Ross, ndrew .2
Rotorte Corporaton
Rowan Drng Co., transferee 8
Rowey, dward G., transferee of estate of Frank
O. urrdge
S.
Safe Depost Trust Co. of at more, e ecutor of
estate of Mdred Sheppard Legg
St. Lous Unon Trust Co. et a., e ecutors of estate
of Carre L. ones
Scanon, Robert II.
SchefTen, Lucy S., estate of --
Schesnger, Rosa
Schey et u ., uan Larcunbe
Schoekopf, r., acob F
Schutz et u ., Nes
Schuman Carrage Co., Ltd
Scuy, ohn C
Seavey Farshem rokerage Co.
Second Carev Trust
Seward Cty Ms
Shamrock O Gas Co
Sharp et u ., . Cec...
Shcden Land Co.1
Shenandoah aey Natona ank (Shrey Carter
estate)
Sherman, Dors ond
Shoenhar, Martha Locke
Sver, Ma
Smon, ose, estate of
Smon et a., ose P., e ecutors -.
97718
98015
10212
95 51
101627
99038
98112
101 53
86 07
91686
91686
9 76
9 75
9 7
98898
96 70
88606
98532
93332
899 2
91831
98020
99961
73892
99 0
76377
/100 0
1100 1
90012
101992
91618
93611
92099
98588
/ 97 25
97 26
93196
93917
95300
102675
100186
918 0
918 0


3

2
3
.
37
1
1
3
3
3
1
0

0
0
II
2

36
2
35

3

11
1

2
2
2
10
1
5
2
0
0
3 2
7 9
38
51
725
275
0
68
635
635
1151
1151
1151
73
1303
189
9
1073
1279
997
137
95
3
855
1 6
880
1279
198
800
173
1016
336
98
7 9
898
576
61
650
650
Nonacquescenee pubshed n Interna Revenue uetn 19 1-32, page 1, wthdrawn.
Un|ust enrchment ta decson.
Oft ta decson.
state ta decson.
cquescence reates ony to the Issue, Is the pettoner s transferor entted to dedurtons as ordnary and
necessary busness e penses amounts e pended n 1932 n the drng of o wes for cash, competed n 1933
Pror nonacquescence pubshed n Cumuatve uetn 1938-1, page 55, wthdrawn.
T cquescence reates ony to the ssue, whether certan osses suffered by pettoner as tho resut of fore-
cosures of propertes owned by the pettoner are deductbe n tho year of forecosure or n the year n
whch the equty of redempton e pred.
cquescence reates ony to the year 1935.
G
e
n
e
r
a
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e
d

f
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L

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g

(
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Y
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U
n

v
e
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s

t
y
)

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2
0
1
3
-
0
1
-
2
1

2
1
:
1
3

G
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/


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a
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/
2
0
2
7
/
u
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1
.
b
3
2
9
6
8
0
6
P
u
b

c

D
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a

n
,

G
o
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12
c u st Nc S Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Savn, rthur M
Smth, Chares G
Smth, Irwn ., estate of 1
Smth, Madene Weder
Smth, arvara Pupu, admnstratr of estate of
Mchae I. Pupn 13
Smoak, ott
Smyth, r., Francs G., transferee of estate of Frank
O. urrdge
Smyth, erbert C, transferee of estate of Frank 0.
urrdge
Smyth, erbert C, admnstrator of the estate of
een Gmore, transferee of estate of Frank O.
urrdge
South tantc Steamshp Lne
Spva, George N
Spor, Sr., Cvpran ., estate of1
Spratt, Chares N
Sprngford, erbert __
Spruance, Mrs. ortense
Spruance, Thomas, estate of.
Staey, ugustus .3
Saey, mma L.
Standard O Co. (and affated subsdares)
Staney, Wam
Stern, son L. S.
Stockton, . W., D. . . Rversde akng Co.5_
Strecker, Lous
Suffok erks, Marguerte yde 6
Sutana O Corporaton (Deaware).
Sunset-Luce Co
Sutcffe Co., The
Swan, Sherwood
Swastka O Gas Co
Tabott, athcrne ., estate of 1
Tabot t et a., arod ., e ecutors of estate of
atherne . Tabott1
Tayor et u ., arden F.7
Terhunc, Wesey .
Thatcher, Lester ., transferee of estate of Frank O.
urrdge
Thatcher et u ., Thomas
9 7C8
9391
102271
95003
92177
100036
93331
93232
93231
988
98293
92588
97917
972 7
9 785
9 786
9 78
9 820
9 821
88772
88773
86516
96558
9313
101627
96038
81 17
93257
90078
90079
9396
9 235
101190
90861
97128
97128
99262
9389
93335
103835
3
0
. ,
1
:ss
3
0
0
0
2
:
0
r.
1
3
3
1
1
3
1
0

3
0
0
2
1
1
0
2
2
.
0
0
0
state ta decson.
Tror nonacquesccnce pubshed n Cumuatve uetn 1939-1 (Fort 1), page CO, wthdrawn.
I Gft ta decson.
cquescence reates ony to the Issue. Is the pettoner ta abe on the ncome of a trust whch was created
for the support and mantenance of hs wfe and mnor chd
Un|ust enrchment ta decson.
cquescence on the foowng ssue s as to resut ony: In determnng the net ncome of a trust cur-
renty dstrbutabe to the benefcares, shoud there be ncuded the rent due under a ong-term ease, the
essee havng mproved the premses wth an offce budng whch woud become the essor s pro crty on
forfeture, the trust on the accrua bass havng accrued the rent but aso havng charged t to a reserve for
uncoected rents
cquescence reates ony to the Issue whether gans were reazed n 1936 or n 1937 from saes made on
the ast two days of December, 1936.
G
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1
3
-
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1
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2
1

2
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:
1
3

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13
cqttescences Contnued.
Ta payer.
Totson, Frank F., estate of 1
Totson et a., Isabee I., e ecutors of estate of
Frank F. Totson 18
Tmmerman, Lous F
Tte Guarantee Trust Co. et a., e ecutors of es-
tate of Lucy S. Scheffen.
Todd, Wam R_._
Tomfohr, Pauyn ._. --
Tonnngsen Trust, ohn and Paune
Torney, eannette Wrght, admnstratr of estate
of Me Langey Wrght1
Traser, Rchard ., estate of1
Trevor, my
Tuey, ddson L., estate of
Tuey, esse ., trustee of estate of ddson L.
Tuey --
U.
Unon Guardan Trust Co
Unon Shpbudng Co., aeged transferee.
Unted States Fdety Guaranty Co
Unversa Motor Co
Unversa Wndng Co
U. S. Industra coho Co. (W. a.)s
aey Lumber Co. of Lod
aey Tractor qupment Co.
auaton Servce Co., The
W.
Water, Wam .
Warrck, Dupuy G ---
Washngton Raway ectrc Co.
Watkns, Forence
Wegeforth, Le S -
Wengarten, Inc., .
Weder, r., ames F
West, ames
Wheeer, een vans 7
Whtthorne, W. R., estate of
Wco , se .9...
Wco , Gay ord P. ..
Wco , Mabe I.8. ---
Docket
No.
100563
100563
96317
99961
101312
98037
99280
99579
91958
89820
99190
99190
9 687
100025
91398
98503
99752
8735
90713
9071
100 21
95878
96373
97537
99162
98689
92 35
1006 0
9 708
99707
95005
101 0
95528
101189
96830
96831
96827
oard of Ta ppeas.
oume.


2



3
3
1
0


11
8
0
3
39
2
3
2
1
2

0
3
2
I
1

2

3
3
3
Pace.
6
6
188
137
776
730
37
551
228
12 0
56
56
1306
11 3
1010
1
962
1323
23
311
811
9 1
1068
12 8
900
633
798
686
1159
2 6
123
931
931
931
1 state ta decson.
1 cquescence reates ony to the deductbty of attorneys fees from gross estate.
1 cquescence reates ony to the oard s mathematca formua for apportonment of the dvdend credt
between the estate and the dstrbutees.
Gft ta decson.
cquescence reates ony to questons Invovng the rates of deprecaton aowabe durng pror years
n estabshng the bases of certan assets sod or abandoned, and s as to resut ony.
1 cquescence reates to the ssue whether pettoner s entted to deduct as a oss the sum of 20, 13.80
representng ts nvestment n certan cense agreements coverng the use of a merchandsng system.
cquescence reates to a ssues e cept as to the deductbty of attorney s fees and abstract fees n-
curred Incdenta to the estabshment of forfeture of a ease and obtanng repossesson of the eased premses.
cquescence reates ony to the ssue. re the pettoners ta abe n 103 as benefcares
wn o George . Wco upon Income earned n 193 by the estate durng admnstraton
G
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2
0
1
3
-
0
1
-
2
1

2
1
:
1
3

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1
cqckscfkces Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Wson, ohn P. .
Wson, Morrs
Wnston ros. Co.2
Wnthrop, eekman 3
Wocott, Frank ...
Wof, dth __
Wood, zabeth
Wood, Orrn G. 5
Woods Lumber Co 6
Word, nna
Word, T. T
Word Suppy Co., T. T
Wrght, Me Langey, estate of7
Wyman et a., rthur M., trustees of Wvman
udng Trusts No. 1 and No. 2
Wyman udng Trusts No. 1 and No. 2
Y.
Young, Du os
931 0
9802
59270
79850
100008
92 29
9500
92 89
97 7
935 3
935 2
935
99579
10 238
10 239
10 238
10 239
783 5
2
2
29
36
2
1
1
0
I
1
1
1
3
5
5
3
1 cquescence reates ony to the ssue, Where ta payer creates a trust for the fetme of hs adut daugh-
ter, s the trust ncome ta abe to the grantor under the provsons of secton 166 of the Revenue ct of 193
2 Pror nonacquesccnco pubshed n Cumuatve uetn I11-2, pace 38 (193 ), wthdrawn.
Nonncquescence pubshed n Cumuatve uetn 1937-2, page 56, wthdrawn.
Gft ta decson.
cquescence reates ony to the ssues nvovng (1) the vauaton of 3S8 shares of rown Paper M
stock, and (2) the queston whether the renqushment of a power to prevent future amendments to a trust
nstrument consttutes a compete gft.
e cquescence s as to resut ony wth respect to the ssue. Were the operatons of the pettoner, the
Woods Lumber Company of Tennessee, and the Woods Lumber Company, Inc. of rkansas, the
operatons of a snge ta abe entty, so that the oss sustaned by the rkansas busness coud be used to
reduce ta abe ncome of the Tennessee corporaton
7 state a decson.
cquescence reates ony to ths ssue, Was the e change of certan certfcates of ownershp In a trust
for underyng portfoo stock represented there by an e change of dfferent assets, resutng n a capta oss
Prevous nonacquesccnco pubshed n Cumuatve uetn -2, page 51 (1936), wthdrawn wth respect
to ths ssue ony.
The Commssoner does NOT acquesce n the foowng decsons
of the Unted States oard of Ta ppeas:
Ta payer.
Docket
No.
oard of Ta ppeas
oume.
bbott, ohn, e ecutor of estate of Rchard .
Traser 1
bcson et u ., acob
beson, Lester
cme reweres (transferee) .
dams, enne rrott
dams, Mabe G.2
ffated nterprses, Inc.3
91958
95102
95103
101296
98106
101820
96603
1


3


228
98
98
721
08
1 Nonacquescenoe reates ony to that part of the Roard s opnon whch hods, wthout supportng
evdence, that gans on the sae of corpus of the estate consttuted ncome avaabe for dstrbuton to the
benefcares.
(ft ta decson.
Nonaoqucscenco reates onv to the ssue, Is the pettoner sub|ect to surta as a persona hodng com-
pany under sectons 351 of the Revenue cts of 193 and 1936
G
e
n
e
r
a
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e
d

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t
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)

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2
0
1
3
-
0
1
-
2
1

2
1
:
1
3

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#
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15
Nonacquescences Contnued.
Ta payer.
I ocket
No.
oard of Ta ppeas.
oume.
abama sphatc Lmestone Co.
Ueu, . Wadegh, estate of
en, ohn
en, r., et a., ona
en, r., et a., ona, e ecutors..
en et a., ctor
ng, Noyes ., estate of
mbrose et u ., W. D
mercan Lberty O Co.2
mercan Lght Tracton Co
msco-Wre Products Cor|wraton, transferee
ppeby, dgar S., estate of.
ppeby et a., dgar T., e ecutors of estate of
dgar S. ppeby --
ppeby, ohn S.1
rmour, Lota S
tkns Co., . C
tknson, Wam G. (aso known as Pau Cava-
nagh)
vaou Paper Co., transferor
.
atmore Steam Packet Co
anfed, T. .
ank of merca Natona Trust Savngs ssoca-
ton, e ecutor of estate of, and trustee of trust
e ecuted by, Wam ohn McGowan 5 1
arbour, dth enry
ateman, Lady Maran
eck, Martn 9 -.
edford Trust, dward T
e et a., Maude ., e ecutors of estate of Ida .
Whte --
ernhemer Co., S. . M.
ngham, Mary Ly (Fager), estate of
shop Trust Co., Ltd., e ecutor of estate of ohn
. McCandess
ase, . F
ake, oseph M., admnstrator of estate of arret
Frances Whtng
ohn, Chares .7
91793
93811
93812
o:;so9
93811
93810
87136
957
957 5
.IS-1S7
98 88
9723
100098
93886
93886
9 080
/ 88151
93150
99196
95500
101162
102559
93313
98688
99999
100967
10071
98766
99 39
97260
93575
88978
9 985
979 3
9829
92817
95953
1
1
11
2
3
2

1
11
1
1

2
3
11
2
3
1
3
3
2
1
1
0
2
2

3
state ta decson.
Nonacquescence reates to a ssues e cept the ssue, Dd the respondent err n ncudng n pettoner s
consodated Income for 1932 and 1933, sub|ect to depeton, the sums of 25,727.65, 27, 21.09, and 0, 5.27
whch pettoner s affate, the Woford Producton Co., pad durng sad years to owners of o payment
contracts on ts I nkston ease
Nonacquescence reates to a ssues e cept the ssue wth respect to the 150 added by the Commssoner
to the pettoner s ta abe ncome.
Nonacquescence reates ony to the ssue, Shoud the ta abe ncome of the pettoner for the year 1935
be ncreased, for the reason that a certan oss sustaned durng that year by the partnershp, of whch he s
a member, resuted from the short sae of property, wthn the meanng of secton 117(c) of the Revenue
ct of 193
Nonacquescence reates ony to the Issue, Dd the Commssoner err n ncudng n gross estate the tota
agreed vaue of the two parces of rea property nvoved
Gft ta decson.
Nonacquescence reates ony to the ssue, Dd the oss resutng from the e changes of and contracts
for ome Owners Loan Corporaton bonds consttute a capta oss
G
e
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a
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)

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2
0
1
3
-
0
1
-
2
1

2
1
:
1
3

G
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16
TConacqctercences Contnued.
Ta payer.
ondhoders Commttee 1.
Ronfs, F. G., estate of -
onfs Trust, F. G.1 --
onfs et a., een G., e ecutors of estate of F. G.
onfs 3
ranch, Caude R
rdgeport Cty Trust Co. et a., The, e ecutors of
estate of Noves ., ng s
rsto, ennct . ..
rown, ntonette
rown, Wam Maynard
ruckner, rnod
uck, sworth
urnett, O. L -
urnqust, ert
Caforna rewng ssocaton.
Cannon aey Mng Co
Carng odng Co_
Carro et a., ohn ., e ecutors of estate of Forence
L. Tsdae
Carte Ms, Inc
Casperscn, Freda R
Caughey, Caroyn G., estate of 3
Cavanagh, Pau (aso known as Wam G. tkn-
son)
Cavett et a., ., e ecutors of estate of W. T. aes 5.
Centra anover ank Trust Co., e ecutor of
estate of W. M. L. ske
Centra Loan Investment Co.
Chamberan, Park
Chaparra O Co
Chase, Gertrude
Chase Natona ank of the Cty of New York,
The, trustee under agreements wth mercan
Depostor Corporaton
Cary, P. T. (Patrck).
Cohen, Moses
Coe, Rufus S
Coona Trust Co. et a, e ecutors
Coumba O Gas Co.7
Coumba vcr Paper Ms...
Cook Drng Co.
Pocket
No.
90 52
90 86
90 87
91501
931 8
91501
9 2 8
87136
96289
977 3
97836
97507
93330
902 8
101259
101295
96330
86776
87378
88616
97S 2
97698
92765
99655
95500
93208
102055
82565
8S067
97552
97902
9385
93855
93856
93857
90 96
9816
9658 )
936 8
9062
977 0
97938
82231
oard of Ta ppeas.
oume.
0
881
0
1079
0
1085
0
1079
0
10 3
1
191
2
263
2
693

881
2
3
1
99
0
60

8
3
721

763
1
93

881
2
89
0
758

385
2
1037
0
12

227
39
981
1
10
3
57

39
1
30
2
11 2

709
2
1110
1
213
1
38
3
263
3
10
38
291
1 Nonacqucscence reates to ssue pertanng to bases for deprecaton of pettoner s assets.
Prevous acquescence pubshed n Interna Revenue uetn 19 0-15, page 1, wthdrawn.
state ta decson.
Gft ta decson.
Nonacquescence s ony as to the ssue, Ts the cash receved by pet toners n 1935 from the Loca Federa
Savngs and Loan ssocaton, whch s admtted to be ncome, ta abe as ordnary ncome or as capta
gan
cquescence pubshed n Cumuatve uetn 1939-2, page 6, wthdrawn.
Nonacquescence reates to ssue pert anng to aocaton of cost of equpment on the property In queston.
Nonacquescence reates ony to the ssue whether the pettoner s entted to deduct the costs ncurred
In drng wes. Pror acquescent res pubshed n Cumuatve uetn 1939-2, page 8, wthdrawn as to ths
ony.
G
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n
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a
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(
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Y
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U
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v
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t
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)

o
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2
0
1
3
-
0
1
-
2
1

2
1
:
1
3

G
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/


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3
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9
6
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0
6
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s
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_
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#
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17
Nonacqt|escences Contnued.
Ta payer.
Corporate Investment Co
Corpus Chrst Termna Co.
Covngton et u ., George W.
Credt ance Corporaton.
Crchton, ate
Crown Zeerbach Corporaton, transferee.
Cushman, Louse C, transferee of estate of Mary
W. Cushman 1
Cushman, Mary W., estate of .
D.
Daas Tte Guaranty Co.1..
Dauth et u ., ohn P
Day, Gertrude ucknc, estate of 1
Deerng, Frank C, estate of
Deerng et a., . oseph Godfrey, e ecutors of the
estate of Frank C. Deerng
Deaware Termna Corporaton
DeLong, Davd .
Denhohn Mc ay Co --
Denver Natona ank et a., tmstees u/w F. G.
onfs
Donahue, Mrs. esse W.
Downng et u ., Rchard
Dunnng, enry .
Durkhemer, S. F
.
dson ros. Stores, Inc.
dwards Drng Co.T
as, dna
mhrst, Dorothy Whtney.
ston Co., Ltd
verson Corporaton 8.
y Trust, Donad
Docket
No.
78363
88103
98283
100561
97025
101161
101163
101166
101168
,101170
92881
92882
92883
90 66
/ 96882
96883
/1006
U006 5
95996
95996
86105
10126
89606
931 8
92980
99171
92629
95209
/10 2
110 25
75931
90827
850 0
85880
95298
9660
93281
103 72
eard of Ta ppeas.
oume.
0
38
2
2
2
3
0
0
0
2
1
0
0
0
3
39
0

3
1
11
5
35
1
1
2
0

1 state ta decson.
Nonacquescence reates ony to the ssue nvovng the ta abty of an amount of 0,000 transferred
from Premum reserve account to Undvded profts account pursuant to resouton of the board
of drectors on uy 5, 193 .
1 Nonacquescence reates ony to the ssue nvovng the amount of gan recognzabo n 1036 upon the
recept of cash and stock n the Sundstrand Machne Too Co. for stock n the mercan roach Machne
Co.
1 Prevous acquescence pubshed In Interna Revenue uetn 19 0-16, page 1, wthdrawn.
1 Nonacquescence reates ony to the Issue whether the Commssoner erred n ta ng the ncome of an
rrevocabe trust to the grantor, the pettoner.
Nonacquescenco reates ony to the ssue whether Mrs. Irma Downng s abe for any part of the de-
fcency.
1 Nonacquescence reates ony to the ssue whether the pettoner s entted to deduct the costs ncurred
In drng o wes. Pror acquescence pubshed n Cumuatve uetn 1939-1, page 11, wthdrawn as
to ths ssue ony.
8 Nonacrrnescence reates ony to the ssue, Was the ncome resutng from tho recept of surrendered
coatera n e tngushment of a debt persona hodng company ncome
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18
NoN C rFscrcNC Contnued.
Ta payer.
oard of Ta ppeas.
oume.
Page.
v Trust, Roand Tavor
y, III, Trust, Wam Newbod
qutabe Lfe ssurance Socety of the Unted
States, The1
rb et a., rthur L., e ecutors of estate of Ges W.
Mead
states dmnstraton, Inc., admnstrator of
estate of Zachary Smth Reynods 3
vans, Mary oyd
vans, Mary .
F. . . O Co
Facon Co
Farmers Gnners Cotton O Co
Fdety-Phadepha Trust Co. et a., trustees and
transferees of estate of Gertrude uckne Day 3.
Frst Mortgage onds 5
Frst Trust Depost Co. et a., guardans.
Fske. W. M. I.., estate of
Femng, Mrs. nna Maud
Femng- mbe Corporaton a.
Femng, Wam 8
Fower et u .. ohn O
Frank Trust of 1927, Isaac W
Frank, Wm. ., trustee of Isaac W. Frank Trust of
1927
Frazer, Frederc
Frost Co., G. C, a corporaton 7
Gadan Co., Ltd
Gardner, . Ws
Getz et u ., Oscar
Gannn et u ., . P..
Gmore, nna
Goss Gos , Lucy M. .
G.
103 70
103 73
/ 8929
93805
97566
86395
97 32
95527
92960
92001
93 36
1006
90 52
90 86
90 87
907 9
90750
90751
102055
92958
9 690
92959
92957
9 689
91162
9827
9827
91 12
100
96605
92115
9511
87127
87128
97835
90391



1
2
2
2
1
1
1

0
1

1
1
1
0


1

2
1

2

1
37(1
370
293
21
1 5
s.-.
2 6
130
1128
1083
62
881
107
227
9 0
9 0
9 0
1293
93
93
1 0
9
208
679
98
5 6
881
1239
1 Nonacfuesccnce reates ony to the ssue. May the company, on a cash recepts and dsbursements bass,
deduct guaranteed nterest pad n the ta year under settement optons e ercsed by the benefcary, when
such nterest had accrued n pror years
a (ft ta decson.
1 stste ta decson.
Nonacquesccnce reates ony to the deductbty of attorney s fees and abstract fees ncurred ncdenta
to I he estabshment of forfeture of a ease and obtanng repossesson of the eased premses.
1 onaequescencc reates to ssue pertanng to bases for deprecaton of pettoner s assets.
ormequesccnce s ony wth res|wet to the hodng that the pett nners woud reaze no ta abe ncome
from tn e change of ther o, equpment, and persona property nterest for contngent o payments unt
they recovered the cost of the e changed property from the o payments receved.
7 Nmtcquescence reates ony to the ssue, Dd the e cess of far market vaue of the od budng at the
tme of e ecuton of the ease, and the far market vaue of the new budng at the tme of the canceaton
of the ease, consttute a proper offset to the cash receved Pror acquescence pubshed n Interna Reve-
nue uetn n 19-11-33, ptfe 1, wthdrawn.
1 Nonacquesccnce reates ony to the ssue. In the case of a gft of securtes n trust, shoud the trust be
treated ns the donee, resutng n ony one e cuson, or shoud the benefcares be treated as donees, resutng
n one e cuson for each benefcary
G
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19
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Goodman, dwn
Greene, . Crawford, guardan of estate of ce .
Lester 1
Greve, Wam M
Grnne, Francs rowne
Grote et u ., Ren
Guaranty Trust Co. of New York, e ecutor of
estate of enry W. Putnam
.
ague, Mary Lews.
aes, George .s
aes, Mrs. Oneta
aes, r., W. T.
aes, W. T., estate of
awe, Water S --
asev, Lan ohnson, e ecutr of estate of
Rchard emmons asey
asey, Rchard emmons, estate of
ardwck Trust, nta Mar|ory..
ardwck Trust. Chares _
ardwck, r., Trust. Gordon -.
ardwck Trust. Tavor
artford-Connectcut Trust Co., The, e ecutor of
estate of Mary W. Cushman
askete Manufacturng Corporaton
eer, dward .
ercues Motor Corporaton
ckman, O. enneth --
ghand, Cec ., e ecutor of estate of rg L.
ghand
ghand Farms Corporaton 5
ghand, rg I.., estate of -.
Stores, Inc., . G --
offman, atherne M
offman, W. W
offman et u ., W. W
oster, ohn R
ooper, ames P., estate of a
ooper, Mathde ., admnstratr of estate of
ames P. ooper 2
opknson, Resse
orner, ua C, e ecutr of estate of Wam
Macpherson orner
orner, Wam Macpherson, estate of 3
ughes Too Co
87799
93 0
96315
97522
105092
9 2
9 3
/102089
102690
103355
93210
93209
93211
93208
102 70
96 0
96 0
103 69
103 7
103 71
103 68
92882
100271
9 79
9 795
92225
103767
98726
95690
98726
10520
967 1
967 2
92 1
9 998
85776
85776
9701
102931
102931
90002
1
1
2

1
5
5
0

2
2
1



0

1
0

3
2
3
I
10
t
1
1
2


0
72
515
1 2
1286
2 7
517
10
12
7 0
607
607
370
370
370
370
9 7
636
1020
998
12 2
598
131
598
1182
59
851
11
11
580
1136
1136
962
1 Gft ta decson.
state ta decson.
Nonacquescence s ony as to the ssue. Is the cash receved by pettoners n 1935from the Loca Federa
Savngs and Loan ssocaton, whch s admtted to be ncome, ta abe as ordnary ncome or as capta pan
1 Nonacquescence reates to the ssue whether pettoner was ta abe on the Income derved from cert n
securtes paced n certan agency accounts wth a bank n pettoner s name as trustee for hs mnor chdren.
Nonacquescence reates to a ssues e cept the ssue, Dd the pettoner reaze ta abe gan as the resut
of recevng an award for compensatory damages
8 Nonacquescence reates ony to the ssue. Was the sum of 132,3 5.73, representng the net proceeds of
certan fe nsurance poces assgned by the decedent to a certan trust, propery ncudbe n the gross
estate; and. f so, may the sum of 10,000 be e cuded under the provsons of secton 302(g) of the Revenue
ct of 1926
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20
Nonacquescencf.s Contnued.
Tn wyer.
Docket
No.
oard of Ta ppeas.
oume.
arvs, r., mue, guardan of Wam D. P.
arvs
arvs, Wam I). P., an nfant
ewe Mnng Co
ohnson County Reaty Co
ohnson, are F
ohnson et a., Thomas M., trustees
ohnston, atherne S., estate of 1
onas, Louse
.
affe et a., arod, soe hers of estate of Leopod
affe 1
affe, Leopod, estate of1
ansas Cty, St. Lous Chcago R. R. Co
atznger Co., The dward
eogg, Cornea . W., e ecutr of estate of
Frederck R. eogg 1
eogg, F. W
eogg, Frederck R., estate of 1
enan et a., Wam R., r., trustees u/ v Mary
Ly (Fager) ngham
ennedy Mnng Mng Co
esebach et u ., enry
an Co., . L.2
mbe, ay --
mbe, Mrs. ema .
eberg, ce G. .
eberg, ce G. ., e ecutr of estate of Robert
. eberg, Sr.
eberg, Sr., Robert
yce, . S., estate of
yce, M. P., admnstrator
app, George O
resge Department Stores, Inc
estate of 5.
L.
Lamont, zabeth .
Lane-Wes Co
Lester, ce ., an ncompetent, estate of
Lpe, Gordon C
Lpe, Suzanne
Lpe, r., Ward C.
99227
99227
992f 6
9631
97388
86776
87378
88616
86395
91010
100526
100526
9 886
102 21
891 3
95135
891 3
9 985
99507
98S97
98691
/ 92956
1 9 67
/ 92955
I 9 673
86178
86178
86179
9017
9017
91699
101906
97 07
99829
9310
96315
90750
90751
907 9
3
3
3
1
13
1
2
0
I

2
1
0
2
0
0
3


1
L
3
3
13
1
1
0

3
5
1
1

Ltte Gem Coa Co 101112
state ta decson.
Nonacquescence reates ony to the ssue, Dd the pettoner reaze ta abe ncome upon the canceaton
of a porton of ts mortgage ndebtedness on certan property
Nouacquescence s ony wth respect to the hodng that the pettoners woud reaze no ta abe Income
from the e change of ther o, equpment, and persona property nterest for contngent o payments unt
they recovered the cost of the e channed property from the o payments receved.
Nonacqucsrence reates ony to the ssue nvovng a bad-debt deducton of 20 .60.
Gft ta decson.
G
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1
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21
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
M.
Ma|estc O Corporaton1
Marborough ouse, Inc., et a. _
Marborough Investment Co.1
Marsha, erbert..
Marsha, Margaret Whte (formery Margaret
Whte Wood)
Mason et a., Sam ., coadmnstrators of estate of
Sas . Mason
Mason, Sas ., estate of
Masterson, nna za
McCandess, ohn ., estate of -.
McCarthy, mmett . -. -
McCormack, Wam .
McGue, G. Percv, estate of
McGue, M. dth, e ecutr of estate of G. Percy
McGue
McGovern, Inc., Patrck
McGowan, Wam ohn, estate of, aso trust
e ecuted by
Mcntyre, Wnfred Wheeer
McLean et u ., Marrs
Mead, Ges W., estate of
Merdan Thrteenth Reaty Co
Mesta, L. W - -
Mche, Morrs
Mchgan Sca Co
Mbank, Dunevy 7
Mooney ectrc Co.
Morehead, atharne oyd
Morre, ohn dgery, estate of
Mueer Co., C. F
Mutua Savngs Loan ssocaton, Inc., of Nor-
fok -
N.
Natona ank of Commerce of San ntono, Te .
Natona ank of Commerce of Seatte
96380
90 52
90 86
90 87
90 52
90 86
90 87
99559
969 8
1009
1009
93517
979 3
101607
9605
98 6
98 6
918 6
100967
103221
f 91170
91171
97566
101968
96531
97311
96786
93050
90072
95 1
103776
/ 8596
1 96331
101321
9316
89720
2
0
0
1
3
3
3
2
1

3
1
1
0
3
5
1
1

2
3
1
1
2
2
3
0

0
0
659
881
881
106
99
813
813
19
1309
17
92
1186
1186
705
695
67
1266
2
865
933
1036
511
101
78
851
651
195
120
70
72
1 Nonacquescenee reates ony to the ssue, Is the pettoner entted to a 1935 oss deducton for the unde-
precated cost of certan casng and other ease equpment whch coud not be removed from a certan o
we whch the pettoner ceased to operate durng that year, because such operaton had become unproft-
abe
3 Nonacquescenee reates to Issue pertanng to bases for deprecaton of pettoner s assets.
Gft ta decson.
state ta decson.
1 Nonacquescenee reates ony to the deductbty of 17,850 under secton 23(e) of the Revenue ct of
1936 for aeged oss of the pettoner s nterest n certan rea property.
6 Nonacquescence reates ony to the ssue, Dd the Commssoner err n ncudng n gross estate the tota
agreed vaue of the two parces of rea property nvoved
7 Nonacquescence s ony wth respect to the ta abty of the ncome from the so-caed short term trusts.
Nonacquescence reates ony to the ssue, Is the pettoner entted to a credt under secton 26(c)2 of
the Revenue ct of 1936 n the amount of 13,810, representng 2 per cent of the argest amount of bonds at
any one tme outstandng durng 1936
cquescence as to one ssue pubshed n Cumuatve uetn 1939-2, page 26, wthdrawn.
G
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22
Nonacqtkscencks Contnued.
Ta payer.
Natona ank of Topeka, ans., admnstrator of
estate of ohn dgery Morrc
Natona Paper Products Co., transferor
Nebraska rdge Suppy Lumber Co
Neustadt et a., gnes, trustees u/w Sgmund
Neustadt
Neustadt, Sgmund, Trust under w of
New McDermott, Inc., The
Newport Industres, Inc
Newton, r., ames
Newton Trust, ames
Ncoa, arry T.1 --
Ortz, ce duPont .
Paefc Grape Products Co.
Page O Co
Pamer. Careton II
Paumgarten, se Rdde 3
Perkns. aph
P- Croup
Phoen State ank fe Trust Co.. trustee under
deed of trust from Mary . Cushman, as trustee
and transferee 5
Pedras N egras roadcastng Co
Permon Corporaton
Prce et u ., . .1
Prouty, Ove II.3
Putnam, enry W., estate of.
P.
Reaty Operators, Inc
Rcbsamcn Motors, Inc
Reynods, Inc., P. C. ...
Reynods, P. ., estate of s
Reynods, Zaehary Smth, estate of 5
Rhodes. Mame 0.. estate of 5
Rhodes et a.. ugh I)., admnstrators of estate of
Mame D. Rhodes
Rchardson. Lunsford 3
Robnette, Meta dde 3
Ronrco Corporaton
92SS3
7():
100371
101200
9610
/102689
1102690
92387
99532
9801
98017
8639
86395
9128
9128
85905
103009
103859
oard of Ta ppeas.
No.
oume.
Page.
103776
3
651
101165
3
5 1
908 6
0
0
99935
3
8 8
99935
3
8 8
99360

1035
92331
0
977
97325
2
73
9732
2
73
93S21
98188
2
899
93159
2
173
97110
2
91
90515
1
9567
1
952
96186

8985
0
1001
103010

701
96126
1
1225
9S835
3
10 1
0
3
3

1
5
10


2
2
1
1
39


9 7
297
770
8
27
517
1051
36
356
1 5
1 5
62
62
927
701
1130
1 Nonacquescence reates ony to the ssue, Is the ncome of a trust pad to the pettoner s dvorced and
remarred wfe ta abe to hm, as the grantor
1 Nonacquescence reates to a ssues e cept the ssue, whether the pettoner s entted to any deducton
W the resut of the satsfacton of the defct e stng n her husband s brokerage accounts at. the end of the
year 193 .
Oft ta decson.
Nonacquescence reates ony to the ssue, d the pettoner sustan a oss n the amount of 13,963.50
on the sae of second preferred and common stock of the Cutch Machne Foundry Co.
state ta decson.
1 Nonacquescence reates ony to the ssue whether R. C. Reynods. Inc., reazed ta abe gan upon the
purchase of shares of ts own stock and contracts reated thereto n 1935.
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23
Nonacc|otescbnces Contnued.
Ta ycr.
Ross, Frank W
Rowan Drng Co., transferee 1
Rubnsten, Wton 3
Rust, r., et a., . L., e ecutors of estate of .
Rust
Rust, . L., estate of
L.
S.
Safe Depost Trust Co. of atmore, trustee under
ws of R. . Reynods and atherne S. ohns-
ton, and deed of atherne S. ohnston 5
Sanford Cotton Ms, Inc.
Santary Products Corporaton, The, transferor
Schmdapp, Car .3
Schwabacher, bert
Schwabacher, ames
Schwabacher, May
Schwabacher, Sophe D
Seerey, ohn
Sheden Land Co.
Sherman, Dors ond1
Sherman, ohn ., estate of
Sherman, atherne M., survvng wfe of ohn .
Sherman
Sherman et a., atherne M., e ecutors of estate of
ohn . Sherman
Smth, W. ncke- - ---
Sobe, Inc., N
Soomon, mea3
Spor Co., Inc., C.
Spreckes, doph
Sprngfed Industra udng Co., The
Stacy, Mar|ore Lpe
Stanart Co., Ltd -
State-Panters ank Trust Co
State Street Trust Co. et a., admnstrators of
estate of Francs rowne Grnnc3
Sten, Nathan
8tern, son L. S.
Stewart, ames R.8
Straus, Fredrch
Straus, Meer
Straus, Mortz
Strong Manufacturng Co., The
Sun Ppe Lne Co
Sweet, Forence M
Docket
No.
Lorenzo W., estate of.
91107
98532
95922
95880
95880
8639
95218
101169
98895
100865
101269
10086
101268
97673
93196
95300
1030 1
1030 1
1030 1
/ 93663
10288
93822
97937
9035
9 621
95639
S7300
99 20
96606
10525
105092
83178
9313
89950
83181
83180
83179
95626
9876
101786
936 8
eard of Ta ppeas.
oume.


1
11
1
2
2
3
3
3
3
3
3
3
2
11




0
3
0
1
38
3
2
5
11
0
0
39
0
11
2

1
swope,
Nonacquescence reates ony to the ssue, Is the pettoner s transferor entted to depeton upon amounts
receved n 1932 from o payments acqured n 1931 for drng wes, the entre cost of whch was deducted
and aowed n ts 1931 ncome ta return
Gft ta decson.
state ta decson.
See 0. C. M. 2210 (page 20 , Cumuatve uetn 19 0-2).
1 Nonacquescence reates ony to the ssue whether pettoner s entted to a deducton for an asserted
oss on an aeged sae of certan and to another corporaton.
Nonacquescence reates ony to the year 1936.
7 Nonacquescence reates ony to the ssue, Where termnaton of a trust coud occur ony at the eecton
of the grantor wth concurrence of attorneys who represented two crscns nterested n the trust, Is the
nterest of the attorneys a substanta adverse Interest
Pror acquescence pubshed n Cumuatve uetn 1939-1 (Part I), pace 3 , wthdrawn.
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2
onacqcksckncks Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Pace.
Tayor et u ., arden F.1 -
Tayor, Roand, trustee of nta Mar|ory ard-
wck Trust, Roand Tayor y Trust, Gordon .
ardwck, r., Trust, Donad y Trust, Wam
Newbod y, III, Trust, Chares . ardwck
Trust, and Tayor ardwck Trust
Techncraft ngneerng Corporaton
Thomas, Martn I) :
Thompson, Mary ., e ecutr of estate of Wam
G. Thompson 2
Thompson, Wam G., estate of 2
Totson, Frank F., estate of23
Totson et a., Isabee I., e ecutors of estate of
Frank F. Totson
Tsdae, Forence L., estate of
Tte Guarantee Trust Co., trustee under deed of
trust from dward T. edford, dated December 1,
1928
Tobn Packng Co., Inc., The
Towne, Wam Stark
Traser, Rchard 10., estate of
Trans Caforna O Co., Ltd.3
Trce .Securtes Corporaton
U.
Unon Trust Co. of the Dstrct of Coumba, The
e ecutor of estate of Caroyn G. Caughey 2
U. S. Industra coho Co. (W. a.) .
W.
Waker, Wam T.
Warner, ack L. 7
Washngton Pup fe Paper Corporaton, transferor.
Watson, rchbad R
99262
103 68-
103 7
99830
10087
96358
96358
100563
100563
978 2
97260
99 83
99197
91958
73111
85176
99655
90713
9071
92600
97 01
10116
s7s7::
880 8
89650
99707
97312
922 5
978 0
978 1
97837
3
11
15

11
1
-I 1


2
13
2
1
37
11

2
0
2
13
2
I
3
2



563
370
175
735
901
901
6
6
881
7 8
6 2
10 6
228
119
306
385 .
1323
702
95
5 1
52
798
1036
225
881
881
881
Wcngarten, Inc., .
Wenstock, Ma .
Wenger, Mary
Webster, . esser
Webster Trust, Fanne S
Webster Trust No. 1, Warren
Nonacqueseence reates ony to the ssue nvovng the e change n 193o of GOO shares of Pressed Stee
Car Co. (N. .) for sock and rghts n Pressed Stee Car Co. U a.).
statc ta decson.
Nonacqueseence reates ony to the ssue: Whether the pettoner has overcome the presumpton that
certan (rfts made by the decedent to the natura ob|ects of hs bounty wthn one year of death were made
In contempaton of death.
Nonacqut scenoe reates ony to that part of the oard s opnon whch hods, wthout supportng
evdence, that gans on the sae of corpus of the estate consttuted ncome avaabe for dstrbuton to the
benefcares.
Nonacqueseence reates ony to the ssue. Dd the pettoner ncorrecty accrue on ts books at the end
Of 1931 the amount of t, .r .78, representng unpad andowner s royates Pror acquescence pubshed
In Cumuatve uetn 193S-1, page 31, wthdrawn.
Nonacqueseence reates ony to the ssue. Is the ta payer entted to a deducton for rent pad for the
Dae of vesses of a subsdary whch t operated under a contract provdng that t shoud mantan the
vesses and make good deprecaton
7 fcft ta decson.
Nonacqueseence reates to the Issue whether pettoner s entted to a dvdends pad credt of 27,180
representng premums n new preferred stock and cash on od preferred stock retred n connecton wth
ft nonta abe reorganzaton n so far as the ssue was decded aganst the Commssoner.
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25
Nonacquescewceb Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Webster, r., et a., Warren, e ecutors of estate of
Warren Webster, Sr
Webster, r., et a., Warren, trustees of Fanne S.
Webster Trust
Webster, r., et a., Warren, trustees of Warren
Webster Trust No. 1
Webster, r., et u ., Warren
Webster, Sr., Warren, estate of
West Producton Co
Western Wa ed Paper Co. of Caforna, transferor
Wether, Samue Prce, e ecutor of the estate of
Gertrude uckne Day 1
Wheeer, een Fvans 2
Wheeer, Robert T
Whte, Ida ., estate of
Whtng, arret Frances, estate of
Wco , se .
Wco , Gayord P.3
Wco , Lucan T
Wco , Mabe I.3 -
Wson, Frances S
Wson, ohn
Wood, Orrn G.5
97839
978 1
97837
97838
97839
88997
101167
1006 5
95528
103222
93575
92817
96830
96831
80393
96827
999S0
931 0
92 89





1
3

2
;
1

3
3

13

2
0
881
8S1
881
881
881
10 3
5 1
52
2 6
67
525
1306
931
931
373
931
583
1260
90
1 state ta decson.
Nonae/uesoenoe reates ony to the deductbty of attorney s fees and abstract, fees ncurred ncdenta
to the estabshment of forfeture of a ease and ohtanm ro| sscsson of the eased premses.
1 Nonacquesoenee reates ony to the ssue. re the pettoners ta abe In 1935 as benefcares under
the w of mma Lyman Wco u|on Income earned n 1935 by the estate durng admntstmtou
Nonacrueseenoe reates to the ssues. Whether the ncome of a 2-year trust created for the beneft of
the t wyer s adut son s ta abe to the grantor under secton 160 of the Revenue ct of 193 , and whether
the capta gans of a fetme trust created for the beneft of an adut daughter are ta abe to the grantor
under swton 1 7 of the evente ct of 193
Gft ta decson.
Nonaor|uesceoe- reates ony to the ssue, Is the vaue of fe nsurance poces to be determned by
the cost to purchase smar contracts as determned by the Commssoner, or Is the vaue mted to the
cash surrender vaue as contended by pettoner
1611 2 3
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C SS PROFITS T R GUL TIONS 109 , M ND D.
19 1- 3-10880
T. D.5092
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 30.
C SS PROFITS T
Reguatons 109 amended to conform to Revenue ct of 10 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 109 Part 30, Tte 26, Code of
Federa Reguatons, 19 1 Sup. to the Revenue ct of 19 1 (Pubc
aw 250, Seventy-seventh Congress), approved September 20, 19 1,
such reguatons are amended as foows:
Paragraph 1. There s nserted mmedatey precedng secton
30.710-1 the foowng:
Seo. 201. cess Profts Ta Rates and Credts. (Revenue ct of
19 1, Tte II.)
(a) Rates. Secton 710(a) of the Interna Revenue Code s amended .
to read as foows:
(a) Imposton.
(1) Genera rue. There sha be eved, coected, and pad,1
for each ta abe year, on the ad|usted e cess profts net ncome, as
defned n subsecton (b), of every corporaton (e cept a corporaton
e empt under secton 727) the ta shown n the foowng tabe:
If the ad|usted e cess profts The ta sha be:
net ncome s:
Not over 20,000 35 of the ad|usted e cess
profts net ncome.
Over 20,000, but not over 7,000, pus 0 of e cess over
r o,ooo. 20,000.
Over 50,000, but not over 10,000, pus 5 of e cess over
100,000. . o,ooo.
Over 100,000, but not over 1,500, pus 50 of e cess over
50,000. 100,000.
Over 250,000, but not over 116,500, pus 55 of e cess over
500,000. 250,000.
Over 500,000 25 ,000, pus G0 of e cess over
500,000.
(2) ppcaton of rates n case of certan e changes. If the
ta payer s hghest bracket amount for the ta abe year computed
under secton 752 (reatng to certan e changes) s ess khan
500,000, then n the appcaton of the tabe n paragraph (1) of
ths subsecton to such ta payer, n eu of each amount, other than
the percentages, specfed n such tabe, there sha be substtuted
an amount whch bears the same rato to the amount so specfed as
the hghest bracket amount so computed bears to 500,000.

(26)
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27
Sec. 202. Deducton of cess-Profts Ta . (Revenue ct of 19 1,
Tte II.)

(e) cess-Profts Credt C arhy-Oveb. Secton 710(c)(1) (defn-
ng the unused e cess-profts credt) Is amended by addng at the end
thereof a new sentence to read as foows: For such purpose the e -
cess-profs credt and the e cess-profts net ncome for any ta abe
year begnnng In 19 0 sha be computed under the aw appcabe to
ta abe years begnnng n 19-11.

Sec. 20 ). Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte II.)
The amendments made by ths tte sha be appcabe ony wth
respect to ta abe years begnnng after December 31, 19 0.
Par. 2. Secton 30.710-2, as amended by Treasury Decson 50 5,
approved May 3, 19 1 C. . 19 1-1, 69 , s further amended as
foows:
( ) y nsertng at the end of that porton of the frst paragraph
foowng tem (c) the foowng new sentence:
In computng the unused e cess profts credt for a ta abe year begnnng In
19 0, the e cess profts credt and the e cess profts net ncome for such ta abe
year sha be determned under the aw appcabe to ta abe years begnnng
In 19 1.
( ) y changng the frst sentence of the thrd paragraph to read
as foows:
The foowng tabes show the e cess profts ta (1) for ta abe years begnnng
after December 31, 1# 9, and before anuary 1, 10 1, and (2) for ta abe years
beg nnng after December 31, 19 0, upon certan specfed amounts of ad|usted
e cess profts net Income.
(C) y changng the headng of the e cess profts ta tabe foow-
ng the thrd paragraph to read as foows:
Tae I Ta abe Years egnnng fter December 31, 1939, and efore
anuary 1, 10 1.
(D) y nsertng mmedatey after the e stng tabe the foowng
addtona tabe:
T u.e II Ta abe Years egnnno fter December 31, 19 0.
Tota e -
cess profts
ta.
d|usted e cess profts net ncome.
Per cent.
10 to 20,000
35
0
5
50
55
60
7,000
50,000 to 100,000
19.000
1,500
116. .500
25 ,000
250,(100 to 5 O,000
500,000 up
( ) y strkng from the frst e ampe 19 0, 25 ,000, 20 ,-
000, 50 per cent, 50,000, and 25 .000, wherever they appear,
and nsertng n eu thereof 19 1, #31 ,000, 25 ,000, 60 per
cent. 60,000, and 31 .000, respectvey.
(F) y changng the frst paragraph foowng the frst e ampe
to read as foows:
d|ustments are requred n the above tabes In the case of corporatons whch
have been through certan ta -free e changes or qudatons (after December
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28
SI, 1939) descrbed n sectons 750 and 752 and whch, as a consequence, have a
hghest bracket amount of ess than 500,000. For defnton and computaton
of hghest bracket amount, see sectons 750(e) and 752. Such ad|ustments are
accompshed by appyng to the appcabe tabe the rato of the corporaton s
hghest bracket amount, ad|usted as provded n secton 752, to what ts hghest
bracket amount woud have been f the ad|ustments requred by secton 752 had
not been made, that s, 500,000. Thus, If the hghest bracket amount of a
corporaton as computed under secton 752 Is ony 300,000, the doar amounts
n Tabe I or Tabe II appcabe to such corporaton w be ony 300-( 00
500,000
or 60 per cent, of the amounts theren set forth. The eft-hand coumn (headed
d|usted cess Profts Net Income ) of Tabe I or Tabe II appcabe to
such a corporaton woud therefore read 0 to 12,000, 12,000 to 30,000, 30,000
to 60,000, 60,000 to 150,000, 150,000 to 300,000, and 300,000 up. The rght-
hand coumn (headed Tota cess Profts Ta ) In Tabe I woud read
3,000, 8, 00,18,900, 5 ,900, and 122. 00; and such coumn n Tabe II woud read
,200, 11, 00, 2 ,900, 69,900, and 152, 00. The mdde, or percentage, coumn In
each tabe woud reman unchanged.
(G) y strkng The tabe from the frst sentence of the second
paragraph foowng the frst e ampe and nsertng n eu thereof
Tabe I or Tabe II, and by strkng n the tabe from the second
and thrd sentences of such paragraph and nsertng n each case n
eu thereof n the appcabe tabe.
( ) y strkng from the thrd paragraph foowng the frst e -
ampe 19 0, 272, 00, 122, 00, 50 per cent, 150,000,
and 272. 00, and nsertng n eu thereof 19 1, 332, 00,
152, 00, 60 per cent, 180,000, and 332, 00, respectvey.
(I) y strkng from the frst sentence of the fourth paragraph
foowng the frst e ampe of the e cess profts ta tabe and n-
sertng n eu thereof of the appcabe tabe.
( ) y strkng 50,000 and 80,000 from the second coumn
of the tabe n the ast e ampe and nsertng n eu thereof 50,-
000 1 and 80,000, 1 respectvey, and by nsertng mmedatey after
such tabe the foowng:
Ths amount s determned under the aw appcabe to ta abe years begnnng
n 19 1.
Pab. 3. There s nserted mmedatey precedng secton 30.711 (a)-1
the foowng:
Sao. 202. Deducton of cess-Pbofts Ta . (Revenue ct of 19 1,
Tte II.)

(c) Computaton of cess-Profts Net Income.
(1) Ta abe years begnnng afteb decembeb s, 19 0.
(a) Secton 711(a) (1) ( ) (reatng to ad|ustment for ncome
ta es n computng e cess-profts net ncome under ncome
credt) s amended to read as foows:
( ) Income Ta es. In computng such norma-ta net n-
come the deducton for the ta mposed by ths subchapter sha
not be aowed; .
( ) Secton 711(a)(2)(C) (reatng to ad|ustment for n-
come ta es n computng e cess-profts net ncome under nvested
capta credt) s amended to read as foows:
(C) Income Ta es. In computng such norma-ta net n-
come the deducton for the ta mposed by ths subchapter sha
not be aowed; .
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( ) COMPUT TION OF Ch IT L , TC., D DrCTTONS.
(1) Secton 711(a)(1) of the Interna Revenue Code Is amended
by nsertng at the end thereof the foowng new subparagraph :
(G) Computaton of Chartabe, tc., Deductons. In deter-
mnng any deducton the amount of whch s mted to a per-
centage of the ta payer s net Income (or net ncome from the
property), such net ncome (or net ncome from the property)
sha be computed wthout regard to the deducton on account
of the ta mposed by ths subchapter.
(2) Secton 711(a)(2) of the Interna Revenue Code Is amended
by addng at the end thereof the foowng new subparagraph:
(I) Computaton of Chartabe, tc., Deductons. In deter-
mnng any deducton the amount of whch s mted to a per-
centage of the ta payer s net ncome (or net ncome from the
property), such net ncome (or net ncome from the property)
sha be computed wthout regard to the deducton on account
of the ta mposed by ths subchapter.

Sec. 205. Ta abe Yearh to Whch mendments ppcabe. (Reve-
nue ct of 19 1. Tte II.)
The amendments made by ths tte sha be appcabe ony wth
respect to ta abe years begnnng after December 81, 19 0.
Par. . Secton 30.711 (a)-2 s amended as foows:
( ) y changng the second paragraph to read as foows:
For ta abe years begnnng before anuary 1, 19 1, secton 711(a)(1)( )
pror to ts amendment by secton 202(c) (1) ( ) of the Revenue ct of 19 1 pro-
vdes that the deducton for ta es s to be ncreased n an amount equa to the
ta for the ta abe year under Chapter 1 (not Incudng the ta Imposed under
secton 102). The amount of such ad|ustment Is the amount of such ta after
the aowance of the credt for foregn ta es as provded by sectons 31 and 131.
For ta abe years begnnng after December 31, 19 0, no ad|ustment s to be made
on account of the ta under Chapter 1. Furthermore, athough the e cess profts
ta s aowed as a deducton n computng norma-ta net ncome for the purposes
of Chapter 1. such deducton Is not aowed under secton 711(a)(1)( ) as
amended by secton 202(c)(1)( ) of the Revenue ct of 19 1 n computng e -
cess profts net ncome.
( ) y strkng 19 0 from the porton of the e ampe precedng
the numbered subdvsons and nsertng n eu thereof 19 1.
(C) y nsertng mmedatey after the word corporaton n sub-
dvson (1) of the e ampe the foowng: , computed wthout regard
to the deducton on account of the e cess profts ta , .
(D) y strkng out subdvson (2) of the e ampe and by chang-
ng the num ers of the ne t fve subdvsons from (3), ( ), (5),
(C), and (7) to (2), (3), ( ), (5), and (6). respectvey.
(P ) y strkng from subdvson (3) (as renumbered bv ths para-
graph) of the e ampe 1930, 19 9, 19 0, and 1939, wher-
ever they appear, and nsertng n eu thereof 1931, 1950, 19 1,
and 19 0, respectvey.
(F) y strkng from subdvson (5) (as renumbered by ths para-
graph) of the e ampe 19 0 and nsertng n eu thereof 19 1.
(G) y changng the frst paragraph after the ast numbered subd-
vson of the e ampe to read as foows:
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30
If the Income credt s used, the e cess profts net ncome of the corporaton
for the caendar year 19 1 s 31 ,600, computed as foows:
Norma-ta net ncome (computed wthout deducton of the e cess
profts ta ) 00,000
Pus:
Long-term capta osses : 75, 000
Less:
Long-term capta gans 100,000
Income from retrement of bonds 20, 000
Income from refun|s of grcutura d|ustment ct
ta es and nterest thereon 00
Income from recovery of bad debts 5,000
ddtona dvdends receved credt (100 per cent of tota
dvdends of 120,000 receved from domestc corpora-
tons ncudng the Chna Tmk ct Corporatons, ess
credt of 85,000 aready aowed by secton 26(b) for
dvdends receved, or 120,000 mnus S5,000 S5,000
75,000
160, 00
cess profts net ncome 31 ,600
Par. 5. Secton 30.711 (a)-3, as amended by Treasury Decson
50 5, s further amended as foows:
( ) y strkng 19 0 and ( ) from subdvson (a) of the
e ampe and nsertng n eu thereof 19 1 and (3), respec-
tvey.
( ) y strkng 19 0 from subdvson (6) of the e ampe,
wherever t appears, and nsertng n eu thereof 19 1.
(C) y changng the frst paragraph after subdvson (c) of the
e ampe to read as foows:
If the nvested capta credt s used, the e cess profts net ncome of the
corporaton for the caendar year 19 1 s 32 ,600, computed as foows:
Norma-ta net ncome (computed wthout deducton of the e cess
profts ta ) 00,000
Pus:
Long-term capta osses 75, 000
50 per cent of nterest on ndebtedness ncuded n bor-
rowed capta 2 ,000
Interest on Government and State obgatons 6, 000
105.000
505,000
Long-term capta gans 100,000
Income from retrement of bonds 20, 000
Income from refunds of grcutura d|ustment ct ta es
and nterest thereon 00
Income from recovery of bad debts 5, 000
ddtona dvdends receved credt ( 1 0,000 dvdends
receved from both domestc and foregn corporatons
ess credt of 85,000 aready aowed by secton 26(b)
for dvdends receved) 55,000
180, 00
cess profts net ncome under secton 711(a)(2) 32 ,600
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Par. 6. There s nserted mmedatey precedng secton 30.711 (b)-
the foowng:
8eo. 202. Deducton of cess-Profts Ta . (Revenue ct of 19 1,
Tte II.)

(c) Computaton of cess-Profts Net Income.

(2) Ta abe years n the base perod. Secton 711(b)(1)( )
(reatng to ad|ustment for Income ta es for ta abe years n the
base perod) Is repeaed.

Seo. 205. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte II.)
The amendments made by ths tte sha be appcabe ony wth respect
to ta abe years begnnng after December 31, 19 0.
Par. 7. Secton 30.711 (b)-, as amended by Treasury Decson 50 5,
s further amended by changng the frst paragraph after the frst e -
ampe to read as foows:
In computng the ncome ta for whch an ad|ustment s requred to be made
by secton 711(b) (1) ( ) for the purpose of computng the e cess profts ta for
a ta abe year begnnng pror to anuary 1, 19 1, the norma-ta net ncome or
speca-cass net ncome for each base perod year sha be that used n the
determnaton of the average base perod net ncome. y reason of the repea of
secton 711(b)(1)( ), no ad|ustment on account of ncome ta for any base
perod year sha be made n computng the e cess profts ta for ta abe years
begnnng after December 31, 19 0.
Par. 8. There s nserted mmedatey precedng secton 30.71 1
the foowng:
Seo. 201. cess Profts Ta Rates and Credts. (Revenue ct of
19 1. Tte II.)

(h) cess Profts Credt ased on Invested Capta. Secton
71 of the Interna Revenue Code, as amended, s amended to read as
foows:
Sec. 71 . cess Profts Credt ased on Invested Capta.
The e cess profts credt, for any ta abe year, computed under ths
secton, sha be the amount shown n the foowng tabe:
If the nvested capta for the The credt sha be:
ta abe year, determned under
secton 715, s:
Not over 5,000,000 S of the nvested capta.
Over 5,000,000 00,000, pus 7 of the e -
cess over 5,000,000.
Seo. 205. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte II.)
The amendments made by ths tte sha be appcabe ony wth
respect to ta abe years begnnng after December 31, 19 0.
Par. 9. Secton 30.71 -1, as amended by Treasury Decson 50 5,
s further amended by changng the second sentence to read as foows:
Regardess of the rato of earnngs to nvested capta for prevous ta abe years,
Mch credt s an amount equa to 6 per cent of the corporaton s nvested capta
for the ta abe year, e cept that, f such nvested capta for any ta abe year
begnnng after December 31, 19 0, e ceeds 5,000,000, the credt for such ta abe
year s an amount equa to 00,000 pus 7 per cent of the e cess over 5,000,000.
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Par. 10. There s nserted mmedatey precedng secton 30.718-1
the foowng:
Sec. 203. New Capta. (Revenue ct of 19 1, Tte II.)
Secton 718(a) of the Interna Revenue Code Is amended by strkng
out and at the end of paragraph ( ) ; by strkng out the perod
at the end of paragraph (5) and Insertng n eu thereof a semcoon
and the word and , and by nsertng at the end thereof the foowng:
(6) New capta. n amount equa to 25 per centum of the
new capta for such day. The term new capta for any day
means so much of the amounts of money or property ncudbe
for such day under paragraphs (1) and (2) as was prevousy
pad n durng a ta abe year begnnng after December 31, 19 0,
and so much of the dstrbutons n stock ncudbe for such day
under paragraph (3) as was prevousy made durng a ta abe
year begnnng after December 31, 19 0, sub|ect to the foowng
mtatons:
( ) There sha not be Incuded money or property pad
In by a corporaton In an e change to whch secton 112(b)
(3), ( ), or (5), or so much of secton 112 (c), (d), or (e)
as refers to secton 112(b) (3), ( ), or (5) s appcabe (or
woud be appcabe e cept for secton 371(g)), or woud have
been appcabe f the term contro had been defned n sec-
ton 112(h) to mean the ownershp of stock possessng more
than 50 per centum of the tota combned votng power of a
casses of stock entted to vote or more than 50 per centum
of the tota vaue of shares of a casses of stock.
( ) There sha not be ncuded money or property pad n
to the ta payer by a transferor corporaton f Immedatey
after such transacton the transferor and the ta payer are mem-
bers of the same controed group. s used n ths subparagraph
and subparagraph (C), a controed group means one or more
chans of corporatons connected through stock ownershp wth
a common parent corporaton f () more than 50 per cetum of
the tota combned votng power of a casses of stock entted
to vote, or more than 50 per centum of the tota vaue of shares
of a casses of stock, of each of the corporatons (e cept the
common parent corporaton) s owned drecty by one or more
of the other corporatons, and () the common parent corpora-
ton owns drecty more than 50 per centum of the tota combned
votng power of a casses of stock entted to vote, or more than
50 per centum of the tota vaue of shares of a casses of stock,
of at east one of the other corporatons.
(C) There sha not be ncuded a dstrbuton n stock de-
scrbed n paragraph (3) made to another corporaton, f mmed-
atey after the dstrbuton the ta payer and the dstrbutee are
members of the same controed group.
(D) Increase n Inadmssbe ssets. The new capta
for any day of the ta abe year, computed wthout the app-
caton of subparagraph ( ), sha be reduced by the e cess,
f any, of the amount computed under secton 720(b) wth
respect to Inadmssbe assets hed on such day, over the
amount computed under secton 720(b) wth respect to nad-
mssbe assets hed on the frst day of the ta payer s frst
ta abe year begnnng after December 31, 19 0. For the
purposes of ths subparagraph, In determnng whether obga-
tons whch are descrbed In secton 22(b)( ) any part of
the nterest from whch s e cudbe from gross ncome or
aowabe as a credt aganst net ncome are to be treated
as admssbe or nadmssbe assets, such obgatons sha be
treated n the same manner as they are treated for the ta abe
year for whch ta under ths subchapter s beng computed.
( ) Ma mum New Capta owabe. The new capta
for any day of the ta abe year sha not be more than the
amount, f any, by whch
(1) the sum of the equty nvested capta (computed
wthout regard to ths paragraph) and the borrowed
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capta (as defned In secton 719(a)) of the ta payer as
of such day, reduced y the amount of money or property
pad n whch s e cuded by reason of the mtaton of
subparagraph ( ) or (15) of ths paragraph, e ceeds
() e mm of such equty nvested capta and bor-
rowed capta as of the begnnng of the frst day of such
ta payer s frst ta abe year begnnng after December 31,
19 0. reduced by the amount, f any, by whch the accu-
muated earnngs and profts as of such frst day of such
frst ta abe year e ceed the accumuated earnngs and
profts (computed wthout regard to dstrbutons made n
ta abe years begnnng after December 31, 10 0) as of the
begnnng of the frst day of the ta abe year for whch
the ta under ths subchapter s beng computed.
(F) Reducton on ccount of Dstrbutons Out of Pre-19 1
ccumuated arnngs and Profts. The new capta for any
day of the ta abe year, computed wthout the appcaton of
subparagraph ( ), sha be reduced by the amount whch, after
the begnnng of the frst ta abe year whch begns after
December 31, 19 0, has been dstrbuted out of earnngs and
profts accumuated pror to the begnnng of such frst ta abe
year.
Par. 11. Secton 30.718-1 s amended by nsertng at the end of
the ffth paragraph a new sentence readng as foows:
s to determnaton of addtona amount to be ncuded n day equty nvested
capta on account of new capta, sec secton 30.718- .
Par. 12. Secton 30.718-2(a) s amended by strkng secton
30.718- from the second sentence and nsertng n eu thereof
secton 30.718-5.
Par. 13. Secton 30.718-3 s amended by nsertng at the end thereof
the foowng:
For new capta treatment of dstrbutons In stock, see secton 30.718- .
Par. 1 . There s nserted mmedatey precedng secton 30.718-
the foowng:
Sec. 30.718- . Determnaton of day equty nvested capta; ner capta.
(a) In genera. The equty Invested capta for any day of a ta abe year
begnnng after December 31, 10 0, as partay determned under secton
718(a) (1) to (5), sha be ncreased by an amount equa to 25 per cent of the
new capta, f any, for such day. The term new capta for any such day
means the aggregate amount of money and property pad n for stock, or as
pad-n surpus, or as a contrbuton to capta, and the amount of dstrbutons
n stock made, durng a ta abe year begnnng after December 31. 19 0, and
ncudbe for such day under secton 718(a) (1) to (3), sub|ect, however, to
the mtatons provded n subparagraphs ( ) to (F) of secton 718(a) (6).
(6) Lmtatons under subparagraph ( ) of secton 7/8(a)(6 ). The mta-
tons provded n subparagraph ( ) of secton 718(a)(6) e cude from the
term new capta the amount f any equty nvested capta acqured n an
e change occurrng durng a ta abe year begnnng after December 31, 19 0,
to whch secton 112(b)(3), ( ), or (5), or so much of secton 112 (c), (d),
or (e) as refers to secton 112(b) (3), ( ), or (5), Is appcabe. owever, n
determnng whether an e change s wthn secton 112(b) (3), ( ), or (5),
or so much of secton 112 (c), (d), or (e) as refers to secton 112(b) (3), ( ),
or (5), the contro requrement s consdered to mean the ownershp of
stock possessng more than 50 per cent of the tota combned votng power of
a casses of stock entted to vote or more than 50 per cent of the tota vaue
of shares of a casses of stock. These mtatons aso appy to a e changes
under Suppement whch woud be sub|ect to the statutory provsons re-
ferred to n the precedng sentence f t were not for secton 371(g). The
appcaton of these mtatons may be ustrated by the foowng e ampe:
ampe. The Corporaton ssues stock durng a ta abe year begnnng
after December 31, 19 0, to the Corporaton n e change for the transfer of
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certan property by the Corporaton. Immedatey after the transfer
the stock acqured by the Corporaton has a vaue of 10,000, the tota vaue
of a casses of stock of the Corporaton then outstandng amountng to
S3 S,0U0. The Corporaton obtans no new capta, snce the property for
whch the new stock was ssued was obtaned n an e change to whch secton
112(b)(5) woud be appcabe f the term contro had been denned n
secton 112(h) so as to ncude ether the ownershp of stock possessng more
than 50 per cent of the tota combned votng power of a casses of stock
entted to vote or more than 50 per cent of the tota vaue of a casses of
stock outstandng.
(c) Lmtatons under subparagraph ( ) of secton 718(a)(6). The m-
tatons provded In subparagraph ( ) of secton 718(a)(6) e cude from the
term new capta any money or property pad n to the ta payer by a
transferor corporaton If mmedatey after such transacton the transferor and
the ta payer are members of the same controed group as that term s denned
n such subparagraph. The appcaton of these mtatons may be ustrated
by the foowng e ampe:
ampe. The Corporaton owns stock n the Corporaton, and the
Corporaton owns stock n the C Corporaton. The Corporaton transfers
property to the C Corporaton n e change for stock of the C Corporaton. Im-
medatey after the transfer the stock owned by the Corporaton n the
Corporaton possesses more than 50 per cent of the tota combned votng power
of a casses of stock entted to vote. so Immedatey after such transfer the
stock owned by the Corporaton n the C Corporaton has a vaue equa to
more than 50 per cent of the tota vaue of a casses of stock of the C Corpora-
ton. The C Corporaton obtans no new capta through the acquston of the
property from the Corporaton n e change for ts stock, snce Immedatey
after the transfer the Corporaton, the transferor, and the C Corporaton, the
transferee, are members of the same controed group.
(d) Lmtatons under subparagraph (C) of secton 118(a)(6). The mta-
tons provded In subparagraph (C) of secton 718(a) (6) e cudes from the term
new capta any dstrbuton n stock descrbed In secton 718(a) (3) made by
the ta payer to another corporaton f Immedatey after the dstrbuton the
ta payer and the other corporaton are members of the same controed group
as that term s denned n subparagraph ( ) of secton 718(a) (6). The appca-
ton of these mtatons may be ustrated by the foowng e ampe:
ampe. The Corporaton makes a dstrbuton n ta abe stock dvdends
to the and C Corporatons durng a ta abe year begnnng after December 31,
19 0. Immedatey after the dstrbuton the and C Corporatons own stock
n the Corporaton whch has a votng power of more than 50 per cent of the
combned votng power of a casses of stock entted to vote. so mmedatey
after the transfer the Corporaton owns stock n the C Corporaton whch has
a vaue of more than 50 per cent of the tota vaue of a casses of stock of the
C Corporaton. The ta abe stock dvdend dstrbuted by the Corporaton
does not consttute new capta to the Corporaton.
(e) Lmtatons under subparagraph (D) of secton 718(a)(6). The mta-
tons provded In subparagraph (D) of sectons 718(a)(6) requre that the
amount of new capta for any day of the ta abe year, computed wthout the
appcaton of secton 718(a) (6) ( ), sha be reduced by the e cess of the amount
of nadmssbe assets hed on the begnnng of that day over the amount of such
assets hed on the begnnng of the frst day of the ta payer s frst ta abe year
begnnng after December 31, 10 0. The appcaton of these mtatons may be
ustrated by the foowng e ampe:
ampe. The Corporaton mnkes ts e cess profts ta return on the ca-
endar-year bass. On uy 1, 19 1, cash In the amount of 100,000 Is pad n for
stock. There are no other changes made n ether the amount of equty nvested
capta or the amount of borrowed capta at any tme durng the year 19 1.
The ad|usted bass of nadmssbe assets as of anuary 1,19 1, amounts to 5,000,
Te ad|usted bass of such assets as of uy 2, 19 1, Is 15,000. Under subpara-
graph (D) the new capta of 100,000 Is reduced to 90,000 as of uy 2, 19 1,
as shown by the foowng computaton:
Money pad n for stock uy 1, 19 1 100,000
Less:
cess of nadmssbe assets as of uv 2, 19 1, over such assets as
of anuary 1, 19 1 ( 15,000 mnus 5,000) 10,000
New capta as reduced under subparagraph (D)
90,000
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35
(f) Lmtatons under subparagraph ( ) of secton 718(a)(6). The mta-
tons provded In subparagraph ( ) of secton 718(a) ((5) prevent new capta
as of any day from e ceedng the amount by whch the tota equty nvested
capta and borrowed capta as of such day (computed wthout ncudng the 25
per cent ncrease and reduced as provded n such subparagraph on account of
amounts e cuded under subparagraph ( ) or ( )) e ceeds the sum of the
equty nvested capta and borrowed capta as of the frst day of the ta payer s
frst ta abe year begnnng after December 31, 19 0 (reduced as provded n such
subparagraph on account of reducton n accumuated earnngs and profts other
than as the resut of dstrbutons). The appcaton of these mtatons may
be ustrated by the foowng e ampe:
ampe. The Y Corporaton makes ts return on the caendar-year bass.
Its equty nvested capta as of anuary 1, 10 1, amounts to 30,000. consstng
of money pad n for stock, 20,000, and accumuated earnngs and profts, . 10,000.
Its borrowed capta as of anuary 1, 19 1, conssts of bonds outstandng n the
amount of 15,000. ccordngy, the tota of ts equty nvested capta and
borrowed capta as of anuary 1, 19 1, s 5,000. The corporaton has no
nadmssbe assets at any tme durng the year 19 1. On uy 1, 19 1, the
foowng events occur:
(1) The corporaton dstrbutes ta abe stock dvdends amountng to
5,000 out of earnngs and profts accumuated pror to anuary 1, 19 1;
(2) Money amountng to 15,000 s pad n as a contrbuton to capta;
(3) Property wth an unnd|usted bass of 20,000 for determnng oss s
acqured for stock n an e change to wheh secton 112(b) ( ) s appcabe;
and
( ) onds In the amount of 10,000 are retred.
Ony 5,000 of the 0,000 of new capta (tentatve) arsng out of the trans-
actons whch took pace on uy 1, 19 1, consttutes new capta as of uy 2,
19 1, computed as foows:
(1) Sum of equty nvested capta and borrowed capta as of uy 2,
19 1 (computed wthout regard to 25 per cent ncrease n new
capta) 70,000
(2) Property pad n for stock e cuded under subparagraph ( ) 20,000
(3) Item (1) mnus tem (2) 50,000
( ) Sum of equty nvested capta and borrowed capta as of anuary 1,
19 1 5, 000
(5) New capta as of uy 2, 19 1 (tem (3) mnus tem ( )) 5,000
If the accumuated earnngs and profts of the T Corporaton are reduced to
zero as of nnuary 1, 19 2, because of the stock dvdend dstrbuton of 5,000
made on uy 1, 19 1, and an operatng oss of 5,000 durng the ta abe year
19 1, the new capta ncudbe In equty nvested capta as of anuary 1. 19 2,
woud reman at 5,000 under the appcaton of subparagraph ( ), as shown
by the foowng computaton :
(1) Sum of equty nvested capta and borrowed capta as of anuary
1, 19 2 (computed wthout regard to 25 per cent ncrease n new
capta) 05. 000
(2) Property pad n for stock e cuded under subparagraph ( ) 20,000
(3) Item (1) mnus tem (2) 5,000
( ) Sum of equty nvested capta and borrowed capta ns of anuary 1,
19 1 5,000
(5) cess of accumuated earnngs and profts as of anuary 1. 10 1,
over earnngs and profts, computed wthout regard to dstrbu-
tons, as of anuary 1, 19 2 ( 10,000 mnus 5,000) 5,000
(6) Item ( ) reduced by tem (5) 0.000
(7) New capta as of anuary 1, 19 2 (tem (3) mnus tem (( )) 5,000
The appcaton of subparagraph (F) Is not shown In te above computaton snce It
does not change the resut.
(g) Lmtatons under subparagraphs (F) of secton 718(a)(6). The mta-
tons provded n subparagraph (F) of secton 718(a)(0) requre that new
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36
capta for any day of the ta abe year (computed wthout the appcaton of
subparagraph ( )), sha be reduced by dstrbutons made after the begnnng
of the frst ta abe year whch begns after December 31, 19 0, out of earnngs
and profts accumuated pror to the begnnng of such frst ta abe year. The
appcaton of these mtatons may be ustrated by the foowng e ampes:
ampe (/). The Z Corporaton makes Its return on the caendar-year bass.
Its tota equty nvested capta and borrowed capta as of anuary 1, 19 1,
Is 100,000, ncudng 10,000 of accumuated earnngs and profts. The ony
capta acqured durng the year amounts to 10,000, resutng from the dstrbu-
ton of a ta abe stock dvdend on uy 1,19 1. The corporaton has no earnngs
and profts for 19 1. The capta resutng from the stock dvdend s e cuded
from new capta by subparagraph (F) (as we as by subparagraph ( )), for
t s reduced by the amount dstrbuted out of earnngs and profts accumuated
pror to anuary 1,19 1.
ampe (2). ssume that the facts wth respect to the Z Corporaton are
the same as n e ampe (1), e cept that the Z Corporaton has an operatng oss
of 10,000 for the year 19 1. though under subparagraph ( ), because of
the ad|ustment reatve to a reducton n accumuated earnngs and profts
not resutng from dstrbutons, there woud be new capta as of anuary
1, 19 2, n the amount of 10,000, the appcaton of subparagraph (F) prevents
the stock dvdend dstrbuted on uy 1, 19 1, from beng new capta, nasmuch
as the capta from the stock dvdend ( 10,000) must be reduced by the amount
of the dstrbuton out of earnngs and profts accumuated pror to anuary ;
19 1 ( 10,000).
ampe (3). ssume that the facts wth respect to the Z Corporaton are
the same as n e ampe (1), e cept that there are no earnngs and profts n
19 1 and no operatng oss for such year and that Its earnngs and profts for
19 2 are 10,000. though, because of the 19 2 earnngs and profts, there
woud be new capta under subparagraph ( ) n the amount of 10,000 as of
anuary 1, 19 3, subparagraph (F) prevents the stock dvdend dstrbuted on
uy 1, 19 1, from beng new capta, nasmuch as the capta resutng from such
stock dvdend ( 10,000) s reduced by the amount of the dstrbuton ( 10,000)
made out of earnngs and profts accumuated pror to anuary 1,19 1.
Par. 15. There s nserted mmedatey before secton 30.718-1 and
mmedatey after secton 203 of the Revenue ct of 19 1 the foow-
ng:
Sf.c. 202. Deducton of cess-Profts Ta . (Revenue ct of 19 1,
Tte II.)

(f) quty Invested Capta. Secton 718(c) (3) (reatng to the
computaton of earnngs and profts for nvested capta purposes) s
amended by addng after the word subchapter the words or chap-
ter 1 .

Sec 205. Ta abe Tears to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte II.)
The amendments made by ths tte sha be appcabe ony wth re-
spect to ta abe years begnnng after December 31, 19 0.
Par. 16. Secton 30.718- s renumbered secton 30.718-5 and s fur-
ther amended as foows:
( ) y nsertng mmedatey after 19 0 n the second sentence
of the frst paragraph the words or, n the case of ta abe years
begnnng after December 31, 19 0, by reason of the ta mposed by
Chapter 1.
( ) y strkng from the second paragraph (wthout dmnuton
by any dstrbutons or the e cess profts ta for the ta abe year)
and nsertng n eu thereof (wthout dmnuton by any dstrbu-
tons, the e cess profts ta for the ta abe year, or, n the case of
ta abe years begnnng after December 31, 19 0, the ncome ta for
the ta abe year).
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37
Par. 17. Secton 30.718-5 s renumbered secton 30.718-6.
Par. 18. There s nserted mmedatey precedng secton 30.722-1
the foowng:
Sec. 202. Deducton of ckss-Phofts Ta . (Revenue ct of 19 1,
Tte II.)

(g d|ustment of bnorma ase Perod Net Income. Secton
722(c) pacng a mt on the amount of reef afforded under secton
722) s amended by addng at the end thereof a new sentence to read as
foows: For the purposes of ths subsecton and subsecton (d) the
ta payer s norma-a net ncome sha be computed wthout deducton
of the ta mposed by ths subchapter. .

Sec. 205. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte II.)
The amendments made by ths tte sha be appcabe ony wth re-
spect to ta abe years begnnng after December 31, 19 0.
Par. 19. Secton 30.722- , as added by Treasury Decson 50 5, s
amended by nsertng mmedatey after the second paragraph the
foowng new paragraph:
though In the case of ta abe years begnnng after December 31, 19 0, the
e cess profts ta s aowed as a deducton n computng norma-ta net ncome
for the purposes of Chapter 1, the norma-ta net ncome s requred to be com-
puted wthout regard to such deducton for the purposes of the above descrbed
6 per cent mtatons.
Par. 20. There s nserted mmedatey precedng secton 30.731-1
the foowng:
Sec. 20 . Cohpobatons ncaced n Mnng Stbategc Metas. (Reve-
nue ct of 19 1, Tte II.)
Secton 731 of the Interna Revenue Code (e emptng from e cess-
profts ta ncome derved from mnng certan metas) sha not appy
wth respect to any ta abe year begnnng after December 31, 19 0.
Par. 21. Secton 30.731-1 (a) s amended by strkng out the frst
sentence and nsertng n eu thereof the foowng:
Secton 731 s appcabe ony to ta abe years begnnng before anuary 1,
19 1, and provdes that, f a domestc corporaton Is engaged n mnng tungsten,
qucksver, manganese, patnum, antmony, chromte, or tn (herenafter
referred to as strategc metas), wthn the Unted States, the porton of Its
ad|usted e cess profts net ncome attrbutabe to such mnng Is e empt
from the e cess profts ta .
(Ths Treasury decson s ssued under authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat., 32; 26 U. S. C,
Sup. , 62), as made appcabe by secton 729 of the Interna
Revenue Code, added by the Second Revenue ct of 19 0 (Pubc,
No. 801, Seventy-s th Congress, thrd sesson), and sectons 201
to 205 of the Revenue ct of 19 1 (Pubc aw 250, Seventy-seventh
Congress).)
Norman D. Cann, .
ctng Commssoner of Interna Revenue.
pproved October 21,19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 23, 19 1, 11.17 a. m.)
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INCOM T RULINGS. P RT L
. INT RN L R NU COD .
19 1 2-10866
T. D. 5086
TITL 2ft INT RN L R NU . C PT I, SD C PT , P T 19.
INCOM T .
Reguatons 103 amended to conform to the Revenue ct of 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. O.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 103 Part 19, Tte 26, Code of
Federa Reguatons, 19 0 Sup. to the Revenue ct of 19 1 (Pubc
aw 250, Seventy-seventh Congress), approved September 20, 19 1,
and to make certan other changes, such reguatons are amended as
foows:
Paragraph 1. There s nserted mmedatey precedng secton
19. -1 the foowng:
Seo. 102. Optona Tat on Indvduas Wth Certan Gross Incomb
of 3,000 or LF.sa (Revenue ct of 10 1, Tte L)

(e) mendment to Secton . Secton of the Interna Revenue
Code s amended by Insertng at the end thereof the foowng:
(k) Sharehoders or Persona Servce Corporatons, Suppe-
ment S.
(1) Indvduas wth gross ncome from certan sources of 3,000 or
ess, Suppement T.
Par. 2. Secton 19. -1 s amended by nsertng at the end thereof
the foowng:
Sharehoders of persona servce corporatons sectons 391 to 396, ncusve.
Indvduas wth gross ncome from certan sources of 3,000 or ess sectons
00 to 0 , ncusve.
Par. 3. There s nserted mmedatey precedng secton 19.11-1 the
foowng:
Sec. 102. Optona Ta on Indvduas Wth Certan Gross Inoomb
of 3,000 or Less. (Revenue ct of 10 1, Tte L)

(b) Cross-referfnces.
(1) Secton 11 of the Interna Revenue Code s amended by Insertng at
the end thereof the foowng: (For aternatve ta f gross ncome
from certan sources s 3,000 or ess, see secton 00) .

(38)
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39
Par. . Secton 19.11-1, as amended by Treasury Decson 5011,
approved September 2 , 19 0, C. . 19 0-2, 15 , s further amended
by strkng out the frst sentence of the frst paragraph and nsertng
n eu thereof the foowng:
Chapter 1 of the Interna Revenue Code, whch appes ony to ta abe years
begnnng after December 31, 1938 (see secton 1), mposes an ncome ta on
Indvduas, ncudng a norma ta (secton 11), a surta (secton 12), and
a defense ta for ta abe years begnnng after December 31, 1939, and before
anuary 1, 19 1 (secton 15 added by secton 201 of the Revenue ct of 19 0).
For optona ta n the case of ta payers wth gross ncome from certan sources
of 3,000 or ess, see secton 00.
Par. 5. There s nserted mmedatey precedng secton 19.12-1 the
foowng:
Sec. 101. Surta on Indvduas. (Revenue ct of 19 1, Tte I.)
Secton 12(h) of the Interna Revenue Code Is amended to read as
foows:
(b) Rates of Surta . There sha be eved, coected, and pad for
each ta abe year upon the surta net ncome of every ndvdua the
surta shown n the foowng tabe:
If the surta net Income s:
Not over 2,000
Over 2,000 but not over ,000
Over ,000 but not over 6,000..
Over 6,000 but not over 8,000
Over 8,000 but not over 10,000
Over 10,000 but not over 12,000.
Over 12,000 but not over 1 ,000.
Over 1 ,000 but not over 16,000-
Over 16000 but not over 18,000.
Over 18,000 but not over 20,000.
Over 20,000 but not over 22,000.
Over 22,000 but not over 26,000.
Over 20,000 but not over 32,000.
Over 32,000 but not over 38,000.
Over 38,000 but not over ,000.
Over ,000 but not over 50,000.
Over 50,000 but not over 60,000.
Over 00,000 but not over 70,000.
Over 70,000 but not over 80,000.
Over 80,000 but not over 90,000.
The surta sha be:
6 of the surta net ncome.
120, pus 9 of e cess over
2,000.
300, pus 13 of e cess over
,000.
500, pus 17 of e cess over
8,000.
900, pus 21 of e cess over
8,000.
1,320. pus 25 of e cess over
10,000.
1,820, pus 29 of e cess over
12,000.
2, 00, pus 32 of e cess over
1 ,000.
3,0 0, pus 35 of e cess over
16,000.
3,7 0, pus 387c of e cess over
18,000.
,500, pus 1 of e cess over
20,000.
5,320, pus of e cess over
22,000.
7,080, pus 77c of e cess over
20,000.
9,900. pus 507c of e cess over
32,000.
12,900, pus 537c of e cess over
38,000.
16,080. pus 557c of e cess over
,000.
19,380, pus 57 of e cess over
50,000.
25,080, pus 597c of e cess over
00,000.
30,980, pus 017 of e cess over
70,000.
37,080, pus 637c of e cess over
80,000.
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If the surta net ncome Is:
Over 90,000 but not over
100,000
Over 100,000 but not over
150,000
Over 150,000 but not over
200,000
Over 200,000 but not over
250 000
Over 250,000 but not over
300,000
Over 300000 but not over
00,000
Over 100,000 but not over
500,000
Over 500,000 but not over
750,000
Over 750,000 but not over
1.000.000
Over 1,000,000 but not over
2,000.000
Over 2 000.000 but not over
5.000,000
Over 5,000,000
The surta sha be:
3,380, pus 6 of e cess over
00,000.
9,780, pus 65 of e cess over
100,000.
82,280. pus 66 of e cess over
150,000.
115,280. pus 67 of e cess
over 200,000.
1 8,780. pus 69 of e cess
over 250,000.
183,280, pus 71 of e cess
over 300,000.
25 ,280. pus 72 of e cess
over 00,000.
320,280. pus 73 of e cess
over 500,000.
508,780. pus 7 of e cess
over 750 000.
693,780, pus 75 of e cess
over 1,000,000.
1, 3,780. pus 76 of e cess
over 2,000,000.
3,723,780. pus 77 of e cess
over 5,000,000.
Sec. 102. Optona Ta on Indtvtduat.s Wth Ckrtan Gboss Income of
3,000 or Less. (Revenue ct of 19 1, Tte I.)

(b) Cross-references.

(2) Secton 12 of the Interna Revenue Code s amended by nsertng
at the end thereof the foowng:
(g) For aternatve ta f gross ncome fron certan sources s 3,000
or ess, see secton 00.

Sec. 118. Ta abe Tears to Whch mendments ppcabe. (Rev-
enue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 110, and
117) sha be appcabe ony wth respect to ta abe years begnnng after
December 31. 19 0.
Par. 6. Secton 19.12-1, as amended by Treasury Decson 5011. s
further amended by strkng out the ast sentence and nsertng n eu
thereof the foowng:
For the defense ta mposed for ta abe years begnnng after December 31,1939,
and before anuary 1, 19 1, see secton 19.15-1.
Pah. 7. Secton 19.12-2, as amended by Treasury Decson 5011, s
further amended as foows:
( ) y strkng out the frst sentence and nsertng n eu thereof
the foowng:
The foowng rubes show the surta (1) for ta abe years begnnng after
December 31, 1038, and before anuary 1, 19 0, (2) for ta abe years begnnng
after December 31, 1939. and before anuary 1. 19 1, and (3) for ta abe years
begnnng after December 31, 19 0, upon certan specfed amounts of surta net
ncome.
( ) y strkng out the headng of the second tabe and nsertng
n eu thereof the foowng:
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1
Tabe II. Ta abe Tears egnnng fter December 31, 1939, and efore
anuary 1, 19 1
(C) y nsertng mmedatey after the second tabe the foowng:
Tabe III. Ta abe years begnnng after December 31, 101,0.
Surta not Income.
0 to 2.000 .
2,000 to .000
,000 to 0.000
6,000 to 8.000
8,000 to 10.000
10,000 to 12,000
12,000 to 1 .000
1 ,000 to 111.000
16,000 to 18.000
18,000 to 20.000
20,000 to 22,000..
22,000 to 26,000
26,000 to 32,000
32,000 to 38.000
38,000 to ,000
1,000 to 50.000
S50.000 to 60,000
),(IO0 to 70.000
70,000 to 80,000
80,000 to 90.000
90,000 to 11 1.000
S 100,000 to 1.10,000
150,000 to 200.000
200,000 to 2 f.O0O
250,000 to 300,000
300,000 to 00,000
100,000 to 00,000
500,000 to 750,000 -
750,000 to 1,000,000
1,000,000 to 2.00(.0 0
2,000,000 to 5,0(0,000
5,000,000 up
Per cent.
Tota
surta .
6
120
9
300
13
500
17
900
. 1
1,320
25
1, 20
29
2, 00
32
3,0 0
.:,
3,7 0
38
,500
1
5,320

7,080
17
9.M )
50
12.900
53
16,080
55
19,380
57
25.080
59
30.980
61
37,080
03
3,380
6
9, 7S0
r.
82,280
m
115.280
67
1 8, 780
69
183,280
71
25 ,280
72
326,280
73
508,780
7
693,780
75
1, 3. 780
78
3,723,780
77
(D) y strkng out the second sentence of the ast paragraph and
nsertng n eu thereof the foowng:
ccordngy, the surta due for ta abe years begnnng after December 31,
19 0, upon a surta net ncome of 03,128 woud be 26,925.52 computed aa
foows:
Surta on 60,000 from tabe 25. 080. 00
Surta on 3,128 at 59 per cent 1, 8 5. 52
Tota 26, 925. 52
Par 8. There s nserted mmedatey precedng secton 19.13-1 the
foowng:
Sec. 103. C bporatton Defense Ta Rates Incorporated n Rate
Schedues. (Revenue ct of 19 1, Tte I.)
(a) Ta on Corporatons n Genera. Secton 13(b) (1) and (2)
of the Interna Revenue Code are amended to read as foows:
(1) Genera r e. ta of 2 per centum of the norma-ta
net ncome; or
(2) ternatve ta (corporatons wth norma-ta net n-
come sghty more than 25,000). ta of ,250, pus 37 per
centum of the amount of the norma-ta net ncome n e cess of
25,000.

Sec. 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
1811 2
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Par. 9. Secton 19.13-1 s amended by strkng out the parenthetca
e presson at the end of the frst sentence n the frst paragraph.
Par. 10. Secton 19.13-5, as amended by Treasury Decson 5038,
approved February 8, 19 1 C. . 19 1-1, 187 , s further amended
as foows:
( ) y nsertng mmedatey after the second sentence of the
fourth paragraph the foowng:
For surta on corporatons generay wth respect to ta abe years begnnng
after December 31, 19-10, see secton 15, as amended by secton 10 of the Revenue
ct of 19 1, and secton 19.15-2.
( ) y strkng out 38,565.89 n the ast paragraph and nsert-
ng n eu thereof 38, 61.5 ( 38,565.89 for ta abe years begnnng
before anuary 1, 19 1).
(C) y strkng out the ast sentence n the ast paragraph and
nsertng n eu thereof the foowng:
For the defense ta mposed for ta abe years begnnng after December 31, 1939,
and before anuary 1, 19 1, see secton 19.15-1.
Par. 11. Secton 19.13-6, as amended by Treasury Decson 5038, s
further amended as foows:
( ) y strkng out u22y10 per cent n the frst paragraph and
nsertng n eu thereof 2 per cent (22 0 per cent for any such
ta abe year begnnng before anuary 1, 19 1).
( ) y strkng out 38,565.89 n the frst paragraph and nsert-
ng n eu thereof 38, 61.5 ( 38,565.89 for any such ta abe year
begnnng before anuary 1, 19 1).
(C) y strkng out the e ampe and nsertng n eu thereof the
foowng:
ampe. The Corporaton, a domestc corporaton, whch Is not a bank
afnte referred to n secton 26(d), has for the caendar year 19 1 a net Income
of 110,000, ncudng nterest on Unted States obgatons (aowabe as a credt
under secton 26(a)) n the amount of 10,000 and dvdends receved (of a cass
aowabe as a credt under secton 26(b)) n the amount of 10,000. The cor-
poraton s ta under secton 13 for the caendar year 19 1 Is 21,960, computed
as foows:
Net Income 110,000.00
Less credt for nterest on Unted States obgatons 10,000. 00
d|usted net ncome 100,000. 00
Less credt for dvdends receved (85 per cent of 10,000) 8, 500. 00
Norma-ta net ncome 91, 500. 00
Ta under secton 13(b) (1) (2 per cent of 91,500) 21,960. 00
Par. 12. Secton 19.13-7, as amended by Treasury Decson 5038, s
further amended to read as foows:
ternatve ta (corporatons rth norma-ta net ncomes sghty more than
25,000); ta abe pears begnnng after December 31. 1939. For any ta abe
year begnnng after December 31, 1939, secton 13(b)(2). as amended, provdes
for an aternatve ta n the case of corporatons havng norma-ta net ncomes
of sghty more than 25,000. Wh respect to such a ta abe year begnnng
before anuary 1.19 1, the aternatve ta s 3,775 pus 35 per cent of the amount
of the norma-ta net Income n e cess of 25,000, such ta beng appcabe In
the case of corporatons havng norma-ta net ncomes of ess than 38,565.89.
Wth respect to such a ta abe year begnnng after December 31. 19 0, the ater-
natve ta s ,250 pus 37 per cent of the amount of the norma-ta net ncome
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n e cess of 25,000. such ta beng appcabe In the case of corporatons havng
norma-ta net ncomes of ess than 38, 61.5 . Ths provson may be ustrated
by the foowng e ampe:
ampe. The Corporaton, a domestc corporaton (not a bank affate),
has for the caendar year 19 1 a net ncome of 30,000, Incudng Interest on
Unted States obgatons (aowabe as a credt under secton 28(a)) n the
amount of 3,000 and dvdends receved of a cass aowabe as a credt under
secton 26(b) n the amount of 1,000. Snce the aternatve ta s ess than
the ta computed under the genera rue, the correct ta s the aternatve ta ,
that s, ,675.50. The ta s computed as foows:
ternatve ta .
Net ncome 30, 000. 00
Less Interest on Unted States obgatons 3,000. 00
d|usted net Income 27, 000. 00
Less credt for dvdends receved (85 per cent of 1,000) 850. 00
Norma-ta net ncome 26,150. 00
mount of norma-ta net ncome In e cess of 25,000 1,150. 00
Ta under secton 13(b)(2) ( ,250 pus 37 per cent of 1,150) ,675.50
Tarn under genera rue.
Norma-ta net ncome (computed as above) 26,150. 00
Ta under secton 13(b) (1) (2 per cent of 26,150) 6, 276. 00
Par. 13. There s nserted mmedatey precedng secton 19,1 -1 the
foowng:
Sec. 103. Corporaton Defense Ta Rates Incorporated n Rate
Schedues. (Revenue ct of 19 1, Tte I.)

(b) Ta on Speca Casses of Corporatons. Secton 1 (b) of the
Interna Revenue Code s amended to read as foows:
(b) CORPOR TIONS WT NoRM L-T. N T INCOM S OF NOT MOR
Than 25,000. If the norma-ta net ncome of the corporaton s not
more than 25,000, and f the corporaton docs not come wthn one of
the casses specfed n subsecton (c), (d), or (e) of ths secton, the ta
sha be as foows:
Upon norma-ta net ncomes not n e cess of 5,000, 15 per
centum.
750 upon norma-ta net Incomes of 5,000, and upon norma-
ta net ncomes n e cess of 5,000 and not n e cess of 20,000, 17
per centum In addton of such e cess.
3,300 upon norma-ta net ncomes of 20,000, and upon norma-
ta net ncomes n e cess of 20,000, 19 per centum n addton of
such e cess.
(c) Foregn Corporatons. Secton 1 (c) of the Interna Revenue
Code (reatng to ta on resdent foregn corporatons) s amended by
strkng out 22 o per centum and nsertng 2 per centum .

Seo. 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. 1 . Secton 19.1 -1 s amended by strkng ont the porton of
the frst sentence n the frst paragraph foowng anuary 1, 19 0.
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P r. 15. Secton 19.1 -2, as amended by Treasury Decson 5038,
s further amended as foows:
( ) y nsertng mmedatey after the thrd sentence of the thrd
paragraph the foowng:
For surta on corporatons generay wth respect to tumbe years begnnng
after December 31, 10 0, see secton 15, as amended by secton 10 of the Revenue
ct of 10 1, and secton 10.15-2.
( ) y changng the frst sentence of the ffth paragraph to read
as foows:
The foowng tabes show the ncome ta mposed by secton 1 , as amended,
(1) for any ta abe year begnnng after December 31, 1939, and before anuary
1, 19 1, and (2) for any ta abe year begnnng after December 31, 19 0, from
corporatons conng wthn the terms of secton 1 (b), us amended, upon certan
specfed amounts of norma-ta net ncome.
(C) y changng the headng of the tabe whch foows the ffth
paragraph to read as foows:
Tabe I. Corporaton ncome ta under secton 1 (h), as amended, for ta abe
years begnnng after December 31, 1939, and before anuary 1, 19 1.
(D) y nsertng mmedatey after the tabe whch foows the
ffth paragraph the foowng:
Tabk II. Corporaton ncome ta under secton 1 (b), a amended, for ta abe
years begnnng after December 31, 19 0.
Norma-ta net Income.
Per cent.
Tota ta .
to to 5,000
15
17
19
750
8,300
,290
5,000 to 20,000 _
20,000 o 25,000...
( ) y strkng from the e ampe 19 0, 1,537.50, 13y2 per
cent, 15 per cent, 675, 862.50, and 1,537.50, wherever they
appear, and nsertng n eu thereof 19 1, 1,727.50, 15 per cent.
17 per cent, 750, 977.50, and 1,727.50, respectvey.
(F) y strkng out 221/q per cent n the ast paragraph and
nsertng n eu thereof 2 per cent (22 0 per cent for ta abe years
begnnng before anuary 1, 19 1).
Pah. 16. There s nserted mmedatey precedng secton 19.15-1 the
foowng:
S O. 10 . SURT ON CORPOR TIONS ND T RMIN TION OF D F NS T .
(Revenue ct of 19 1, Tte I.)
(a) Genera Rue. Secton 15 of the Interna Revenue Code (re-
atng to defense ta ) s amended to read as foows:
Skc. 15. Surta on Corporatons.
(a) Corporaton Surta Net Income. For the purposes of ths chap-
ter the term corporaton surta net ncome means the net ncome mnus
the credt for dvdends receved provded n secton 26(b), computed
by mtng such credt to 85 per centum of the net Income n eu of 85
per centum of the ad|usted net ncome.
(b) Imposton or Ta . There sha be eved, coected, and pad for
each ta abe year upon the corporaton surta net ncome of every cor-
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poraton (e cept a corporaton sub|ect to the ta Imposed by secton
231(a) or Suppement ) a surta as foows:
Upon corporaton surta net ncomes not n e cess of 25,000,
6 per centum of the amount thereof;
Upon corporaton surta net ncomes In e cess of 23,000, 1,500,
pus 7 per centum of the e cess over 25,000.

Sec. 118. Ta abe Yeaes to Whch mendments ppcabe (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) sha be appcabe ony wth respect to ta abe years begnnng after
December 31, 19 0.
Par. 17. Secton 19.15-1, as amended by Treasury Decson 5038, s
further amended by strkng out anuary 1,19 5 m the frst sentence
and nsertng n eu thereof anuary 1,19 1.
Par. 18. There s nserted mmedatey after secton 19.15-1 the
foowng new secton:
Sec. 19.15-2. Surta on corporaton . For ta abe years begnnng after De-
cember 31, 19 0, secton 15, as amended by secton 10 (a) of the Revenue ct of
1 1, mposes a surta upon the corporaton surta net ncome of every corpora-
ton, e cept a nonresdent foregn corporaton ta abe under secton 231(a) or a
mutua nvestment company ta abe under Suppement . The corporaton surta
net ncome of a corporaton s ts net ncome mnus the credt for dvdends re-
ceved provded n secton 26(b). Secton 15, as amended by secton 10 (a)
of the Revenue ct of 19 1, provdes that the credt for dvdends receved shaU
be mted to 85 per cent of a corporaton s net Income, rather than to 85 per
cent of ts ad|usted net ncome. The credt provded In secton 26(a) for Interest
receved upon obgatons of the Unted States or ts nstrumentates s not a-
owabe In computng corporaton surta net ncome.
Par. 19. There s nserted mmedatey precedng secton 19.23 (c)-
the foowng:
Sec. 202. Deducton of cess-Profts Ta . (Revenue ct of 19 1,
Tte II.)
(a) mendment of Secton 23(c). Secton 23(c) of the Interna
Revenue Code (reatng to the deducton of ta es n computng net n-
come) Is amended to read as foows:
(c) Ta es Generay.
(1) owance n genera. Ta es pad or accrued wthn the
ta abe year, e cept
( ) Federa ncome ta es;
( ) war-profts and e cess-profts ta es Imposed by Tte II of
the Revenue ct of 1017, Tte III of the Revenue ct of 1918,
Tte III of the Revenue ct of 1921, secton 216 of the Natona
Industra Recovery ct, or secton 702 of the Revenue ct of
193 , or by any such provsons as amended or suppemented;
(C) Income, war-profts, and e cess-profts ta es mposed by
the authorty of any foregn country or possesson of the Unted
States; but ths deducton sha be aowed n the case of a ta -
payer who does not sgnfy n hs return hs desre to have to any
e tent the benefts of secton 131 (reatng to credt for ta es of
foregn countres and possessons of the Unted States) |
(D) estate, nhertance, egacy, successon, and gft ta es;
and
( ) ta es assessed aganst oca benefts of a knd tendng
to Increase the vaue of the property assessed; but ths para-
graph sha not e cude the aowance as a deducton of so much
of such ta es as s propery aocabe to mantenance or nterest
charges.
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(2) cess-promts ta under chapter 2e Speca rues. For
te purposes of ths subsecton, n the case of tbe e cess-profts ta
mposed by Subchapter of Chapter 2
( ) The deducton sha he mted to the ta mposed for the
ta abe year, but any porton of such ta pad after the ta abe
year sha be consdered as havng been pad wthn the ta abe
year;
( ) No reducton n such ta sha be made by reason of the
credt for ncome, war-profts, or e cess-profts ta es pad to
any foregn country or possesson of the Unted States;
(C) Such ta sha be computed wthout regard to the
ad|ustments provded n secton 73 ; and
(D) Such ta , n the case of a consodated return under
secton 730, sha be aocated to the members of the affated
group under reguatons prescrbed by the Commssoner, wth
the approva of the Secretary.

Sec. 205. Ta abe Years to Whch mendments ppcabe. (Revenue
ct of 19 1, Tte II.)
The amendments made by ths tte sha be appcabe ony wth respect
to ta abe years begnnng after December 31, 19 0.
Par. 20. Secton 19.23(c)- s amended by strkng out the second
sentence and nsertng n eu thereof the foowng:
state, nhertance, egacy, successon, and gft ta es and Federa ncome ta es
are not deductbe from gross ncome. The Federa war-profts and e cess-
profts ta es mposed by Tte II of the Revenue ct of 1917, Tte III of the
Revenue ct of 1918. Tte III of the Revenue ct of 1921, secton 216 of the
Natona Industra Recovery ct, and secton 702 of the Revenue ct of 193 are
not deductbe from gross ncome. The e cess-profts ta mposed by Subchapter
of Chapter 2 s deductbe ony for ta abe years begnnng after December
81, 19 0, and ts deductbty for such years s sub|ect to the rues set forth
n secton 19.23 (c)- .
Par. 21. There s nserted mmedatey after secton 19.23(c)-3 the
foowng:
Sec. 19.23(c)- . cess-profts ta under Subchapter of Chapter 2 of the
Interna Revenue Code. The deductbty of the e cess-profts ta mposed by
Subchapter of Chapter 2 of the Interna Revenue Code s sub|ect to the
foowng speca rues:
(a) The deducton s mted to the e cess-profts ta mposed for the ta abe
year. ta payer whch computes ts net ncome on the cash recepts and
dsbursements bass may deduct ts e cess-profts ta for any ta abe year In
ts ncome ta return for such ta abe year, despte the fact that such ta s
not actuay pad unt after such ta abe year. The deducton n the case of
such a ta payer, however, w he dsaowed upon e amnaton of the return
to the e tent that the e cess-profts ta Is not actuay pad after such ta abe
year.
(6) The e cess-profts ta , for tbe purposes of ths deducton, sha be com-
puted wthout reducton by reason of the credt for ncome, war-profts, or
e cess-profts ta es pad to any foregn country or possesson of the Unted
States.
(c) For the purposes of ths deducton, the e cess-profts ta sha not be
Increased or decreased on account of any ad|ustment made under secton 73 ,
reatng to ad|ustments n case of Inconsstent poston.
d) The deducton aowabe to a ta payer whch s a member of an affated
group fng a consodated e cess-profts ta return s an amount whch bears
the same rato to the e cess-profts ta of the group as the norma-ta net ncome
of the ta payer, computed wthout a deducton for e cess-profts ta , bears to
the sum of the norma-ta not ncomes of the severa members of the group,
computed wthout a deducton for e cess-profts ta .
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Par. 22. Secton 19.23 (e)- s amended by changng the ast para-
graph to read as foows:
Losses from the sae or other dsposton of Treasury bs Issued after une 17,
1030, and before March 1, 19 1, are not deductbe.
Par. 23. Secton 19.23 (o)-, as amended by Treasury Decson
5057, approved uy 2,19 1, page 97, ths uetn , s further amended
by strkng anuary 1,1939 from the frst paragraph and nsertng
n eu thereof anuary 1, 1938 .
Par. 2 . There s nserted mmedatey precedng secton 19.25-1
the foowng:
Sbo. 111. Persona empton. (Revenue ct of 19 1, Tte I.)
(a) Secton 25(b)(1) of the Interna Revenue Code s amended to
read as foows:
(1) Persona e empton. In the case of a snge person or a
marred person not vng wth husband or wfe, a persona e emp-
ton of 750; or n the case of the head of a famy or a marred
person vng wth husband or wfe, a persona e empton of 1,500.
husband and wfe vng together sha receve but one persona
e empton. The amount of such persona e empton sha be 1,500.
If such husband and wfe make separate returns, the persona e -
empton may be taken by ether or dvded between them, e cept
that If one spouse makes a return under Settement T, the persona
e empton of the other spouse sha be 750.

Sec. 113. Credt for Dependents. (Revenue ct of 19 1, Tte I.)
Secton 25(b)(2) of the Interna Revenue Code (reatng to credt
for dependents) s amended to read as foows:
(2) Credt for Dependents.
( ) owance n Genera. 00 for each person (other than
husband or wfe) dependent upon and recevng hs chef sup-
port from the ta payer f such dependent person s under eght-
een years of age or s ncapabe of sef-support because mentay
or physcay defectve.
( ) cepton for Certan eads of Fames. If the ta -
payer woud not occupy the status of head of a famy e cept
by reason of there beng one or more dependents for whom he
woud be entted to credt under subparagraph ( ), the credt
under such subparagraph sha be dsaowed wth respect to
one of such dependents.
Seo. 118. Ta abe Years to Whch mendments ppcabe. (Revenue
ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. 25. Secton 19.25-3, as amended by Treasury Decson 5011,
s further amended to read as foows:
mount of pergona e empton aooabe. snge person or a marred per-
son not vng wth husband or wfe s entted to a persona e empton of 750
( SO0 for a ta abe year begnnng after December 31, 1939, and before anuary
1, 19 1, and 1,000 for a ta abe year begnnng before anuary 1, 1910), and
the head of a famy or a marred person vng wth husband or wfe, to 1,500
( 2,000 for a ta abe year begnnng after December 31, 19. 9, and before an-
uary 1, 19 1, and 2,500 for a ta abe year begnnng before anuary 1, 19 0).
husband and wfe vng together have but one persona e empton, whch s
1,500 ( 2,000 for a ta abe year begnnng after December 31, 1039, and before
anuary 1,19 1, and 2,500 for a ta abe year begnnng before anuary 1, 10 0).
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If they make separate returns, each may cam one-haf of the persona e emp-
ton, or such e empton may, n accordance wth an agreement entered Into hy
them, he taken by ether or dvded between them n any proporton. If, however,
one spouse eects to make a return under Suppement T, the persona e empton
of the other spouse sha be 750.
Par. 2( . Secton 19.25-6 s amended by nsertng at the end thereof
a new paragraph to read as foows:
If, for any ta abe year begnnng after December 31, 19 0, a ta payer
occupes the status of the head-of a famy soey by reason of the e stence of
one or more dependents for whom he woud be entted to credt under sec-
ton 25(b)(2)( ) were It not for secton 25(b)(2)( ), the credt n respect
of one of such dependents s dsaowed. For e ampe, a wdower who occupes
the status of the head of a famy soey by reason of the fact that he s
mantanng a home for two dependent chdren under 18 years of age s
entted to the credt of -100 aowed for one such dependent, and the credt
for the other dependent s dsaowed. If, however, n addton to the two
dependent chdren under 18 years of age, the wdower aso supports and man-
tans n the home a chd who s over 18 years of age and who s not mentay or
physcay defectve, he s entted to a credt of 00 for each of the two chdren
under 18 years of age, snce hs support and mantenance of the chd over 18
years of age s n tsef suffcent to gve hm the status of head of a famy,
and therefore he does not occupy such status soey by reason of the e stence
of dependent chdren under 18 years of age.
Par. 27. Secton 19.25-7, as amended by Treasury Decson 5011, s
further amended to read as foows:
Persona e empton and credt for dependents where status changes. If the
status of the ta payer changes durng the ta abe year, the persona e empton
aowed by secton 25(b)(1) to a snge person, a marred person not vng
wth husband or wfe, a head of a famy, or a marred person vng wth
husband or wfe, and the credt for dependents aowed by secton 25(b) (2) w
be apportoned accordng to the number of months durng whch the ta payer
occuped each status. ta payer not havng the status of a head of a famy
or the status of a marred person vng wth husband or wfe sha be con-
sdered as havng the status of a snge person. For the purpose of the appor-
tonment of the persona e empton and credt for dependents a fractona part
of a month sha be dsregarded uness t amounts to more than haf a month.
In whch case t sha be consdered as a month. In the event one spouse
eects to be ta ed under Suppement T, the other spouse, not so eectng, w
be aowed for that porton of the ta abe year durng whch there e sted the
status of a marred person vng wth husband or wfe one-haf of the
persona e empton aowed a marred person for such porton of the ta abe
year. In genera, the persona e empton and credt for dependents aowabe
to any ta payer w be the sum of the amounts apportoned to the severa
perods of the ta abe year durng whch each status was occuped.
ampe ( ). and , who were heads of fames durng the frst s
months of 19 1, wore marred on uy 1, 19 1, and ved together durug the
remander of the year. If a |ont return s made by and on the caendar
year bass for 19 1, the persona e empton w be 2,250; that Is, of 1,500
for whe the head of a famy, pus of 1,500 for whe the head of a
famy, pus of 1,500 for the perod durng whch they were marred and
vng together. If separate returns are made by and on the caendar
year bass for 10 1 and nether eects to be ta ed under Suppement T, each
may cam a persona e empton of 1,125; that s, of 1,500, pus y of 2
cf 1,500. In the atter case, however, the |ont e empton of of 1,500 may
by agreement be taken ether by or or dvded between them n any
proporton.
ampe (2). and were marred and vng together unt November
80, 10 1, when , the wfe, ded. They hod no dependents. The e ecutor or
admnstrator n makng a return for may cam a persona e empton of
750; that s, of n/2 of 1,500, or 0S7.50, for the perod from the begnnng
of the ta abe year to the date of the decedent s death, pus Ma of 750, or
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62.50, for the perod from the date of decedent s death to the cose of the
ta abe year. If , the survvng spouse, makes a return for 19 1 on the
caendar year bass, he may cam a persona e empton of 750; that s, of
31/2 of 1,500, or 087.50, pus Yu.ot 750, or 62.50. owever, f nether eects
to be ta ed under Suppement T, the combned persona e empton of and U
for the perod durng whch they were marred and vng together, that s,
1,/2 of 1,500, or 1,375, may by agreement be taken ether by , or by s
e ecutor or admnstrator n behaf of , or dvded between them n any
proporton.
ampe (3). and were marred and vng together unt une 30,
19 1, when , the husband, ded. Pror to the date of death, was the chef
support of a chd 10 years of age. , the survvng spouse, supported and
mantaned the chd n her househod durng the remander of the year. The
e ecutor or admnstrator n makng a return for (not under Suppement T)
Is entted, In addton to a persona e empton, to a credt for dependents n
the amount of 200; that s, of 00. owever, snce quates as head
of a famy for the ast s months soey by reason of the fact that she man-
taned a home for such dependent chd, the credt for such dependent a
dsaowed.
ampe ( ). , a wdower havng two dependent chdren under 18 years
of age, marred on uy 1, 19 1. For the caendar year 19 1, they fe separate
returns and eects to be ta ed under Suppement T. Is ta ed as a snge
person and, snce she receves the beneft of a 750 e empton, she, n effect,
receves the beneft of haf the marta e empton of 750 for the second haf
of the year by reason of her status on the ast day of the ta abe year. ,
who s ta ed under sectons 11 and 12, s sub|ect to the provsons of secton
25(b)(3) requrng an apportonment of the persona e empton and credt for
dependents by reason of a change of status durng the ta abe year. qua-
fes as the head of a famy for the frst s months of the ta abe year and as
a marred person vng wth husband or wfe for the ast s months.
ccordngy, hs persona e empton s n of 1,500 for the frst haf of the
year pus 2 of 750 for the second haf, or 1,125. Inasmuch as hs status as
the head of a famy arses from the fact that he mantaned a home for two
dependent chdren, the credt for one of such dependents for the frst s
months of the tn nbe year s dsaowed. e s, therefore, entted to a
credt for dependents n the amount of 600; that s, 2 of 00, pus
2 of S00.
If the change of status shown by the precedng e ampes occurs n any ta abe
year begnnng before anuary 1. 19 1, the apportonment of the persona e emp-
tons w be based upon an aowance of
(a) For a ta abe year begnnng after December 31, 1939, and before
anuary 1, 19 1, 00 to a snge person or a marred person not vng wth
husband or wfe, and 2,000 to the head of a famy or a marred person vng
wth husband or wfe; and
(6) For a ta abe year begnnng before anuary 1, 19 0, 1,000 to a snge
person or a marred person not vng wth husband or wfe, and 2,500 to the
head of a famy or a marred person vng wth husband or wfe.
The provsons of secton 25(b)(2)( ) requrng the dsaowance of the
credt for one dependent where the ta payer s status as the head of a famy
resuts soey from the e stence of one or more of such dependents are app-
cabe ony for ta abe years begnnng after December 31, 19 0. ccordngy, n
the appcaton of the precedng e ampes to ta abe years begnnng pror to
anuary 1, 19 1, the dsaowance n such cases of the credt for one dependent
shoud be dsregarded.
Par. 28. Secton 19.26-2 s amended by changng the e ampe to
read as foows:
ampe. For 1939 the Corporaton, whch makes ts ncome ta returns
on the caendar year bass, has a net ncome of 50,000, ncuded n whch s
10,000 of nterest on Unted States obgatons aowed as a credt under secton
26(a). For 1938 ts gross ncome was 25,000 and ts aowabe deductons were
50,000. Incuded n such deductons was 15,000 for depeton based on ds-
covery vaue. If depeton had been computed wthout reference to dscovery
vaue or to percentage depeton the amount of such deducton woud have been
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5,000. For 1038 the corporaton had 15,000 of whoy ta -e empt Interest, and
nad . 10,0(10 n nterest on Indebtedness ncurred to carry the obgatons from
whch such ta -e empt nterest was derved. The net operatng oss credt
avaabe to such corporaton for 1939 s 10,000, computed as foows:
Deductons for 1938 50,000
Less e cess of depeton deducton computed on bass of dscovery vaue
over amount aowabe for depeton wthout reference to dscovery
vaue or percentage depeton ( 15,000 5,000) 10,000
Deductons as mted by secton 26(c)(2)( ) 0,000
Cross ncome for 1938 25,000
Pns ta -e empt nterest mnus nterest pad ( 15,000
10,000) 5,000
Gross ncome contempated by secton 20(c)(2)( ) 30,000
cess of deductons over gross ncome for 1938 10, 000
Net ncome for 1939 50,000
Less credt under secton 20(a) for Interest receved 10,000
d|usted net ncome for 1939 0, 000
The net operatng oss credt Is 10,000, that amount not beng n e cess of
the ad|usted net ncome for 1939.
Par. 29. There s nserted mmedatey precedng secton 19. 2-1
the foowng:
Sec. 11 . Nonnterest- earno Obgatons Issued at Dscount.
(Revenue ct of 19 1.)
Secton 2 of the Interna Revenue Code (reatng to perod In whch
tems of gross ncome are ncuded) s amended by nsertng before
the frst sentence thereof (a) Genera Rue. , and by nsertng at
the end of such secton a new subsecton to read as foows:
(b) Nonnterest- earng Obgatons Issued at Dscount. If, n
the case of a ta payer ownng any nonnterest-bearng obgaton ssued
nt a dscount and redeemabe for f ed amounts ncreasng at stated
ntervas, the Increase n the redempton prce of each obgaton occur-
rng n the ta abe year does not (under the method of accountng used
n computng hs net ncome) consttute ncome to hm n such year,
such ta payer may, at hs eecton made n hs return for any ta abe
year begnnng after December 31, 19 0, treat such ncrease as ncome
receved n such ta abe year. If any such eecton s made wth
respect to any such obgaton, t sha appy aso to a such obgatons
owned by the ta payer at the begnnng of the frst ta abe year to
whch t appes and to a such obgatons thereafter acqured by hm
and sha be bndng for a subsequent ta abe years, uness upon app-
caton by the ta payer the Commssoner permts hm, sub|ect to such
condtons as the Commssoner deems necessary, to change to a dfferent
method. In the case of any such obgatons owned by the ta payer at
the begnnng of the frst ta abe year to whch hs eecton appes, the
ncrease n the redempton prce of such obgatons occurrng between
the date of acquston and the frst day of such ta abe year sha aso
be treated as ncome receved n such ta abe year.
Par. 30. Secton 19. 2-1 s amended by strkng out the frst three
sentences (ncudng the sentence n parentheses) and nsertng n
eu thereof the foowng:
cept as otherwse provded n secton 2, gans, profts, and ncome are
to be ncuded n the gross ncome for the ta abe year n whch they are
receved by the ta payer, uness they are ncuded as of a dfferent perod n
accordance wth the approved method of accountng foowed by hm. (See
sectons 19. 1-1 to 19. 1-3, ncusve.) In the case of the death of a ta payer,
there sa aso be ncuded n computng net ncome for the ta abe perod
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n whch he ded amounts accrued up to the date of hs death If not otherwse
propery ncudbe n respect of such perod or a pror perod, regardess of the
fact that the decedent may have kept hs books and made hs returns on the
bass of cash recepts and dsbursements. ( s to ncome from nonnterest-
bearng obgatons ssued at dscount, see secton 19. 2-G, and as to ncome
from short-term obgatons ssued ou a dscount bass, see secton 10. 2-7.)
Par. 31. There s nserted mmedatey after secton 19. 2-5 the
foowng:
Sec. 19. 2-6. Nonntcrcst-bearnp obgatons ssued at dscount. If a ta -
payer owns any nonnterest-bearng obgaton ssued at a dscount and redeem-
abe for f ed amounts ncreasng at stated ntervas, and f the ncrease n
redempton prce of such obgaton occurrng n the ta abe year does not
consttute ncome for such year under the method of accountng used n com-
putng hs net ncome, the ta payer may, at hs eecton, treat such ncrease
as consttutng ncome for the year n whch t occurs rather than n the year
n whch the obgaton s dsposed of, redeemed, or pad at maturty. The eec-
ton must be made n the ta payer s return, and may be made for any ta abe
year begnnng after December 31, 19 0. The eecton sha appy aso to a
other obgatons of the type descrbed n ths secton owned by the ta payer
at the begnnng of the frst ta abe year to whch the eecton appes and to
those thereafter acqured by hm. It sha appy to the ta abe year for whch
such return s fed, and sha be bndng for a subsequent ta abe years un-
ess upon appcaton by the ta payer the Commssoner permts the ta payer,
sub|ect to such condtons as the Commssoner deems necessary, to change
to a dfferent method of reportng ncome from such obgatons. though
the eecton, once made, s bndng upon the ta payer, t does not appy to a
transferee of such ta payer.
In any case n whch an eecton s made under ths secton, the amount
consdered to accrue In any ta abe year to whch the eecton appes s
measured by the actua ncreases n the redempton prce occurrng n that
year. Such amount sha not be consdered to accrue rataby between the
dates on whch the redempton prce changes. Thus, f two dates on whch
the redempton prce ncreases fa wthn a ta abe year and f the re-
dempton prce ncreases n the amount of 50 cents on each such date,
the amount deemed to accrue n that year woud be 1. If at the begn-
nng of the frst ta abe year to whch the eecton appes the ta payer
owns nonnterest-bearng bonds of the prescrbed character acqured pror
thereto, he s requred to report n such year, In addton to the ncreases n
the redempton prce actuay fang wthn that year, the tota of the ncreases
n such prce occurrng between the date of hs acquston and the begnnng
of such year.
ampe,. Throughout the caendar year 19 5, a ta payer who makes hs
ncome ta returns on the caendar year bass and computes hs net ncome
on the cash recepts and dsbursements bass hods the foowng Unted States
bonds:
(a) Unted States savngs bonds havng a maturty vaue of 10,000, whch
he purchased on anuary 1, 1938, for 7,500. The entre ncrease n the re-
dempton prce of these bonds s e empt from norma ta but ony such part
of the ncrease as s attrbutabe to 5,000 n prncpa amount (purchase prce)
of such bonds s e empt from the surta .
(6) Unted States Defense savngs bonds, Seres , havng a maturty vaue
of 5,000, whch he purchased on anuary 1, 19 2, for 3,750. The ncrease
n the redempton prce of these bonds s sub|ect to both the norma ta and
the surta .
(c) Unted States savngs bonds, Defense Seres F, havng a maturty vaue
of 10,000, whch he purchased on anuary 1, 19 , for 7, 00. The ncrease
n the redempton prce of these bonds s sub|ect to both the norma ta and
the surta .
The ta payer hods no other obgatons of the type descrbed n ths secton.
In hs return for 19 5 the ta payer eects to treat the ncreases n the re-
dempton prces of such bonds occurrng n such year as ncome to hm for
such year. Under ths secton he s requred n such return to report wth
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respect to such bonds 250 as sub|ect to norma ta and 750 as sub|ect to
surta , determned as foows:
Sub|ect to norma ta .
Sub|ect to surta.
Increases
pror to
19 5.
Increases
In 19 5.
Increases
pror to
19 5.
Increases
n 19 5.
None
1U0
None
None
100
00
100
100
80
60
100
None
Tota
250
750
In the case of the Unted States savngs bonds acqured on anuary 1, 1938,
the ncreases of WIW and 100 n the redempton prce are attrbutabe to the
prncpa amount (purchase prce) n e cess of 5,000.
Par. 32. There s nserted mmedatey before secton 19. 2-1 and
mmedatey after secton 11 of the Revenue ct of 19 1 the
foowng:
Sec. 11 ). Short-Term Obgatons Issued on a Dscount ass.
(Revenue ct of 19 1.)
(a) Dscount ccrued at Maturty. Secton 2 of the Interna
Revenue Code (reatng to perod In whch tems of gross Income are
ncuded) Is amended by nsertng at the end thereof the foowng
new subsecton:
(c) Short-Tkrm Obt|gatons Issued on Dscount ass. In the
case of any obgaton of the Unted States or any of ts possessons,
or of a State or Terrtory, or any potca subdvson thereof, or of the
Dstrct of Coumba, ssued on or after March 1, 19 1, on a dscount
bass and payabe wthout nterest at a f ed maturty date not e ceed-
ng one year from the date of ssue, the amount of dscount at whch
such obgaton Is orgnay sod sha not be consdered to accrue unt
the date on whch such obgaton s pad at maturty, sod, or otherwse
dsposed of.

(c) ffectve Date of mendments. The amendments made by
ths secton sha be appcabe wth respect to ta abe years endng
after February 28, 19 1.
Par. 33. There s nserted mmedatey after secton 19. 2-6
(added by paragraph 30 of ths Treasury decson) the foowng:
Sec 19. 2-7. Short-term obgatons ssued on dscount oass. In the case
of any obgaton of the Unted States or any of ts possessons, or of a State
or Terrtory, or any potca subdvson thereof, or of the Dstrct of Coumba,
ssued on or after March 1, 19 1, on a dscount bass and payabe wthout
nterest at a f ed maturty date not e ceedng one year from the date of Issue,
the amount of dscount at whch such obgaton s orgnay sod sha not
be consdered to accrue unt the date on whtch such obgaton s pad at
maturty, sod, or otherwse dsposed of. ccordngy, If a ta payer who
computes hs net ncome on the accrua bass purchases upon ssuance a Unted
States Treasury b ssued on or after March 1, 19 1, and hods t unt ma-
turty, the entre amount of the dscount at whch the b was orgnay sod
accrues on the date of maturty; and f such a ta payer hods a Unted States
Treasury b ssued on or after March 1, 19 1, for a perod ess than ts fe,
the porton of the orgna dscount attrbutabe to such perod accrues ony
on the date on whch he ses or otherwse dsposes of the b or receves pay-
ment at maturty. The orgna dscount or the porton of such dscount, as
the case may be, s Incudbe ony n the gross Income for the ta abe year
In whch the ta payer ses or otherwse dsposes of the b or receves pay-
ment at maturty. For e ampes Iustratng rues for computaton of Income
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from sae or other dsposton of obgatons of the type descrbed n ths
secton, see secton 19.117-1.
Par. 3 . There s nserted mmedatey precedng secton 19.51-1
the foowng:
Seo. 112. Returns or Income Ta . (Revenue ct of 10 1, Tte I.)
(a) Indvdua Returns. Secton 51(a) of the Interna Revenue
Code s amended to read as foows:
(a) Requrement. The foowng ndvduas sha each make
under oath a return statng specfcay the tems of hs gross ncome
and the deductons and credts aowed under ths chapter and such
other nformaton for the purpose of carryng out the provsons of
ths chapter as the Commssoner wth the approva of the Secretary
may by reguatons prescrbe
(1) very ndvdua who s snge or who s marred but not
vng wth husband or wfe, f havng a gross ncome for the
ta abe year of 750 or over.
(2) very Indvdua who Is marred and vng wth husband
or wfe, If no ont return s made under subsecton (b) and f
( ) Such ndvdua has for the ta abe year a gross
ncome of 1,500 or over, and the other spouse has no gross
ncome; or
( ) Such ndvdua and hs spouse each has for the ta abe
year a gross Income and the aggregate gross ncome s 1,500
or over.

Sew. 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116,
and 117) sha be appcabe ony wth respect to ta abe years begnnng
after December 81, 19 0.
Pah. 35. Secton 19.51-1, as amended by Treasury Decson 5057, s
further amended as foows:
( ) y strkng from the paragraph desgnated as fb) the fg-
ure 800 and nsertng n eu thereof the foowng: 750 ( S()0
for a ta abe year begnnng after December 31, 1939, and before
anuary 1, 19 1).
( ) y strkng from the paragraph desgnated as (b) the fgure
2,000 wherever occurrng and nsertng n eu thereof the fo-
owng : 1,500 ( 2,000 for a ta abe year begnnng after December
31, 1939, and before anuary 1, 19 1)/
Par. 36. Secton 19.51-2, as amended by Treasury Decson 5011, s
further amended as foows:
( ) y nsertng mmedatey after the headng the foowng:
For ta abe years begnnng after December 31, 19 0, the return sha be on
Form 10 0 e cept that t sha be on short Form 10 0 f (1) the gross ncome
does not e ceed 3,000 and conssts whoy of saary, wages, compensaton for
persona servces, dvdends. Interest, rent, annutes, or royates, and (2) the
ta payer eects to pay the ta mposed by secton 00 n eu of the ta mposed
by sectons 11 and 12.
( ) y strkng out the frst two sentences of the secton before
ts amendment by ( ) and nsertng n eu thereof the foowng
paragraph:
For ta abe years begnnng before anuary 1, 19 1, the return sha be on
Form 10 0 e cept that t sha be on short Form 10 0 f (1) the net ncome
does not e ceed 5,000, or for ta abe years begnnng n 19 0, f the gross
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Income does not e ceed . 5,000, and s derved from nterest, dvdends, annutes,
ncome from fducares, and saares, wages, commssons, bonuses, and other
compensaton for persona servces, and (2) the ta payer does not own a
busness or practce a professon on hs own account and renders a return on
the cas recepts and dsbursements bass for the caendar year. The return
sha be made on Form 10 0 n a cases n whch the ta payer cams any
deductons for osses from the rentng of, or sae or e change of, property.
Par. 37. Secton 19.51-3, as amended by Treasury Decson 5011,
s farther amended by strkng out the fgure 800 wherever oc-
currng and nsertng n eu thereof the foowng: 750 ( 800 for
a ta abe year begnnng after December 31, 1939, and before
anuary 1, 19 1).
Par. 38. There s nserted mmedatey precedng secton
19.55(b)- the foowng:
Sec. 55 . Transportaton of Persons, tc. (Revenue ct of 19 1,
Tte , Part .)

(d) Technca mendments.
(1) Secton 55(a)(2) of the Interna Revenue Code Is amended
by strkng out subchapters and of .

Sec. 558. ffectve Date of Part . (Revenue ct of 19 1, Tte
, Part .)
Ths part sha take effect on October 1, 19 1.
Par. 39. There s nserted mmedatey precedng secton 19.102-1
the foowng:
Sec 103. Corporaton Defense Ta Rates Incorporated n Rate
Schedues. (Revenue ct of 19 1, Tte I.)

(d) Surta on Corporatons Impropery ccumuatng Surpus.
The rate schedue of secton 102 of the Interna Revenue Code s
amended to read as foows:
27 per centum of the amount of the undstrbuted secton
102 net ncome not n e cess of 100,000. pus
38 per centum of the undstrbuted secton 102 net Income n
e cess of 100,000.

Sec. 118. Ta abe Years to Whch mendments ppcabe. (Rev-
enue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 110.
and 117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. 0. Secton 19.102-1, as amended by Treasury Decson 5011, s
further amended by strkng out anuary 1, 19 5 n the ast sen-
tence of the ast paragraph, and nsertng n eu thereof anuary 1,
19 1.
Par. 1. There s nserted mmedatey precedng secton 19.102-1
and mmedatey after secton 118 of the Revenue ct of 19 1 the -
foowng:
Sec. 202. Deducton of cess-Profts Ta . (Revenue ct of 19 1,
Tte II.)

(b) mendment of Secton 102(d). Secton 102(d)(1)( ) of the
Interna Revenue Code (reatng to the deducton of ta es n computng
secton 102 net ncome) s amended to read as foows:
( ) Ta es.. Federa ncome, war-profts, and e cess-profts
ta es (other than the ta Imposed by Subchapter of Chapter 2
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55
for a ta abe year begnnng after December 31, 19 0) pad or
accrued durng the ta abe year, to the e tent not aowed as a
deducton by secton 2. , but not ncudng the ta mposed by
ths secton or a correspondng secton of a pror ncome-ta aw.

Sec. 205. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 10 1, Tte II.)
The amendments mnde by ths tte sha be appcabe ony wth re-
spect to ta abe years begnnng after December 31, 19 0.
Par. 2. Secton 19.102- s amended by nsertng mmedatey after
the word ta es n (a) of the second sentence of the frst paragraph
the foowng:
(other than the ta Imposed by Subchapter of Chapter 2 of the Interna
Revenue Code for a ta abe year begnnng after December 31, 19 0).
Par. 3. There s nserted mmedatey precedng secton 19.10 -1
the foowng:
Sec. 10 . Surta on Corporatons and Termnaton or Defense Ta .
(Revenue ct of 19 1, Tte I.)

(c) Surta on anks. Secton 10 (b) of the Interna Revenue Code
(reatng to certan banks and trust companes) s amended to read as
foows:
(b) Rate of Ta . anks sha be sub|ect to ta under secton 13 or
secton 1 (b), and under secton 15.

8ec 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.) - . .
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) shn be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. . Secton 19.10 1, as amended by Treasury Decson SOU,
s further amended by strkng out the ast sentence of the second
paragraph, and nsertng n eu thereof the foowng:
For a ta abe year begnnng after December 31, 1939, and before anuary 1,
19 1, he ta s ncreased by the emount of the defense ta . For a ta abe year
begnnng after December 31, 19 0, such a bank s sub|ect to the surta mposed
by secton 15, as amended by secton 10 of the Revenue ct of 19 1.
Par. 5. Secton 19.112()- s amended by strkng out the ast
sentence n the frst paragraph and nsertng n eu thereof the
foowng:
The term Federa ncome ta es ncudes (1) the e cess profts ta on the
net ncome of a corporaton referred to n secton Ot of the Revenue ct of
1935, secton 02 of the Revenue ct of 1936, and secton 602 of the Revenue ct
of 1938, (2) the decared vaue e cess-profts ta referred to n secton 600 of
the Interna Revenue Code, and (3) the e cess-profts ta mposed by Subchapter
of Chapter 2 of the Interna Revenue Code.
Par. 6. Secton 19.115-5 s amended by strkng 1936 wherever
appearng n the e ampe n subsecton (o) and nsertng 1937 n
eu thereof.
Par. 7. There s nserted mmedatey precedng secton 19.117-1
the foowng:
Sec. 115. Short-Term Obgatons Issued on a Dscount ass.
(Revenue ct of 19 1.)

(b) Capta Gan Rue Not ppcabe. Secton 117(a)(1) of the
Interna Revenue Code (reatng to defnton of capta assets) a
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amended by strkng out the semcoon at the end thereof and nsertng
In eu thereof the foowng: , or an obgaton of the Unted States
or any of ts possessons, or of a State or Terrtory, or any potca sub-
dvson thereof, or of the Dstrct of Coumba, ssued on or after March
1, 19 1, on a dscount bass and payabe wthout nterest at a f ed ma-
turty date not e ceedng one year from the date of Issue; .
(c) ffectve Date of mendments. The amendments made by ths
secton sha be appcabe wth respect to ta abe years endng after
February 28, 19 1.
Par. 8. Secton 19.117-1 s amended by nsertng after the second
paragraph thereof the foowng paragraph:
Obgatons of the Unted States or any of Its possessons, or of a State or
Terrtory, or any potca subdvson thereof, or of the Dstrct of Coumba,
Issued on or after March 1, 19 1, on a dscount bass and payabe wthout
Interest at a f ed maturty date not e ceedng one year from the date of
Issue, are e cuded from the term capta assets. n obgaton may be
Issued on a dscount bass even though the prce pad e ceeds the face amount.
Thus, athough the Second Lberty ond ct provdes that Unted States Treas-
ury bs sha be Issued on a dscount bass, the Issung prce pad for a
partcuar b may, by reason of compettve bddng, actuay e ceed the face
amount of the b. Snce the obgatons of the type descrbed n ths
secton are e cuded from the term capta assets, gans or osses from
the sae or e change of such obgatons are not sub|ect to the percentage pro-
vsons of secton 117(b) and osses from such transactons are not sub|ect to
the mtaton on osses provded n secton 117(d). It s, therefore, not necessary
for a ta payer, other than a fe Insurance company sub|ect to ta aton ony
on nterest, dvdends, and rents, to segregate the orgna dscount accrued
(see secton 19. 2-7) and the gan or oss reazed upon the sae or other
dsposton of any such obgaton.
ampe ( ). (not a fe Insurance company) buys a 100,000 nnety-day
Treasury b upon ssuance for 99,998. s of the cose of the forty-ffth day
of the fe of such b, he ses t to (not a fe Insurance company) for
99,999.50. The entre net gan to of 1.50 may be taken nto account as a
snge tem of Income, wthout aocatng 1 to nterest and 0.50 to gan.
If hods the b unt maturty hs net gan of 0.50 may smary be taken
Into account as a snge Item of Income, wthout aocatng 1 to nterest and
0.50 to oss.
ampe (2). The facts In ths e ampe are the same as In e ampe (1)
e cept that the seng prce to s 99,998.50. The net gan to of 0.50
may be taken nto account wthout aocatng 1 to Interest and 0.50 to
oss, and, smary, f hods the b unt maturty hs entre net gan of
1.50 may be taken nto account as a snge tem of ncome, wthout aocatng
1 to nterest and 0.50 to gan.
Par. 9. Secton 19.122- , as amended by Treasury Decson 5057,
s further amended as foows:
( ) y strkng out the ffth paragraph n the second e ampe
n subsecton (b), and nsertng n eu thereof the foowng:
For 19 1 the net ncome of s deemed to be 2,000, . e., 1,000, the porton
of the combned not ncome for 15) 1 attrbutabe to , pus 1,000, the e cess of
the porton of the combned net Income for 19 1 attrbutabe to W ( 3,000) over
the net operntng oss carry-over of to 19 1 ( 2,000). See paragraph (3)()
( ) and ( ).
( ) y strkng out the second ( 1,000) n the ne t to the ast
paragraph of the second e ampe n subsecton (b), and nsertng n
eu thereof ( 2,000).
Par. 50. There s nserted mmedatey precedng secton 19.1 2-1
the foowng:
Sec. 112. Rktuhns of Income Ta . (Revenue ct of 19 1, Tte I.)

(b) Fducary Returns. Secton 1 2(a) of the Interna Revenue
Code s amended to read as foows:
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(a) Reqt|hement of Return. very fducary (e cept a recever
apponted by authorty of aw n possesson of part ony of the property
of an ndvdua) sha make under oath a return for any of the foow-
ng ndvduas, estates, or trusts for whch he acts, statng specfcay
the tems of gross ncome thereof and the deductons and credts aowed
under ths chapter and such other nformaton for the purpose of
carryng out the provsons of ths chapter as the Commssoner wth
the approva of the Secretary may by reguatons prescrbe
(1) very ndvdua havng a gross ncome for the ta abe year
of 7f 0 or over, f snge, or t marred and not vng wth husband
or wfe;
(2) very ndvdua havng a gross ncome for the ta abe year
of or over, f marred and vng wth husband or wfe;
(3) very estate the gross ncome of whch for the ta abe year
s 750 or over;
( ) very trust the net ncome of whch for the ta abe year s
100 or over, or the gross ncome of whch for the ta abe year s
750 or over, regardess of the amount of the net ncome; and
(5) very estate or trust of whch any benefcary s a nonres-
dent aen.

Sec. 118. Ta abe Ykars to Whch mendments ppcabe. (Rev-
enue ct of 19 1, Te I.)
The amendments made by ths tte (e cept sectons 107, 115, 110, and
117) sha appcabe ony wth respect to ta abe years begnnng after
December 31, 19 0.
Par. 51. Secton 19.1 2-1, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y strkng from the paragraphs desgnated as ( ) and
the fgure 800 wherever occurrng and nsertng n eu
thereof (e foowng: 750 ( 800 for a ta abe year begnnng after
December 31. 1939, and before anuary 1, 19 1)/
( ) y strkng from the paragraph desgnated as (c) the fg-
ure 2,000 wherever occurrng and nsertng n eu thereof the
foowng: 1,500 ( 2,000 for a ta abe year begnnng after Decem-
ber 31. 1939. and before anuary 1, 19 1)
Par. 52. Secton 19.1 2-5, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y strkng out the second and thrd sentences of subsecton
(6) and nsertng n eu thereof the foowng:
ctzen or resdent fducary havng the dstrbuton of the ncome of an
estate or trust sha make a return on Form 10 0N -a f a benefcary, other
than a resdent of Canada wth respect to ncome receved pror to pr 30,
19 1, has gross ncome for the ta abe year of more than 23,000 ( 21,000 for
a ta abe year begnnng before anuary 1, 19 0, and 2 ,000 for a ta abe
year begnnng after December 31, 1939, and before anuary 1, 19 1) from
the sources specfed n secton 211(a), regardess of the amount of ta wth-
hed at the source. If the gross ncome from such sources s 23,000 or ess
( 21,000 or ess for a ta abe year begnnng before anuary 1, 19 0, and
2 ,000 or ess for a ta abe year begnttng after December 31, 1939, and before
anuary 1, 19 1), the return (f a return s requred to be fed) for the bene-
fcary sha be on Form 10 0N .
( ) y strkng out the ne t to the ast sentence of subsecton (b)
and nsertng n eu thereof the foowng:
The fducary sha make a return on Form 10 2 of the ta at 27 per cent
(16 / per cent for a ta abe year begnnng after December 31, 1939, and before
anuary 1, 19 1, and 10 per cent for a ta abe year begnnng pror to anuary
1. 19 0) on the entre amount of the ncome payabe to the benefcary, e cept
that In-the case of a benefcary, resdent of Canada, the rate sha be 5 per cent
Wth respect to ncome receved pror to pr 30, 19 1.
1611 2 5
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Par. 53. There s nserted mmedatey precedng secton 19.1 7-1
the foowng:
Sec. 112. Returns of Income Ta . (Revenue ct of 19 1, Tte I.)

(c) Informaton Returns. Secton 1 7(a) of the Interna Revenue
Code (reatng to nformaton at the source) s amended by strkng out
81 0 wherever occurrng theren and nsertng n eu thereof 750 .
Sec. 118. Ta abe Years to Whch mendments ppcabe. (Rev-
enue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. 5 . Secton 19.1 7-1, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y changng the headng of the secton to read as foows:
Return of nformaton as to payments of 1,000 for 1939, 800 far
19 0, and 750 for years thereafter.
( ) y changng the frst sentence to read as foows:
persons makng payment to another person of f ed or determnabe ncome
of 1,000 or more n the caendar year 1939, or of 800 or more In the caendar
year 19 0, or of 750 or more n any subsequent year, must render a return
thereof to the Commssoner for such year on or before February 15 of the fo-
owng year, e cept as specfed n sectons 19.1 7-3 to 19.1 7-5, ncusve.
Par. 55. Secton 19.1 7-2, as amended by Treasury Decson 5011,
s further amended by changng the frst sentence thereof to read as
foows:
The names of a empoyees to whom payments of 1,000 or over a year are made
durng the caendar year 1939, or of 800 or over durng the caendar year 19 0,
or of 750 or over durng a subsequent caendar year, whether such tota sum
s mnde up of wages, saares, commssons, or compensaton n any other form,
must be reported. :
Par. 56. Secton 19.1 7-3, as amended by Treasury Decson 5011,
s further amended as foows:
) y changng the frst sentence to read as foows:
Payments of the foowng character, athough over 1,000 durng the caendar
year 1939, or over 800 durng the caendar year 19 0, or over 750 durng a sub-
sequent caendar year, need not be reported n returns of nformaton on Form
1099:
( ) y changng that part desgnated as (e) to read as foows:
(e) Payments of rent made to rea estate agents (but the agent must report
payments to the andord f the amount pad durng the caendar year 1939
was 1,000 or more, or durng the caendar year 19 0 was 800 or more, or durng
a subsequent caendar year was 750 or more ;
(C) y changng that part desgnated as ( ) to read as foows:
(ft) Payments of saares, or other compensaton for persona servces ag-
gregatng ess than 2,500 for the caendar year 1939, or ess than 2,000. for the
caendar year 19 0, or ess than 1,500 for subsequent caendar years, made to
a marred ndvdua (ctzen or resdent) ;
Par. 57. Secton 19.1 7-7, as amended by Treasury Decson 5011,
s further amended by strkng from the frst sentence thereof wthn
a subsequent year and by nsertng n that sentence mmedatey
after 800 or more the foowng: wthn 19 0, or 750 or more
wthn a subsequent year.
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Par. 58. Secton 10.1 8-1 s amended as foows:
( ) y strkng out (1) out of ts earnngs or profts accumuated
after February 28, 1913, or (2) out of earnngs or profts of the ta -
abe year (computed as of the cose of the ta abe year wthout dmnu-
ton by reason of any dstrbutons made durng the ta abe year)
wthout regard to the amount of the earnngs and profts at the tme
the dstrbuton was made, n the frst sentence of subsecton (a).
( ) y changng subsecton (b) to read as foows:
(6) Iu the ease of a dstrbuton whch s made from a depeton or deprec-
aton reserve, or whch for any other reason s deemed by the corporaton to be
nonta abe or party nonta abe to ts sharehoders, the corporaton w f In
the nformaton on both sdes of Form 1006 and forward ths form, together wth
Forms 1009, to the Commssoner of Interna Revenue, Returns Dstrbuton Sec-
ton, Washngton, D. C, not ater than February 1 of the foowng .year. Upon
recept of ths nformaton the Commssoner w advse the corporaton by etter
as to any apparent errors made by the corporaton n computng the nonta abe
porton of the dstrbuton n order that the corporaton may, f tme permts,
furnsh such advce to ts sharehoders before the sharehoders fe ther ncome
ta returns for the year n whch the dstrbuton was made.
Par. 59. Secton 19.1 8-3, as amended by Treasury Decson 5015,
approved October 22, 19 0 C. . 19 0-2, 1 7 , s further amended
by strkng out 800 n the frst paragraph and nsertng n eu
thereof 750.
Par. 60. Secton 19.201 (b)-, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y strkng out anuary 1, 19 5 n the ast sentence n sub-
secton ( ), and nsertng n eu thereof anuary 1, 19 1.
( ) _ y nsertng after the ast sentence n subsecton (c) the
foowng:
For the surta on corporatons, ncudng fe nsurance companes, mposed
for ta abe years begnnng after December 31, 19 0, see secton 19.15-2.
Par. 61. Secton 19.20 (a)-, as amended by Treasury Decson
5011, s further amended as foows:
( ) y strkng out anuary 1, 19 5 n the ast sentence n
subsecton (c), and nsertng n eu thereof anuary 1, 19 1.
( ) y nsertng after the ast sentence n subsecton (c) the
foowng:
For the surta on corporatons, ncudng nsurance companes other than fe or
mutua, mposed for ta abe years begnnng after December 31, 19 0, see
secton 19.15-2.
Par. 62. Secton 19.207-1, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y strkng out anuary 1, 19 5 n the ast sentence n
subsecton (c), and nsertng n eu thereof anuary 1, 19 1.
( ) y nsertng after the ast sentence n subsecton (c) the
foowng:
For the surta on corporatons, ncudng mutua nsurance companes, m-
posed for ta abe years begnnng after December 31, 19 0, see secton 19.15-2.
Par. 63. There s nserted mmedatey precedng secton 19.211-1
the foowng:
Seo. 105. Ta on Nonresdent ukn Indvdua:. (Revenue ct of
19 1, Tte I.)
(a) Ta n Genera. Secton 211(a)(1)( ) of the Interna Rev-
enue Code (reatng to ta on nonresdent aen ndvduas not engaged
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60
n trade or busness wthn the Unted States and not hayng an offce
or pace of busness theren) s amended by strkng out 15 per
centum and nsertng n eu thereof 27 per centum .
(b) ggregate Recepts Moke Than 23.00 ). Secton 211(a)(2) of
the Interna Revenue Code s amended to read as foows:
(2) ggregate more than 23,000. The ta mposed by para-
graph (1) sha not appy to any Indvdua f the aggregate amount
receved durng the ta abe year from the sources theren specfed
s more than 23,000.
(c) Ta Where Gross Income or More Than 23,000 Secton
211(c) of the Interna Revenue Code (reatng to ta on certan non-
resdent aen ndvduas) s amended by strkng out 2 ,000 where-
ever occurrng theren and nsertng n eu thereof 23,000 ; and
by strkng out 15 per centum and nsertng n eu thereof 27
per centum .
Sec. 108. Treaty Obgatons. (Revenue ct of 19 1, Tte t)
No amendment made by ths tte sha appy to any case where ts
appcaton .woud be contrary to any treaty obgaton of the Unted
States.
Sec. 109. Reducton n Pursuance of Treates of Rates of Ta and
Wthho|hng on Nonresdent en Indvduas Rfsdewt n,
and Corporatons Organzed Under Laws of, Western emsphere
Countres. (Revenue ct of 19 1, Tte L)
(a) Secton 211(a)(1) (reatng to tn on nonresdent
aen ndvduas) ; of the Interna Revenue Code are
amended by strkng out a contguous country and nsertng n eu
thereof any country n North. Centra, or South merca, or n the
West Indes, or of Newfoundand .
(b) Secton 211(a)(3) of the Interna Revenue Code s amended to
read as foows:
(8) Resdfnts of certan countres. The provsons of para-
graph (2) sha not appy to a resdent of any country n North,
Centra, or South merca, or n the West Indes, or of Newfound-
and, so ong as there s n effect wth such country a treaty whch
provdes otherwse.
(c) Secton 211(c)( ) of the Interna Revenue Code s amended to
read as foows:
( ) Ths subsecton sha not nppy to a resdent of any country
n North, Centra, or South merca, or n the West Indes, or of
Newfoundand, so ong as there s n effect wth such country
a treaty whch provdes otherwse.
Sec. 118. Ta abe Years to Whch mendments ppcabe. (Rev-
enue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115. 116,
and 117) sha be appcabe ony wth respect to ta abe years begn-
nng after December 31, 19 0.
Par. 6 . Secton 19.211-7, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y strkng out 21,600 ( 2 ,000 durng a ta abe year be-
gnnng after December 31, 1939) wherever appearng theren and
nsertng n eu thereof the foowng: 23,000 ( 2 ,000 durng
a ta abe year begnnng after December 31, 1939, and before anuary
1, 19 1, and 21,600 durng a ta abe year begnnng before anuary
1, 19 0).
( ) y strkng from the second paragraph of subsecton (a)
10 per cent for a ta abe year begnnng pror to anuary 1, 19 0,
at the rate of 16 per cent for a ta abe year begnnng after De-
cember 31, 1939, and before anuary 1, 19 5 (see secton 19.15-1),
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61
and at the rate of 15 per cent thereafter, and nsertng n eu thereof
the foowng: 27 Per cent (I6 2 per cent for a ta abe year begn-
nng after December 31, 1939, and before anuary 1, 19 1 (see secton
19.15-1), and 10 per cent for a ta abe year begnnng pror to
anuary 1, 19 0),
(C) y strkng from the second paragraph of subsecton (a) s
reduced to 5 per cent and nsertng n eu thereof the foowng:
was reduced to 5 per cent as to tems of ncome receved pror to
pr 30, 19 1, .
(D) y strkng from the second paragraph of subsecton (a)
or 15 per cent, .
( ) y nsertng n the second paragraph of subsecton (a) after
a contguous country, the foowng: or (for ta abe years be-
gnnng after December 31, 19 0) any country n North, Centra, or
South merca, or n the West Indes, or of Newfoundand, .
(F) y strkng from subsecton (b) 10 per cent, or 15 per cent
for a ta abe year begnnng after December 31, 1939, and nsertng
n eu thereof the foowng: 27 per cent (15 per cent for ta abe
years begnnng after December 31, 1939, and before anuary 1,
19 1, and 10 per cent for ta abe years begnnng pror to anuary
1, 19 0).
(G) y strkng out the ast sentence of subsecton (6) and nsert-
ng n eu thereof the foowng: Nonresdent aen ndvduas,
resdents of Canada, were, wth respect to ncome receved pror to
pr 30, 19 1, sub|ect to the terms of the ta conventon between
the Unted States and Canada and the speca provsons of sub-
secton (a) of ths secton. Such speca treatment s not appcabe
wth respect to ncome of such ta payers receved on or after
pr 30, 19 1.
( ) y strkng from the frst paragraph of subsecton (c) 10
per cent, or 15 per cent for a ta abe year begnnng after December
31, 1939, and nsertng n eu thereof the foowng: 27 2 per cent
(I6 2 Per cent, ncudng the defense ta (see secton 19.15-1) for a
ta abe year begnnng after December 31, 1939, and before anuary
1, 19 1, and 10 per cent for a ta abe year begnnng pror to
anuary 1, 19 0).
(I) y strkng from the frst paragraph of subsecton (c) 19 5
and nsertng n eu thereof 19 1.
Par. 65. Secton 19.213-1, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y changng the headng of paragraph (2) of subsecton
(a) to read as foows:
(2) ggregate more than 23,000 ( 2 t,000 for a ta abe year begnnng after
December 31, 1939, and before anuary 1, 19 1, and 21,000 for a ta abe year
begnnng pror to anuary 1, 191)0).
( ) y strkng from paragraph (2) of subsecton (a) 21,600,
or more than 2 ,000 for a ta abe year begnnng after December
SI, 1939, and nsertng n eu thereof the foowng: 23,000
( 2 ,000 for a ta abe year begnnng after December 31. 1939, and
before anuary 1, 19 1, and 21,000 for a ta abe year b fmnng
pror to anuary 1, 19 0).
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Par. 66. There Is nserted mmedatey precedng secton 19.21 -1
the foowng:
Sec. 111. Persona empton. (Revenue ct of 19 1, Tte I.)

(b) Secton 21 of the Interna Revenue Code (reatng to persona
e empton of nonresdent aen Indvduas) s amended by strkng
out 800 and nsertng n eu thereof 750 .

Seo. 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte L)
The amendments made by ths tte (e cept sectons 107, 115, 116,
and 117) sha be appcabe ony wth respect to ta abe years begn-
nng after December 31, 19 0.
Par. 67. Secton 19.21 -1, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y changng the headng of paragraph (2) of subsecton
(a) to read as foows:
(2) ggregate more than 23,000 ( 2 ,000 for a ta abe year begnnng after
December SI, 1939, and before anuary 1, 19 1, and 21,600 for a ta abe pear
begnnng pror to anuary 1, 19 0).
( ) y strkng from paragraph (2) of subsecton (a). w 21,600,
or more than 2 ,000 for a ta abe year begnnng after December
31, 1939, and nsertng n eu thereof the foowng: 23,000
( 2 ,000 for a ta abe year begnnng after December 31, 1939, and
before anuary 1, 19 1, and 21,600 for a ta abe year begnnng
pror to anuary 1, 19 0), .
(C) y strkng from subsecton (b) 1,000, or 800 for a ta -
abe year begnnng after December 31, 1939, and nsertng n eu
thereof the foowng: 750 ( 800 for a ta abe year begnnng after
December 31, 1939, and before anuary 1, 19 1, and 1,000 for a
ta abe year begnnng pror to anuary 1,19 0), .
Par. 68. Secton 19.215-1, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y changng the headng of paragraph (2) of subsecton (a)
to read as foows:
(2) ggregate more than 23,000 ( 2 ,000 for a ta abe pear begnnng
after December 31, 1939, and before anuary 1, 191(1, and 21,600 for a ta abe
year begnnng pror to anuary 1, 19 0).
( ) y strkng from paragraph (2) of subsecton (a) 21,600,
or more than 2 ,000 for a ta abe year begnnng after December 31,
1039, wherever appearng theren and nsertng n eu thereof the
foowng: 23,000 ( 2 ,000 for a ta abe year begnnng after
December 31, 1939, and before anuary 1, 19 1, and 21,600 for a
ta abe year begnnng pror to anuary 1, 19 0), .
Par. 69. Secton 19.217-2, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y changng the headng of paragraph (2) of subsecton (a)
to read as foows: v
(2) ggregate more than 23,000 2 ,000 for a ta abe year begnnng
after December 31, 1939, and before anuary 1, 19 1, and 21,600 for a ta abe
year begnnng pror to anuary 1, 19 0).
( ) y strkng from paragraph (2) of subsecton (a) 21,600,
or more than 2 ,000 for a ta abe year begnnng after December
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63
81, 1939, and nsertng n eu thereof the foowng: 23,000
( 2 ,000 for a ta abe year begnnng after December 81, 1039, and
before anuary 1, 19 1, and 21,600 for a ta abe year begnnng
pror to anuary 1, 10 0).
(C) y strkng from the frst paragraph of subsecton (Z )
1,000 durng a ta abe year begnnng pror to anuary 1, 10 0,
or 800 durng a ta abe year begnnng after December 31, 1039
and nsertng n eu thereof the foowng: 750 ( 800 durng a
ta abe year begnnng after December 31, 1030, and pror to an-
uary 1, 10 1, and 1,000 durng a ta abe year begnnng pror to
anuary 1, 19 0).
Par. 70. Secton 19.219-1, as amended by Treasury Decson 5011,
s further amended by strkng out 21,600, or more than 2 ,000
for a ta abe year begnnng after December 31, 1939, and nsertng
n eu thereof the foowng: 23,000 ( 2 ,000 for a ta abe year
begnnng after December 31, 1930, and pror to anuary 1, 10 1,
and 21,600 for a ta abe year begnnng pror to anuary 1, 10 0), .
Par. 71. There s nserted mmedatey precedng secton 10.231-1
the foowng:
Sec. 10 . Subta on Corporatons and Termnaton of Defense Ta .
(Revenue ct of 10 1, Tte I.)

(d) Surta on Resdent Foregn Corporatons. Secton 231(b) of
the Interna Revenue Code (reatng to certan foregn corporatons)
s amended to rend as foows:
(b) Resdent Corporatons. foregn corporaton engaged n trnde
or busness wthn the Unted States or havng an offce or pace of
busness theren sha be ta abe as provded n secton 1 (c)(1) and
secton 15.

Sec. 706. Ta on Fobhcn Corporatons. (Revenue ct of 19 1,
Tte I.)
Secton 231(a) of the Interna Revenue Code (reatng to ta on
nonresdent foregn corporatons) s amended by strkng out 15
per centum and Insertng n eu thereof 27W per centum .
Sec. 10S. Treaty Obgatons. (Revenue ct of 10 1, Tte I.)
No amendment made by ths tte sha appy n any case where ts
appcaton woud be contrary to any treaty obgaton of the Unted
States.
Sec. 100. Reducton n Pursuance of Treates of Rates of Ta
and Wthhodng on Nonresdent en Indvduas Resdent
n, and Corporatons Organzed Under Laws ok, Western
emsphere Countres. (Revenue ct of 19 1, Tte I.)
(a) Secton 231(a)(1) (reatng to ta on nonresdent
foregn corporatons) of the Interna Revenue Code are amended by
strkng out a contguous country and Insertng n eu thereof
any country n North. Centra, or South merca, or n the West
Indes, or of Newfoundand .

Sec. 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 110, and
117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 10 0.
Par. 72. Secton 10.231-1, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y strkng from the second paragraph of subsecton (a)
16 per cent, e cept that for ta abe years begnnng after December
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81, 1939, and before anuary 1, 19 5, the rate s 61/2 per cent (see
secton 19.15-1), and e cept further for a ta abe year begnnng
before anuary 1, 19 0, dvdends are ta abe at the rate of 10 per
cent and nsertng n eu thereof the foowng: 27 per cent
(I6 2 per cent for a ta abe year begnnng after December 31, 1939,
and before anuary 1, 19 1 (see secton 19.15-1), and 15 per cent (10
per cent as to dvdends) for a ta abe year begnnng before anuary
1,19 0).
( ) y nsertng n the second paragraph of subsecton (a) after
a contguous country, the foowng: or (as to ta abe years
begnnng after December 31, 19 0) any country n North, Centra,
or South merca, or n the West Indes, or of Newfoundand, .
(C) y nsertng at the end of subsecton (a) the foowng:
Under the ta conventon between the Unted States and Canada,
effectve anuary 1,1936, the rate of 5 per cent apped wth respect to
dvdends pad pror to pr 30,19 1, to such corporatons organzed
under the aws of Canada.
(D) y strkng out the frst sentence n subsecton (b) and nsert-
ng n eu thereof the foowng:
resdent foregn corporaton Is not ta abe upon the tems of f ed or
deterrannbe annua or perodca ncome enumerated n secton 231(a) at the
rote specfed n that secton.
( ) y strkng out the ast three sentences n the frst paragraph
of subsecton (b) and nsertng n eu thereof the foowng:
For any ta abe year begnnng after December 31, 1939, a resdent foregn
corporaton s, under secton 1 (c)(1), as amended, abe to a ta of 2 per
cent (22 o per cent for such a ta abe year begnnng before anuary 1,
11) 1) of ts norma-ta net ncome (regardess of the amount thereof), that
s. ts net ncome from sources wthn the Unted States (gross ncome from
sources wthn the Unted States mnus the statutory deductons provded n
sectons 23 and 232) ess the credts aowed aganst net ncome by secton 26 (a)
and (b). For the defense ta mposed for ta abe years begnnng after
December 31, 1939, and before anuary 1. 19 1, see secton 19.15-1. For a
ta abe year begnnng after December 31, 19 0. a resdent foregn corporaton
s abe to a surta of 6 per cent of the frst 25,000 of ts corporaton surta
net ncome and 7 per cent of the remander thereof. The corporaton surta
net ncome of a resdent foregn corporaton s ts net ncome from sources
wthn the Unted Stntes ess the credt aowed by secton 20(b), whch credt
s mted n amount to 85 per cent of ts net ncome from sources wthn
the Unted States.
Par. 73. Secton 19.236-1 s amended as foows:
( ) y strkng secton 231(a) from subsecton (a) and by
nsertng n eu thereof Chapter 1.
( ) y strkng from subsecton (b) the porton of the frst
entence begnnng wth provded and endng wth December
31, 1939), and by nsertng n eu thereof mposed by Chapter 1.
Par. 7 . There s nserted mmedatey precedng secton 19.251-1
the foowng:
Sec. 10 . Surta on Corporatons and Termnaton of Defense
Ta . (Revenue ct of 19 1, Tte I.)

(e) Surta on Corporatons ntttted to the enefts of Secton
251. Secton 251(c)(1) of the Interna Revenue Code (reatng to
the ta on corporatons entted to the benefts of secton 251) Is
amended to read as foows:
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65
(1) Corporaton ta . domestc corporaton entted to the
benefts of ths secton sha be sub|ect to ta under secton 13
or secton 1 (b), and under secton 15.

S:c. 111. Persona k.mpton. (Revenue ct of 19 1, Tte I.)

(c) Secton 251(f) of the Interna Revenue Code (rentng to persona
e empton of ctzens entted to benefts of secton 251) s amended
by strkng out S00 and nsertng n eu thereof 750 .
Sec. 118. Ta abe Years to Whch mendments ppcabe. (Rev-
enue ct of 1 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116,
nnd 117) sha be appcabe ony wth respect to ta abe years begn-
nng after December 31, 11) 0.
Par. 75. Secton 19.251-3 s amended by nsertng at the end of
the second paragraph the foowng:
For any ta abe year begnnng after December 31, 10 0, a domestc corpora-
ton entted to the benefts cf secton 2.11 s sub|ect to the surta mposed
by secton 15, as amended by secton 10 of the Revenue ct of 19 1. For
the defense ta mposed for ta abe years begnnng after December 31,
1939, and before anuary 1, 19 1, see secton 19.15-1.
Par. 76. There s nserted mmedatey precedng secton 19.261-1
the foowng:
Sec. 10 . Surta on Corporatons and Termnaton of Defense Ta .
(Revenue ct of 19 1, Tte I.)

(f) Surta on Chna Trade ct Corporatons.
(1) Surta . Secton 201 (a) of the Interna Revenue Code (reatng
to the ta on Chna Trade ct corporatons) s amended to read as
foows:
(a) Corporaton Ta . corporaton organzed under the Chna
Trade ct, 1922 ( 2 Stat. 8 9; U. S. C, 193 ed., tte 15, eh. ), sha
be sub|ect to ta under secton 13 or secton 1 (b), and under secton
15.

Sec. 118. Ta abe Years to Whch mendments ppcabe. (Rev-
enue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 110,
and 117) sha be appcabe ony wth respect to ta abe years begn-
nng after December 31, 19 0.
Par. 77. Secton 19.261-1 s amended by nsertng at the end of the
second paragraph the foowng:
For a ta abe year begnnng after December 31, 19 0, a Chna Trade ct
corporaton s abe to the surta mposed by secton 15 as amended by secton
10 of the Revenue ct of 19 1. For the defense ta mposed for ta abe
years begnnng after December 81, 19. , and before anuary 1, 19 1, see
secton 19.15-1.
Par. 78. There s nserted mmedatey precedng secton 19.262-1
the foowng:
Sec 10 . Surta on Corporatons and Termnaton of Defense Ta .
(Revenue ct of 19 1, Tte I.)

(f) Surta on Chna Trade ct Corporatons.

(2) Credt of Chna Trade ct Corporatons. Secton 262(a) of the
Interna Revenue Code (reatng to credt aganst net ncome of Chna
Trade ct corporatons) s amended by strkng out sectons 13, 1 ,
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66
and 600 and nsertng In en thereof sectons 13, 1 , 15, and 600 ;
and by strkng out secton 13 or 1 wherever occurrng theren and
nsertng n eu thereof secton 13,1 , or 15 .
Sec. 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. 79. Secton 19.2G2-2, as amended by Treasury Decson 5011,
s further amended as foows:
( ) y strkng out the atter part of the frst sentence of the frst
paragraph begnnng wth and (2) and nsertng n eu thereof
the foowng:
(2) for the ta abe year 19 0, by secton 13 or 1 , as amended, and by secton
600, and (3) for the ta abe year 19 1 and subsequent years, by secton 13 or 1 ,
as amended, by secton 15, as amended, and by secton 600.
( ) y strkng out the thrd and fourth sentences of the frst
paragraph and nsertng n eu thereof the foowng:
The decrease n the ta mposed for 1939 by secton 1 (d), pror to Its
amendment, for 19 0 by secton 13 or 1 , as amended, or for 19 1 and subse-
quent years by secton 13 or 1 , as amended, and by secton 15, as amended, by
reason of- such credt must not, however, e ceed the amount of the speca
dvdend referred to n secton 262(b), and s not aowabe uness the speca
dvdend has been certfed to the Commssoner by the Secretary of Commerce.
The decrease n the ta mposed by secton 600 by reason of such credt must
not e ceed the amount by whch such speca dvdend e ceeds the decrease per-
mtted by secton 262 n the ta mposed for 1939 by secton 1 (d), pror to
ts amendment, for 19 0 by secton 13 or 1 , as amended, and for 19 1 and
subsequent years by secton 13 or 1 , as amended, and secton 15, as amended.
(C) y strkng out e ampe (2) and nsertng n eu thereof the
foowng:
ampe 2. ssume that for the caendar year 19 1 the ad|usted decared vaue
of the capta stock s the same as for 1 )3 ) and that the other facts are the same
as n e ampe (1), e cept that a speca dvdend of 66,000 s dstrbuted on
February 15, 19 2. Snce, under secton 13. as amended, the rate of ncome ta
for 19 1 s 2 per cent, and under secton 15, as amended, the rate of surta s
6 per cent on the frst 25,000 of corporaton surta net ncome and 7 per cent
on the remander, the tota ncome ta for such year conssts of a norma ncome
ta of 8,000 pus a surta of 13,750, or 61,750. Snce the speca dvdend
( 66,000) e ceeds the dmnuton of the ncome ta ( 61,750) on account of the
aowance of the speca credt aganst net ncome, the entre amount of speca
credt s aowabe and the corporaton has no ncome ta abty for 19 1. Snce
the speca dvdend e ceeds the amount of the ncome ta by the sum of ,250,
whch sum e ceeds the amount of the dmnuton of the decared vaue e cess-
profts ta ( n per cent of 50,000, or 3,300) on account of the aowance of
the speca credt aganst net ncome, the entre amount of the speca credt
( 200,000) s aowabe for decared vaue e cess-profts ta purposes for 19 1
and hence the corporaton has no decared vaue e cess-profts ta abty for
that year.
Par. 80. There s nserted mmedatey precedng secton 19.362-1
the foowng:
Sec. 103. Corporaton Defense Ta Rates Incorporated n Rate
Schedues. (Revenue ct of 19 1, Tte I.)

(e) Mutua Investment Companes. Secton 362(b) of the Interna
Revenue Code (reatng to ta on mutua nvestment companes) Is
amended by strkng out 22 0 per centum and nsertng 2 per
centum .
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67
eo. 118. Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 10 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115. 116,
and 117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. 6f. Secton 19.362-1, as amended by Treasury Decson 5038,
s further amended by strkng out the frst two sentences and by
nsertng n eu thereof the foowng:
If a corporaton, as defned n secton 3797(a)(3), shows to the satsfacton of
the Commssoner that t s entted to the status of a mutua nvestment com-
pany, as defned n secton 861, t Is ta abe upon ts Suppement net ncome,
as defned n secton 362(a), (1) at the rate of 16 ,o per cent for any ta abe
year begnnng after December 31, 1933, and before anuary 1, 19 0, (2) at the
rate of 22 /o per cent for any ta abe year begnnng after December 31, 1939,
and before anuary 1, 19 1, and (3) at the rate of 2 per cent for any ta abe year
begnnng after December 31, .) 0. (For the defense ta mposed for ta abe
years begnnng after December 31, 1939, and before anuary 1, 19 1, see
secton 19.15-1.)
Par. 82. There s nserted mmedatey after secton 19.362-1 the
foowng:
S C. 10 . SU T ON CORPOR TIONS ND T RMIN TION OF D F NS T .
(Revenue ct of 19 1, Tte I.)

(b) Subta on Mutua Investment Companes. Suppement of
the Interna Revenue Code (reatng to mutua nvestment companes)
Is amended by nsertng at the end thereof a new secton to read as
foows:
Sec. 363. Surta on Mutua Investment Companes.
(a) Suppement Surta Net Income. For the purposes of ths
chapter the term Suppement surta net Income means the net
Income, computed wthout the net operatng oss deducton provded n
secton 23(s), mnus the dvdends pad durng the ta abe year n-
creased by the consent dvdends credt provded n secton 28. For the
purposes of ths subsecton the amount of dvdends pad sha be com-
puted n the same manner as provded n subsectons (d), (e), (f), (g),
(h), and () of secton 27 for the purpose of the basc surta credt pro-
vded n secton 27.
(b) Imposton of Ta . There sha be eved, coected, and pad
for each ta abe year upon the Suppement surta net ncome of every
mutua nvestment company a surta as foows:
Upon Suppement surta net ncomes not n e cess of 25,000,
6 per centum of the amount thereof;
Upon Suppement surta net ncomes n e cess of 25,000,
1,500, pus 7 per centum of the e cess over 25,000.

Sec. 118. Ta abe Years to Whch mendments fpcab|:. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116, and
117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Sec. 19.363-1. Surta on mutua Investment companes. For ta abe years
begnnng after December 31, 19 0, secton 363 mposes a surta upon the Suppe-
ment surta net ncome of every corporaton ta abe as a mutua nvestment
company. mutua nvestment company s Suppement surta net ncome s
Its net ncome (computed wthout the net operatng oss deducton provded n
secton 23(s)), ess the amount, of dvdends pad durng the ta abe year ncreased
by the consent dvdends credt provded n secton 28. For the purpose of com-
putng a mutua Investment company s Suppement surta net ncome, the
amount of dvdends pad durng the ta abe year s determned n the same
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manner as provded n secton 27 (d), (e), (f), (g), (h), and (1) for the purpose
of the basc surta credt provded n secton 27.
Par. 83. There s nserted mmedatey precedng secton 19.373-1
the foowng:
Sec. 117. tenson of Tme of Orders of Securtes and change
Commsson. (Revenue ct of 19 1.)
(a) tenson. Secton 373(a) of the Interna Revenue Code (re-
atng to the defnton of orders of the Securtes and change Comms-
son wth respect to whch Suppement R appes) s amended to read
as foows:
(a) The term order of the Securtes and change Commsson
means an order (1) ssued after May 28, 1938, and pror to anuary 1,
1 3, by the Securtes and change Commsson to effectuate the pro-
vsons of secton 1 b) of the Pubc Utty odng Company, ct
of 1935 ( 9 Stat. 820; U. S. C, Supp. , tte 15, secton 79k(b)), o r (2)
ssued by the Commsson subsequent to December 31, 19 2, n whch t
s e pressy stated that an order of the character specfed n cause
(1) s amended or suppemented, and (3) whch has become fna n
accordance wth aw.
(b) ffectve Date of mendment. The amendment made by ths
secton sha be appcabe ony wth respect to ta abe years begnnng
after December 31. 1939.
Par. 8 . There s nserted mmedatey precedng secton 19.500-1 the
foowng:
sc. 110. Defense Ta Rates on Pf|Sona odng Companes and
Transkkrs to vod Income Ta Incorporated n Rate Schedu.es.
(Revenue ct of 19 1, Tte I.)
(a) Pe-sona odng Companes. Secton 500 of the Interna
Revenue Code (reatng to ta on persona hodng companes) a
amended as foows:
(1) y strkng out the headng (a) Genera Rue. ;
(2) y amendng the rate schrdue to read as foows:
(1) 71 per centum of the amount thereof not n e cess of
2,0 0; p ns
(2) 82M. per centum of the amount thereof n e cess of 2,000. ;
and
(3) y repeang subsecton (b) (reatng to defense ta for fve
years).

Sec. 118. Ta apf, Yf.ars to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116. and
117) sha he appcabe ony wth respect to ta abe years begnnng after
December 81, 19 0.
Par. 85. Secton 19.500-1, as amended by Treasury Decson 5011,
s further amended by strkng out the ast sentence of the frst para-
graph and by nsertng n eu thereof the foowng:
For ta abe years begnnng before anuary 1, 19 1, the surta mposed by sec-
ton 500 s 65 per cent of the amount of the undstrbuted Subchapter net
ncome not n e cess of 2,000, and 75 per cent of the amount of the undstrbuted
Subchapter net ncome n e cess of 2,000, e cept that for such a ta abe year
begnnng after December 31, 1939, such surta s ncreased 10 nor cent on account
of the defense ta . For ta abe years begnnng after December 31. 19 0, the
rate of ta s 71 y2 per cent of the undstrbuted Subchapter net ncome not n
e cess of 2,000. and 82 per cent of the undstrbuted Subchapter net Income
n e cess of 2,000.
Par. 86. Secton 19.3801 (b)-0 s amended by strkng out and
D n the ast paragraph and by nsertng n eu thereof D, and .
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69 19.15-1.
(Ths Treasury decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat., 32; 26 U. S.
Sup. , 62) and sectons 101 to 118 of the Revenue ct of 19 1 (Pubc
aw 250, Seventy-seventh Congress).)
Guy T. everng,
Commssoner of Interna Revenue,
pproved October 10. 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 13, 10 1, 11.0 a. MS.)
C PT R 1. INCOM T .
SU C PT R . G N R L PRO ISIONS.
P RT I. R T S OF T .
S CTION 15. D F NS T FOR FI Y RS.
Secton 19.15-1: Defense ta . 19 1-33-10806
I. T. 3 97
INT RN L R NU COD .
The net ncome referred to n secton 15 of the Interna Rev-
enue Code, as amended, means the gross ncome computed under
secton 22 of the Code, ess deductons aowed by secton 23 of the
Code, ncudng deductons for ong-term capta osses.
dvce s requested reatve to the net ncome to be used n
appyng the mtaton on the defense ta provded n secton 15 of the
Interna Revenue Code, as amended, n a case where there s a net ong-
term capta oss and the aternatve ta s computed under secton
117(c)2 of the Interna Revenue Code n eu of the ta mposed by
sectons 11 and 12 of t he Code.
It s provded n secton 15 of the Code, as amended, that:
In the case of any ta payer, the amount of ta under ths chapter
ha be the ta computed wthout regard to ths secton, Increased by 10 per cen-
tum . In no case sha the effect of ths secton be to ncrease the ta
computed wthout regard to ths secton by more than 10 per centum of the amount
by whch the net ncome e ceeds such ta .
Treasury Decson 5011 (C. . 19 0-2,15), amendng secton 19.15-1
of Reguatons 103, provdes n part as foows:
further effect of the mtaton on the 10 per cent ncrease s to prevent any
Increase n the ta of a ta payer who under e stng aw, as amended by Tte I
of the Revenue ct of 19 0, has no net ncome because he has a net ong-term
capta oss, but s sub|ect to ta under secton 117(c)2 of the Interna Revenue
Code.
The above-quoted anguage of Treasury Decson 5011 s n accord
wth a statement n the report of the Ways and Means Commttee
on the revenue b of 19 0 (C. . 19 0-2, 56(5) e pressng the ntenton
of Congress n enactng secton 15.
In vew of ths provson of the reguatons, whch, as stated, s
n accord wth the commttee report, t s hed that net ncome
referred to n secton 15 of the Code, as amended, means the gross
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19.15-1.) 70
ncome computed under secton 22 of the Code, ess deductons
aowed by secton 23 of the Code, ncudng deductons for ong-term
capta osses.
The computaton of the ta s ustrated by the foowng e ampe:
INCOM .
Saary 225, 0O0. 00
Dvdends 15,000. 00
Net short-term gan from sae or e change of capta
assets 17,000.00
Net ong-term oss from sae or e change of capta
assets (37,500.00)
Tota Income 219,500.00
D DUCTIONS.
Contrbutons pad 50,000 (deducton mted to 15 per cent
of 219,500) 32,925.00
Net Income 186,575.00
COMPUT TION OF T ORDIN Y M T OD.
Net ncome 186,575.00
Less:
Persona e empton 2,000.00
aance (surta net ncome) 1S , 575. 00
Less:
arned Income credt 1, 00.00
aance sub|ect to norma ta 183,175. (10
Norma ta ( per cent of 183,175) 7, 327. 00
Surta on 18 .575 86,525.00
Tota ta 03,852.00
COMPUT TION OF LT RN TI T .
Net ncome 1S6, 575. 00
dd:
Net ong-term capta oss 37, 500. 00
22 075 00
Contrbutons 50,000 aowabe to e tent of 15 per
cent of 257,000 (e cudng the net ong-term oss)__ 38,550.00
Prevousy accounted for 32, 925. 00
5.625.00
Ordnary net Income . 21S, 50. 00
Less:
Persona e empton 2,000.00
aance (surta net Income) 210, 50.00
Less:
arned Income credt 1, 00.00
aance sub|ect to norma ta 215. 050. 00
Norma ta ( per cent of 215,050) 8.002.00
Surta on 210, 50 105, 979. 00
Parta ta 8,602 105,979) 11 ,581.00
Less:
80 per cent of net ong-term capta oss 11,250. 00
ternatve ta 103,381.00
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71 19.22(a)-.
The aternatve ta , beng greater than the ta computed n the
ordnary way, represents the ta abty e cusve of defense ta .
COMPUT TION OF D F NS T .
Net ncome 188,575.00
Income ta (aternatve ta ) 103,331.00
cess of net ncome over ncome ta (see secton 15, supra) 83,2 .00
10 per cent of suc e cess (mtaton on defense ta ) 8,32 . 0
10 per cent of ncome ta 10, 333.10
though 10 per cent of the ncome ta due s 10,333.10, snce the
defense ta can not e ceed 10 per cent of the dfference between the
net ncome and the ncome ta , the defense ta s mted to 10 per
cent of 83,2 , or 8,32 . 0.
ccordngy, the tota ta abty n ths case s the ncome ta
( 103,331) pus the defense ta ( 8,32 . 0), or 111,655. 0.
P RT II. COMPUT TION OF N T INCOM .
S CTION 22(a). GROSS INCOM : G N R L
D FINITION.
Secton 19.22(a)-: What ncuded n gross 19 1-28-10771
ncome. I. T. 3 89
( so Secton 2, Secton 19. 2-1.)
INT RN L revenue code.
Method to be empoyed for Federa ncome ta purposes In re-
portng nterest on property mprovement oans made under Tte I
of the Natona ousng ct, as amended.
dvce s requested as to the method to be empoyed n reportng
for Federa ncome ta purposes nterest on property mprovement
oans made under Tte I of the Natona ousng ct, as amended.
ccordng to the Gross Charge and Dscount Tabes ssued by
the Federa ousng dmnstraton, a person who borrows 100 to
be repad wth nterest at 5 per cent over a perod of three years sgns
a note n the amount of 11 .98 to be pad n 36 equa nstaments, the
e cess ( 1 .98) over the prncpa amount of the oan representng
nterest on the prncpa amount of 100. person who desres a oan
of 100 on the dscount bass for a 3-year perod receves 86.97 and
sgns a note for 100 to be pad n 36 equa monthy nstaments, the
dfference ( 13.03) between the amount receved and the face of the
note representng (appro matey) nterest at the rate of 5 per cent
per year on the amount receved by the borrower.
It s hed that when payments are made n accordance wth the terms
of such notes the aggregate of the nterest charged s pad n 36 equa
nstaments. ccordngy, n the case of a oan under ether of the
pans referred to, one thrty-s th ( 6) of the tota amount repre-
sentng nterest ( 1 .98 under the gross-charge pan and 13.03 under
the dscount pan) shoud be regarded as the porton of each monthy
payment whch represents nterest.
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19.22(b)-. 72
Secton 19.22(a)-r What ncuded n gross ncome.
INT RN L R NU COD .
Interest on Unted States oavngs bonds, Defense Seres G. (See
I. T. 350 , page 93.)
Secton 19.22 (a)-2: Compensaton for per- 19 1-39-10836
ona servces. I. T. 3505
INT RN L R NU COD .
Compensaton receved from the Unted States Government by
members of the mtary or nava forces of the Unted States
statoned at bases eased by the Unted States from foregn
countres s requred to be ncuded n gross Income for Federa
ncome ta purposes.
dvce s requested whether compensaton receved from the
Unted States Government by members of the mtary or nava
forces of the Unted States statoned at bases eased by the Unted
States from foregn countres s requred to be ncuded n gross
ncome for Federa ncome ta purposes.
Under secton 22 of the Interna Revenue Code, gross ncome n-
cudes gans, profts, and ncome derved from saares, wages, or
compensaton for persona servce, of whatever knd and n what-
ever form pad, or gans or profts and ncome derved
from any source whatever, uness e empt from ta by aw. (Sec-
ton 19.22(a)-, Reguatons 103.)
The ony tems of ncome not requred to be ncuded n gross
ncome are those whch are e empt under the provsons of the
Interna Revenue Code or any other ct of Congress st n effect,
or those whch are, under the Consttuton, not ta abe by the Fed-
era Government. (Secton 19.22(b)-, Reguatons 103.) The com-
pensaton receved by the members of the mtary and nava forces
of the Unted States referred to above s not one of such tems.
In vew of the foregong, t s hed that compensaton receved
from the Unted States Government by members of the mtary or
nava forces of the Unted States statoned at bases eased by the
Unted States from foregn countres s requred to be ncuded n
gross ncome for Federa ncome ta purposes.
S CTION 22(b). GROSS INCOM : CLUSIONS
FROM GROSS INCOM .
Secton 19.22 (b)-: emptons cusons 19 1-28-10772
from gross ncome. I. T. 3 90
INT RN L R NU COD .
Income (dvdends and bonus payments of assocaton profts)
from share accounts In Federa savngs and oan assocatons Is
e empt from a Federa ta es whch are or may be Imposed upon
ncome or profts, e cept surta es, rrespectve of when the share
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73
19.22(b)- .
accounts were Issued or payments In purch.se thereof were made
by ther hoders. ccordngy, such ncome s e empt from a Fed-
era norma ta , and aso from the Federa decared vaue e cess
profts ta and Federa e cess profts ta (now mposed n cases of
corporatons), but s not e t npt from any Federa surta es whch
are or may be mposed.
Gan from the sae or other dsposton of the share accounts by
ther hoders s not e empt from any Federa ta es upon ncome or
profts, and any such gan or oss s recognzed as such, and ncudbe
n or deductbe from gross ncome, tnder and sub|ect to appcabe
provsons of the Interna Revenue Code, as amended-
dvce s requester reatve to te ta -e empt and ta abe status
and treatment of dvdends and bonus payments (of profts) on, and
gan or oss from sae or other dsposton of, share accounts n Federa
savngs and oan assocatons, wth partcuar reference to the effect,
f any, thereon of the Pubc Debt ct of 19 1 (approved February 19,
19 1, C. . 19 1-1, 5 6).
Secton 5 (a) and (b) of the ome Owners Loan ct of 1933 (ap-
proved une 13,1933, 8 Stat., 132) provdes as foows:
(a) In order to provde oca mutua thrft nsttutons n whch peope may
nvest ther funds and n order to provde for the fnancng of homes, the
fFedera ome Loan ank oard s authorzed, under such rues and regu-
atons as t may prescrbe, to provde for the organzaton, ncorporaton,
e amnaton, operaton, and reguaton of assocatons to be known as Federa
Savngs and Loan ssocatons, and to ssue charters therefor, gvng prmary
consderaton to the best practces of oca mutua thrft and home-fnancug
Insttutons In the Unted States.
(b) Such assocatons sha rase ther capta ony n the form of payments
on such shares as are authorzed n ther charter, whch shares may be retred
as s theren provded. No deposts sha be accepted and no certfcates of
ndebtedness sha be ssued e cept for such borrowed money as may be
authorzed by reguatons of the oard.
Secton 5(h) of such ct, as amended by secton 909 of the Soca
Securty ct mendments of 1939 (approved ugust 10, 1939, 53
Stat., 1 02), provdes:
Such assocatons, ncudng ther franchses, capta, reserves, and surpus,
and ther oans and ncome, sha be e empt from a ta aton now or hereafter
mposed by the Unted Sates (e cept the ta es mposed by sectons 1 10 and
1GU0 of the Interna Revenue Code wth respect to wages pad after December
81, 1939, for empoyment after such date), and a shares of such assocatons
sha be e empt both as to ther vaue and the ncome therefrom from a
ta aton (e cept surta es, estate, nhertance, and gft ta es) now or hereafter
mposed by the Unted States; and no State, Terrtora, county, muncpa, or
oca ta ng authorty sha mpose any ta on such assocatons or ther
franchse, capta, reserves, surpus, oans, or ncome greater than that mposed
by such authorty on other smar oca mutua or cooperatve thrft and home
fnancng nsttutons. Itacs supped.
Secton of the Pubc Debt ct of 19 1, whch secton became
effectve March 1, 19 1, provdes (n so far as here concerned) that
(a) Interest upon, and gan from the sae or other dsposton of, ob-
gatons ssued on or after the effectve date of ths ct by the Unted States
or any agency or nstrumentaty thereof sha not have any e empton, as
such, and oss from the sae or other dsposton of such obgatons sha not
have any speca treatment, as such, under Federa ta cts now or hereafter
enacted;
(b) The provsons of ths secton sha, wth respect to such obgatons, e
consdered as amendatory of and suppementary to the respectve cts or parts
cf cts authorzng the Issuance of such obgatons, as amended and suppe-
mented.
1611 -
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19.22(b)- .
7
It has been hed n prevous Federa ta rungs that Federa
pavngs and oan assocatons are nstrumentates of the Unted
States. (S. S. T. 62, C. . 1937-1. 09; I. T. 3360, C. . 19 0-1, 50.)
It s cear, however, from secton 5 (a) and (b) of the ome
Owners Loan ct of 1933, supra, and the arrangement (provded for
n the charters prescrbed thereunder) between these assocatons and
ther share account hoders, that dvdends and bonus payments by
the assocaton on the share accounts are dstrbutons of assocaton
profts, and that the shares or share accounts consttute an ownershp
nterest n the. assocaton n the nature of shares of capta stock.
Therefore, t s the opnon of ths offce that the dvdends and bonus
payments (of profts) by these assocatons on such share accounts
are not, wthn the meanng of secton (a) of the Pubc Debt ct
of 19 1, supra, nterest upon obgatons of the asso-
catons; and, accordngy, that such ct has no appcabty to, or
effect upon, the Federa ta status of the ncome (dvdends and bonus
payments of assocaton profts) from such share accounts. Snce
the share accounts are not, wthn the meanng of secton (a),
supra, obgatons of these assocatons, t foows that the Pubc
Debt ct of 19 1 aso has no appcabty to, or effect upon the
Federa ta treatment of, gans or osses from the sae or other
dsposton of the share accounts by ther hoders.
The arrangement between these assocatons and ther share account
hoders s set forth qute e tensvey n Charter 1 prescrbed for the
assocatons n rues and reguatons for the Federa Savngs and
Loan System promugated by the Federa ome Loan ank oard,
e cerpts from whch are quoted beow:
. Members. hoders of share accounts of the assocaton sha
bo deemed and hed to he members thereof. In the consderaton of a ques-
tons requrng acton by the members, each hoder of a share account sha
be permtted to cast 1 vote for each 100. or fracton thereof, of the partcpa-
ton vaue of hs share account. No member, however, sha cast more
than 50 votes.
5. Drectors and offcers. The assocaton sha he under the drecton of a
board of drectors of not ess than 5 nor more than 15, as determned and
eected by the members.
6. Share capta). The share capta of tho assocaton sha consst of the
aggregate of payments upon share accounts and dvdends credted thereto ess
redempton and repurchase payments. The partcpaton vaue n the share
capta of each share account hed by a member sha be the aggregate of pay-
ments upon such share account and dvdends credted thereto ess redempton
and repurchase payments. Share accounts of 100 or mutpes thereof may
be known as nvestment sharp accounts, consstng of fu-pad ncome shares.
other share accounts sha be known as savngs share accounts.
7. Ownershp of share accounts. share accounts sha be represented by
share account books contanng a certfcate of membershp and evdencng the
partcpaton vaue of the share account, e cept that nvestment share accounts
may be represented by separate membershp certfcates.

9. Rcserrcs, undvded profts, and dvdends. s of une 30 and December 31
of each year, after payment or provson for payment of a e penses and
approprate transfers to the reserve requred beow, and addtona transfers
to other reserve accounts, and provson for an undvded profts account, the
board of drectors sha decare as dvdends the remander of the net earnngs
of the assocaton for the s months perod. dvdends sha be decared
1 It Is understood that a number of these assocatons are operatng under Charter ,
orgnay prescrbed therefor, but such charter Is not materay dfferent n bo far aa
here concerned.
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75 19.22(b) (2)-2.
as of sad dvdend dates. The board of drectors may decare dvdends as of
sad .dvdend dates payabe out of the amounts remanng from prevous perods
In the undvded profts account. Profts to hoders of share accounts sha be
termed dvdends (e cept bonus payments) and sha not be referred to as
nterest. Dvdends upon nvestment share accounts sha be prompty
pad In cash as of the dvdend date. Dvdends on savngs share accounts sha
be credted to such share accounts on the books of the assocaton as of the
dvdend date. hoders of share accounts sha partcpate equay n dv-
dends pro rata to the partcpaton vaue of ther share accounts; provded that
the assocaton sha not be requred to credt dvdends on nactve share
accounts of 5 or ess. hoders of share accounts sha be entted
to equa dstrbuton of net assets, pro rata to the vaue of ther share accounts,
n the event of vountary or nvountary qudaton, dssouton, or wndng
up of the assocaton.
10. onus and bonus reserve. In order to stmuate systematc thrft and to
provde reguar funds for the fnancng of homes, the members, by by-aw
provson, may obgate the assocaton to pay a cash bonus as foows:
(a) Short-term bonus.
(b) Long-term bonus.
The members, by amendment of the by-aws, may abosh the bonus pan as
to savngs share accounts opened after the da e of such repea of the bonus
pau.
Smutaneousy wth the decaraton of each semannua dvdend after the
adopton of the bonus pan, the board of drectors sha transfer out of net
earnngs to an account desgnated reserve for bonus an amount, whch,
together wth e stng credts to such reserve, s suffcent to pay the bonus on a
savngs share accounts then entted to partcpaton n such reserve In accord-
ance wth the provsons of ths secton. tacs supped.
y vrtue of secton 5(h) of the ome Owners Loan ct of 1933,
supra, the ncome (dvdends and bonus payments of assocaton
profts) from share accounts n these assocatons s e empt from a
Federa ta es whch are or may be mposed upon ncome or profts,
e cept surta es. ccordngy, such ncome s e empt from a Fed-
era norma ta , and aso from the Federa decared vaue e cess
profts ta and Federa e cess profts ta now mposed n cases of
corporatons (see G. C. M. 18893, C. . 1937-2, 210), but s not
e empt from any Federa surta es whch are or may be mposed. It
s mmatera whether the share accounts were ssued, or payments n
purchase thereof were made by ther hoders, before or on or after
the effectve date of the Pubc Debt ct of 19 1, snce, as herenbefore
hed, such ct s nappcabe thereto.
Gan from the sae or other dsposton of the share accounts by
ther hoders s not e empt, under secton 5(h), supra, or otherwse,
from any Federa ta es upon ncome or profts, and any such gan or
oss s recognzed as such, and ncudbe n or deductbe from gross
ncome, under and sub|ect to appcabe provsons of the Interna
Revenue Code, as amended.
Secton 19.22(b) (2)-2: nnutes. 19 1-1 -10883
( so Secton 1 7, Secton 19.1 7-1.) I. T. 3513 -
INT RN L R NU COD .
Where premums on an annuty contract are dscounted because
of prepayment, the dscounted vaue of the premums shoud be
used n determnng the aggregate premums or consderaton
pad under secton 22(b)2 of the Interna Revenue Code, The
ncrement represented by the e cess of the aggregate premum
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I 19.22(b) ( )- .)
76
s ated n the pocy over the dscounted vaue shoud not he In-
cuded In the gross ncome of the premum payor In the years n .
whch the premums fa due, and the nsurance company shoud not
report such e cess as ncome to hm on an nformaton return.
dvce s requested whether the aggregate premums or consdera-
ton pad, as that term s used n secton 22(b)2 of the Interna
Revenue Code, means, where the premums on an annuty contract
are dscounted because of prepayment, the annua premums stated n
the pocy or the dscounted premums.
The pocy n queston s a deferred annuty pocy ssued on the
fe of an ndvdua n consderaton of an annua premum of
doars, wth the provson that, upon wrtten request of the annu-
tant, premum payments w termnate and the annuty ncome
w commence. fter the pocy was ssued, the nsurance company
accepted a snge sum payment representng the dscounted vaue
of two advance premums. The soe agreement as to the prepay-
ment of premums s emboded n the prnted form of recept whch
provdes, nter aa, for the wthdrawa of unearned premums pror
to ther due date and states that premums pad n advance are
dscounted at 3 per cent compound nterest but, f wthdrawn, the
payment s dscounted at per cent compound nterest.
The specfc nqures presented are (1) whether the dscounted
vaue of the premums shoud be used n determnng the aggre-
gate premums or consderaton pad ; (2) whether the ncrement
represented by the e cess of the tota premums over the dscounted
vaue shoud be ncuded n the gross ncome of the premum payor
n the years n whch the premums fa due; and (3) whether the
company shoud report the e cess as ncome to the premum payor
n an nformaton return.
It s hed that where premums on an annuty contract are ds-
counted because of prepayment, the dscounted vaue of the premums
shoud be used n determnng the aggregate premums or consder-
aton pad under secton 22(b)2 of the Interna Revenue Code.
The ncrement represented by the e cess of the aggregate premums
stated n the pocy over the dscounted vaue shoud not be ncuded
n the gross ncome of the premum payor n the years n whch
the premums fa due, and the nsurance company shoud not report
such e cess as ncome to hm on an nformaton return.
Status for Federa Income ta purposes of Interest upon, and gan
or oss from the sae or other dsposton of. Unted States Treasury
hs ssued on or after March 1,19 1, under the Second Lberty ond
ct, as amended and suppemented by the Pubc Debt ct of 10 1,
approved February 19, 19 1 (C. . 19 1-1, 5 0).
Inqury has been made reatve to the status for Federa ncome
ta purposes of nterest (dscount at whch ssued) upon, and gan or
oss from the sae, or other dsposton of. Unted States Treasury bs
ssued on or after March 1,19 1. under the Second Lberty ond ct,
as amended and suppemented by the Pubc Debt ct of 19 1, ap-
proved February 19, 19 1 (C. . 19 1-1, 5 0).
Secton 19.22(b) ( )-1: Interest upon Unted
States obgatons.
INT RN L R NU COD .
19 1-27-10763
I. T. 3 86
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77
19.22(b) ( )- .
The pertnent parts of secton 5 of the Second Lberty ond ct,
as amended pror to amendment by the Pubc Debt ct of 19 1, pro-
vded as foows:
(b) Treasury bs ssued hereunder (after the date une 17,
1929 upon whch ths subdvson becomes aw) sha be e empt n.s
to nterest, from a ta aton now or hereafter mposed by
the Unted States, any State, or any of the possessons of the Unted States, or
by any oca ta ng authorty ; and the amount of dscount at whch Treasury bs
are orgnay sod by the Unted States sha be consdered to be nterest wthn
the meanng of ths subdvson.

(d) ny gan from the sae or other dsposton of Treasury bs ssued here-
under (after the date une 17, 1930 upon whch ths subdvson becomes aw)
sha be e empt from a ta aton now or hereafter mposed by the
Unted States, any State, or any of the possessons of the Unted States, or by
any oca ta ng authorty; and no oss from the sae or other dsposton of
such Treasury bs sha be aowed as a deducton, or otherwse recognzed, for
the purposes of any ta now or hereafter mposed by the Unted States or any
of ts possessons.
The pertnent parts of the Pubc Debt ct of 19 1 provde as
foows:
Sf.o. . (a) Interest upon, and gan from the sae or other dsposton of,
obgatons ssued on or after the effectve date of ths ct by the Unted
States sha not have any e empton, as such, and oss from the sae
or other dsposton of such obgatons sha not have any speca treatment,
as such, under Federa ta cts now or hereafter enacted;
(b) The provsons of ths secton sha, wth respect to such obgatons, be
consdered as amendatory of and suppementary to the respectve cts or parts
of cts authorzng the ssuance of such obgatons, as amended and suppemented.
Sec. 5 Ths ct sha become effectve on the frst day of the
month March foowng the date of ts enactment February 19, 19 1 .
y vrtue of the foregong statutory provsons, nterest upon, and
gan from the sae or other dsposton of, Unted States Treasury
bs ssued on or after March 1,19 1, have no e empton, as such, and
oss from the sae or other dsposton of such bs may not be specay
treated, as such, under Federa ta cts now or hereafter enacted.
In the opnon of ths offce, under secton 5(b) of the Second Lberty
ond ct, as amended by secton of the Pubc Debt ct of 19 1,
the amount of dscount at whch the bs are orgnay sod (ssued)
by the Unted States s to be consdered as nterest for the purpose of
determnng ta es as we as ta e emptons: ccordngy, the amount
of such dscount s ncudbe n gross ncome as nterest, separate and
apart from gan or oss, f any, from sae or other dsposton of the
bs, and any gan or oss from sae or other dsposton of the bs
s recognzed as such gan or oss, and s ncudbe n or deductbe from
gross ncome under and sub|ect to appcabe provsons of the Interna
Revenue Code, as amended. Where a b s hed by an orgna pur-
chaser to maturty, the entre amount of the nterest (dscount at whch
ssued) s ncudbe as such n hs gross ncome and there s no gan
or oss. Foowng, n prncpe, Treasury Decson 276 (C. . III-2,
83 (1929)), where a b s sod or otherwse dsposed of before ma-
turty, the nterest (dscount at whch ssued) s to be prorated and
apportoned among the orgna and other hoders accordng to ther
respectve hodng perods (computed on an actua caendar-day bass).
That Treasury decson aso sets forth the proper computaton, to-
gether wth four e ampes, of gan or oss, f any, reazed or sustaned
by each of the orgna and other hoders n such cases.
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19.22 (b)( )- . 78
Secton 19.22(b) ( )- : Interest upon Unted 19 1-3 -10810
States obgatons. I. T. 3 99
INT RN L R NU COD .
The M Lodge, whch has been hed to be e empt from Federa
Income ta under secton 101(3) of the Interna Revenue Code, s
not sub|ect to Federa ncome ta on nterest receved by t on Unted
States savngs bonds.
The M Lodge, whch has been hed to be e empt from Federa
ncome ta under secton 101(3) of the Interna Revenue Code, desres
to nvest ts surpus funds n Unted Stases savngs bonds, and has
nqured whether the odge w be requred to pay Federa ncome
ta on the nterest receved by t on such bonds. Smar nqures
have been receved from other e empt organzatons.
The Pubc Debt ct of 19 1, approved February 19,19 1, provdes
that the nterest upon, and the gan from the sae or other dsposton
of, obgatons ssued on or after March 1, 19 1, by the Unted States
or any .agency or nstrumentaty thereof sha not have any e emp-
ton, as such, and oss from the sae or other dsposton of such obga-
tons sha not have any speca treatment, as such, under Federa ta
cts now or hereafter enacted, wth certan e ceptons not here per-
tnent. The effect of the provsons of the Pubc Debt ct of 19 1 s
to sub|ect a nterest upon, and gans from the sae or other dspo-
ston of, obgatons of the Unted States or any agency or nstru-
mentaty, thereof to the same Federa ta es as ke ncome derved
from obgatons of prvate corporatons s sub|ected. The ct does
not affect the e empton wth respect to savngs bonds ssued pror
to March 1,19 1.
Secton 101 of the Interna Revenue Code provdes for the e empton
from ncome ta aton of certan organzatons, ncudng fraterna
organzatons specfed theren. Secton 1.101-1 of Reguatons 103,
whch reates to the ncome ta under the Interna Revenue Code,
provdes that when an organzaton has estabshed ts rght to e emp-
ton t need not thereafter make a return of ncome or any further
showng wth respect to ts status under the aw, uness t changes
the character of ts organzaton or operatons or the purpose for
whch t was orgnay created. Therefore, any organzaton whch
has estabshed ts e empton from Federa ncome ta aton under
the provsons of secton 101 of the Interna Revenue Code or cor-
respondng provsons of pror Revenue cts s not abe to Federa
ncome ta on any of ts ncome, ncudng nterest on, and the gan
from the sae of, Unted States bonds ssued before, or on or after,
March 1, 19 1.
The M Lodge, havng been hed by the ureau to be e empt from
Federa ncome ta aton under the provsons of secton 101(3) of
the Interna Revenue Code, w not be requred to fe returns of
ncome so ong as the purposes for whch t was organzed and ts
method of operaton reman unchanged. ccordngy, such organza-
ton s not sub|ect to Federa ncome ta aton on any of ts ncome,
ncudng nterest on Unted States savngs bonds.
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79
.23(a)-.
S CTION 23(a). D DUCTIONS F OM GROSS
INCOM : P NS S.
Secton 19.23 (a)-: usness e pensea 19 1-30-10788
I. T. 3 93
INT RN L R NU COD .
ountary payments by empoyers, under the ermont unempoy-
ment compensaton aw of 19:56, as amended, for the purpose of
ncreasng ther reserve account baance to meet the requrements
of secton 7(e) of such aw, consttute ordnary and necessary bus-
ness e enses and are deductbe from gross ncome for Federa
ncome ta purposes by such empoyers n the year of payment,
whether ther accounts are kept on the cash recepts and dsburse-
ments bass or on the accrua bass.
dvce s requested whether vountary payments under the ermont
unempoyment compensaton aw of 1936, as amended, made by em-
poyers to ther reserve accounts n order to ncrease such accounts to
an amount whch w permt the empoyer to make a ower rate of
contrbuton for the foowng caendar year, are aowabe deductons
from gross ncome for Federa ncome ta purposes.
The above-mentoned vountary payments by empoyers are not re-
qured under the ermont unempoyment compensaton aw of 1936,
as amended, and are not aowabe as credts aganst the Federa unem-
poyment compensaton ta . Sectons 7 and 8 of the ermont unem-
poyment compensaton aw of 1936, as amended, provde n part
as foows:
Sec. 7
(b) Rate of Contbbtttons. The contrbuton reguary payabe by each em-
poyer e cept as herenafter provded sha be an amount equn to 2.7 per cent of
the aggregate pay ro for the perod covered by the return, e cept that the
contrbuton payabe by each empoyer for the caendar year 1936 sha be an
amount equa to nne-tenths per cent of sugh pay roU and for the year 1937 sha
be an amount equa to 1.8 per cent of such pay ro.

(e) Mert Ratno. (2) For the caendar year 19 1 no empoyer s
contrbuton rate shn be reduced uness he has had beneft e perence through-
out the most recenty competed caendar year wth the benefts payabe from hs
separate reserve account wthn such year beng pad n fu from hs separate
reserve account and uness hs separate reserve account at the start of the gven
caendar year equas at east fve tmes the argest amount of benefts pad on
account of wage credts earned n hs empoy as aforesad wthn any one of the
three most recenty competed caendar years of compensaton e perence, and
uness sad separate reserve account equas 7 per cent of hs pay ro n the pre-
cedng caendar year. ut If an empoyer s contrbutons to hs separate reserve
account durng the precedng caendar year have e ceeded the benefts pad from
hs separate reserve account durng such year and hs separate reserve account
at the start of the gven caendar year equas at east 7 per cent of hs pay ro
for the ast precedng caendar year, and fve tmes the argest amount of benefts
pad on account of wage credts earned n hs empoy as aforesad durng any
one of the three precedng years of compensaton e perence, hs contrbuton
rate to bs separate reserve account sha he reduced to such per cent on hs pay
ro throughout the gven year as w provde for compensaton from such sepa-
rate reserve account to the e tent prescrbed n ths act wthout reducng sad
reserve beow ether of sad standards.
Sec. 8. (g) ny empoyer may at any tme make vountary pay-
ments, addtona to the contrbutons requred under ths act. to hs separate
reserve account In the fund, pursuant to reguatons of the commsson.
The vountary payments made by empoyers to ther reserve ac-
counts under the ermont unempoyment compensaton aw of 1986,
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5 19.23(c)- .
80
as amended, are not recoverabe shoud they be nsuffcent to ncrease
the empoyer s reserve account baance to meet the requrements of
secton 7(e) thereof.
It s hed that the vount ary payments by empoyers, under the er-
mont unempoyment compensaton aw of 1936, as amended, for the
purpose of ncreasng ther reserve account baance to meet the re-
qurements of secton 7(e) of such aw, consttute ordnary and neces-
sary busness e penses and are deductbe for Federa ncome ta pur-
poses by such empoyers n the year of payment, whether ther accounts
are kept on the cash recepts and dsbursements bass or on the accrua
bass.
S CTION 23(c). D DUCTIONS FROM GROSS INCOM :
T S G N R LLY.
Secton 19.23 (c)-: Ta es. 19 1-27-1076
Mm. 5200
Interna revenue ta es mposed under the Interna Revenue Code
whch consttute aowabe deductons for Federa Income ta
purposes.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, une 9,19 -1.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
eath of Fed Dvsons of the Technca Staff, and Other Offcers
and mpoyees of the ureau- of Interna Revenue Concerned:
1. Secton 23(c), Chapter 1, of the Interna Revenue Code, as
amended, permts the deducton from gross ncome of a ta es pad
or accrued wthn the ta abe year, e cept
(1) Federa ncome, war-profts, and e cess-profts ta es (other
than the e cess-profts ta mposed by secton 106 of the Revenue
ct of 1935 ( 9 Stat., 1019) or by secton 602 of the Revenue ct
of 1938 (52 Stat., 567), and other than the decared vaue e cess-
profts ta mposed by secton 600);
(2) ncome, war-profts, and e cess-profts ta es mposed by the
authorty of any foregn country or possesson of the Unted
States; but ths deducton sha be aowed n the case of a ta -
payer who does not sgnfy n hs return hs desre to have to any
e tent the benefts of secton 131 (reatng to credt for ta es of
foregn countres and possessons of the Unted States);
(3) estate, nhertance, egacy, successon, and gft ta es; and
( ) ta es assessed aganst oca benefts of a knd tendng to
ncrease the vaue of the property assessed; but ths paragraph
sha not e cude the aowance as a deducton of so much of such
ta es as s propery aocabe to mantenance or nterest charges.
2. ddtona e ceptons to the genera rue regardng the deduct-
bty of ta es pad or accrued durng the ta abe year are the Federa
empoyment ta es eved upon empoyees and empoyee representatves
by the provsons of sectons 1 00, 1500, and 1510 of the Code, Such
ta es are specfcay desgnated as not deductbe by the provsons
of sectons 1 02, 1503, and 1512, respectvey, of the Code. Nether
are these ta es deductbe, as such, by the empoyers who, athough
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IS 19.23(c)- .
charged by aw wth responsbty for deductng the amount, thereof
from wage payments made by them to ther empoyees and the pay-
ment of such sums to the coector, are not prmary abe wth respect
thereto.
3. The ta es herenafter referred to consttute aowabe deduc-
tons from the gross ncome of the person aganst whom they are
eved, for he ta abe year n whch pad or accrued (dependent upon
the accountng method empoyed by the ta payer), provded the
amounts thereof are not added to or made a part of the busness
e penses of such person, and/or are not added to or made a part of
the cost of the artces or quanttes of merchandse, or of servces,
wth respect to whch such ta es are pad.
. The chapters and sectons of the Code under whch the Federa
nterna revenue ta es are mposed are treated n ths mmeograph n
the order n whch they appear n the Code. The person who s en-
tted to deduct the partcuar ta s desgnated n each nstance; the
term person as used heren means an ndvdua, a trust, estate,
partnershp, assocaton, company, or corporaton. .
C PT R 2 DDITION L INCOM T S.
5. The decared vaue e cess-profts ta mposed by secton 600,
Subchapter , Chapter 2, of the Code, as specfcay provded n
secton 215(c) 1, s an aowabe deducton from the gross ncome of the
person upon whose ncome t s m| sed. No other ta eved under
Chapter 2 of the Code consttutes an aowabe deducton.
C PT R 8 C PIT L STOC T .
6. The capta stock ta mposed by secton 1200, Chapter 6, of the
Code s an aowabe deduct on from the gross ncome of the person
upon the ad|usted decared vaue of the capta stock of whch t s
mposed. The capta stock ta for each year endng une 30 accrues
n ts entrety on uy 1 of the precedng year. Wth e ceptons not
matera here, t s mposed wth respect to carryng on or dong
busness for any part (even one day) of each such year. The resut
of tha stuaton s that a person sub|ect to the ta w be abe for
the same amount f busness s carred on or done ony on one day
durng the year as f that status s effectve for each and every day
throughout the entre year.
CII PT 7 T ON TR NSF RS TO OID INCOM T .
7. The ta mposed by secton 1250, Chapter 7, of the Code upon
ctzens or resdents of the Unted States, domestc corporatons or
partnershps, or trusts not foregn, who transfer stock or securtes
to a foregn corporaton as pad-n surpus or as a contrbuton to
capta, or to a foregn trust, or to a foregn partnershp, s an aow-
abe deducton from the gross ncome of the persons makng such
transfers.
C PT R 0 MPLOYM NT T S.
8U C PT F D R L INSUR NC CONTRI UTIONS CT.
8. The ta mposed by secton 1 10, Part II, Subchapter , Chap-
ter 9, of the Code upon an empoyer wth respect to havng ndvduas
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19.23(c)- .
S2
n hs empoy s an aowabe deducton from the gross ncome of
the empoyer. s stated n paragraph 2 of ths mmeograph, the
ta mposed by secton 1 00. Part I, Subchapter . Chapter 9. s
not deductbe from gross ncome for purposes of the Federa ncome
ta ether by the empoyee upon whose ncome t s mposed or by
the empoyer who coects the amount of the ta from the empoyee
through a deducton from the atter s wages. In those nstances
where the empoyer does not deduct the amount of the ta from
the empoyee s wages, but pays such amount out of hs own pocket,
the amount of such payment s an aowabe deducton from the
gross ncome of the empoyer not as a ta , but as a busness e -
pense and such amount must be ncuded n gross ncome by the
empoyee.
SU C PT R MPLOYM NT Y C RRI RS.
9. The ta mposed by secton 1520, Part III. Subchapter ,
Chapter 9, of the Code upon an empoyer wth respect to havng nd-
vduas n hs empoy s an aowabe deducton from the gross ncome
of the empoyer.
SU C PT R C F D R L UN MPLOYM NT T CT.
10. The ta mposed by secton 1600, Subchapter C, Chapter 9, of
the Code upon an empoyer wth respect to havng ndvduas n
hs empoy s an aowabe deducton from the gross ncome of the
empoyer. In connecton wth such ta t s to be remembered that
ony the net amount remanng after appcaton of the credts pro-
vded n secton 1601 w be aowabe as a deducton nasmuch as
the contrbutons to State unempoyment funds consttutng the meas-
ure of such credts are themseves aowabe deductons from the gross
ncome of the empoyer.
R ILRO D UN MPLOYM NT INSUR NC CT.
11. though contrbutons mposed upon empoyers and em-
poyee representatves by the Raroad Unempoyment Insurance
ct are not mposed under the Interna Revenue Code nor admn-
stered by the ureau of Interna Revenue, and are. therefore, not
wthn the scope of ths mmeograph under a strct constructon of
he defned fed, but because the contrbutons themseves and ther
ncdents and measurements are strkngy smar to the ta mposed
by secton 1600 of the Code, t s deemed advsabe to advert thereto
at ths pont. Such contrbutons consttute aowabe deductons
from the gross ncome of the empoyers or empoyee representatves
upon whch they arc mposed.
MPLOY S T S UND R CII Fr R 9.
12. Whe not deductbe, as such, by ether the empoyees or the
empoyers, as ponted out n paragraph 2 of ths mmeograph, and
to that e tent aso not germane to the sub|ect of ths mmeograph,
the amount of the ta es upon the ncomes of empoyees provded for
n secton 1 00, Part I, Subchapter , Chapter 9, of the Code, and n
secton 1500, Part I, Subchapter , Chapter 9, of the Code, may
consttute aowabe deductons from the gross ncome of the em-
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19.23(c)- .
poyer concerned as busness e penses under secton 23(a) 1,
Chapter 1, of the Code, n case the empoyer pays such sums out of
hs own pocket. In that event the amounts so pad consttute add-
tona compensaton to the empoyees concerned and must be ncuded
n ther gross ncomes for Federa ncome ta purposes.
C PT R 10 DMISSIONS ND DU
8U C PT DMISSIONS.
13. The ta on admssons mposed by secton 1700, Subchapter ,
Chapter 10, of the Code, as amended, s, n genera, on the amount
pad for admsson at the estabshed rate or prce and s mposed
upon and deductbe from gross ncome by the purchaser. In certan
nstances where admssons are sod for a prce n e cess of the
reguar or estabshed rate, an addtona ta s mposed upon the
seer. In the atter event, the addtona ta s deductbe ony by
the seer, whe the ta upon the reguar rate of admsson w be
deductbe, as usua, by the purchaser.
SU C PT R II DU S.
1 . The ta on membershp or ntaton dues or fees mposed by
secton 1710, Subchapter , Chapter 10, of the Code on members of
soca, athetc, or sportng cubs or organzatons, s mposed upon
and s deductbe from gross ncome ony by the member.
C PT R 11 DOCUM NTS, OT R INSTRUM NTS, ND PL YING C RDS.
15. The severa documentary stamp ta es mposed under Sub-
chapter , Chapter 11, of the Code by secton 1800 and
(a) Secton 1801 on the ssue of corporate securtes, . e.,
bonds, debentures, certfcates of ndebtedness, etc.;
(b) Secton 1802(a) on the ssue of capta stock and smar
nterests;
(c) Secton 1802(b) on saes and transfers of capta stock
and smar nterests;
(d) Secton 180 on certan foregn nsurance poces;
(e) Secton 1805 on transfers of nterests n sver buon;
and
(/) Secton 1806 on certan passage tckets;
appy wth respect to any party to the ta abe transacton. such
ta es, therefore, are deductbe from gross ncome by the person who
as a party to the transacton, whether drecty or ndrecty through
an agent, purchased the stamps from the Government and used them
n payment of the ta by aff ng them to the document or sub|ect
of the ta and canceng them as requred by the aw and reguatons.
16. The partes to a ta abe transacton may agree among them-
seves as to whch one sha pay the ta . Such agreement, however,
does not affect the ta abty of the partes and does not reeve
any one of them from payng the ta . ence, where such an agree-
ment s made but through defaut the ta s pad by a party other
than the one who had agreed to make the payment, the ta s never-
theess deductbe from the gross ncome of the person who made
the payment; and such deducton s aowabe notwthstandng that
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19.23(c)- .
8
the person who made the payment may be entted to cam rem-
bursement from the party n defaut. If n such case the person
payng the ta s rembursed by the party n defaut, the amount
of the rembursement woud be ncudbe m hs gross ncome.
17. Where the ta s pad by one of the partes to the transacton
but the burden of the ta s shfted to another party to the trans-
acton, for e ampe, where the amount of the ta s ncuded n
the saes prce of the sub|ect matter of the ta , the other party to
the transacton s not the ta payer entted to deduct the amount of
the ta as such from hs gross ncome. The other party to whom
the burden of the ta was shfted s entted to add the amount
thereof to the cost of the sub|ect matter of the ta for purpose of
computng hs gross ncome from the sae, use, or other dsposton
thereof.
18. The ta on payng cards mposed by sectons 1800 and 1807,
Subchapter , Chapter 11, of the Code s mposed on the manu-
facturer as that term s defned n secton 1831(a) and s deductbe
from gross ncome ony by such person. |obber, deaer, or con-
sumer who remburses the manufacturer for such ta , even though
requred to do so by terms of the contract under whch such artces
are acqured, s not entted to deduct from gross ncome the amount
so rembursed as a payment of ta , but may add such amount to the
cost of the artces for purpose of computng hs gross ncome from
the sae, use, or other dsposton of the artces.
C PT R 12 S F D POSIT O S.
19. The ta on safe depost bo es mposed by secton 1850,
Chapter 12, of the Code s mposed on the person payng for the
use of the safe depost bo and s deductbe from gross ncome ony
by such pe-son.
C PT R 13 CIRC UL TION OT R T N OF N TION L N S.
20. The ta on the amount of crcuaton ssued by any bank,
assocaton, corporaton, company, or person, mposed by secton
1900, Chapter 13, of the Code s mposed on the bank, etc., ssung
the crcuaton and 6 deductbe from gross ncome ony by such
bank, etc.
C PT R 1 COTTON FUTUR S.
21. The ta upon each contract of sae of any cotton for future
devery mposed by secton 1920, Chapter 1 , of the Code s mposed
upon the seer of the cotton nvoved n the contract of sae and s
deductbe from gross ncome ony by such person.
C PT R 15 TO CCO, SNUFF, CIG RS, ND CIG R TT S.
22. The ta es mposed by secton 2000, Chapter 15, of the Code
upon a tobacco, snuff, cgars, cgarettes, and cgarette paper manu-
factured n or mported nto the Unted States, and sod by the
manufacturer or mporter, or removed for consumpton or sae, are
mposed upon the manufacturer or mporter and are deductbe
from gross ncome ony by such person.
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19.23(c)- .
C PT R 1 OL OM RG RIN , DULT R T D UTT R. ND PROC SS OR
R NO T D UTT R.
SU C PT R OL OM RG RIN .
23. The ta es mposed by secton 2301, Subchapter , Chapter 10,
of the Code upon oeomargarne whch s manufactured and sod,
or removed for consumpton or use, are mposed upon the manufac-
turer thereof and are deductbe from gross ncome ony by such
person.
SU C PT R DCT.T R T D ND PROC SS OR R NO T D UTT R.
2 . The ta es mposed by secton 2321, Subchapter , Chapter 16,
of the Code upon aduterated butter and upon process or renovated
butter, whch s manufactured or sod, or removed for consumpton
or use, are mposed upon the manufacturer thereof and are deduct-
be from gross ncome ony by such person.
C PT R 17 PILL D Cn S .
25. The ta mposed by secton 2351, Chapter 17, of the Code upon
fed cheese whch s manufactured s mposed upon the manufac-
turer thereof and s deductbe ony by such person.
C PT R 18 MI D FLOUR.
26. The ta mposed by secton 2381, Chapter 18, of the Code upon
the manufacture and sae of m ed four s mposed upon the manu-
facturer or packer thereof and s deductbe from gross ncome ony
by such person.
27. The ta mposed by secton 238 , Chapter IS, of the Code upon
a m ed fours, mported from foregn countres, s mposed upon
the mporter thereof and s deductbe from gross ncome ony by
such person.
C PT R 21 COCONUT ND OT R G T L OILS.
28. cept as provded n secton 2 78 of such chapter, the ta es
mposed by secton 2 70, Chapter 21, of the Code upon the frst
domestc processng of coconut and the other vegetabe os specfed
n that secton are mposed upon the frst domestc processng
thereof as defned n secton 2 77 of that chapter, and those ta es
are deductbe from gross ncome ony by the person performng the
frst domestc processng.
29. Secton 2 78, Chapter 21, of the Code provdes that under the
crcumstances set forth theren the abty for the ta es mposed
under the chapter shfts from the person performng the frst
domestc processng to hs vendee. In such a case t necessary
foows that the ta s deductbe from the gross ncome of the ven-
dee rrespectve of whether the amount of the ta s pad by the ven-
dee to the vendor or drect by the vendee to the coector.
C PT R 22 FIS , NIM L, ND G T L OILS.
30. The ta es mposed by secton 2 90, Chapter 22, of the Code at
the rates and upon the substances enumerated n that chapter are
mposed upon the mportaton thereof nto the Unted States after
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I 19.23(c)-. 86
May 10, 193 , and are a abty of the mporter. ccordngy, such
ta es are deductbe from gross ncome ony by the mporter.
C PT R 23 N RCOTICS.
SU C PT R OPIUM ND COC L S.
31. The ta mposed by secton 2550, Subchapter , Chapter 23,
of the Code upon opum, coca eaves, any compound, sat, dervatve,
or preparaton thereof, produced n or mported nto the Unted
States, and sod, or removed for consumpton or sae, s mposed
upon the mporter, manufacturer, producer, or compounder, and s
deductbe from gross ncome ony by such person.
SU C PT R OPIUM FO SMO ING.
32. The ta mposed by secton 2567, Subchapter , Chapter 23,
of the Code upon a opum manufactured n the Unted States for
smokng purposes s mposed upon the manufacturer thereof and
s deductbe from gross ncome ony by such person.
SU C PT C M RI U N .
33. The ta es mposed by secton 2590. Subchapter C, Chapter 23,
of the Code upon the transfers of marhuana descrbed theren are
mposed n genera upon the transferee and are deductbe from
gross ncome ony by such person. owever, n the event of a
transfer n voaton of secton 2591 wthout an order form and
wthout payment of the transfer ta mposed upon the transferee,
the transferor aso s abe for the ta and f pad by such transferor
the amount thereof may be deducted from hs gross ncome.
C PT R 2 W IT P OSP ORUS M TC S.
3 . The ta mposed by secton 2651, Chapter 2 , of the Code
upon whte phosphorus matches manufactured, sod, or removed
s. mposed upon the manufacturer of such matches and s deductbe
from gross ncome ony by such person.
C IT R 25 FIR RMS.
SU C PT R PISTOLS ND R OL RS.
85. The ta mposed by secton 2700, Subchapter , Chapter 25,
of the Code upon pstos and revovers sod or eased by the manu-
facturer, producer, or mporter s mposed upon the manufacturer,
producer, or mporter and s deductbe from gross ncome ony by
such person.
SU C PT R M C IN GUNS ND S ORT- RR LL D FIR RMS.
36. The ta es mposed by secton 2720, Subchapter , Chapter 25,
of the Code upon frearms transferred n the contnenta Unted
States are mposed upon the transferor and are deductbe from
gross ncome ony by such person.
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19.23(c)- .
C PT R 20 LI UOR.
SU C PT R DISTILL D SPIRITS.
37. The ta es mposed by secton 2800, Subchapter , Chapter 26,
of the Code upon dsted sprts as denned n such secton are m-
posed upon the dst er or mporter or nterna revenue bonded ware-
houseman and are deductbe from gross ncome ony by such person.
SU C PT WIN S.
88. The ta es mposed by secton 3030, Subchapter , Chapter 26,
of the Code upon the varous knds of wnes specfed theren are
mposed upon the sae or the remova for consumpton or sae of
such wnes and are, therefore, a abty of the producer or mporter.
Consequenty, the amount of such ta es may be deducted from gross
ncome ony by the producer or mporter or propretor of a bonded
storeroom upon whom sch abty rests.
39. The ta mposed by secton 3031, Subchapter , Chapter 26, of
the Code upon brandy or sprts used n the fortfcaton of wnes
s mposed upon the producer of such wnes and s deductbe from
gross ncome ony by such person.
SU C PT R D F RM NT D LI UORS.
0. The ta mposed by secton 3150, Subchapter D, Chapter 26, of
the Code upon the fermented quors desgnated theren s mposed
upon the brewng or manufacture and sae, or remova for consump-
ton or sae, wthn the Unted States, and s a abty of the brewer.
ccordngy, the amount of such ta es may be deducted from gross
ncome ony by the brewer.
C PT R 27 OCCUP TION L T S.
1. The speca ta es mposed by sectons 3200. 3200, 3210, 3215,
8220, 3230, 3250, and 3260, Subchapter , Chapter 27, of the Code are
mposed upon the persons engaged n the occupatons specfed n
each of those sectons and are deductbe from gross ncome ony by
such persons.
C PT R 29 M NUF CTUR RS CIS ND IMPORT T S.
SU C PT R M NUF CTUR RS CIS T S.
2. The manufacturers e cse ta es mposed by sectons 3 00, 3 01,
3 03, 3 0 , 3 05, 3 07, 3 09, and 3 12, Subchapter , Chapter 29, of the
Code are mposed upon the sae of the artces specfed theren by the
manufacturer, producer, or mporter and are deductbe from gross
ncome ony by such persons.
3. The ta mposed upon eectrca energy by secton 3 11, Sub-
chapter , Chapter 29, of the Code s mposed upon the vendor of
such energy and s deductbe from gross ncome ony by such person.
. The ta mposed by secton 3 13, Subchapter , Chapter 29,
of the Code upon ubrcatng os sod n the Unted States s mposed
upon the manufacturer or producer and s deductbe ony by such
person.
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f 19.23(e)- .
88
C PT R 30 TR NSPORT TION ND COMMUNIC TION.
SU C PT R TR NSPORT TION OF OIL Y PIP LIN .
5. The ta mposed by secton 3 60, Subchapter , Chapter 30,
of the Code upon the transportaton of crude petroeum and qud
products thereof by ppe ne s mposed upon the persons furnshng
such transportaton and s deductbe from gross ncome ony by such
person.
SU C PT R T L GR P , T L P ON , R DIO. ND C L F CILITI S.
6. The ta es mposed by secton 3 65, Subchapter . Chapter 30. of
the Code upon teegraph, teephone, cabe, or rado dspatches s m-
posed upon the person payng for the servces or factes and s
deductbe from gross ncome ony by such person.
C PT R 31 POCUM NTS ND OT R INSTRUM NTS.
7. The ta es mposed by secton 3 80. Chapter 31, of the Code
for and n respect of the documents and other nstruments mentoned
and descrbed n sectons 3 81 and 3 82 are sub|ect to the same ad-
mnstratve provsons that appy to the stamp ta es mposed under
Chapter 11 wth respect to documents, other nstruments, and payng
cards. ccordngy, the rues stated n paragraph 15 reatve to the
stamp ta es mposed under Chapter 11 aso appy to the stamp ta es
mposed under Chapter 31.
C PT R 82-SUG R.
SU C PT R M NUF CTUR .
8. The ta es mposed by secton 3 00. Subchapter , Chapter 32,
of the Code upon manufactured sugar manufactured n the Unted
States are mposed upon the manufacturer as defned n secton 3 92
and are deductbe from gross ncome ony by such person.
C PT R 33 ITUMINOUS CO L.
9. The ta mposed by sect on 3520, Chapter 33, of the Code upon
the sae or other dsposa of btumnous coa produced wthn the
Unted States when sod or otherwse dsposed of by the, producer
s mposed upon the producer and s deductbe from gross ncome
ony by such person.
G N R L.
50. The defense ta supermposed upon varous of the ta es
mposed under the Code s, for purposes of ths mmeograph, merey
an addton to the ta to whch t attaches and s deductbe, or not,
n the same manner and to the same e tent as s the ta to whch t
s added.
51. Correspondence regardng ths mmeograph shoud refer to
the number thereof and to the symbos IT: TM.
Guy T. everng,
Commssoner.
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89
19.23(c)- .
Secton 19.23(c)-1 : Ta es. 19 1-36-10818
I. T. 3502
INT RN L R NU COD .
Under the amendments effected by chapter 0, Oregon Laws,
19 1, re and persona property ta es Imposed by the State of
Oregon accrue as of anuary 1 of the caendar year 1912 and
subsequent years.
dvce s requested wth respect to the accrua date of rea and
persona property ta es n the State of Oregon n vew of the aws
reatng to assessment and ta aton enacted durng the 1911 sesson
of the State egsature.
The enactng egsaton referred to conssts of chapters 256, 359,
389, and 0 of the Oregon Laws, 19 1. Chapter 0 of the Oregon
Laws, 19 1, wth an e cepton not here matera, becomes effectve
anuary 1, 19 2, and amends numerous sectons ot the Oregon Com-
ped Laws nnotated. Provsons of the aw pertnent to the ques-
ton nvoved, as amended by chapter 0, read n part as foows:
Sec. 110-335. The assessor sha procure for the county a bank assessment
ro, and forthwth proceed each year to assess the vaue of a ta abe prop-
erty wthn the county, . Sad assessor sha enter n such assessment
ro a fu and compete assessment of such ta abe propery, ncudng a
defnte descrpton of the rea property owned by each person theren named, on
anuary 1 of sad year, at the hour of 1 o cock a. m.

Sec. 110-3 8. persona property not e empt from ta aton sha be assessed
at ts true cash vaue as of anuary 1 at the hour of 1 o cock a. m.; .
Sectons 110-3 and 3 9 of the Oregon Comped Laws nnotated,
as amended by chapter 359, Oregon Laws, 19 1, read n part as fo-
ows:
Sec. 110-3 . t the tme prescrbed by aw the assessor n each county
sha ascertan by dgent Inqury the names of a persons n hs county who
by aw are assessabe by hm, and aso a the ta abe persona property and
a ta abe rea estate theren whch by aw Is assessabe by hm, and make
out an assessment ro of a such property, and apprase the same accordng
to the provsons of the statutes reatng thereto.

See. 110-3 9. very person and the managng agent or offcer of any frm,
corporaton or assocaton ownng, or havng n possesson or under contro
ta abe persona property sha make a return thereof to the assessor of the
county Id whch such property has ts stus for ta aton. In smar manner
every such person, managng agent or offcer sha make a return of ta abe
rea property, when so requested by the nssessor of the county n whc such
property Is stuated.

returns sha be n such form as the assessor, wth the approva of the
State ta commsson, may prescrbe, and sha be fed on or before the s teth
day foowng the assessment date of each year.
Under the aw as amended, ta es on rea property n Oregon become
a en thereon from and ncudng the 1st day of uy of the year n
whch they are eved, and ta es on persona property are a en on a
the persona property of the person assessed from and ncudng the
1st day of anuary of the year of the assessment unt pad.
It s hed that the accrua date of rea and persona property ta es,
under the amendments effected by chapter 0, Oregon Laws, 19 1, s
anuary 1 of the caendar year 19 2 and subsequent years. (See
generay G. C. M. 15305, C. . I -2, 80 (1935).)
1611 2 7
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19.23(c)- .
1)0
Secton 19.23(c)-1: Ta es.
( so Secton 1, Secton 19. 1-3.)
INT RN L R NU COD .
Pennsyvana rea estate ta es accrue on anuary 1 of the year
for whch such ta es are mposed.
dvce s requested as to the date on whch Pennsyvana rea
estate ta es accrue for Federa ncome ta purposes.
The specfc statutory provsons wth respect to assessment and co-
ecton of rea estate ta es n Pennsyvana dffer accordng to the
cass n whch the ta ng unt beongs. Whe there are no genera
statutory provsons specfyng the date on whch rea estate ta es
accrue, the courts of the State nave determned the date as of whch
abty for rea estate ta es accrues. The rue enuncated s that
the actua owner of property at the tme the assessment s made s
abe for ta es coverng the entre caendar year for whch such ta es
are mposed, and that abty for such ta es accrues as of anuary 1
of such ta year. (Pennsyvana Co. for Insurances on Lves and
Grantng nnutes v. ergson, 307 Pa., , 159 t., 32; Wood v.
Unted States Nat. Ug. Loan ss n, 105 Pa. Sup. Ct., 18 , 160
t., 2 ; Provdent Trust Co. of Phadepha v. udca ag, ds
Loan ss n et a, 112 Pa. Sup. Ct., 352,171 t., 287.)
I. T. 2908 (C. . I -2, 72 (1935)) nvoved ta es assessed bv
Phadepha, a cty of the frst cass, and I. T. 3 1 (C. . 19 0-2, 70)
nvoved ta es assessed by Pttsburgh, a cty of the second cass, and
by egheny County, a county of the second cass. In those rungs
t was hed that the ta es assessed by the respectve ta ng unts
nvoved theren accrued for Federa ncome ta purposes on anuary
1 of the caendar year for whch such ta es were mposed.
The rue enuncated by the Pennsyvana courts, vz, that rea estate
ta es accrue as of anuary 1 of the ta year, s equay appcabe to
rea estate ta es assessed by a ta ng unts n Pennsyvana, rre-
spectve of the cass to whch the ta ng unt beongs.
Secton 19.23 (c)-: Ta es. 19 1- 3-1087
I. T. 3511
INT RN L R NU COD .
Fees pad for dog censes, automobe nspecton, and automobe
tte regstraton are not ordnary aowabe deductons as ta es
under secton 23(c) of the Interna Revenue Code.
dvce s requested wth respect to the deductbty for Federa
ncome ta purposes of fees pad for dog censes, automobe nspec-
ton, and automobe tte regstraton, assumng that such fees are
not cassfabe as busness e penses.
s a genera rue, dog cense fees are coected to defray the e -
penses of mantanng dog pounds, etc. utomobe nspecton fees
are coected prmary to cover the cost of perodca nspecton of
automobes and for upkeep of nspecton statons. utomobe tte
regstraton fees generay represent amounts pad for tte regstraton
19 1-39-10833
I. T. 3506
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91
19.23(c)- .
certfcates whch are requred to be devered to purchasers upon
transfers of automobes.
The prmary queston n determnng whether the above-mentoned
tems are deductbe from gross ncome for Federa ncome ta pur-
poses s whether they are deductbe as ta es under secton 23(c)
of the Interna Revenue Code. In genera, the term ta ncudes
every burden that may awfuy be ad upon the ctzen by vrtue of
the ta ng power, but ts appcaton n statutory provsons vares
wth the ntent and purpose of the partcuar provson. ta s
an enforced contrbuton, e acted pursuant to egsatve authorty n
the e ercse of the ta ng power, and mposed and coected for the
purpose of rasng revenue to be used for pubc or governmenta pur-
poses, and not as a payment for some speca prvege granted or
servce rendered. Ta es are, therefore, dstngushabe from varous
other charges mposed for partcuar purposes under partcuar powers
or functons of government. In vew of such dstnctons, the ques-
ton whether a partcuar charge s to be regarded as a ta depends
upon ts rea nature. If t s n the nature of a ta , t s not matera
that t may be caed by a dfferent name; conversey, f t s not n the
nature of a ta , t s not matera that t may be so caed.
In 26 Rung Case Law, page 17, the genera rue dstngushng
ta aton from reguaton s stated n the foowng anguage:
. Ta atfon dstvgughcd from reguaton. Some governments derve a con-
sderabe revenue from a |udcous e ercse of the power of reguaton; but
snce a ta s a charge mposed for the purpose of rasng revenue, a churge
prmary mposed for the purpose of reguaton s not a ta , and s not sub|ect
to the consttutona mtatons upon the power of ta aton. If the
prmary purpose of the egsature n mposng such a charge s to reguate the
occupaton or the act, the charge s not a ta , even If t produces revenue for the
pubc.
Generay, the fees here nvoved are nomna n amount and are
coected prmary for reguatory, not for revenue-producng pur-
poses. The funds coected are used to defray e penses of reguaton.
Snce the fees are usuay for reguatory as dstngushed from revenue-
producng purposes and are not coected as ta es, they are not ord-
nary deductbe as ta es under secton 23(c) of the Interna Revenue
Code. Ths concuson s n accord wth the prncpes of I. T. 2796
(C. . III-2, 8 (193 )), nvovng the cost of huntng and fshng
censes n the State of North Dakota; I. T. 2999 (C. . -2, 139
(1936)), nvovng the cost of Federa mgratory brd huntng stamps
and huntng censes n the States of New York, North Carona,
and Pennsyvana; I. T. 3166 (C. . 1938-1, 133), nvovng the cost
of huntng and fshng censes n the State of Oho; and I. T. 3365
(C. . 19 0-1, 31), nvovng amounts deposted n parkng meters
n the Dstrct of Coumba.
Secton 19.23 (c)-: Ta es. 19 1 5-10888
I. T. 351
INT RN L R NU COD .
Contrbutons requred to be made by empoyers nto the Inos
unempoyment fund under the Inos Unempoyment Compensaton
ct are deductbe from gross Income as ta es under secton 23(c)
of the Interna Revenue Code.
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19.23(c)-2.
92
dvce s requested whether the amounts requred to be pad by
empoyers, under the Inos Unempoyment Compensaton ct, nto
the Inos unempoyment fund are deductbe as ta es under secton
23(c) of the Interna Revenue Code or as ordnary and necessary
busness e penses under secton 23(a) of the Code.
Secton 23(a) 1 of the Interna Revenue Code provdes for the
deducton n computng net ncome of a the ordnary
and necessafy e penses pad or ncurred durng the ta abe year n
carryng on any trade or busness, .
Secton 23(c) of the Code provdes that n computng net ncome
there sha be aowed as deductons ta es pad or accrued wthn
the ta abe year wth certan e ceptons not here matera.
The ureau hods that empoyer contrbutons under State un-
empoyment nsurance aws are deductbe as busness e penses, e cept
that t the State under whose aw such contrbutons are eved cass-
fes them as ta es, they are deductbe as ta es and not as busness
e penses. (Mm. 595, C. . 1937-1, 63.)
From a consderaton of the statute under whch contrbutons by
empoyers are made nto the Inos unempoyment fund, and pur-
suant to advce receved by the ureau from the State of Inos, t s
hed that such contrbutons under the Inos Unempoyment Com-
pensaton ct are deductbe as ta es and not as busness e penses.
Retaers e cse ta es mposed by Chapter 19 of the Interna
Revenue Code, added by secton 552 of the Revenue ct of 19 1,
are not deductbe from gross Income by the vendee for Federa
Income ta purposes. Such ta es are deductbe from gross ncome
ony by the vendor (retaer).
dvce s requested whether the retaers e cse ta es mposed by
Chapter 19 of the Interna Revenue Code, added by secton 552 of
the Revenue ct of 19 1, are deductbe from gross ncome by the
vendee for Federa ncome ta purposes.
Secton 23(c) 1 of the Interna Revenue Code, as amended, provdes
that n computng net ncome there sha be aowed as deductons
ta es pad or accrued wthn the ta abe year wth certan e ceptons
not here matera. Secton 19.23(c)- of Reguatons 103, reatng to
the ncome ta under the Interna Revenue Code, provdes, nter aa,
that n genera ta es are deductbe ony by the person upon whom they
are mposed.
Secton 552 of the Revenue ct of 19 1, reatng to the new retaers
e cse ta es, amends the Interna Revenue Code by addng after
Chapter 18 a new chapter entted, Chapter 19 Retaers cse
Ta es. Sectons 2 00, 2 01, and 2 02 of Chapter 19 of the Code
mpose ta es upon varous artces sod at reta (equvaent to 10 per
cent of the prce for whch so sod), ncudng |ewery, etc., furs, and
toet preparatons, respectvey. Secton 2 03(a) of the Code pro-
vdes n part as foows:
Secton 19.23(c)-2: Federa dutes and
e cse ta es.
INT RN L R NU COD .
19 1- 2-10867
I. T. 3510
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93
5 19.23(e)- .
(a) rcry person cho ses at reta any artce ta abe under ths chapter
sha make monthy returns under oath In dupcate and pay the tawes mposed
by ths chapter to the coector for the dstrct n whch s ocated hs prncpa
pace of busness . Itacs supped.
It s apparent that the retaers e cse ta es mposed by Chapter
19 of the Interna Revenue Code are mposed upon the sae by the
retaer of the artces specfed theren, and the anguage of secton
2 03(a), Chapter 19, of the Code, supra, shows that such ta es are
payabe by the vendor (retaer), not by the vendee.
In vew of the foregong, t s hed that the retaers e cse ta es
mposed by Chapter 19 of the Interna Revenue Code, added by secton
552 of the Revenue ct of 19 1, are not deductbe from gross ncome
by the vendee for Federa ncome ta purposes. Such ta es are de-
ductbe from gross ncome ony by the vendor (retaer). (Cf. Mm.
5200, page 80, ths uetn, and . R. R. 30 1, C. . II-2,110 (1923).)
S CTION 23(e). D DUCTIONS FROM GROSS INCOM :
LOSS S Y INDI IDU LS.
Secton 19.23(e)-: Losses by ndvduas. 19 1-38-10829
( so Secton 22(a), Secton 19.22(a)-; Secton I. T. 350
23(f), Sacton 19.23(f)-.)
INT RN L R NU COD .
Interest on Unted States savngs bonds, Defense Seres G, Is
ncudbe In gross ncome when receved or accrued, dependng upon
the ta payer s method of accountng. Such nterest accrues when t
becomes- payabe but not unt then.
No ad|ustment, for Federa ncome ta purposes, s to be made n
any ta abe year of such aready reazed nterest on account of the
refund by the ta payer of a porton thereof upon redempton of the
bond before maturty, the amount thus refunded beng deductbe
as an ordnary oss, ncurred n a transacton entered Into for proft,
n the ta abe year of such redempton and refund.
In so far as the bond tsef s concerned, a purchaser thereof has
no gan or oss, ether ordnary or capta, upon ts redempton,
whether at or before maturty.
dvce s requested reatve to the proper treatment, for Federa
ncome ta purposes, of nterest on Unted States savngs bonds, De-
fense Seres G, and aso of the refund of a certan porton of such
prevousy reazed nterest whch hoders of the bonds are requred
to make upon redempton thereof before maturty (e cept n certan
cases upon death) n accordance wth the terms of ssuance of the
bonds ncorporated theren.
These bonds were paced on sae, begnnng May 1, 19 1, at par n
denomnatons of 100, 500, 1,000, 5,000, and 10,000, and are ssued
under the provsons of the Second Lberty ond ct, as ast amended
and suppemented by the Pubc Debt ct of 19 1 (approved February
19, 19 1, C. . 19 1-1, 5 6), whch became effectve, n so far as
here appcabe, on March 1, 19 1.
The bonds provde nter aa, as foows:
Th Unted States or mkeca for vaue receved promses to pay
doars tweve years from the date as of whch ths
Issued, and to pay nterest on sad prncpa sum semannuay from
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19.23(e)- .
9
sad Issue date at the rate of two and one-haf per cent per annum, unt the
prncpa hereof sha be payabe. Ths s a Unted States savngs bond of
Defense Seres G, authorzed by I he Second Lberty ond ct, as amended, and
ssued pursuant to Treasury Department Crcuar No. 65 , dated pr 15, 19 1,
to whch reference s made for a statement of the rghts of hoders, as fuy and
wth the same effect as though heren set forth. Ths bond s redeemabe at
the opton of the owner on one month s notce n wrtng, on the frst day of any
mouth durng any perod after sad Issue date (but not wthn the frst s
months) In an amount equa to ts redempton vaue durng that perod as
shown by the tabe of redempton vaues appearng hereon, or at a hgher vaue
under certan specfed condtons set forth n sad Crcuar No. 65 . In case
of redempton before maturty, nterest on ths bond sha cease at the end of
the perod precedng that n whch the bond s redeemed. Itacs supped.
Department Crcuar No. 65 , dated pr 15,19 1, provdes n part:
II. D SCRIPTION ND T RMS OF ONDS.

. onds of Seres O w be ssued at par, and w bear nterest at the rate
of 2 per cent per annum, payabe semannuay from date of ssue. Interest
w be pad by check drawn to the order of the regstered owner and maed to
hs address. Interest w cease at maturty, or, n case of redempton before
maturty, at the end of the nterest perod ne t precedng the date of redempton.
tabe of redempton vaues for each bond appears on ts face, and the dfference
between the face amount of the bond and the redempton vaue fared for any
perod represents an ad|ustment (or refund) of nterest. ccordngy, f the
owner e ercses hs opton to redeem a bond pror to maturty, the nvestment
yed w be ess than the nterest rate on the bonds. onds of Seres G may
be redeemed at par (1) upon the death of the owner, or a coowner, f a natura
person, or (2), as to bonds hed by a trustee or other fducary, upon the death
of any person whch resuts n termnaton of the trust, n whoe or n part. If
the trust s termnated ony In part redempton at par w be made ony to the
e tent of the pro rata porton of the trust so termnated, to the ne t ower mutpe
of 100. In any case request for redempton at par must be made wthn four
months after the date of death and n accordance wth the reguatons governng
savngs bonds.

7. Ta aton. nterest on bonds of Seres G, s not e empt from Income
or profts ta es now or hereafter Imposed by the Unted States. The bonds
sha be sub|ect to estate, nhertance, gft, or other e cse ta es, whether Federa
or State, but sha be e empt from a ta aton now or hereafter mposed on the
prncpa or nterest thereof by any State, or any of the possessons of the Unted
States, or by any oca ta ng authorty. Itacs supped.
The f ed redempton vaue of a bond f redeemed before ts
maturty (e cept n certan cases upon death) s ess than ts purchase
prce (par or face amount), but n every case the aggregate of such
redempton vaue and the prevousy reazed nterest e ceeds the
purchase prce.
Under the above quoted provsons of the bond and of the crcuar
ncorporated theren by reference, the arrangement agreed upon s
one whereunder nterest at the rate of 2 k per cent per annum on the
prncpa sum (purchase prce, face amount) of the bond s payabe
and pad semannuay by check, wthout any condton precedent as
to ts avaabty or use, durng the 12-year term of the bond or unt
the end of the nterest perod ne t precedng redempton f not hed
to maturty, but wth a condton subsequent that f the bond s re-
deemed before maturty (e cept n certan cases upon death) the
bondhoder sha refund a certan porton of the nterest aready
pad to hm, and he w receve ony the dfference between the face
amount (purchase prce) of the bond and such nterest ad|ustment
(refund), the dfference beng termed, for the sake of smpcty, n
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95
19.23(e)- .
the bond and crcuar the redempton vaue of the bond as of the
tme redeemed. In other words, upon such a redempton before ma-
turty, athough there s for the sake of convenence pad over to the
bondhoder ony the net dfference, he n effect or constructvey re-
ceves the fu face amount of the bond and smutaneousy refunds
prevousy reazed nterest to the e tent of the dfference between
the face amount of the bond and the net amount he actuay receves
at the tme of the redempton. That the arrangement s so regarded
by the Treasury Department s confrmed by the facts that the bonds
are carred on ts books at par as a abty, that upon such a redemp-
ton the fu par or face amount thereof s refected as pad, and the
nterest refunded s refected as receved n a defnte tem repayment
of nterest.
In vew of the arrangement under whch these bonds are ssued
and redeemed, t s manfest that the bondhoder recovers n every
case, even where a bond s redeemed before maturty, the fu purchase
prce thereof. ccordngy, t s hed that, n so far as the bond tsef
s concerned, a purchaser of such a bond has no gan or oss, ether
ordnary or capta, upon ts redempton.
Inasmuch as the nterest payments are payabe and pad wthout
any condton precedent as to the avaabty of the amount of nterest
due or to the use of the amount of nterest pad, such payments are
ncudbe n gross ncome n the ta abe year or years n whch
receved or accrued, dependng upon the method of accountng regu-
ary empoyed by the ta payer n keepng hs books and makng hs
Federa ncome ta returns. The payments are consdered to accrue
n the ta abe year or years n whch they become payabe nasmuch
as abty therefor then becomes f ed, but not unt then.
No ad|ustment for Federa ncome ta purposes shoud be made n
any ta abe year of such aready reazed nterest (whch s ncudbe
n gross ncome as and when above stated) on account of the refund by
the ta payer of a porton of such nterest upon the redempton of a
bond before maturty. s aready set forth, the nterest payments
made are payabe and pad by check wthout any condton precedent
as to avaabty or use, and the obgaton on the part of the bond-
hoder to refund, n the event of redempton of the bond before ma-
turty (e cept n certan cases upon death), a certan porton of the
nterest prevousy pad to hm s a condton subsequent n determnng
whether he was entted to receve and use as hs own such nterest
payments. Such obgaton or requrement to refund a certan porton
of the nterest aready reazed does not become operatve unt f, as,
and when a bond s redeemed before maturty. It s, however, a con-
dton precedent to such redempton. Stated dfferenty, the makng
of such refund resuts n a oss then beng ncurred and sustaned of a
porton of the prevousy reazed nterest, a under provsons ncor-
porated n the bond. ccordngy, t s hed that the amount of nter-
est thus refunded by a purchaser of such a bond s deductbe for Fed-
era ncome ta purposes as an ordnary oss, ncurred n a transacton
entered nto for proft, n the ta abe year of such redempton and
refund. (Secton 23 (e) (2) and (f) of the Code.)
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19.23(e)- .
96
Secton 19.23(e)- : Losses by ndvduas.
19 1- 8-10912
I. T. 3519
INT RN L R NU COD ND R NU CT OF 1921.
oss due to destructon of persona property as a resut of bom-
bardment consttutes an aowabe deducton under secton 23(e)3 of
the Interna Revenue Code. In determnng the amount of deduct-
be oss, consderaton must be gven to any savage vaue and to
any nsurance or other compensaton receved.
I. T. 2037 (C. . III-, 1 6 (192 )) modfed.
dvce s requested whether a oss due to destructon of persona
property as a resut of bombardment consttutes an aowabe deduc-
ton under secton 23(e) 3 of the Interna Revenue Code. The facts
ocated n a resdence whch was destroyed n 19 0 as a resut of
bombardment of a cty n France.
Secton 23(e)3 of the Interna Revenue Code provdes that n
computng net ncome there sha be aowed as deductons:
(e) Losses by Indvduas, In the case of an ndvdua, osses sustaned
durng the ta abe year and not compensated for by nsurance or otherwse

(3) of property not connected wth the trade or busness, f the oss arses
from fres, storms, shpwreck, or other casuaty, or from theft. Itacs
supped.
In I. T. 2037 (C. . III-, 1 6 (192 )) t was hed that a oss
resutng from an e poson of a bomb s not deductbe under secton
21 (a)6 of the Revenue ct of 1921 uness the e poson resuted
n a fre whch destroyed the ta payer s home or a part of t, n whch
case, the oss resutng from the fre woud be deductbe. In reachng
that concuson, t was sad that the term other casuaty n secton
21 (a)6 of the Revenue ct of 1921 reates to casuates smar to
fres, storms, and shpwreck, that s, to casuates resutng from the
acton of natura physca forces. Secton 21 (a)6 of the Revenue
ct of 1921 and secton 23(e)3 of the Interna Revenue Code, nvoved
n the present nqury, contan smar anguage.
In Shearer v. nderson (16 Fed. (2d), 995) the Crcut Court of
ppeas for the Second Crcut hed that a oss resutng from damage
to an automobe mantaned for persona use and attrbuted to ts
overturnng whe beng drven over an cy road and to the subse-
quent freezng of the motor arose from a casuaty whch woud be
embraced wthn the term other casuaty as used n secton
21 (a)6 of the Revenue ct of 1918.
In G. C. M. 1802 (C. . I-1, 219 (1927)) t was stated that the
ureau w foow the decson of the Crcut Court of ppeas for
the Second Crcut n Shearer v. nderson, supra. (See aso I. T. 2363,
C. . I-1,220 (1927).)
It. s hed that the oss sustaned by the ta payer n the nstant case
consttutes a oss arsng from other casuaty under the provsons
of secton 23(e) 3 of the Interna Revenue Code, supra, and s an
aowabe deducton for the year 19 0. In determnng the amount of
the deductbe oss, consderaton must be gven to any savage vaue
certan persona property
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97
19.23(h)- .
and to any nsurance or other compensaton receved. (See secton
19.23(e)- of Reguatons 103.)
I. T. 2037. supra, whch s contrary n prncpe to the above-stated
concuson, s modfed accordngy.
S CTION 23(f). D DUCTIONS FROM GROSS INCOM :
LOSS S Y CORPOR TIONS.
Secton 19.23(f)-: Losses by corporatons.
INT RN L R NU COD .
Interest refunded upon redempton pror to maturty of Unted
States savngs bonds. Defense Seres G. (See I. T. 350 , page 93.)
S CTION 23(b). D DUCTIONS FROM GROSS
INCOM : W G RING LOSS S.
Secton 19.23(h)-: Wagerng osses. 19 1-28-10773
( so Secton 23(o), Secton 19.23(o)-; Sec- T. D. 5057
ton 25, Secton 19.25-2; Secton 51, Secton
19.51-1; Sucton 117, Secton 19.117-5; Sec-
ton 120, Secton 19.120-1; Secton 122, Sec-
tons 19.122-3.19.122- , and 19.122-5; Secton
131, Secton 19.131-9; Secton 251, Secton
19.251-1.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RTS 3, 9,
ND 19. INCOM T .
Reguatons 103, 101, 9 , and 80, amended. Computaton of ta
where |ont returns fed.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. .
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 103 Part 19, Tte 26, Codo of
Federa Reguatons, 19 0 Sup. , Reguatons 101 Part 9, Tte 26,
Code of Federa Reguatons, 1939 Sup. , Reguatons 9 Part 3,
Tte 26, Code of Federa Reguatons , and Reguatons 86 to the
prncpes set forth n the decsons handed down by the Supreme
Court n the cases of Icverng v. anney et a. (19 0) (311 U. S.,
189, 61 S. ., 2 1) and Taft et u . v. everng (19 0) (311 U. S.,
195, 61 S. Ct., 2 ), such reguatons are amended as foows:
Paragraph 1. The foowng s nserted n Reguatons 103 m-
medatey foowng secton 23(h) and desgnated Sec. 19.23(h)-;
n Reguatons 101 mmedatey foowng secton 23(h) and desg-
nated rt. 23(h)-; and n Reguatons 9 and 86 mmedatey fo-
owng secton 23(g) and desgnated rt. 23(g)-:
Wagerng osses. Deductons for osses from wagerng transactons are a-
owed ony to the e tent of gans from such transactons. In the case of a
husband and wfe makng a |ont return, the combned osses of the spouses as
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19.23(h)- .
98
a resut of wngerng transactons sha he aowed to the e tent of the com-
bned gans of the spouses from such transactons.
Sec. 23. Deductons Fbom Gross Income.
In computng net ncome there sha be aowed as deductons:
Par. 2. The fourth paragraph of secton 19.23(o)- of Reguatons
103, the thrd paragraph of artce 23(o)- of Reguatons 101, and
the second paragraph of artce 23(o)- of Reguatons 9 , and the
second paragraph of artce 23(o)- of Reguatons 86, as amended
by Treasury Decson 626, approved February 18, 1936 C. . -1.
61 (1936) , are strcken and the foowng new paragraph s nserted
n eu of each such paragraph:
In the case of a husband and wfe makng a |ont return, the deducton for
contrbutons or gfts s the aggregate of such contrbutons or gfts made by
the spouses, and s mted to 15 per cent of the aggregate net ncome of the
spouses (computed wthout regard to such contrbutons or gfts) as shown by
the |ont return.
Par. 3. The foowng new paragraph s nserted mmedatey fo-
owng the ast paragraph of secton 19.25-2 of Reguatons 103 and
mmedatey foowng the ast paragraph of artce 25-2 of Regua-
tons 101, 9 , and 86:
In the case of a husband and wfe makng a |ont return, there s but one
earned Income credt, computed upon the combned Income of the spouses, and
the ma mum and mnmum mtatons prescrbed wth respect to such credt
sha be based upon the combned ncome as f the ont return were the return
of one ndvdua.
Par. . The second sentence of secton 19.51-1 (c) of Reguatons
103, as amended by paragraph 18(C) of Treasury Decson 5011,
approved September 2 . 19 0 C. . 19 0-2, 15 , and the second
sentence of artce 51-1 (b) of Reguatons 101 are amended to read
as foows:
In such a case, the ta sha be computed on the aggregate ncome.
Par. 5. The eghth sentence of artce 51-1 of Reguatons 9 and
the eghth sentence of artce 51-1 of Reguatons 86, as amended
by Treasury Decson 585, approved September 9,1935 C. . I -2,
5 (1935) , are amended to read as foows:
If the ncome of each s Incuded n a snge ont return, the ta sha be
computed on the aggregate ncome.
Par. 6. Secton 19.117-5 of Reguatons 103 s amended to read as
foows:
Sec. 19.117-5. . ppcaton of secton 117 n the case of husband and wfe.
(a) Short-term capta gans and osses. In the case of a husband and wfe
makng a ont return, the mtaton under paragraph (2) of secton 117(d),
pror to ts amendment, and under secton 117(d), as amended, reatng to the
aowance of short-term capta osses, s to be computed wth respect to the
combned short-term capta gans and osses of the spouses.
If a husband and wfe makng a |ont return for any ta abe year begnnng
after December 31, 1938, dd not make a ont return for the precedng ta abe
year, the Indvdua net short-term capta oss of each spouse for the precedng
ta abe year (n an amount not n e cess of the ndvdua net Income of such
spouse for such year) sha be treated as a short-term capta oss for the ta -
abe year. If, however, a |ont return was made for such precedng ta abe
year, a net short-term capta oss as shown by such ont return (n an amount
not In e cess of the aggregate net ncome for such year as shown by nch
return) sha be treated as a short-term capta oss for the ta abe year. If
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19.23(h)- .
a husband and wfe makng separate returns for any ta abe year begnnng
after December 31, 1938, made a |ont return for the precedng ta abe year,
a net short-term capta oss shown by such |ont return sha be aocated to
the spouses on the bass of ther ndvdua net short-term capta osses for
such precedng ta abe year, and the net short-term capta oss nocated to
each spouse (n an amount not n e cess of the porton of the aggregate net
ncome shown by such |ont return attrbutabe to such spouse) sha be treated
as a short-term capta oss of such spouse fO the ta abe year.
(6) Long-term capta gans and osses. In the case of a husband and wfe
makng a |ont return, the ong-term capta osses of the spouses are to be
deducted from ther aggregate gross ncome n computng the ta mposed by
sectons 11 and 12. The aternatve ta es computed under secton 117(c) are
In eu of the ta mposed by sectons 11 and 12 and must be compared wth
the ta mposed by such sectons to determne whch ta s appcabe. In
computng the aternatve ta es under secton 117(c) n the case of a |ont
return, the determnaton of the net ong-term capta gan or the net ong-
term capta oss s to be made by combnng the ong-term capta gans and
the ong-term capta osses of the spouses.
Pak. 7. rtce 117-5 of Reguatons 101 s amended to read as
foows:
bt. 117-5. ppcaton of secton 111 n the case of husband and wfe.
(a) Short-term capta gans and osses. In the case of a husband and wfe
makng a |ont return, the mtaton under secton 117(d) (2), reatng to the
aowance of short-term capta osses, s to be computed wth respect to the
combned short-term capta gans and osses of the spouses.
(6) Long-term capta gan and osses. In the case of a husband and wfe
makng a |ont return, the ong-term capta osses of the spouses are to be
deducted from ther aggregate gross ncome n computng the ta mposed
by sectons 11 and 12. The aternatve ta es computed under secton 117(c)
are n eu of the ta mposed by sectons 11 and 12 and must be compared
wth the ta mposed by such sectons to determne whch ta s appcabe.
In computng the aternatve ta under secton 117(c) n the case of a |ont
return, the determnaton of the net ong-term capta gan or the net
ong-term capta oss s to be made by combnng the ong-term capta
gans and the ong-term capta osses of the spouses.
Pak. 8. rtce 117-5 of Reguatons 9 and 86 s amended to read
as foows:
rt. 117-5. ppcaton of secton n n the case of husband and wfe.
In the case of a husband and wfe makng a |ont return, the mtaton under
secton 117(d) on the aowance of osses from saes or e changes of capta
assets s to be computed wth respect to the combned gans and osses of the
spouses upon such saes or e changes.
Par. 9. The foowng s nserted n Reguatons 103 mmedatey
foowng secton 120 and desgnated Sec. 19.120-1, and aso n Regu-
atons 101, 9 , and 86 mmedatey foowng secton 120 and desg-
nated rt. 120-1:
Unmted deducton for chartabe and other contrbutons. Under the cr-
cumstances specfed n secton 120, the 15 per cent mtaton mposed by sec-
ton 23(o) on the deducton for chartabe and other contrbutons s not
appcabe.
In the case of a husband and wfe makng a ont return for any ta abe
year, the 15 per cent mtaton on the deducton for contrbutons or gfts
mposed by secton 23(o) sha not. be appcabe f the aggregate amount of
the contrbutons or gfts descrbed n secton 23(o) (or correspondng pro-
vsons of pror Revenue cts) made by the spouses n the ta abe year and
In each of the 10 precedng years, pus the aggregate amount of ncome, war-
profts, or e cess-profts ta es pad by the spouses durng such year n respect
of precedng ta abe years, e ceeds 90 per cent of the aggregate net ncome
of the spouses for each such year, as computed wthout the beneft of any
deducton for contrbutons or gfts.
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I 19.23(h)- .
100
Par. 10. The foowng new paragraph s nserted mmedatey
foowng the ast paragraph of secton 19.122-3 of Reguatons 103:
(e) ont return by husband and wfe. In the case of a husband and wfe,
the |ont net operatng oss for any ta abe year for whch a ont return
s ed s to be computed upon the bass of the combned Income and deductons
of both spouses, and the e ceptons and mtatons prescrbed by secton
122(d) are to be computed as f the combned Income and deductons of both
spouses were the ncome and deductons of one ndvdua.
Par. 11. Secton 19.122 of Reguatons 103 s amended as foows:
( ) The foowng s nserted mmedatey foowng the secton
headng:
(a) In genera.
( ) The foowng s nserted mmedatey foowng the ast
paragraph:
(6) ont return by husband and wfe. (1) If a husband and wfe makng a
ont return for any ta abe year dd not mnke a ont return for any of the
precedng ta abe years nvoved n the computaton of the net operatng oss
carry-over, the ont net operatng oss carry-over to the ta abe year Is the
sum of the separate net operatng oss carry-overs of both spouses to such
year, computed as set forth n paragraph (a) of ths secton.
(2) If a husband and wfe makng a |ont return for any ta abe year made
a |ont return for each of the precedng ta abe years Invoved In the computa-
ton of the net operatng oss carry-over, the |ont net operatng oss carry-
over to the ta abe year s computed n the same manner as the net operatng
oss carry-over of an ndvdua under paragraph (a) of ths secton but upon
the bass of the |ont net operatng osses and the combned net ncome of
both spouses.
(3) If a husband and wfe makng separate returns for any ta abe year
made a |ont return for any or a of the precedng ta abe years nvoved n
the computaton of the net operatng oss carry-over, the separate net operatng
oss carry-over of each spouse to the ta abe year s the net operatng oss
carry-over computed n the manner set forth n paragraph (o) of ths secton,
but wth the foowng e ceptons and mtatons:
(1) The net operatng oss of such spouse for each of such precedng
ta abe years for whch a |ont return was made sha be deemed to
be the porton of the |ont net operatng oss (computed In accordance wth
secton 19.122-3(e)) attrbutabe to the gross ncome and deductons of
such spouse, both beng taken Into account to the same e tent that they are
taken nto account n computng such |ont net operatng oss.
() The net ncome (computed wth the e ceptons and mtatons pro-
vded n secton 122(d) (1) to ( )) of such spouse for any of such pre-
cedng ta abe years for whch a |ont return was made sha be deemed
to be
( ) The porton of the combned net ncome of both spouses for such
year (computed wth the e ceptons and mtatons provded In secton
122(d) (1) to ( ) and as though the combned ncome and deductons
of both spouses were those of one Indvdua) attrbutabe to the gross
ncome and deductons of such spouse, both beng taken Into account to
the same e tent that they are taken nto account In computng such
combned net Income.
( ) Pus the e cess of the porton of such combned net Income
attrbutabe to the other spouse over the separate net operatng oss
carry-over of such other spouse to such year, or
(C) Mnus the e cess of the porton of the separate net operatng oss
carry-over of the other spouse to such year attrbutabe to the net operat-
ng oss of such other spouse for the second precedng ta abe year
over the porton of such combned net ncome attrbutabe to such
other spouse.
( ) If a husband and wfe makng a |ont return for any ta abe year made
a ont return for one or more but not a of the precedng ta abe years n-
voved n the computaton of the net operatng oss carry-over, the ont net
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101
19.23(h)- .
operatng oss carry-over to the ta abe year Is the sum of the separate net
operatng oss carry-overs of both spouses, computed n the manner set forth
n paragraph (3), above.
Paragraph (3), above, may be ustrated by the foowng e ampes:
ampe (/). , a husband, and W, hs wfe, who make ther ncome ta
returns on the caendar year bass, made |ont returns for 1939 and 19 1 and
separate returns for 19 0 and 19 2. For 1939, 19 0, and 19 1 they had net
ncomes (ad|usted as provded n secton 122(d) (1) to ( )) and net operatng
osses as foows:
1039
19 0
19 1

2,000 (Income)
5,000 (oss)
3,000 (Income).
,000 (ncome).
W
3,000 (oss)
2,000 (oss)
1,000 ( ont oss).
7,000 (combned ncome).
The net operatng oss carry-over of to 19 2 s 1,000, and that of W s
zero, computed as foows:
For 1939 s deemed to have nether a net ncome nor a net operatng oss
(there beng a |ont net operatng oss for such year, none of whch s attrbut-
abe to ), and the net operatng oss of W s deemed to be 1,000 (the por-
ton of the |ont net operatng oss for 1939 attrbutabe to W). See
paragraph (3)(1).
For 19 0 the net operatng osses of and W are 5,000 and 2,000, respec-
tvey, no ad|ustment of such amounts beng necessary snce separate returns
were made for such year.
For 19 1 the net ncome of n s deemed to be ,000, L e., 3,000, the porton
of the combned net ncome for 19 1 attrbutabe to , pus 1,000, the e cess
of the porton of such combned net ncome attrbutabe to W ( ,000) over
the net operatng oss carry-over of W to 19 1 ( 2,000 from 19 0 and 1,000
from 1939. or a tota of 3,000). See paragraph (3) () ( ) and ( ).
For 19 1 the net ncome of W s deemed to be ,000, the porton of the
combned net Income for 19 1 attrbutabe to W. No ad|ustment of such
amount s necessary snce there s no e cess under paragraph (3)() ( )
or (C).
ppyng the rue set forth In paragraph (a) of ths secton, the net operat-
ng oss carry-over of to 19 2 s 1,000 ( s net operatng oss for 19 0
( 5,000) reduced by the e cess of s net ncome for 19 1 ( ,000) over s
net operatng oss for 1939 (zero)).
Smary, the net operatng oss carry-over of W to 19 2 Is zero (W s net
operatng oss for 19 0 ( 2,000) reduced by the e cess of W s net ncome
for 19 1 ( ,000) over W s net operatng oss for 1939 ( 1,000)).
ampe (2). ssume the same facts as In e ampe (1) e cept that and
W had net ncomes and net operatng osses as foows:
1939
19 0
19 1
.
2,000 (oss)
1,000 (oss)
1,000 (ncome).
3,000 (ncome).
W
,000 (oss).
2, 000 (ncome)
8,000 ( ont oss)
,000 (combned ncome).
The net operatng oss carry-over of to 19 2 s 1,000, and that of W s
zero, computed as foows:
For 1939 the net operatng osses of and W are deemed to be 2,000 and
,000, respectvey (the porton of the |ont net operatng oss for 1939 attrbu-
tabe to and W, respectvey).
For 19 0 the net operatng oss of s 1,000 and the net ncome of W s
2,000.
For 19 1 the net Income of s deemed to be 1,000, the porton of the com-
bned net ncome for 19 1 attrbutabe to . No ad|ustment of such amount s
necessary snce there s no e cess under paragraph (3)() ( ) or (C).
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19.23(h)- .
102
For 19 1 the net Income of W Is deemed to be 2,000, I. e., 3,000, the porton
of the combned net ncome for 19 1 attrbutabe to W, mnus 1,000, the e cess
of the porton of s net operatng oss carry-over to 19 1 attrbutabe to s net
operatng oss for 1939 ( 2,000) over the porton of such combned net ncome
attrbutabe to II ( 1,000). See paragraph (3) () ( ) and (C).
ppyng the rue set forth n paragraph (a) of ths secton, the net operatng
oss carry-over of to 19 2 s 1,000 ( s net operatng oss for 19 0 ( 1,000)
reduced by zero, s net ncome for 19 1 ( 1,000) not beng n e cess of hs net
operatng oss for 1939 ( 2,000)).
The net operatng oss carry-over of W to 19 2 Is zero, there beng no net
operatng oss for ether 19 0 or 19 1.
Par. 12. The foowng new paragraph s nserted mmedatey
foowng the ast paragraph of secton 19.122-5 of Reguatons 103:
In the case of a husband and wfe makng a ont return for any ta abe
year, the computaton of the net operatng oss deducton (as set forth n the
frst paragraph of ths secton) s to be made upon the bass of the combned
net operatng oss carry-over of the spouses to such year (computed as pre-
scrbed n secton 19.122- (b)) and the combned net ncome of the spouses.
Par. 13. The foowng s nserted mmedatey foowng secton
19.131-8 of Reguatons 103, as amended by Treasury Decson 5011,
approved September 2 , 19 0 supra , and desgnated Sec. 19.131-9,
and aso mmedatey foowng artce 131-8 of Reguatons 101, 9 ,
and 86 and desgnated rt. 131-9:
ont return by husband and tcfe. In case of a husband and wfe makng
a |ont return, the credt for ta es pad or accrued to any foregn country or
to any possesson of the Unted States sha be computed upon the bass of
the tota ta es so pad by or accrued aganst the spouses, and the mtatons
prescrbed by secton 131(b) upon such credt sha be apped wth respect
to the aggregate net ncome from sources wthn each such country or posses-
son, the aggregate net ncome from a sources wthout the Unted States, and
the aggregate net ncome from a sources, of the spouses.
Par. 1 . The foowng new paragraph s nserted mmedatey fo-
owng the second paragraph of secton 19.251-1 of Reguatons 103,
mmedatey foowng the second paragraph of artce 251-1 of Regu-
atons 101 and 9 , and mmedatey foowng the frst paragraph of
artce 251-1 of Reguatons 86:
In the case of a husband and wfe makng a |ont return, the term gross
ncome, as used n ths secton, means the combned gross ncome of the
spouses.
(Ths Treasury decson s ssued under the authorty contaned
n sectons 23(h), 23(o), 25(a), 51(b), 62, 117, 120, 122, 131, and 251
of the Interna Revenue Code (53 Stat., 13. 1 , 17, 27, 32, 50, 56, and
79; 26 U. S. C, Sup. , 23(h),23(o), 25(a), 51(b), 62,117, 120, 122,
131, and 251) and n sectons 211(b), 212(a) (b), and 216(b) of the
Revenue ct of 1939 (53 Stat, 367, 368, and 876; 26 U. S. C, Sup. ,
117, 122, and 131); sectons 23(h), 23(o), 25(a), 51(b), 62, 117, 120,
131, and 251 of the Revenue ct of 1938 (52 Stat., 61, 63, 66. 76,
80, 500, 506, and 532; 26 U. S. C, Sup. I . 23(h), 23(o), 25(a),
51(b) 62, 117,120, 131, and 251); sectons 23(g), 23(o),25(a), 51(b),
62, 117, 120, 131, and 251 of the Revenue ct of 1936 ( 9 Stat, 1659,
1660,1662, 1670, 1673,1691, 1695, 1696, and 1718; 26 U. S. C, Sup. II,
23(g), 23(o), 25(a), 51(b), 62, 101, 120, 131, and 251); and sectons
23(g), 23(o), 25(a), 51(b), 62, 117, 120, 131, and 251 of the Revenue
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103
19.23(m)- .
ct of 193 ( 8 Stat.. 689. 690. 692, 697. 700. 71 , 718, and 738; 26
U. S. O, 23(g), 23(o), 25(a), 61(b), 62, 101, 120, 131. and 251).)
Guy T. everng,
Commssoner of Interna Revenue.
pproved uy 2. 19 1.
ohn L. Suvan,
ctng Secretary of the Treaswy.
(Fed wth the Dvson of the Federa Regster uy 5, 10 1, 11.55 a. m.)
S CTION 23(m). D DUCTIONS FROM GROSS
INCOM : D PL TION.
Secton 19.23(m)- : Computaton of depeton 19 1- 0-10897
based on a percentage of ncome n te case G. C. M. 22956
of o an gas wes.
INT RN L R NU COD .
The net Income from the property for purposes of
determnng the net Income mtaton on the ptrcentage depeton
aowance under secton 11 (b (3) and ( ) of the Interna Reve-
nue Code must be separatey computed for each depetabe eco-
nomc nterest or property hed by the ta payer. Deductbe tems
drecty attrbutabe to a specfc nterest or property are deductons
ony n conputug the net ncome from that nterest or property.
Overhead or genera tems of deducton must bo fary aocated
between depetabe propertes and the actvtes reatng thereto
and a other propertes and actvtes. The part thereof aocabe
to depetabe propertes must then be fary apportoned to the
severa specfc propertes.
. C. M. 22(589 (O. . 19 1-1, 225) superseded.
Reference s made to G. C M. 22689 (C. . 19 1-1, 225) reatve
to deductons whch enter nto the computaton of the net ncome
from the property for purposes of computng the net n-
come mtaton on the percentage depeton aowance under secton
11 (b) (3) and ( ) or the Interna Revenue Code, provdng for
depeton aowances measured by stated percentages o the gross n-
come derved from o or mnera property, but not to e ceed 50
per cent of the net ncome of the ta payer from the property.
Further consderaton has been gven to the questons theren ds-
cussed.
In G. C. M. 22106 (C. . 19 1-1, 2 5), whch nvoved the meanng
of the term property as used n the depeton provsons, t was
sad:
The ta payer s nterest, then, n each dfferent tract or parce of and s a
separate property. The tem tract or parce of and s used here n
the same sense In whch t s ordnary used. Separate tracts or parces
of and not ony e st when two areas or peces of and are separated geo-
graphcay, but a snge tract or parce of and may be dvded nto two
or more separate tracts or parces by means of the e ecuton of convey-
ances or eases carvng up the orgna tract or parce. If a ta payer
hods severa Interests n the same tract or parce, each nterest Is a property
wthn the comprehenson of that term as used n the provsons of the Revenue
cts f ng a bass for the computaton of depeton. s the bass f ed aso
governs the computaton of gan or oss, t foows that a depetabe property
Is aso an asset sub|ect to sae or other dsposton gvng rse to gan or oss.
ccordngy, each such Interest must be treated as a separate property for
ncome ta purposes.
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19.23(m)- .
10
ccordngy, the term property may be defned as each separate nterest
owned by the ta payer n each separate tract or parce of and.
In G. C. M. 22730 (C. . 19 1-1, 21 ) t was ponted out that the
basc concepts of ncome and the attendng depeton aowances
appy to depeton provsons basng aowances on percentages of
gross ncome from the propertes as we as to the provsons of the
earer Revenue cts grantng aowances based on cost or vaue at
March 1, 1913, or upon dscovery vaue. It was aso ponted out that
the term gross ncome, as used n the phrase gross ncome from
t he property n the percentage depeton provsons, means the same
as gross ncome n the provsons generay defnng ncome, wth
the quafcaton that the phrase gross ncome from the property
n the depeton provsons s confned to the gross ncome from the
e tracton and sae of o rather than gross ncome from the tract of
and n a ts uses.
It thus seems cear that the depeton aowances on each separate
property must be separatey computed. If, as ndcated, gross n-
come from a partcuar property for percentage depeton purposes s
confned to the o or mnera e tracted therefrom and sod, then t
foows that the net ncome from the property for purposes of the
mtaton on such depeton aowances s the e cess of the proceeds
derved from the sae of o or mnera e tracted from that property,
ess the e penses attrbutabe to such property. (See secton 19.23
(m)-(ff) of Reguatons 103.) The cted secton of the reguatons per-
tans argey to the separaton of the tems of ncome and deductons
attrbutabe to the e tracton and sae of o or mnera product, whch
form the essenta factors n the computaton of depeton, from such
tems attrbutabe to the processng or transportaton of such product
whch have no more reaton to depeton aowances than do such
tems attrbutabe to actvtes and propertes n no way reated to
o or mnera propertes. sde from provsons separatng tems
essenta to the depeton computaton from those tems foregn to
such computaton, the rue stated s that the net ncome of the ta -
payer from the property means the gross ncome from such property
ess aowabe deductons attrbutabe thereto. Deductons (nduct-
ng tems of e pense) attrbutabe to a specfc property are those
drecty ncurred wth respect to such property, pus that porton of
overhead or genera tems of deducton aocabe to depetabe o or
mnera nterests whch s attrbutabe to such specfc property.
The eadng cases bearng upon the matter nvove questons
whether varous tems of deducton are of a character nherenty
attrbutabe to depetabe propertes hed and operated durng the
year rather than to the farness of the apportonment made. In
evvrmg v. Wshre O Co., Inc. (308 U. S., 90, Ct. D. 1 2 , C. .
1939-2, 213) t was hed that ntangbe deveopment costs whch the
ta payer had eected to treat as deductbe tems n computng net
ncome were aso deductbe n computng net ncome from the prop-
erty for purposes of computng the net ncome mtaton on per-
centage depeton. s such costs are drecty chargeabe to the
specfc propertes deveoped, there was no queston of apportonment
among specfc propertes n that casa. Decsons by the oard of
Ta ppeas nvovng overhead or genera tems of deducton hod
such tems deductbe n computng net ncome from the property for
purposes of determnng the net ncome mtaton on percentage de-
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105
19.23(o)-.
peton. (See Mrabe ucksver Co. v. Commssoner, 1 . T. .,
01, nvovng capta stock ta es and nterest pad on money bor-
rowed for deveopment purposes; Montrea Mnng Co. v. Comms-
soner, 1 . T. ., 399, nvovng payments of cams of empoyees
who had contracted scoss whe workng n the ta payer s mne
n pror years; Grson O Corporaton v. Commssoner, 2 . T. .,
117, nvovng State ncome ta paymenrs; St. Marys O Gas Co.
v. Commssoner, 2 . T. ., 270, nvovng nterest pad on money
borrowed to purchase property producng o and gas; Lumach Coa
Co. v. Commssoner, memorandum opnon, une 15, 19 0, nvovng
bad debts, dues, assessments, attorneys fees, capta stock ta es, and
nterest on money borrowed for deveopment; Sverdan-Wyomng
Coa Co., Inc., v. Commssoner, memorandum opnon, une 2 , 19 0,
nvovng nterest on bonds, bond dscount, and e pense amortza-
ton; and oy Deveopment Co. v. Commssoner, . T. ., 51,
nvovng nterest pad durng the ta abe year on Federa ncome
ta defcences for pror years ) The tems nvoved n each of those
cases were at east n part attrbutabe to depetabe natura resource
propertes hed and operated durng the years n whch the tems
were camed as deductons n computng net ncome. In each case
the ta payer questoned the appcabty of the tems of deducton
to the net ncome mtaton provson rather than the apportonment
made of such deductons to depctabe o or mnera nterests or
among the specfc propertes whch comprsed such nterests.
Thus the resut of the decded cases s n accord wth the above-
stated prmary rue that the percentage depeton aowance, as we
as the net ncome mtaton thereon, must be separatey computed
for each depetabe economc nterest hed by the ta payer. ccord-
ngy, such decsons do not warrant the concuson that a deductbe
tems aocabe to a busness of e potng a natura resource must
be attrbuted to producng propertes.
In vew of the foregong, t s the opnon of ths offce that the
net ncome from the property for purposes of deter-
mnng the net ncome mtaton on the percentage depeton aowance
must be separatey computed for each depetabe economc nterest
or property hed by the ta payer. Deductbe tems drecty attrbu-
tabe to a specfc nterest or property are deductons ony n com-
putng the net ncome from that nterest or property. Overhead or
genera tems of deducton must be fary aocated between depetabe
propertes and the actvtes reatng thereto and a other types
of propertes and actvtes. The part thereof aocabe to depet-
abe propertes must then be fary apportoned to the severa spe-
cfc propertes.
Ths opnon supersedes G. C. M. 22689, supra.
. P. Wenche,
Chef Counse, ureau of Interna Revenue.
S CTION 23(o). D DUCTIONS FROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS.
Secton 19.23(o)-: Contrbutons or gfts by ndvduas.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
1611 2 8
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19.23(o)-.
106
Secton 19.23(o)-1 : Contrbutons or gfts
by ndvduas.
INT RN L R NU COD .
19 1- 1-10852
I. T. 3508
Contrbutons made to cv defense commttees formed n accord-
ance wth the ecutve Order of .the Presdent of the Unted
States, dated May 20, 19 1, consttute aowabe deductons under
secton 23(o) of the Interna Revenue Code n the ndvdua
returns of the donors.
dvce s requested whether contrbutons made to the cv defense
commttees consttute aowabe deductons under secton 23(o) of
the Interna Revenue Code n the ndvdua ncome ta returns of
the donors.
The cv defense commLttees referred to are organzed n accord-
ance wth the ecutve Order of the Presdent of the Unted States
ssued on May 20, 19 1, stabshng the Offce of Cvan Defense
n the Offce for mergency Management of the ecutve Offce
of the Presdent. The ecutve Order provdes that the Pres-
dent sha appont a drector as the ead of Cvan Defense, who
n turn sha, wth the approva of the Presdent, appont such add-
tona advsory commttees and subcommttees, wth respect to State
and oca cooperaton, natona morae, cv defense pannng, cvan
partcpaton, and reated defense actvtes, as he may fnd necessary
or desrabe to assst hm n the performance of hs dutes, and that
such advsory commttees may ncude representatves from Federa
departments and agences, State and oca governments, prvate or-
ganzatons, and the pubc at arge. The ecutve Order aso pro-
vdes that wthn the mtaton of such funds as may be approprated
to the Offce of Cvan Defense, or as may be aocated to t by
the Presdent through the ureau of the udget, the Drector may
empoy necessary personne and make provson for the necessary
suppes, factes, and servces.
Secton 23(o) of the Interna Revenue Code, as amended, provdes
n the case of an ndvdua for the aowance as a deducton n com-
putng net ncome of contrbutons or gfts payment of whch s made
wthn the ta abe year to or for the use of the Unted States, any
State, Terrtory, or any potca subdvson thereof, or the Dstrct
of Coumba, for e cusvey pubc purposes to an amount whch,
together wth other contrbutons aowabe as a deducton under
secton 23(o) of the Code, does not e ceed 15 per centum of the ta -
payer s net ncome as computed wthout the beneft of the deducton
for contrbutons.
It s hed that contrbutons made to cv defense commttees
formed n accordance wth the ecutve Order of the Presdent of
the Unted States, dated May 20, 19 1, referred to above, consttute
aowabe deductons under secton 23(o) of the Interna Revenue
Code n the ndvdua returns of the donors. (Cf. S. 992, C. . 1,
1 5 (1919), reatng to contrbutons to the Counc of Natona
Defense.)
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107 19. 2-1.
S CTION 25. CR DITS OF INDI IDU L
G INST N T INCOM .
Secton 19.25-2: arned ncome credt.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
P RT rW- CCOUNTING P RIODS ND M T ODS OF CCOUNTING.
S CTION 1. G N R L RUL .
Secton 19. 1-3: Methods of accountng.
INT RN L R NU COD .
Pennsyvana rea estate ta es date of accrua. (See I. T. 3500,
page 90.)
S CTION 2. P RIOD IN W IC IT MS OF
GROSS INCOM INCLUD D.
Secton 19. 2-1: When ncuded n gross ncome.
INT RN L R NU COD .
Interest on Tte I, Natona ousng ct, property mprovement
oans. (See I. T. 3 89, page 71.)
Secton 19. 2-1: When ncuded n gross ncome. 19 1-32-10802
I. T. 3 96
INT RN L R NU COD .
The M ank Trust Co., the ta payer, acqures, ses, nnd
servces mortgages guaranteed by the Federa ousng dmns-
traton. It coects each year as a servce charge a sma percentage
of the unpad prncpa of the mortgage. The mortgages are
amortzed over a perod of 20 or 25 years, and the servce charges
are based on the decnng baances. The ta payer s books of account
are kept on the accrua bass.
ed, the ta payer s requred to Incude the servce charges n
gross ncome for the ta abe year n whch such charres are receved,
even though ts books of account are kept on the accrua bass and
the amount receved on an outstandng mortgage In the ater years
s ess than that receved In the earer years for ke servces.
dvce s requested as to the proper method of reportng, for Fed-
era ncome ta purposes, servce fees receved under a servcng
agreement entered nto by the M ank Trust Co. wth purchasers of
mortgages guaranteed by the Federa ousng dmnstraton, under
the crcumstances heren set forth.
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19. 2-1.
108
The M ank Trust Co., whch keeps ts books of account and
fes ts Federa ncome ta returns on the accrua bass, conducts a
genera commerca and trust bankng busness, n connecton wth
whch t acqures for resae mortgages guaranteed by the Federa
ousng dmnstraton. These mortgages are amortzed over perods
of 20 and 25 years. It acqures the mortgages by endng money to
the purchasers of houses, ses the mortgages to nvestors at par, and
enters nto an agreement wth the purchaser of the mortgage to
servce the mortgage durng ts fetme for a sma percentage of the
unpad prncpa. Such servcng ncudes the coecton of prncpa
and nterest, payment of ta es and nsurance, nspecton of the proper-
tes, etc. The servce charge coected each year s based on the
decnng baance.
The sae and servcng agreement, among other thngs, provdes:
Contnuousy from the date hereof unt the prncpa and nterest of the
mortgage are pad n fu, the servcer w proceed dgenty to coect a
payments due under the mortgage, as and when the same sha become due and
payabe, and w prompty dscharge a of the obgatons of the mortgagee
named n the mortgage, as we as every obgaton arsng hereunder and under
the contract of nsurance wth the Federa ousng dmnstrator. s fu
compensaton for Its servces, the servcer w retan, from money coected
by t each month an amount equa to per cent of the outstandng baance as
shown by the Federa ousng dmnstraton amortzaton schedue.
It s ponted out by the M ank Trust Co. that the e pense
ncurred n servcng a mortgage durng the ast year the mortgage
s outstandng s at east as great as the e pense durng the frst
year, and that snce the fee s based on the decnng baance of
the prncpa of the mortgage, ony a very sma amount w be
receved durng the ast year the mortgage s outstandng. The com-
pany desres to compute the servce charge whch w be receved n
connecton wth each mortgage durng ts entre fe and, based upon
that amount, then to compute the average annua servce charge.
It desres to set up a reserve for the amount of the servce charges
receved and report as ncome for each year durng the fe of the
mortgage ony the average amount of the servce charge computed
over the fe of the mortgage.
Secton 2 of the Interna evenue Code provdes that a tems
of gross ncome sha be reported for the ta abe year n whch re-
ceved by the ta payer, uness under methods of accountng permtted
under secton 1 any such amounts are to be propery accounted for
as of a dfferent perod. Secton 1 of the Code provdes that
ncome sha be reported n accordance wth the method of accountng
reguary empoyed n keepng the books of the ta payer, but f no
such method of accountng has been so empoyed, or f the method
empoyed does not ceary refect the ncome, the computaton sha
be made n accordance wth such method as n the opnon of the
Commssoner does ceary refect the ncome. Secton 19. 1-2 of
Reguatons 103, promugated under the Code, provdes n part:
method of accountng w not, however, be regarded as ceary
refectng Income uness a tems of gross ncome and a deductons are
treated wth reasonabe consstency. ta payer s deemed to have
receved tems of gross ncome whch have been credted to or set auart for
hm wthout restrcton.
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109
19. 2-1.
It has been the genera practce of the ureau not to permt post-
ponement of the ta aton of ncome receved wthout restrcton,
whether such ncome s advance rentas, advance bonuses or royates,
compensaton pad n advance, membershp fees, or other types of n-
come pad n advance, even though the ta payer keeps ts accounts on
the accrua bass. The Unted States oard of Ta ppeas and the
courts have consstenty uphed the ureau s poston. ( utomobe
Underwrters, Inc., v. Commssoner, 19 . T. ., 1160 (recept of
membershp fees for servces to be rendered over a 3-year perod);
C. . Mead Coa Co. v. Commssoner, 31 . T. ., 190 (advance
payments on tonnage royaty); Maoy Co. v. Commssoner, 33
. T. ., 1130 (advance payment for gas to be produced n future
years); Poneer utomobe Servce Co. v. Commssoner, 36 . T. .,
213 (fees pad for servces to be rendered durng ves of automobe
owners for whch reserves were set apart on the books); dward .
Renwck et a., Trustees, v. Unted States, 87 Fed. (2d), 123, Ct. D.
1252, C. . 1937-2, 33 (advance rentas).) In Creasy Corpora-
ton v. eburn (57 Fed. (2d), 20 ) t was hed that sums receved
from, and at the tme of, the sae .of servce contracts were ncome
n the year receved, and that the Commssoner was ceary wthout
authorty to treat an aquot part thereof as ta abe ncome for
subsequent years, athough the ta payer kept ts accounts on the
accrua bass and the contracts covered servces to be rendered n
future vears.
The Unted States Supreme Court n North mercan O Con-
sodated v. urnet (286 U. S., 17, Ct. D. 99, C. . I-1, 293
(1932)) stated:
If a ta payer receves earnngs under a cam of rght and wthout
restrcton as to ts dsposton, he has receved ncome whch he s requred
to return, even though t may st be camed that he s not entted to retan
the money, and even though he may st be ad|udged abe to restore ts
equvaent.
In New York Centra Raroad Co. v. Commssoner (79 Fed. (2d),
2 7, cert, dened, 296 U. S., 653), the Court stated:
The compensaton was earned when the servces were performed
and no uncertanty e sted e cept as to what was a fnr and reasonabe
amount. Snce the ta payer reported on the accrua bass, we can
see no |ustfcaton for deferrng accrua of the ncome beyond the year when
the precse amount thereof coud have been ncuded n the ta return.
The above authortes are regarded as f ng the rue that amounts
whch are receved as ncome, and whch are sub|ect to the unre-
strcted use and dsposton of the recpent, sha be reported not
ater than the year of recept, and that the fact that the recpent s
accounts are kept on the accrua bass does not ater such concuson.
In the nstant case, the M ank Trust Co. enters nto an agree-
ment wth the purchaser of a mortgage to servce the mortgage dur-
ng ts fe for a specfed per cent of the unpad prncpa thereof
(decnng baance), whch amount t receves monthy wthout re-
strcton as to ts dsposton. It s accordngy hed that the servce
fees receved by the M ank Trust Co. are ncudbe n ts gross
ncome for the year n whch receved.
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56. 110
P RT . R TURNS ND P YM NT OF T .
S CTION 51. INDI IDU L R TURNS.
Secton 19.51-1: Indvdua returns.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
S CTION 53. TIM ND PL C FOR
FILING R TURNS.
Secton 19.53-2: tensons of tme for fng 19 1-29-10781
returns. Mm. 5213
Tme for fng corporaton ncome ta returns for the caendar
year 19 0 and fsca years endng n 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, I). C, uy 8, 191,1.
Deputy Commssoners, Coector of Interna Revenue, Interna Reve-
nue gents n Charge, and Others Concerned:
1. Reference s made to Mmeograph 520 C. . 19 1-1, 286 ,
settng forth nstructons wth regard to grantng e tensons of tme
for fng e cess profts ta returns for the caendar year 19 0 and for
fsca years endng n 19 1.
2. In vew of that mmeograph, no addtona e tensons of tme
w be granted for the fng of corporaton ncome ta returns for the
caendar year 19 0. In no case, e cept n most unusua crcumstances,
w an e tenson of tme for the fng of corporaton ncome ta
returns for fsca years endng n 19 1 be granted, and then ony after
submsson to and approva by ths offce.
3. Correspondence regardng ths mmeograph shoud refer to the
number thereof and to the symbos IT: TM.
Gcy T. everng,
Commssoner.
S CTION 56. P YM NT OF T .
19 1-32-1080
T. D.506
TITL 20 INT RN L R NU . C TT R I, SU C PT R , P RT 10.
INCOM T .
Reguatons governng the acceptance of Treasury notes of Ta
Seres -19-13 and Treasury notes of Ta Seres -19 3 In payment
of ncome ta es.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Sec. 19.56-5. cceptance of Treasury notes of Ta Seres -19 3
and Treasury notes of Ta Seres -19 3 n payment of ncome
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I
15 56.
ta es. Coectors of nterna revenue are authorzed and drected to
accept at par and accrued nterest notes of the Unted States desg-
nated as Treasury notes of Ta Seres -19 3 and Treasury notes of
Ta Seres -19 3 n payment of ncome ta es (current and back
persona and corporaton ta es, and e cess-proft ta es). The notes
of ether seres may be receved after three months from the month
of purchase (as shown by the date of ssue on each note), but not
before anuary 1, 19 2, and may be accepted ony n payment of
ncome ta es (ether current or back) due from the purchaser thereof,
at the vaue current n the month n whch presented. The notes
may be presented for ta payment by the purchaser, hs agent, or
hs estate. In the case of Treasury notes of Ta Seres -19 3, not
more than 1,200 n prncpa amount of such notes may be accepted
wthn any perod of 12 consecutve months from any one ta payer
n payment of hs abty for any one ta abe year. Coectors
sha not n any case aow credt to a ta payer on account of notes,
or accept notes, for an amount greater than ther prncpa amount
pus accrued nterest, nor sha notes be accepted n an amount
(ncudng accrued nterest) greater than the unpad abty of the
ta payer. (Sectons 3607 and 3791 of the Interna Revenue Code
(53 Stat., 7, 67, 26 U. S. C, Sup. , 3657, 3791) and secton
18 of the Second L berty ond ct of 1917, as amended ( 0 Stat.,
1309, 31 U. S. C, Sup. , 753).)
Sec. 19.56 6. Procedure wth respect to Treasury notes of Ta
Seres -19 3 and Treasury notes of Ta Seres -19 3. Deposts
of Treasury notes of Ta Seres -19 3 and Treasury notes of Ta
Seres -19 3 receved n payment of ncome ta es sha be made by
the coector n a Federa reserve bank or a branch Federa reserve
bank. Pror to depost the coector w certfy on the reverse sde
of the notes that tney were receved n payment of ncome ta and
w show n the ndorsement stamp the date of depost. (Sectons
3657 and 3791 of the Interna Revenue Code (53 Stat., 7, 67. 26
U. S. C, Sup. , 3657, 3791) and secton 18 of the Second Lberty
ond ct of 1917, as amended ( 0 Stat., 1309, 31 U. S. C, Sup. ,
753).)
Sec. 19.56-7. Pror reguatons revoked. The provsons of any
reguatons, rues, orders, or nstructons nconsstent wth ths Treas-
ury decson are revoked as of the date of the approva of ths
Treasury decson. (Sectons 3657 and 3791 of the Interna Revenue
Code (53 Stat., 7, 67, 26 U. S. C, Sup. , 3657, 3791) and secton
18 of the Second Lberty ond ct of 1917, as amended ( 0 Stat,
1309, 31 U. S. C, Sup. , 753).)
Gttt T. everno,
Commssoner of Interna Revenue.
pproved uy 31, 19 1.
ohn L. Sum|van,
ctng Secretary of the Treasury.
(Ped wth the Dvson of the Federa Regster ugust 2, 19 1, 11. 5 a. m.)
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56.
112
19 1-33-10807
D. C. C67
19 1. Department Crcuar No. 067. Fsca Servce. ureau of the Pubc Debt.
The Unted States of merca. Treasury notes. Ta Seres
-19 3. Ta Seres -19 3. Dated ugust 1, 19 1. Due ugust
1, 19 3. Issued at par and accrued nterest; acceptabe at par and
accrued Interest n payment of Federa ncome ta es.
Treasury Department,
Offce of the Secretary,
Washngton, uy 22,19 1.
I. OFF RING of notes.
1. The Secretary of the Treasury, pursuant to the authorty of
the Second Lberty ond ct, as amended, offers for sae, to the
peope of the Unted States, through the Federa reserve banks, at
ar and accrued nterest, two ssues of nontransferabe notes of the
Unted States, desgnated Treasury notes of Ta Seres -19 3, and
Treasury notes of Ta Seres -19 3. s herenafter provded, the
notes of both seres w be acceptabe at par and accrued nterest n
payment of Federa ncome ta es: Provded, however That not
e ceedng 1,200 prncpa amount of notes of Ta Seres -19 3,
and the accrued nterest thereon, w be accepted from any one
owner n any perod of 12 consecutve months n payment of ta es
due from such owner. If not presented n payment of ta cS| the
notes w be redeemabe at the purchase prce as herenafter provded.
2. Descrptons of the notes of both seres, and ther terms are
herenafter fuy set forth. The notes w be paced on sae begn-
nng ugust 1, 19 1, and the sae w contnue unt December 31,
19 1. uness earer termnated, as to ether or both seres, by the
Secretary of the Treasury.
II. descrpton of notes.
1. Genera. The notes of both seres w be dated ugust 1,19 1,
and w mature ugust 1, 19 3. The owner s name and address,
and the date of ssue w be entered on each note at the tme of ts
ssue by a Federa reserve bank. The month n whch payment
s receved by a Federa reserve bank or branch, or by the Treasurer of
the Unted States, w determne the purchase prce and ssue date of
each note. The notes may not be transferred. No hypothecaton of
the notes on any account w be recognzed by the Treasury De-
partment, and they w not be accepted to secure deposts of pubc
money. cept as heren provded, the notes w be sub|ect to the
genera reguatons of the Treasury Department, now or hereafter
prescrbed, governng bonds and notes of the Unted States.
2. Denomnatons and nterest. The notes of Ta Seres -19 3
w be ssued n denomnatons of 25, 50, and 100, and nterest
thereon w accrue durng each month after ugust, 19 1, n the
amount of 16 cents on each 100 prncpa amount, that s, cents on
each 25, 8 cents on each 50, and 10 cents on each 100 denomnaton
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113
of note. The notes of Ta Seres -19 3 w be ssued n denomna-
tons of 100, 5bO, 1,000, 10,000, and 100,000 and nterest thereon
w accrue each month after ugust, 19 1, n the amount of cents
on each 100 prncpa amount, that s cents on each 100, 20 cents
on each 500, 0 cents on each 1,000, on each 10,000, and 10
on each 100,000 denomnaton of note. In no case, however, sha
nterest accrue beyond the month n whch the note s presented n
payment of ta es, or beyond ts maturty. changes of authorzed
denomnatons of each seres from hgher to ower, but not from ower
to hgher, may be arranged at the Federa reserve bank of ssue.
3. Purchase prce, and ta -payment vaue. The notes of both seres
w be sod at par durng ugust, 19 1, and w be sod at par and
accrued nterest durng each subsequent month whe they reman
on sae, the purchase prce for a note of any denomnaton of ether
seres advancng each month after ugust, 19 1, n the amount of
one month s nterest on that note. Tabes, showng for each month
from ugust, 19 1, to ugust, 19 3, for each denomnaton of each
seres, the prncpa amount of the notes wth accrued nterest added,
are appended to ths crcuar. The tota shown for any denomna-
ton for any month ugust through December, 19 1 whe the notes
reman on sae, s the purchase prce, or cost, of the note durng that
month. so, the tota shown for any denomnaton for any month
thereafter s the ta -payment vaue, or the amount at whch the note
w be acceptabe durng that month n payment of Federa ncome
ta es as heren provded.
. cceptabty n payment of ta es. The notes of both seres
(but not more than 1,200 prncpa amount of notes of Ta Seres
-19 3 from any one owner n any perod of 12 consecutve months)
w be acceptabe, at,par and accrued nterest, n payment of Federa
ncome ta es (current and back persona and corporaton ta es, and
e cess-profts ta es). The condtons of presentaton, surrender and
acceptance of the notes n payment of such ta es are set forth n
Secton I of ths crcuar.
5. Payment or redempton for cash. The notes of ether seres may
not be caed by the Secretary of the Treasury for redempton pror
to maturty. If such notes are not presented n payment of ta es:
(1) they w be payabe at maturty, or (2) they w be redeemabe
pror to maturty, at the owner s opton and request, as herenafter
provded n Secton , and n ether case payment w be made ony
at the prce pad for the notes.
6. Ta aton. Income derved from the notes sha be sub|ect to a
Federa ta es, now or hereafter mposed. The notes sha be sub|ect
to estate, nhertance, gft, or other e cse ta es, whether Federa or
State, but sha be e empt from a ta aton now or hereafter m-
posed on the prncpa or nterest thereof by any State, or any of the
possessons of the Unted States, or by any oca ta ng authorty.
I. PURC S OF NOT S.
1. ppcatons and payment. ppcatons w be receved by
the Federa reserve banks and branches, and by the Treasurer of the
Unted States, Washngton, D. C. ankng nsttutons generay
may submt appcatons for account of customers, but ody the
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5 56.
11
Federa reserve banks and the Treasurer of the Unted States are
authorzed to act as offca agences. very appcaton must be
accompaned by payment n fu, at par and accrued nterest to the
month n whch payment s receved by a Federa reserve bank or
branch, or the Treasurer of the Unted States. ny form of e -
change, ncudng persona checks, w be accepted sub|ect to coec-
ton, and shoud be drawn to the order of the Federa reserve bank
or of the Treasurer of the Unted States, as the case may be. ny
depostary, quafed pursuant to the provsons of Treasury Depart-
ment Crcuar No. 92 (revsed February 23, 1932, as suppemented)
w be permtted to make payment by credt for notes apped for
on behaf of tsef or ts customers up to any amount for whch t
sha be quafed n e cess of e stng deposts.
2. Reservatons. The Secretary of the Treasury reserves the rght
to re|ect any appcaton n whoe or n part, and to refuse to ssue
or permt to be ssued hereunder any notes n any case or n any
cass or casses of cases f he deems such acton to be n the pubc
nterest, and hs acton n any such respect sha be fna. If an
appcaton s re|ected, n whoe or n part, any payment receved
therefor w be refunded. The Secretary of the Treasury, n hs ds-
creton, may desgnate agences other than those heren provded for
the sae of, or for the handng of appcatons for, Treasury notes to
be ssued hereunder.
3. Devery of notes. Upon acceptance of fu-pad appcatons,
notes w be duy ssued and, uness devered n person, w be
devered by regstered ma wthn the contnenta Unted States,
the Terrtores and nsuar possessons of the Unted States, the
Cana Zone and the Phppne Isands. No deveres esewhere w
be made.
. Form of appcaton. In appyng for notes under ths crcu-
ar, care shoud be e ercsed to specfy whether those of Ta Seres
-19 3, or Ta Seres -19 3 are desred, and there must be fur-
nshed the name and address of the ndvdua, corporaton, or other
entty n whch the notes are to be ssued; and f address for the
devery of the notes s dfferent, approprate nstructons shoud be
gven. The name shoud be n the same form as that used n the
Federa ncome ta return of the purchaser. The use of an offca
appcaton form s desrabe, but not necessary. pproprate forms
may be obtaned on appcaton to any Federa reserve bank or
branch, and bankng nsttutons generay w suppy such forms.
I . PR S NT TION IN P YM NT OF T S.
1. fter three months from month of purchase (as shown by the
date of ssue on each note), but not before anuary 1, 19 2, durng
such tme, and under such rues and reguatons as the Commssoner
of Interna Revenue, wth the approva of the Secretary of Treasury,
sha prescrbe, notes ssued hereunder n the name of a ta payer
(ndvdua, corporaton, or other entty) may be presented and sur-
rendered by such ta payer, hs agent, or hs estate, to the coector
of nterna revenue, to whom the ta return s made, and w be
recevabe by the coector at par and accrued nterest from ugust,
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115
5 56.
19 1, to the month, ncusve (but no accrua beyond ugust, 19 3),
n whch presented n payment of any Federa ncome ta es (current
and back persona and corporaton ta es, and e cess-proft ta es)
assessed aganst the orgna purchaser or hs estate, but not more
than 1,200 prncpa amount of notes of Ta Seres -19 3, and the
accrued nterest thereon, may be accepted by the coector n any
perod of 12 consecutve months n payment of Federa ncome ta es
due from such owner. The notes must be forwarded to the coector
at the rsk and e pense of the owner, and, for hs protecton, shoud
be forwarded by regstered ma, f not presented n person.
. C S R D MPTION T OR TRIOR TO M TURITY.
1. Genera. ny Treasury note of Ta Seres -19 3 or Ta
Seres -19 3 w be redeemed for cash at the purchase prce at or
before maturty. Notes of Ta Seres -19 3 may be redeemed be-
fore maturty wthout advance notce, but notes of Ta Seres -19 3
may be redeemed before maturty ony after 60 days from date of
ssue and on 30 days advance notce. The tmey surrender of a
note of Ta Seres -19 3, bearng a propery e ecuted request for
payment, w be accepted as consttutng the advance notce requred
hereunder.
2. ecuton of request for payment. The owner n whose name
the note s nscrbed must appear before one of the offcers authorzed
by the Secretary of the Treasury to wtness and certfy requests for
payment, estabsh hs dentty, and n the presence of such offcer
sgn the request for payment appearng on the back of the note, add-
ng the address to whch check s to be maed. fter the request
for payment has been so sgned, the wtnessng offcer shoud compete
and sgn the certfcate provded for hs use.
3. Offcers authorzed to wtness and certfy requests for pay-
ment. ny offcers authorzed to wtness and certfy requests for
ayment of Unted States savngs bonds, as set forth n Treasury
epartment Crcuar No. 530, fourth revson, as amended, are
hereby authorzed to wtness and certfy requests for cash redempton
of Treasury notes ssued under ths crcuar. Such offcers ncude
Unted States postmasters, certan other post offce offcas, and the
e ecutve offcers of a banks and trust companes ncorporated n
the Unted States or ts organzed Terrtores, ncudng offcers at
branches thereof who are certfed to the Treasury Department as
e ecutve offcers.
. Presentaton and surrender. Notes bearng propery e ecuted
requests for payment must be presented and surrendered to the Fed-
era reserve bank of ssue, at the e pense and rsk of the owner. For
the owner s protecton, notes shoud be forwarded by regstered ma,
f not presented n person.
5. Dsabty or death. In case of the dsabty or death of the
owner, and the notes are not to be presented n payment of Federa
ncome ta es due from hs estate, nstructons shoud be obtaned
from the Federa reserve bank of ssue before the request for pay-
ment s e ecuted, or the notes presented.
6. Parta redempton. Parta cash redempton of notes of ether
seres, correspondng to an authorzed denomnaton, may be made
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56.1
116
n the same manner, approprate changes beng made n the request
for payment. In case of parta redempton of a note, the remander
w be ressued wth the same date of ssue as the note surrendered.
7. Payment. Payment of any note, ether at maturty or on re-
dempton before maturty, w be made ony by the Federa reserve
bank that ssued the note, and w be made by check drawn to the
order of the owner, and maed to the address gven n hs request
for payment. In any case, payment w be made at the purchase
prce of the note, that s, at par and accrued nterest (f any) pad at
tme of purchase.
I. G N R L PRO ISIONS.
1. Federa reserve banks, as fsca agents of the Unted States, are
authorzed to perform suc servces or acts as may be approprate
and necessary under the provsons of ths crcuar, and under any
nstructons gven by the Secretary of the Treasury.
2. The Secretary of the Treasury may at any tme or from tme to
tme suppement or amend the terms of ths crcuar, or of any amend-
ments or suppements thereto, and may at any tme or from tme to
tme prescrbe amendatory rues and reguatons governng the offer-
ng of the notes, nformaton as to whch w prompty be furnshed
to the Federa reserve banks.
enry Morge tau, r.,
Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 31, 19 1.)
Treasury Notes Ta Seres -19 3.
PURC S PRIC ND T -P YM NT LU DURING SUCC SSI MONT S.
Tabe, showng for each month from ugust. 19 1, to ugust, 19 3, for notes
of each denomnaton, the prncpa anonnt wth accrued nterest added. The
tota shown for any denomnaton, for any month ugust through December,
19 1 whe the notes reman on sae, s the purchase prce, or cost, of the note
durng that month. so, the tota shown for any denomnaton for any month
thereafter s the ta -payment vaue, or the anonnt at whch the note w be
acceptabe durng that month n payment of Federa ncome ta es.
25
50
100
Purchase pr
ee.
ugust, 19 1...
September, 19 1
October, 19 1...
November, 19 1
December, 19 1.
25. 00
25. 0
25. 08
25. 12
25. 16
50. 00
50. 08
50. 16
50. 2
50. 32
100. 00
100. 16
100. 82
100. 8
100. 6
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117
56.
anuary, 19 2
February, 19 2
M RC , 19 2
pr, 19 2
Mav, 19 2.
UN , 19 2
uy, 19 2--.-
ugust, 19 2
S PT M R, 19 2.
October, 19 2-
November, 19 2
D C M R, 19 2..
anuary, 19 3
February, 19 3
M RC , 19 3
pr, 19 3
Mav, 19 3.
UN , 19 3
uy, 19 3-
ugust, 19 3
25
50
100
Ta -payment vaue.
25. 20
50. 0
100. 80
25. 2
50. 8
100. 96
25. 28
50. 56
101. 12
25. 32
50. 6
101. 28
25. 36
50. 72
101.
25. 0
50. 80
101. 60
25.
50. 88
101. 76
25. 8
50. 96
101. 92
25. 52
51. 0
102. 08
25. 56
51. 12
102. 2
25. 60
51. 20
102. 0
25. 6
51. 28
102. 56
25. 68
51. 36
102. 72
25. 72
51.
102. 88
25. 76
51. 52
103. 0
25. 80
51. 60
103. 20
25. 8
51. 68
103. 36
25. 88
51. 76
103. 52
25. 92
51. 8
103. 68
25. 96
51. 92
103. 8
Treasury Notes Ta Seres -19 3.
PURCII S PRIC ND T -P YM NT LU DURING UCC SSI MONT S.
Tabe, showng for each month from ugust, 19 1, to ugust, 19 3, for notes
of each denomnaton, the prncpa amount wth accrued nterest added. The
tota shown for any denomnaton, for any month ugust through December,
19 1 whe the notes reman on sae, s the purchase prce, or cost, of the note
durng that month. so, the tota shown for any denomnaton for any month
thereafter s the ta -payment vaue, or the amount at whch the note w be
acceptabe durng that month n payment of Federa Income ta es.
1 -1
100
500
1,000
10,000
100,000
Purchase prce.
ugust, 19 1
100. 00
100. 0
100. 08
100. 12
100. 16
500. 00
500. 20
500. 0
500. 60
500. 80
1, 000. 00
1, 000. 0
1, 000. 80
1, 001. 20
1, 001. 60
10, 000
10, 00
10, 008
10,012
10, 016
100, 000
100, 0 0
100, 080
100, 120
100, 160
September, 19 1.
October, 19 1.
December, 19 1...
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56.
118
100
500
1,000
10,000
100,000
Ta -payment vaue.
anuary, 19 2
February, 19 2..
M RC , 19 2.
pr, 19 2. -
Mav, 19 2
UN , 19 2.-
uv, 19 2-.- ---
ugust, 19 2
S PT M R, 19 2..
October, 19 2
November, 19 2. --
D C M R, 19 2..
anuarv, 19 3
February, 19 3
M RC , 19 3.
pr, 19 3
Mav, 19 3
UN , 19 3
uv, 19 3
ugust, 19 3
100. 20
100. 2
100. 28
100. 32
100. 36
100. 0
100.
100. 8
100. 52
100. 56
100. 60
100. 6
100. 68
100. 72
100. 76
100. 80
100. 8
100. 88
100. 92
100. 96
501. 00
501. 20
501. 0
501. 60
501. 80
502. 00
502. 20
502. 0
502. 60
502. 80
503. 00
503. 20
503. 0
503. 60
503. 80
50 . 00
50 . 20
50 . 0
50 . 60
50 . 80
1, 002. 00
1, 002. 0
1,002. 80
1, 003. 20
1, 003. 60
1, 00 . 00
1, 00 . 0
1, 00 . 80
1, 005. 20
1, 005. 60
1, 006. 00
1, 006. 0
1, 006. 80
1, 007. 20
1, 007. 60
1, 008. 00
1, 008. 0
1, 008. 80
1, 009. 20
1, 009. 60
10, 020
10, 02
10, 028
10, 032
10, 036
10, 0 0
10, 0
10, 0 8
10, 052
10, 056
10, 060
10, 06
10, 068
10, 072
10, 076
10, 080
10, 08
10, 088
10, 092
10, 096
19 1- 0-108
I. T. 3507
INT RN L R NU COD .
Payment of Federa ncome ta es wth Treasury notes of Ta
Seres -19 3 and Treasury notes of Ta Seres -19 3.
arous questons have been presented wth respect to the payment
of Federa ncome ta es by means of Treasury notes of Ta Seres
-19 3 and Ta Seres -19 3. These questons and the answers
thereto are as foows:
1. ueston: May Treasury notes of Ta Seres -19 3 and Ta
Seres -19 3 be nscrbed |onty n the names of husband and wfe
nswer: The Treasury Department has requested the Federa re-
serve banks to ssue notes of both seres nscrbed n one name ony,
even where they are to be presented n payment of ncome ta due
on a |ont return.
2. ueston: re notes nscrbed n the name of ether spouse ac-
ceptabe n payment of ncome ta where a |ont return s fed
nswer: In the case of a |ont ncome ta return, notes nscrbed
n the name of ether spouse may be used to satsfy the |ont ta
abty.
3. ueston: May husband and wfe fng a |ont ncome ta return
each be permtted to tender Treasury notes of Ta Seres -19 3 to a
ma mum of 1,200 prncpa amount, or woud the acceptance of such
notes be mted to 1,200 |onty
nswer: Up to 1,200 (prncpa amount) n Seres notes n each
name may be accepted n payment of ncome ta due from husband
and wfe on a |ont return. usband and wfe fng separate returns
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119
156.1
woud kewse each be permtted to use 1,200 (prncpa amount) of
the Seres notes.
. ueston: May a parent corporaton purchase notes n the name
of the parent corporaton and subsdares
nswer: In ne wth the determnaton of the Treasury Depart-
ment that notes shoud be nscrbed n one name ony, a parent cor-
poraton may not purchase notes n the name of the parent corporaton
and subsdares. If a consodated e cess profts ta return s fed,
the e cess profts ta of a corporaton and ts subsdares woud be
assessed n the name of the parent corporaton together wth a of
the names of ts subsdares. Therefore, notes purchased by a parent
corporaton woud be acceptabe n payment of ts e cess profts ta ,
and they woud be equay acceptabe n payment of the e cess profts
ta of one or more of ts subsdares; and notes purchased n the name
of a subsdary woud be acceptabe n payment of ts e cess profts
ta and the e cess profts ta of the parent corporaton, as we as the
e cess profts ta of any other subsdary. Inasmuch as subsdares,
e cept n the case of raroads, are requred to fe separate ncome ta
returns, notes n the name o the parent corporaton woud not be
acceptabe n payment of the ncome ta of a subsdary, nor woud
notes n the name of a subsdary be acceptabe n payment of the
ncome ta of the parent or that of any other subsdary, e cept, as
ndcated above, n the case of raroad corporatons whch are per-
mtted to fe consodated ncome ta returns as we as consodated
e cess profts ta returns.
5. ueston: Is a ta payer mted to the tender wthn a year of
not e ceedng 1,200 prncpa amount of Seres notes n payment
of both current and back ta abtes
nswer: The mtaton mposed on the use of Seres notes s
ntended to restrct the ta payer to the tender of not more than 1,200
prncpa amount of Seres notes n payment of hs ta abty
for each ta abe perod. Specfcay, a ta payer w be permtted
to tender durng the caendar year 19 2, for e ampe, a ma mum of
1,200 prncpa amount of Spres notes n payment of hs 19 1 ta
abty, a ma mum of 1,200 n payment of hs 19 0 ta abty, a
ma mum of 1,200 n payment of hs 1939 ta abty, etc. So ong
as he does not e ceed the mt of 1,200 prncpa amount wth respect
to hs abty for one ta abe perod, there s no voaton of the rues
and reguatons governng the sae and acceptance of the Seres
notes. (See D. C. 667, page 69, ths uetn; T. D. 506 , page 110, ths
uetn.)
6. ueston: In the case of a corporaton whch s requred to de-
duct and wthhod at the source ncome ta es on the payment of dv-
dends to any nonresdent aen ndvdua or foregn corporaton not
engaged n trade or busness wthn the Unted States and not havng
an offce or pace of busness theren, may Treasury notes of Ta Seres
-19 3, purchased currenty by the corporaton, be accepted by the
coector of nterna revenue n payment of the tn es wthhed from
19 1 dvdends, whch ta es are payabe on or before une 15, 19 2
nswer: In such a case, the corporaton as wthhodng agent s
requred to fe a return n ts own name and pay the ta wthhed to
the coector of nterna revenue at the tmes f ed by aw and regua-
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56.
120
tons. Under the provsons of Treasury Decson 506 (page 110, ths
uetn), the coector of nterna revenue w accept Treasury notes
of Ta Seres -19 3 from the wthhodng agent n payment of ta
wthhed, f the name of the purchaser nscrbed on the notes s the
same as the name of the wthhodng agent on the wthhodng return.
7. ueston: In the case of a trust company actng wth certan
ndvduas as coe ecutor of a decedent s estate, s the trust company
obged to buy Treasury notes of Ta Seres -19 3 or Ta Seres
-19 3 n the names of a coe ecutors where the notes are to be used
n payment of ncome ta due from the estate
nswer: In such a case, the Treasury notes w be accepted by
the coector of nterna revenue n payment of ncome ta es f they
are nscrbed substantay as foows:
Trust Company, Coe ecutor,
state of ohn Doe,
New York, N. Y.
In connecton wth payment by Treasury notes of ncome ta due
from an estate havng coe ecutors, t s unnecessary that the notes be
nscrbed n the names of a of the coe ecutors. s ndcated, the
nscrpton on the notes shoud be suffcenty specfc to enabe the co-
ector of nterna revenue ready to assocate such nscrpton wth
the name n whch the ncome ta return of the estate s fed.
19 1- 3-10875
I. T. 3512
INT RN L R NU COD .
Where a ta payer des durng any ta abe year. Treasury notes
of Ta Seres -19 3 may be accepted n the prncpa amount of
1,200 coverng the abty of tbe decedent pror to hs death,
and n the addtona prncpa amount of 1,200 coverng the
abty of the estate for the baance of the same year.
dvce s requested wth respect to the acceptance of Treasury notes
of Ta Seres -19 3 n payment of ncome ta es where a ta payer
des durng a ta abe year. Specfcay, the queston presented s
whether, n such a case, Treasury notes of Ta Seres -19 3 may be
accepted ony n the prncpa amount of 1,200 coverng both the
abty of the decedent pror to hs death and the abty of hs
estate for the baance of the ta abe year.
Secton 19.56-5 of Treasury Decson 506 (page 110, ths uetn),
reguatons governng the acceptance of Treasury notes of Ta
Seres -19 3 and Treasury notes of Ta Seres -19 3 n payment
of ncome ta es, provdes n part as foows:
In the case of Treasury notes of Ta Seres -1M3, not more
than 1,200 n prncpa amount of such notes may be accepted wthn any
perod of 12 consecutve months from any one ta payer n payment of hs
abty for any one ta abe pear. Itacs supped.
It s we estabshed that the ncome ta return fed by an e ecutor
or admnstrator on behaf of the decedent for the perod of the
ta abe year durng whch the decedent was ave and the ncome
ta return fed by an e ecutor or admnstrator on behaf of the
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121
decedent s estate for the baance of (e same year are the returns
of two separate ta payers for two separate ta abe perods.
It s hed that where a ta payer des durng any ta abe year,
Treasury notes of Ta Seres -19 3 may be accepted n the prncpa
amount of 1,200 coverng the abty of the decedent pror to hs
death, and n the addtona prncpa amount of 1,200 coverng the
abty of the estate for the baance of the same year. It woud,
therefore, be mmatera whether the ta payer had purchased Ta
Seres -19 3 notes to the e tent of 1,200 pror to hs death or
the e ecutor or admnstrator of the estate purchased smar notes
n the amount of 1,200 after the ta payer s death.
19 1- 6-10898
D. C. 6G7 (1st amendt.)
110 1. Frst amendment to Department Crcuar No. 667. Fsca Servce. ureau of
the Pubc Debt.
The Unted States of merca. Treasury notes. Tu Seres
-19 3; Ta Seres -1SI 3. Dated ugust 1, 1 ) 1; due ugust 1,
19 3. Issued at par and accrued nterest. cceptabe at par and
accrued nterest n payment of Federa ncome ta es.
Trf.asurt Department,
Offce of the Secretary,
Washngton, ugust 7, 101 1.
1. Secton 11(2) of Department Crcuar No. 667, dtted uy 22,
1911, s hereby amended to read as foows:
2. P-nomnatons and nterest. The notes of Ta Seres -19 3 w he ssued
n denomnatons of 25, 50, and 100, and nterest thereon w accrue durng
each month afer ugust, 19 1, n the amount of 16 cents on each 1(10 prncpa
amount, that s, cents on each 25, 8 cents on each 50, and It cents on each
100 denomnaton of note. The notes of Ta Seres -19 3 w be ssued n
denomnatons of 100, ,500, 1,000, 10,000, 100,000, 500,000, and 1,000,000,
and nterest thereon w accrue each month after ugust, 19 1, n the amount
of cents on each 100 prncpa amount, that s, cents on each 100, 20 cents
on each 500, -10 cents on each 1,000, on each 10,000, 0 on each 100,000,
200 on each 500,000, and 00 on each 1,000,000 denomnaton of note. In
no case, however, sha nterest accrue beyond the month n whch the note s
presented n payment of ta es, or beyond ts maturty. changes of authorzed
denomnatons of each seres from hgher to ower, but not from ower to
hgher, may be arranged at the Federa reserve bank of Issue.
enry Morgenthau, r.,
Secretary of the Treasury.
(Fed wth the Dvson of the Federa Itegster ugust 7, 19 1.)
19 1- 6-10899
D. C.6G7 (2d amendt.)
19 1. Second amendment to Department Crcuar No. CC7. Fsca Servce. ureau of
the I ube Debt.
The Unted Stntes of merca. Treasury notes. Ta Seres
-19 3; Ta Seres -19 3. Dated ugust 1, 19 1; due ugust 1,
19 3. Issued at par and accrued nterest. cceptabe at par and
accrued nterest n payment of Federa Income ta es.
1611 2 9
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56.
122
Treasury Department,
Offce of the Secretary,
Washngton, October 21, 19 1.
1. Secton 11(1) of Department Crcuar No. 667, dated uy 22,
19 1, s hereby amended to read as foows:
1. Genera. The notes of both seres w be dated ugust 1, 19 1, and w
mature ugust 1, 19 3. The owner s name and address, and the date of ssue
w be entered on each note at the tme of ts ssue by a Federa reserve bank.
The month n whch payment Is receved by a Federa reserve bank or branch,
or by the Treasurer of the Unted States, w determne the purchase prce
and ssue date of each note. The notes may not e transferred e cept n the
case of notes ssued n the name of a parent corporaton, n whch case they
may be ressued n the name of a subsdary of that corporaton wth the same
datng as the notes surrendered, upon presentaton to the Federa reserve bank
of ssue; for the purposes of ths paragraph a subsdary corporaton s defned
as one more than .TO per cent of whose stock wth votng power s hed by
another corporaton. No hypothecaton of the notes on any account w be
recognzed by the Treasury Department, and they w not be accepted to secure
deposts of pubc money. cept as heren provded, the notes w be sub|ect
to the genera reguatons of the Treasury Department, now or hereafter
prescrbed, governng bonds and notes of the Unted States.
enry Morgenthau, r.,
Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 21, 19 1.)
19 1- 8-10913
I. T. 3520
INT RN L R NU COD .
Treasury notes of Ta Seres -19 3 and Ta Seres -19 3
may be accepted n payment of ncome ta es estmated to be due on
tentatve returns.
dvce s requested whether Treasury notes of Ta Seres -19 3
and Ta Seres -19 3 may be accepted n payment of ncome ta es
estmated to be due on tentatve returns.
In genera, t appears that ta payers who fe tentatve returns
dscosng estmated amounts of ncome ta es are reasonaby certan
that they owe the ta es to the Government for the ta abe year n-
voved. ccordngh . Treasury notes of Ta Seres -19 3 and Ta
Seres -19 3 may be accepted n payment of ncome ta es estmated
to be due on tentatve returns.
( so Secton 1 3. Secton 19.1 3-7.) 19 1-51-10931
I. T. 3521
INT RN L, R NU COD .
Payment of ncome ta wthhed at the source wth Treasury
notes of Ta Seres -19 3.
dvce s requested wth respect to the acceptance of Treasury
notes of Ta Seres -19 3 n payment of certan Federa ncome
ta es wthhed at the source.
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123
II 101(6)-1.
The coector of nterna revenue w accept Treasury notes of
Ta Seres -19 3 nscrbed n the name of a corpor aton n payment
of (1) ncome ta wthhed and shown on Form 10 2 fed by or for
t as wthhodng agent n respect of dvdends pad on ts own stock,
and (2) ncome ta wthhed and shown on Form 1013 fed by or for
t as wthhodng agent n respect of nterest pad on ts own ta -free
covenant bonds and/or nterest pad on ts own obgatons to a non-
resdent aen. The coector w not accept n payment of those
ta es any such notes nscrwd n the name of a person who s the
fsca or other agent of the corporaton, even though that person fes
the returns for the corporaton as ts fsca or other agent.
SU C PT R C SUPPL M NT L PRO ISIONS.
n
SUPPL M NT . R T S OF T .
S CTION 101 MPTIONS FROM T
ON CORPOR TIONS.
Secton 101 (6)-1: Regous, chartabe, 19 1-27-107G5
scentfc, terary, and educatona or- I. T. 3 87
ganzatons and communty chests.
INT RN L R CO .
The t npd Servce Organzatons for Natona Defense. Inc.,
s e empt from Federa ncome ta aton under secton 101 ((5) of
the Interna Revenue Code, and contrbutons thereto are dednet-
h e from gross ncome n the manner and to the e tent provded
n secton 2. 5 (o) and (q) of the Code.
dvce s requested whether the Unted Servce Organzatons for
Natona Defense. Inc., s e empt from Federa ncome ta aton
under the provsons of secton 101(G) of the Interna Revenue Code,
and whether contrbutons thereto are aowabe deductons from
gross ncome n the ncome ta returns of the donors.
The Unted Servce Organzatons for Natona Defense, Inc., s
ncorporated to ad n the defense program of the Unted States by
servng the regous, sprtua, wefare, and educatona needs of
the men and women n the armed forces and defense ndustres of the
Unted States, and n genera to contrbute to the mantenance of
morae n mercan communtes. The consttuton and by-aws of
the corporaton provde that t s not to be operated for proft, that
no part of ts net earnngs sha nure to the beneft of any member
thereof, and that t w not engage n any actvtes for the purpose
of nfuencng or attemptng to nfuence egsaton.
It s hed that the Unted Servce Organzatons for Natona De-
fense, Inc., s e empt from Federa ncome ta aton under the pro-
vsons of secton 101(6) of the Interna Revenue Code, and that
contrbutons thereto are aowabe deductons n the ncome ta
returns of ndvdua donors n the manner and to the e tent pro-
vded by secton 23(o) of the Code, as amended. The deductbty
of contrbutons by corporatons s governed by secton 23(q) of the
Code, as amended.
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I 19.112(a)- .
12
SUPPL M NT . COMPUT TION OF N T INCOM .
S CTION 112(a). R COGNITION OF G IN OR
LOSS: G N R L RUL .
Secton 19.112(a)-: Saes or e changes. 19 1-52-10937
( so Secton 113(a), Secton 19.113(a)-2.) I. T. 3523
INT RN L R NU COD .
The e change by the M Company of Reconstructon Fnance Cor-
poraton per cent Seres N notes, maturng uy 21, 19 1, for new
Reconstructon Fnance Corporaton 1 per cent Seres W notes,
maturng pr 15, 19 (accrued nterest on the od notes beng
pad by check), resuted n a gan for Federa ncome ta purposes
measured by the dfference between the cost of the od notes and the
far market vaue of the new notes. The bass of the new notes
Is ther far market vaue at the date of the e change.
dvce s requested as to the manner n whch proft or oss shoud
be computed by the M Company on certan Reconstructon Fnance
Corporaton notes descrbed n 19 1 Department Crcuar No. 66 ,
Fsca Servce, ureau of the Pubc Debt, dated une 2 , 19 1.
Pror to uy, 19 1, the M Company purchased Reconstructon
Fnance Corporaton per cent Seres N notes maturng uy 21,
19 1, n the open market at a cost of 1,003. 375 per 1,000 note. On
une 2 , 19 1, the Secretary of the Treasury ssued a crcuar nvt-
ng subscrptons to new Reconstructon Fnance Corporaton 1 per
cent Seres W notes maturng pr 15, 19 . On uy 3, 19 1, the
date specfed n the crcuar, the M Company surrendered to the
Federa Reserve ank of New York ts Seres N notes and n return
receved an equvaent amount of Seres W notes together wth a
check coverng the accrued nterest on Seres N notes for the perod
anuary 20, 19 1, through uy 3, 19 1. On the date the new Seres
W notes were receved the market quotaton was 1,006,875 per 1,000
note.
The pertnent provsons of Department Crcuar No. 66 read as
foows:
I. OFF RING OF NOT S ND IN IT TION FO T ND RS.
1. The Secretary of the Treasury, on behaf of the R-oonstructon Fnance Cor-
poraton, Invtes subscrptons, at par and accrued nterest, from the peope of the
Unted States for notes of the Reconstructon Fnance Corporaton, desgnated 1
per cent notes of Seres W. The amount of the offerng s r 00,0( ),000, or there-
abouts.
2. The Secretary of the Treasury, on behaf of the Reconstructon Fnance Cor-
poraton, offers to purchase on uy 3, 19 1, at par and accrued nterest, the out-
standng notes of the Corporaton desgnated Seres N, maturng uy 20, 19 1, to
the e tent to whch the hoders thereof subscrbe to the ssue of Seres notes
hereunder. Tenders of Seres N notes for that purpose are nvted.

I . Payment.
1. Payment at par and accrued nterest, f any. for notes aotted hereunder
must be made or competed on or before uy 3, 19 1, or on ater aotment. In
every case where payment s not so competed, the payment wth appcaton up to
10 per cent of the amount of notes apped for sha, upon decaraton made by
the Secretary of the Treasury n hs dscreton, be forfeted t the Unted States.
Notes of Seres N tendered for purchase must have coupons dated uy 20, 19 1,
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125
19.115-3.
attached, and payment w be made at par and accrued nterest to uy 3, 19 1.
Te prncpa proceeds of the Scres N notes w be apped n payment of the
S. res W notes, and accrued nterest from anuary 20, 19 1, to uy 3, 19 1, on
Seres N notes ( 3.90 0) per 1,000) w be pad foowng acceptance of the
notes.
The e change of Reconstructon Fnance Corporaton per cent
Seres N notes, maturng uy 21, 19 1, for Reconstructon Fnance
Corporaton 1 per cent Seres W notes, maturng pr 15, 19 , con-
sttutes a transacton n whch gan or oss, sub|ect to the provsons
of secton 117 of the Interna Revenue Code, f appcabe, s recognzed
for Federa ncome ta purposes. The gan n the nstant case w be
the dfference between the cost of the Seres N notes ( 1,003. 375 per
1,000 note) and the far market vaue ( 1,006,875 per 1,000 note) of
the new notes on the date of the e change.
The new Seres W notes w have a bass to the M Company of
1,006,875 per 1,000 note for the purpose of determnng gan or oss
upon the subsequent sae or e change of such notes.
S CTION 118 (a). D UST D SIS FOR D T RMINING
G IN OR LOSS: SIS (UN D UST D) OF PROP RTY.
Secton 19.113 (a)-2: Genera rue.
INT RN L R NU COP .
New notes acqured n e change for od notes of the Reconstructon
Fnance Corporaton. (See I. T. 3523. page 12 .)
S CTION 115. DISTRI UTIONS Y CORPOR TIONS.
Secton 19.115-3: arnngs or profts. 19 1-28-10778
T. D. 5059
TITL 26 INT RN L R I . C PT R I. STnCIT PT R , P RTS 10 ND
30. INCOM T ND C SS PROFITS T .
mendng secton 19.11. 3 of Reguatons 103, reatng to earnngs
or profts, and sectons 30.718-1 and 30.718-2 of Reguatons 109,
reatng to determnaton of day equty nvested capta.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. G.
To Coectors of Interna Revenue and Others Concerned:
Paragraph 1. Reguatons 103 Part 19. Tte 26, Code of Federa
Reguatons, 19 0 Sup. are amended by strkng out the frst sentence
foowng the headng of secton 19.115-3 as amended by Treasury
Decson 502 , approved December 19. 19 0 C. . 19 0-2, 110 , and
nsertng n eu thereof a new paragraph as foows:
In determnng the amount of earnngs or profts (whether of the ta abe
year, or accumuated snce February 28, 1013, or accumuated pror to March 1,
1913) due consderaton must e gven to the facts, and, whe mere bookkeepng
entres ncreasng or decreasng surpus w not be concusve, the amount of
the earnngs or profts n any case w be dependent upon the method of account-
ng propery empoyed n computng net ncome. For nstance, a corporaton
keepng ts books and fng Its ncome ta returns under sectons 1, 2. and 3
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5 19.115-5.
126
on the cash recepts and dsbursements bass may not use the accrua bass In
determnng earnngs and profts; a corporaton computng Income on the nsta-
ment bass as provded n secton sha, wth respect to the nstament trans-
actons, compute earnngs and profts on such bass; and an nsurance company
sub|ect to ta aton under secton 20 sha e cude from earnngs and profts
that porton of any premum whch Is unearned under the provsons of secton
20 (b) (5) and whch s segregated accordngy n the unearned premum reserve.
Par. 2. Reguatons 109 Part 30, Tte 26, Code of Federa Regu-
atons, 19 1 Sup. are amended as foows:
( ) Secton 30.718-1 s amended by nsertng after the second
sentence n the frst paragraph a new sentence as foows:
Te terms money pad In and property pad n do not ncude amounts
receved as premums by an nsurance company sub|ect to ta aton under sec-
ton 20 .
( ) Secton 30.718-2 s amended by nsertng after the thrd sen-
tence n paragraph (a) a new sentence as foows:
See, for Instance, secton 19.115-3 of Reguatons 103, as amended, reatng to
the computaton of earnngs and profts n the case of a corporaton computng
net ncome on the cash, accrua, or nstament bass, or n the case of an
nsurance company ta abe under secton 20 .
(Ths Treasury decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat., 32, 26 U. S. C,
Sup. , 62) as made appcabe by secton 729 of such Code, added
by secton 201 of the Second Revenue ct of 19 0 (Pubc, No. 801,
Seventy-s th Congress, thrd sesson); secton 115 of such Code (26
U. S. C, Supp. , 115); and secton 718 of such Code as added by
the Second Revenue ct of 19 0.)
Guy T. evertng.
Commssoner of Interna Revenue.
pproved uy 8, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 9, 19 1, .23 p. m.)
Secton 19.115-5: Dstrbutons n qudaton. 19 1- 9-10921
G. C. M. 22822
INT RN L R NU COD .
The stockhoders of the M Company keepng ther accounts on the
accrua bass shoud have reported n ther returns for 1938 ther
entre gan or oss from the qudaton of that company n that year,
even though a nomna amount of cash was hed as a reserve for con-
tngences and sma fna dstrbutons of such cash were made n
ater years. Stockhoders keepng ther accounts on the cash
recepts and dsbursements bass who sustaned osses shoud have
reported such osses n fu In ther returns for 1938, but gans derved
by such stockhoders shoud have been reported for the year n
whch such gans were receved.
n opnon s requested as to the proper method of reportng the
gans derved and osses sustaned by the stockhoders of the M Com-
pany upon fna qudaton of that corporaton under the crcum-
stances heren set forth.
The M Company qudated and was dssoved wthn the year 1938.
In that year the tota amount of 25 per share n cash and property
was dstrbuted to the stockhoders of the corporaton and a of the
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127
19.115-5.
outstandng stock certfcates were surrendered. t the cose of 1938
a property of the corporaton had been dstrbuted e cept an est-
mated amount of 30 cents per share n cash, whch amount was retaned
as a reserve for contngences. Of ths reserve, 25 cents per share was
dstrbuted durng 19 0 and t s now estmated that appro matey
10 cents per share remans to be dstrbuted. of the stockhoders
reported gan or oss n ther returns for 1938 wthout gvng consd-
eraton to the 30 cents per share whch woud be dstrbuted subse-
quenty provded no contngency arose to absorb t.
The opnon of ths offce has been requested reatve to four specfc
questons. uestons (a) and (b) w be treated together.
(o) In the case of a stockhoder whose return s fed on the accrua bass,
shoud the nomna amount wthhed for contngences, or an estmated amount
to be reazed on the dsposa of nomna assets, be ncuded n the computaton n
etermn the o reazed on fna qudaton n the year n whch the stock
was surrendered and substantay a of the assets were dstrbuted
(6) If the answer to (u) above s n the affrmatve, woud the answer st be
n the affrmatve f the stockhoder fed hs return on the cash bass
- Secton 115(c) of the Interna Revenue Code provdes that dstrbu-
tons n qudaton of a corporaton sha be treated for purposes of
ta aton as a gan or oss from the sae or e change of stock. ere,
there s nvoved a oss arsng out of a sae or e change of stock where
payments are made over a perod of more than one ta abe year.
Under secton 23 of the Interna Revenue Code, t appears that a
dfferent treatment s prescrbed for deducton of osses under subsec-
ton (e) than for deductons prescrbed under some of the other sub-
sectons. These subsectons specfcay provde for the deducton of
e penses pad or ncurred, nterest pad or accrued, and ta es pad or
accrued, n each nstance recognzng a dstncton between the cash
and accrua bass, whe subsecton (e) provdes for the deducton of
osses sustaned durng the ta abe year.
owever, the courts and the ureau have made a dstncton between
the cash and accrua bass of accountng reatve to the deducton of
osses unde certan crcumstances. (See ckert v. urnet, 283 U. S.,
1 0 (Ct. D. 325, C. . -1,2 1 (1931)); Lucas v. mercan Code Co.,
Inc., 280 U. S., 5 (Ct. D. 168, C. . I -1, 31 (1930)); Lucas v. O
Fbre rush Co., 281 U. S., 115 (Ct. D. 265, C. . I -2, 38 (1930));
urns Manufacturng Co. v. Commssoner, 59 Fed. (2d), 50 (1932).)
ut n each of these cases the amount of the oss was determnabe by a
sum to be pad out by the ta payer. In the urns Manufacturng Co.
case, supra, the ta payer gave ts note to a bank n substtuton of a
note of an nsovent debtor. The fna amount to be pad on the note
was determned n 1919. but the note was not pad unt 192 . In
hodng that the oss was deductbe n 1919 the court reasoned as
foows:
To hod that a corporaton, whose books are kept on the accrua
system, coud cam a deducton n ta ony at the tme ts obgatons were
actuay pad off. woud, we thnk, be smpy to aow a ta payer to manpuate
hs hooks so as to take an undue advantage of the prveges aowed hm. Such
a hodng woud aow a ta payer to cam a deducton n ta abe ncome when-
ever t was most needed to cut down an unduy arge ncome.
ere, however, there s a oss arsng from a sae or e change n
whch the amount of the oss s determnabe by an amount to be pad
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19.115-, ).
128
, to the ta payer and not by an amount to be pad by hm. In Lucas v.
mercan Code Co., Inc., supra, t was stated that:
The genera requrement that osses be deducted n the year In whch they are
sustaned cas (or a practca, not a ega test.
Furthermore, n the present case the ta payer had no contro over
ncomng moneys and resutngy coud not manpuate hs books and
ta status reatve to the oss to be sustaned from the sae or e change.
cosed or competed transacton shoud determne the year n whch
a oss from a sae or e change s sustaned.
In Dresser v. Unted States (55 Fed. (2d), 99, Ct. D. 503, C. .
I-1,2G7 (1932), certorar dened, 287 U. S., 635 (1932)) and n Com-
mssoner v. cekman Wnthrop (98 Fed. (2d), 7 ), the courts had
before them osses of the same nature as that nvoved n the present
case. In both of these cases the year n whch the deducton was a-
owed turned upon the queston whether the transacton was competed.
In nether case does the opnon revea whether the ta payer kept hs
accounts on a cash or accrua bas9, and the courts dd not rey upon the
bass of accountng n reachng ther concusons.
s t has been determned that the year n whch the transacton
s cosed or competed s the year n whch a oss arsng from a sae
or e change s sustaned for purposes of the deducton aowabe, t
remans to be determned whether, n the present case, a oss was sus-
taned n 1938 or some ater year.
In Commssoner v. cekman Wnthrop, supra, whch case was
adopted as the ureau s poston n G. C. M. 21966 (C. . 19 0-1,130),
the corporaton was dssoved n 1932. In that year the pettoner sur-
rendered hs stock n the corporaton and receved a dstrbuton n
qudaton consstng of bonds wth a defnte market vaue and a
qudaton certfcate enttng hm to a proportonate share n the
fna qudaton dstrbuton. It was estmated that about 20 cents
per share woud be the amount of the fna dstrbuton. In 193 the
amount of 20 cents per share was pad as a fna dstrbuton. The
ssue before the court was whether pettoner s oss on the e change
shoud be taken as a deducton n 1932 or 193 . In determnng that
1932 was the proper year for the deducton, the Court sad:
When as n the case at bar the shares of stock of a company n qu-
daton are surrendered, the ony remanng asset of the company s money, and
the dsbursements to be charged aganst t are kuown wth enough certanty to
make sure what the fna dvdend w be, we thnk that the qudaton Is com-
pete wthn the ntendment of the provsons reatng to oss on the Invest-
ment.
The above requrements were met n the present case n 1938 when
the stockhoders of the M Company surrendered ther stock and t
was estmated that a fna dstrbuton of 30 cents per share woud
be pad to the stockhoders. though the stockhoders n the present
case apparenty w receve 35 cents per share nstead of the orgna
estmate of 30 cents per share, t s not beeved that ths fact woud
change the concuson. If the court n the Wnthrop case based ts
decson strcty upon the fact that the orgna estmate of the fna
dstrbuton turned out to be the e act amount dstrbuted, t woud
ead to the resut that n every case a ta payer woud have to wat
unt the year of fna dstrbuton Itefore t coud be determned
whether he was entted to a deducton n the pror year. Such was
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129
19.115-5.
obvousy not the ntenton of the court. It seems cear that the
court must have ntended that the rue appy where the amount of
money to be dstrbuted n the future s susceptbe of a reasonabe
estmate. Nor s t beeved that the ssuance of qudaton certf-
cates s matera to that concuson, such certfcates beng merey
evdences of a rght to share n the fna dstrbuton.
The rue ad down n the Wnthrop case woud not appy to those
cases mentoned n queston (a) where an estmated amount to be
reazed on dsposa of nomna assets s wthhed. The Court n
the Wnthrop case uphed the dstncton drawn by the oard of Ta
ppeas between that case (36 . T. ., 31 ) and Dreser v. Unted
States, supra, by sayng that n the Dresser case the corporaton
had tangbe assets whch had not been converted nto cash
and ntangbe assets the vaue of whch had not been determned.
Unt such nomna assets have been converted nto cash, t s not
beeved that the transacton s susceptbe of beng construed as
cosed or competed.
It s, therefore, the opnon of ths offce that a nomna amount n
money wthhed for contngences, where such amount s susceptbe
of reasonabe estmate, shoud be ncuded n the computaton n deter-
mnng the oss reazed on fna qudaton of a corporaton n the
year n whch the stock s surrendered and substantay a of the
assets are dstrbuted.
(c) It, as n (a) above, the stockhoder reazed n (|nn wthout takng nto
consderaton the nomna amount wthhed for possbe contngences, shoud
such amount be ncuded n the year n whch the stock was surrendered and
substantay a of the assets were dstrbuted
Nothng n secton 22 of the Interna Revenue Code provdes for the
year n whch ncome s to be reported, but secton 2 provdes that
tems of ncome sha be ncuded n gross ncome for the ta abe year
n whch such tems are receved by the ta payer uness the method of
accountng empoyed by the ta payer woud aow such tems to be
the accrua method of accountng may ncude tems of ncome n gross
ncome as of a | ear other than the ta abe year of recept where such
tems of ncome are susceptbe of beng accrued n a year other than
the year of recept.
The Unted States Supreme Court n Sprng Ct Foundry Co. v.
Commssoner (292 U. S. 182, Ct. D. 82 ), C. . III-1, 281 (193 ))
eepng accounts and makng returns on the accrua bass, as dstngushed
from the cash bass, mport that t s the rght to receve and not the actua
recept that determnes the ncuson of the amount n gross ncome. When the
rght to receve an amount becomes f ed, the rght accrues.
The same rue s contaned n Contnenta Te Lumber Co. v. Unted
States (286) U. S. 290, Ct. D. 9 , C. . I-1, 260 (1932)).
Stockhoders of a corporaton, upon dssouton, have a rght to
receve a surpus of corporate assets remanng after corporate debts
have been pad ( acon v. Robertson. 59 U. S., 80). In the present
case, after a known debts of the M Company had been pad there
remaned a surpus of assets vaued at 25 per share pus appro -
matey 30 cents per share. The stockhoders had a rght to receve and
dd receve the 25 per share; they aso had a rght to receve the
Thus, a ta payer who empoys
sad:
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19.120-1.
130
appro mate sum of 50 cents per share provded no contngences
arose to absorb t. The fact that the sum of 30 cents per share mght
become uncoectbe s not matera to ts accrua. In the Sprng
Cty Foundry Co. case, supra, the Court sad:
If such accounts recevabe become uncoectbe, n whoe or n part, the ques-
ton s one of the deducton whch may be taken accordng to the appcabe statnte.
Nor s t necessary that the amount to be receved be known wth
absoute accuracy; t s suffcent f the amount can be ascertaned
wth reasonabe accuracy Contnenta Te Lumber Co. v. Unted
States, supra).
It s, therefore, the opnon of ths offce that a stockhoder whose
returns are fed on the accrua bass shoud report the entre gan
from the qudaton, where the amount of such gan s susceptbe of
ascertanment wth reasonabe accuracy, n the year n whch the
stock s surrendered and substantay a of the assets are dstrbuted.
d) If the answer to (c) above Is n the affrmatve, woud the answer st be
n the affrmatve f the stockhoder fed ts return o the cash bass
s a ta payer s books, kept on the cash bass, refect ncome as of
the actua recept thereof, t foows that, under secton 2 of the
Interna Revenue Code, such ta payer woud be requred to report a
gan from the sae or e change of stock upon dssouton of the cor-
poraton as of the year n whch such gan was receved. The doctrne
of constructve recept may be appcabe n certan nstances where
the dstrbuton, though not actuay receved, s avaabe to the
ta payer.
It s the opnon of ths offce that the answer to queston (c) woud
not be n the affrmatve n the case of a stockhoder whose return s
fed on the cash bass.
. P. Wenche,
Chef Counse, ureau of Interna Revenue.
S CTION 117. C PIT L G INS ND LOSS S.
Secton 19.117-5: ppcaton of secton 117 n the
case of husband and wfe.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
S CTION 120. UNLIMIT D D DUCTION FOR C RI-
T L ND OT R CONTRI UTIONS.
Secton 19.120-1: Unmted deducton for chartabe
and other contrbutons.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
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131 19.12 -1.
S CTION 122. N T OP TING LOSS D DUCTION.
Secton 19.122-3: Computaton of net operatng oss
n case of a ta payer other than a corporaton.
INT RN L R NU COD .
Reguatons 103. amended. (See T. D. 5057, page 97.)
Secton 19.122- : Computaton of net operatng oss
carry-over.
INT RN L R Nt COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
Secton 19.122-5: Converson of net operatng oss
carry-over nto net operatng oss deducton.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
S CTION 12 . MORTIZ TION D DUCTION.
Secton 19.12 -1: Defntons. 19 1-52-109 2
( so Sectons 19.12 -2, 19.12 -6, 19.12 -7, T. D. 510
19.12 -9.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 10.
INCOM T .
Reguatons ()3 amended to conform to Pubc aw 28 ) (Seventy-
seventh Congress), e tendng tme for appcatons, and changng
procedure, for certfcaton of natona defense factes and con-
tracts for amortzaton purposes.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Other Concerned:
In order to conform Reguatons 103 Part 19, Tte 26, Code of
Federa Reguatons. 19 0 Sup. to the provsons of Pubc aw 285
(Seventy-seventh Congress), approved October 30, 19 1, such regu-
atons are amended as foows:
Paragraph 1. There s nserted mmedatey precedng secton
19.12 -1, as added bv Treasury Decson 5016. approved October 23,
19 0 C. . 19 0-2, 1191, and amended by Treasury Decson 50 9,
approved May 29, 19 1 C. . 19 1-1, 255 , the foowng:
Pubc aw 285, approved October 30, 10 1.
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed. That secton 12 (f)(1) of
the Interna Revenue Code, as amended, s amended to read as foows:
(1) There sha be ncuded ony so much of the amount otherwse
consttutng such ad|usted bass as s propery attrbutabe to such con-
structon, reconstructon, erecton, Instaaton, or acquston after une
10, 19 0, as cther the Secretary of War or the Secretary of the Navy
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19.12 -1.
132
has certfed as necessary In the nterest of natona defense durng the
emergency perod, whch certfcaton sha be under such reguatons as
may be prescrbed from tme to tme by the Secretary of War and the
Secretary of the Navy, wth the approva of the Presdent.
Sec. 2. Secton 12 (f) (3) of the Interna Revenue Code, as amended,
s amended by strkng out s ty days and nsertng n eu thereof
s months and by strkng out February 6, 19 1 and nsertng
n eu thereof December 1, 19 1 .
Sec. 3. Secton 12 () of the Interna Revenue Code, as amended, s
amended to read as foows:
Protecton of the Unted States. If the ta payer has been or w
be rembursed by the Unted States for a or a part of the cost of any
emergency facty pursuant to any contract (n e cess of 15,000 In
amount) wth the Unted States, made on Its behaf after December 31,
1939, by the War Department, the Navy Department, the Unted States
Martme Commsson, or such other department or agency as the
Presdent may desgnate, ether
(1) drecty, by a provson theren deang e pressy wth such
rembursement, or
(2) ndrecty, because the prce pad by the Unted States
(nsofar as return of cost of the facty s used by the Unted
States as a factor n the f ng of such prce) s recognzed by the
contract as ncudng a return of cost greater than the norma
e hauston, wear, and tear: Provded, That no such greater return
of cost sha be deemed to have been used as a factor n the f ng
of such prce when the negotatng or contractng offcer reports that
after carefu consderaton he s satsfed that such greater return
was not ncuded n the prce,
no amortzaton deducton wth respect to such emergency facty sha
be aowed for any month after the end of the month n whch snch
contract s made uness ether the Secretary of War or the Secretary
of the Navy certfes to the Commssoner that the nterest of the Unted
States s adequatey protected wth reference to the future use and
dsposton of such emergency facty. certfcate of ke effect may
aso be ssued wth respect to emergency factes for whch the ta payer
has not been or w not be so rembursed. certfcate by ether the
Secretary of War or the Secretary of the Navy made to the Commssoner,
to the effect that under any such contract, rembursement for a or a
part of the cost of any emergency facty s not provded for wthn the
meanng of cause (1) or cause (2), sha be concusve for the purposes
of ths subsecton. cept n cases of appcatons therefor fed before
December 1, 19 1, the certfcates provded for under ths subsecton sha
have no effect uness nn appcaton therefor s fed ct cr before the
e praton of s months after the makng of such contract or before the
e praton of s ty days after the makng of a certfcate under subsecton
(f). whchever s ater.
The reports of negotatng and contractng offcers and the certfcates
provded for n ths subsecton sha be ssued under such reguatons as
may be prescrbed from tme to tme by the Secretary of War and the
Secretary of the Navy, wth the approva of the Presdent.
The terms and condtons of contracts wth reference to remburse-
ment of the cost of emergency factes and the protectng of the Unted
States wth reference to the future use and dsposton of such emergency
factes sha be made avaabe to the pubc.
Sec. . The amendments made by ths |ont resouton sc to secton
12 of the Interna Revenue Code sha be appcabe as f they were a
part of such secton on the date of the enactment of the Second Revenue
ct of 19 0.
Par. 2. Secton 19.12 -1. as added by Treasury Decson 5016
and amended by Treasury Decson 50 9. s amended by strkng out
subdvson (a); by redesgnatng subdvsons (ft) and (d) as (a)
and (c); and by nsertng the foowng n eu of subdvson (r):
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133
10.12 -1.
(6) mcrpcnry facty means any facty, and, budng, machnery, or
equpment, or any part thereof,
(1) the acquston of whch occurred after une 10, 19 0, or the con-
structon, reconstructon, erecton, or nstaaton of whch was competed
after such date, and
(2) any part of the constructon, reconstructon, erecton, nstaaton, or
acquston of whch has, under such reguatons as may be prescrbed by
the Secretary of War and the Secretary of the Navy, wth the approva of
the Presdent, been certfed by the Secretary of the Department concerned
as nece.-snry n the nterest of natona defense durng the emergency pe-
rod (such certfcate to have no effect uness an appcaton therefor s
fed ( ) before the e praton of s months after the begnnng of such
constructon, reconstructon, erecton, or nstaaton, or the date of such
acquston, or ( ) before December 1, 10 1, whchever date s the ater).
The term emergency facty, as so defned, may ncude, among other thngs,
mprovements of and, such as the constructon of arports and the dredgng of
channes.
Par. 3. The frst sentence of secton 19.12 -2, us added by Treasury
Decson 501G, s amended by strkng out the dvsory ( ommsson
and and by nsertng makes n eu of have made. There s
nserted mmedatey foowng the frst sentence of secton 19.12 -2
the foowng sentence:
No amortzaton deducton sha be aowed for any ta abe year uness a certf-
cate of necessty pursuant to secton 12 (f)(1) s made pror to the makng of
the eecton to take the amortzaton deducton, or pror to December 1, 19 1,
whchever s ater.
P b. . Secton 19.12 G, as added by Treasury Decson 5016, s
amended by strkng out the dvsory Commsson and wherever
occurrng theren; and the frst sentence of the thrd, fourth, and ast
paragraphs of such secton s amended by nsertng certfes n eu
of certfy.
Par. 5. The second paragraph of secton 19.12 -7, as added by
Treasury Decson 5016, s amended by strkng out the dvsory
Commsson and.
Par. 6. Secton 19.12 -9, as added by Treasury Decson 5016 and
amended by Treasury Decson 50 9, s amended to read as foows:
Skc. 19.12 -9. Urmhvr emcnt by Unted State for to t of facty. If the
ta payer has been or w be rembursed by the Unted States for a or a part
of the cost of any emergency facty pursuant to any contract, e ceedng 15,000
n amount, wth the Tnted States, made on ts behaf after December 31, 1930,
by the War Department, the Navy Department, the Unted States Martme
Commsson, or such other department or agency as the Presdent may desgnate,
no amortzaton deductons w be aowed wrh respect to such facty for
any month after the end of the month n whch such contract s made, uness
the Secretary of the Department concerned certfes to the Commssoner that
the nterest of the Unted States s adequatey protected wth reference to the
future use and dsposton of such facty. Ony one certfcate of protecton s
necessary wth respect to a partcuar emergency facty regardess of the
number of contracts entered nto. For treatment of rembursements, see secton
19.12 -6. If the Secretary of the Department concerned certfes to the Com-
mssoner that under a contract no rembursement s provded for wthn the
meanng of secton 12 (), such certfcate sha be concusve of such fact.
cept n the case of appcatons therefor fed before December 1, 19 1, the
certfcates referred to n ths secton sha have no effect uness an appcaton
therefor s fed before the e praton of s months after the makng of such
contract or before the e praton of 60 days after the makng of a certfcate
of necessty under secton 12 (f)(1) (see secton 19.12 -(b)), whchever s
ater.
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19.12 -2.
13
(Ths Treasury decson s ssued under the authorty contaned n
sectons 1 to , ncusve, of Pubc aw 285 (Seventy-seventh Con-
gress), approved October 30, 19 1, and secton G2 of the Interna
Revenue Code (53 Stat., 32) (26 U. S. C, Sup. , 62).)
Guy T. everng,
Commssoner of Interna Revenue.
pproved December 23, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster Decemher 23. 19 1. 3.36 p. m.)
Secton 19.12 -2: mortzaton deducton 19 1- 9-10923
Genera rue.
Treasury, War, and Navy Departments Notce of procedure for
certfcaton under secton 12 of the Interna Revenue Code, as
amended (Tte III, secton 302, of the Second Revenue ct of 19 0).
Sectons 23 and 12 of the Interna Revenue Code, as amended, aow
a deducton for ncome and e cess-profts ta purposes for amortza-
ton, over a 60-month perod, wth respect to any emergency facty,
the constructon, reconstructon, erecton, or nstaaton of whch was
competed, or whch was acqured, after une 10, 19 0, upon the ssu-
ance of the certfcate or certfcates provded for n the statute. Such
certfcates are to be ssued to the Commssoner of Interna Revenue
by the Secretary of War or the Secretary of the Navy.
In a cases, a Necessty Certfcate s requred certfyng that
the facty s necessary n the nterest of natona defense durng the
emergency perod.
ta payer who has been or w be rembursed by the Unted States
for a or a part of the cost of any emergency facty pursuant to any
contract (n e cess of 15,000 n amount) wth the Unted States, made
on ts behaf after December 31, 1939, by the War Department, the
Navy Department, the Unted States Martme Commsson, or such
other department or agency as the Presdent may desgnate, s not
aowed such amortzaton deducton wth respect to such facty
uness ether the Secretary of War or the Secretary of the Navy ssues
a Certfcate of Government Protecton to the effect that the nter-
est of the Unted States s adequatey protected wth reference to the
future use and dsposton of such emergency facty.
Certfcate of Non-Rembursement to the effect that under the
contract certfed rembursement for a or a part of the cost of any
emergency facty s not provded for, sha concusvey estabsh that
fact for the purpose of the aw.
In the event that a ta payer has no contract wth the Unted States
t s not consdered necessary for the ta payer, n addton to a Neces-
sty Certfcate, to obtan a Certfcate of Government Protecton
or a Certfcate of Non-Rembursement, uness the ta payer s the
rea par ty n nterest under a contract wth the Unted States, as, for
e ampe, a case n whch some other person s actng n a contract as
agent for the ta payer to obtan payment of the cost of the emergency
factes by the Unted States.
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135
19.12 -2.
The Secretary of the Treasury, the Secretary of War. and the Secre-
tary of the Navy hereby gve notce (supersedng the Notce of Proce-
dure dated November 1,19 0) that the foowng w be the procedure
for appyng for certfcaton:
I. ppcatons. ppcatons for certfcates sha be respectvey entted
ppcaton for a Necessty Certfcate, ppcaton for a Certfcate of Non-
Rembursement, ppcaton for a Certfcate of Government Protecton.
Instructons as to the nformaton to be gven n such appcatons may be ob-
taned from the Offce of the Under Secretary of War, Ta mortzaton Secton,
Washngton, D. ( ., or from the Offce of the Under Secretary of the Navy,
Washngton. D. C.
II. Pace of fng appcaton and copes requred. The sgned and verfed
orgna of each appcaton, together wth two e tra copes whch need not be
sgned, addressed to ether the Secretary of War or-the Secretary of the Navy,
as the case may be, sha be duy prepared n accordance wt the appcabe
nstructons, and fed as foows:
ppcatons addressed to the Secretary of War sha he fed wth the Offce
of the Under Secretary of War, Ta mortzaton Secton. Washngton, I). C.
ppcatons addressed to the Secretary of the Navy sha be fed wth the
Offce of the Under Secretary of the Navy, Washngton, D. C.
III. Tme of fng appcaton . Secton 12 of the Interna Revenue Code
provdes that a Necessty Certfcate sha have no effect uness appcaton
therefor s fed before the e praton of s months after the begnnng of the
constructon, reconstructon, erecton, nstaaton, or the date of acquston of
the emergency facty, or before December 1, 19 1, whchever s ater, and that
a Certfcate of Government Protecton and a Certfcate of Non-Remburse-
ment sha have no effect uness appcaton therefor s fed before December
1, 19 1; or ether before the e praton of 6 months after the makng of the
contract or before the e praton of 60 days after the makng of a necessty
certfcate, whchever s atest.
I . Notfcaton. The Offce of the Under Secretary of War, Ta mortza-
ton Secton, or the Offce of the Under Secretary of the Navy, as the case may
be, w notfy the appcant of the acton upon ts appcaton by the Secretary
of War or the Secretary of the Navy.
. Defnton of tcrn . ) The term Necessty Certfcate, as used heren,
means a certfcaton, ssued pursuant to secton 12 (f) of the Interna Revenue
Code, as amended, that the constructon or acquston of the factes, referred
to n the certfcate, s necessary n the nterest of natona defense durng the
emergency perod.
(2) The term Certfcate of Government Protecton, as used heren, means
a certfcaton, ssued pursuant to secton 12 () of the Interna Revenue Code,
as amended, that the nterest of the Unted States s adequatey protected wth
reference to the future use and dsposton of the emergency facty, referred
to n the certfcate.
(3) The term Certfcate of Non-Rembursement, as used heren, means a
certfcaton, ssued pursuant to secton 12 () of the Interna Revenue Code,
as amended, that rembursement to the ta payer for a or a part of the cost of
any emergency facty s not provded for under a contract.
( ) The term rembursement, as used heren, means rembursement to the
ta payer, pursuant to any contract wth the Unted States, n e cess of . r ,000
made o ts behaf after December 31, 1039, by the War Department, the Navy
Department, the Unted States Martme Commsson, or such other agency or
department as the Presdent may desgnate, ether (1) drecty, by a provson
theren deang e pressy wth such rembursement, or (2) ndrecty, because
the prce pad by the Unted States (n so far as return of cost of the facty s
used by the Unted States as a factor n the f ng of such prce) s recognzed
by the contract as ncudng a return of cost greater than the norma e hauston,
wear and tear: Provded. That no such greater return of cost sha be deemed
to have been used as a factor n the f ng of such prce when the negotatng
or contractng offcer reports that after carefu consderaton e s satsfed that
such greater return was not ncuded n the prce.
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19.12 -9.
135
(5) The terra emergency facty as used heren, means any facty, and,
Madng, machnery, or equpment, or part thereof, the constructon, reconstruc-
ton, erecton, or nstaaton of whch was competed after une 10, 19 0, or
whch was acqured after such date, and wth respect to whch a necessty cer-
tfcate has been made.
ohn L. Suvan, .
ctng Secretary of the Treasury.
Robert P. Patterson.
Under Secretary of War.
ames Forrest a,
Under Secretary of the Nary.
October 30, 19 1.
(Fed wth the Dvson of the Federa Regster November 1, 19 1, 11.08 a. n.)
Secton 19.12 -2: mortzaton deducton Genera rue.
nterna revenue code.
Reguatons 103, amended. (See T. D. 510 , page 131.)
Secton 19.12 -6: d|usted bass of emergency facty.
nterna revenue code.
Reguatons 103, am .ded. (See T. D. 510 , page 131.)
Secton 19.12 -7: Deprecaton of porton of emer-
gency facty not sub|ect to amortzaton.
INT RN L R NU COD .
Reguatons 103, amended. (Sec T. D. 5101, page 131.)
Secton 19.12 -9: Rembursement by Unted 19 1-33-10808
States for cost of facty. I. T. 3 98
INT RN L R NU COD .
The Defense Pant Corporaton s an agency of the Unted States,
and a contract wth that corporaton s a contract wth the Unted
States wthn the ntendment of secton 12 (1) of the Interna
Revenue Code, as amended, reatng to amortzaton deductons,
where, pursuant to any contract wth the Unted States, a ta payer
s rembursed for a or a part of the cost of any emergency facty.
The ureau of Interna Revenue does not requre any ta payer to
appy to the statutory certfyng agences for certfcates of non-
rembursement prescrbed by secton 12 ( of the Interna Revenue
Code, as amended, and the ureau s not n a poston to advse
whether, wth respect to a partcuar contract, such a certfcate
w be avaabe.
dvce s requested by the M Company wth respect to the amor-
tzaton deducton provded by secton 12 of the Interna Revenue
Code, as amended, under the crcumstances heren stated.
The M Company states that t has receved a necessty certfcate
and that t has fed appcatons for certfcates of nonrembursement
wth respect to a st of contracts and outstandng bds whch t
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137
19.12 -9.
had on ts records. It further sates that t has some orders from
manufacturng concerns whch cam to be actng for and on behaf
of the Defense Pant Corporaton. Copes of such orders were sub-
mtted for the consderaton of the ureau. Inqury s made reatve
to the status of the Defense Pant Corporaton, and whether the
orders mentoned above shoud be ncuded n the M Company s
appcatons for certfcates of nonrembursement.
The copes of the orders submtted for consderaton reate to
machne too equpment. It s stated that the machne toos are
sod at f ed prces to a customers and the prces charged ncude
ony aowed or aowabe deprecaton. The factes were fur-
nshed by the M Company on orders from the N Company and the
O Corporaton, actng for and on behaf of Defense Pant Corpora-
ton. The order from the O Corporaton drects that the shpment
be marked Property of Defense Pant Corporaton, an nstrumen-
taty of the Unted States Government. In the agreement be-
tween the Defense Pant Corporaton and the N Company, the
Defense Pant Corporaton s stated to be a corporaton created by
the Reconstructon Fnance Corporaton pursuant to secton 5(d)
of the Reconstructon Fnance Corporaton ct, as amended, to ad
the Government of the Unted States n ts natona defense program.
The agreement between the Defense Pant Corporaton and the O
Corporaton s caed an agreement of ease and contans statements
smar to statements n the N Company contract reatve to the
reasons for the creaton of the Defense Pant Corporaton and of
addtona manufacturng capacty.
The Defense Pant Corporaton was created on ugust 22, 1 I),
wth a capta of 5,000,000, and wth the foowng powers:
(a) To purchase, ease, or otherwse acqure rea estate and
nterests n rea estate, to purchase, ease, or otherwse acqure
and to bud and e pand pants and factes, and to purchase,
ease, produce, or otherwse acqure and to repar, rebud, and
ater equpment, suppes, and machnery for the manufacture of
arms, ammunton, and mpements of war;
(b) to use, ease, cense, or otherwse arrange for the use of
such rea estate, pants, factes, equpment, suppes, and ma-
chnery for the manufacture of arms, ammunton, and mpe-
ments of war and the producton of equpment, suppes, and
machnery usabe n such manufacture.
It has made commtments for natona defense purposes aggregatng
many mons of doars. The pants and equpment whch t owns
are eased to manufacturers, and t s protected ether by the rent t
receves or by contracts of rembursement from the War Department
or the Navy Department. Utmatey, by contract, the Unted
States acqures tte or nterest n many of the Defense Pant Cor-
poraton defense factes whch, drecty or ndrecty, are pad for
by the Unted States. It s managed and operated by drectors,
offcers, and empoyees of the Reconstructon Fnance Corporaton
under the su|ervson of the Federa Loan dmnstrator. (Cf. re-
port to the Presdent and the Congress by esse . ones, dmn-
strator: see Congressona Record dated anuary 27, 19 1, voume
87, No. 1 , pages 3 2-3 3.) It s understood that the capta stock of
the Defense Pant Corporaton was purchased by and s hed by the
Reconstructon Fnance Corporaton.
1611 2 10
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19.131-1.
138
It s hed that the Defense Pant Corporaton s an agency of the
Unted States, and a contract wth the Defense Pant Corporaton
s a contract wth the Unted States wthn the ntendment of secton
12 () of the Interna Revenue Code, as amended.
The ureau of Interna Revenue does not requre any ta payer to ap-
py to the statutory certfyng agences for certfcates of nonremburse-
ment prescrbed by secton 12 ( ) of the Interna Revenue Code, as
amended, and the ureau s not n a poston to advse whether, wth
respect to a partcuar contract, such a certfcate w be avaabe.
In cases where a ta payer prefers not to a vat the ureau determna-
ton, secton 12 () of the Code, as amended, provdes two means
whereby the ta payer may f mmedatey, wth respect to a par-
tcuar contract wth the Unted States, the status of the amortza-
ton: (1) by provdng n the partcuar contract for adequate
protecton of the Unted States wth reference to the future use and
dsposton of the emergency factes so that a certfcate of Gov-
ernment protecton may be obtaned, or (2) by estabshng to the
satsfacton of the certfyng agences that the partcuar contract
does not remburse the ta payer for a or a part of the cost of any
emergency facty so that the certfyng agences may, f they con-
sent, ssue a certfcate of nonrembursement.
Secton 19.12 -9; Rembursement by Unted States for
cost of facty.
INT L R Nf COD .
Reguatons 103. amended. (See T. D. 510 , page 131.)
SUPPL M NT C CR DIT G INST T .
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S.
Secton 19.131-1: nayss of credt for 19 1-3 -10811
ta es. I. T. 3500
INT L R N COD .
The ta mposed by Guatemaan decree No. 2000 upon profts or
net earnngs of busness enterprses s an ncome tu and s an
aowabe credt aganst Federa ncome ta under secton 131 of
the Interna Revenue Code.
dvce s requested whether the ta mposed by Guatemaan decree
No. 209 ) upon profts or net earnngs (f busness enterprses s aow-
abe under secton 131 of the Interna Revenue Code as a credt
aganst the Federa ncome ta .
rtce 1 of Guatemaan decree No. 209ft mposes an annua pro-
portona and progressve ta on the qud profts or net earnngs
of busness enterprses of a descrptons operatng wth a workng
capta or effectvey subscrbed capta of 5,000 quetzaes or more.
Under artce 3 of te decree, busness ent rprses are defned as a
commerca, bankng, ndustra, or agrcutura enttes and a
actvtes organzed for the renderng of servce to the pubc. Under
artce , the computaton of qud profts or net earnngs of busness
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139
19.131-3.
enterprses s made by deductng such tems as e penses of operaton,
nterest, commssons, osses, etc., ncurred durng the ta abe year.
Ta rates range from o per cent upon profts of 1,000 quetzaes to
10.000 quetzaes to 12 per cent upon profts e ceedng 100,000 quetzaes.
It s hed that the ta mposed by Guatemaan decree No. 2009
upon the profts or net earnngs of busness enterprses s an ncome
ta and s aowabe as a credt under secton 131 of the Interna
Revenue Code.
Secton 19.131-3: Condtons of aowance of 19 1-27-107G9
credt. T. D. .r 05G
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 19.
INCOM T .
Foregn ta credt. mendng secton 19.131-8 of Reguatons,
103; artce 131-3, Reguatons 101, 9 , and 86; artce 693, Regua-
tons 77 and 7 ; and artce 383, Reguatons 69, 65, 62, and 5.
Treasury Department.
Offce of Commssoner of Interna Revenue.
Washngton, D. C.
To Coector of Interna Revenue and Other Concerned:
Paragraph 1. Secton 19.131-3 of Reguatons 103 Part 19, Tte 20,
Code of Federa Reguatons, 19 0 Sup. s amended as foows:
( ) y substtutng for the thrd and fourth sentences thereof the
foowng sentence:
cept where t s estabshed to the satsfacton of the Commssoner that t s
mpossbe for the ta payer to furnsh such evdence, the form must have
attached to t (1) the recept for each such ta payment f credt s sought for
ta es aready pad or (2) the return on whch each such accrued ta was based
If credt s sought for ta es accrued.
( ) y nsertng as the second paragraph thereof the foowng:
Where t has been estabshed to the satsfacton of the Commssoner that t
s Impossbe (1) to furnsh a recept for such foregn ta payment or (2) the
foregn ta return, or (3) drect evdence of the amount of ta wthhed at the
source, secondary evdence of the payment or accrua of the ta or of the wth-
hodng of the ta may, n hs dscreton, and under such rues as he may prescrbe,
be accepted by the Commssoner.
Par. 2. rtce 131-3, Reguatons 101 secton 9.131-3, Tte 26,
Code of Federa Reguatons, 1939 Sup.; artce 131-3. Reguatons
9 secton 3.131-3, Tte 26, Code of Federa Reguatons ; artce
131-3, Reguatons 86; artce 693, Reguatons 77 and 7 ; and artce
383, Reguatons 69, 65, 62, and 5, are hereby modfed to the e tent
that they are nconsstent wth the changes made n Reguatons 103
by ths Treasury decson.
(Ths Treasury decson s prescrbed pursuant to sectons 62 and
131 of the Interna Revenue Code (53 Stat., 32, 56) (26 U. S. C, Sup.
, 62,131), and the correspondng provsons of pror nterna revenue
aws.)
Gut T. ever:n a,
Commssoner of Interna Revenue.
pproved une 28,19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 1,19 1,11. 7 a. m.)
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19.131-3.
1 0
Secton 19.131-3: Condtons of aowance of 19 1-31-10800
credt. Mm. 5219
Modfcaton n requrements as to basc evdence n substanta-
ton of credt for foregn ta es n certan cases, n conformty wth
change n reguatons provded by Treasury Decson 0o6 page 133,
ths buetn .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, uy 16,19 .1.
Coectors of nterna Revenue, Interna Revenue gents n Charge,
and Other Persons Concerned:
In order to factate the unform appcaton of the revson n the
reguatons provded by Treasury Decson 5056, approved une 28,
9 1 (page 139, ths uetn), for makng more fe be the re-
qurements as to evdence n support of credt for foregn ta es, the
foowng rues are furnshed for your gudance n determnng the
acceptabty of secondary evdence wthn the purvew of the revsed
reguatons:
Where t has been estabshed to the satsfacton of the Comms-
soner that t s mpossbe to furnsh recepts for such foregn ta
payments or foregn ta returns, secondary evdence of the payment
or accrua of the ta may n hs dscreton be accepted by the Com-
mssoner. In such case, there sha be submtted a photostatc copy
of the check, draft, or other medum of payment showng the amount
and date thereof, wth certfcaton dentfyng t wth the ta camed
to have been pad, together wth evdence estabshng that the ta
was pad for ta payer s account as ts own ta on ts own ncome.
If credt s camed on the accrua bass, t must be shown that the
ta accrued n the ta abe year. s to accrua of the ta . f t has
not be n pad, and the foregn ta return s not avaabe, there sha
be submtted a certfed statement of the amount camed to have
accrued; e cerpts from ta payer s accounts showng amounts of for-
egn ncome and ta thereon accrued on ts books; a computaton of
the foregn ta based on ncome from the foregn country carred
on the books and at current rates of ta to be estabshed by data such
as e cerpts from the foregn aw. assessment notces, or other docu-
mentary evdence thereof; a bond, f deemed necessary by the Com-
mssoner, fed n the manner provded n cases where the foregn
return s avaabe; and, n case a bond s not requred, a specfc
agreement wheren the ta payer sha recognze ts abty to report
the correct amount of ta when ascertaned, as requred by the prov-
sons of secton 131(c). If at any tme the foregn ta recepts or
foregn ta returns become avaabe to the ta payer, they sha be
prompty submtted to the Commssoner.
In the case of ta es wthhed at the source from dvdends, nterest,
royates, compensaton, or other form of ncome, where evdence of
wthhodng can not be secured from those who have made the pay-
ments, the Commssoner may n hs dscreton accept secondary
evdence of such wthhodng and of the amount of the ta so wth-
hed, havng due regard to the ta payer s books of account and to the
rates of ta aton prevang n the partcuar foregn country durng
the perod nvoved.
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1 1
23.11(a).
In compance wth the revsed reguatons, the requrements n-
dcated n Forms 1116 and 1118, and I. T. 2676 (C. . II-1, 8
(1933)), are hereby modfed to the e tent that they confct wth such
revson.
Correspondence regardng ths mmeograph shoud refer to the
number thereof and to the symbos IT: TM.
Guy T. everng,
Commssoner.
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S.
Secton 19.131-9: ont return by husband and wfe.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
SUPPL M NT D. R TURNS ND P YM NT OF T .
S CTION 1 1. CONSOLID T D R TURNS OF
R ILRO D CORPOR TIONS.
Secton 23.11(a), Reguatons 10 : Consodated 19 1- 2-10868
returns requred for subsequent years. T. D. 5087
( so Secton 730, Secton 33.11, Reguatons 110.)
TITL 20 INT RN L R NU . C PT R 1. SU C PT R , P RTS 23 ND
33. INCOM T ND C SS PROFITS T .
mendng secton 23.11 (a) of Reguatons 10 and secton 33.11 (a)
of Reguatons 110, reatng to the necessty of fng consodated
returns for years foowng the year n whch the eecton to fe a
consodated return has been e ercsed.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
R GUL TIONS 10 .
Paragraph 1. ffectve for ta abe years begnnng after December
31, 19 0, secton 23.11 (a) of Reguatons 10 s amended to read as
foows:
(a) Consodated Returns Requred for Ruh et/nen Years. If a consodated
return s made under these reguatons for nny ta abe year, a consodated
return must be made for each subsequent ta abe year durng whch the affated
group remans n e stence uness (1) a corporaton (other than a corporaton
created or organzed, drecty or ndrecty, by a member of the group) has
become a member of the group durng such subsequent ta abe year, or (2)
Chapter 1 of the Code to the e tent appcabe to corporatons, or these reguatons
whch have been consented to, have been amended and any such amendment s
of a character whch makes ess advantageous to affated groups as a cass the
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19.1 3-1.
1 2
contnued fng of consodated returns, or (3) the Commssoner, pror to the
tme of makng the return, upon appcaton mde by the common parent corpora-
ton and for good cause shown, gants permsson to change.
R GUL TIONS 110.
Par. 2. ffectve for ta abe years begnnng after December 31,
939, secton 33.11 (a) of Reguatons 110 s amended to read as foows:
(a) Consodated Returns Requred for Subsequent Years.- If a consodated
return s made under these reguatons for any ta abe year, a consodated
return must be made for each subsequent ta abe year durng whch the affated
group remans In e stence uness (1) a corporaton (other than a corporaton
created or organzed, drecty or ndrecty, by a member of the group) has
become a member of the group durng such subsequent ta abe year, or (2)
Chapter 1 of the Code to the e tent appcabe to corporatons, or Subchapter
of Chapter 2 of the Code, or these reguatons whch have been consented to, have
been amended and any such amendment s of a character whch makes ess
advantageous to affated groups as a cass the contnued fng of consodated
returns, or (3) the Commssoner, pror to the tme of makng the return, upon
appcaton made by the common parent corporaton and for good cause shown,
grants permsson to change.
(Ths Treasury decson s ssued under the authorty contaned n
secton 1 1(b) of the Interna Revenue Code (53 Stat., 58; 26 U. S. C,
Sup. , 1 1(b)) and secton 730(b) of the Interna Revenue Code,
added by the cess Profts Ta ct of 19 0 (5 Stat.. 989).)
Guy T. ever g.
Commssoner of Interna Revenue.
pproved October 10, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 13, 11) 1. 12. 0 p. m.)
S CTION 1 a WIT OLDING OF T
T SOURC .
Secton 19.1 :5-1: Wthhodng ta at source. 19 1-39-108 2
( so Secton 19.1 3-3; Secton 1 . Secton T.D.50T1
19.1 -1, Secton 19.1 -2; Secton 262,
Secton 19.262- .)
TITL 2C INT RN L R NU . C PT R I, SU C PT R . P RT 19.
INCOM T .
Wthhodng under sectons 1 3 and 1 of the Interna Revenue
Code, as amended by the Revenue ct of 19 1 Reguatons 103
amended.
Treasury Department.
Offc e of Commssoner ok Interna Revenue.
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 103 Part 19, Tte 26. Code of
Federa Reguatons, 1910 Sup. , reatng to the ncome ta under the
Interna Revenue Code, to sectons 107, 108, 109(a). and 118 of the
Revenue ct of 19 1 (Pubc Law 250, Seventy-seventh Congress),
approved September 20, 19 1. amendng secton 1 3 and secton 1
of the Interna Revenue Code, such reguatons are amended as foows:
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1 3
19.1 3-1.
Paragraph 1. There s nserted mmedatey precedng secton
19.1 3-1 the foowng:
Sec. 107. Wthhodng of Ta at Source. (Revenue ct of 19 1,
Tte I.)
(a) Sectons 1 3 (a) and (h) of the Interna Revenue
Code are amended by strkng out 15 per centum wherever occurrng
theren and nsertng n eu thereof 27 / per centum .
(b) Secton 1 3(h) of the Interna Revenue Code s repeaed.
(c) Subsectons (a) and- (b) of ths secton sha appy ony wth
respect to the perod egunng wth the tenth day after the date of
the enactment of ths ct.
Sec. 108. Treaty Obgatons. (Revenue ct of 19 1, Tte I.)
No amendment made by ths tte sha appy n any case where ts
appcaton woud be contrary to any treaty obgaton of the Unted
States.
Sec. 109. Reducton n Pursuance of Treates of Rates of Ta and
Wthhodng on Nonresdent en Indvduas Rehotnt n, and
Corporatons Organzed Under Laws of, Western emsphere
Countres. (Revenue ct of 19 1, Tte I.)
(a) Secton 1 3(a)(1) (reatng to wthhodng of ta on ta -free
covenant bonds) ; secton 1 3(b) (reatng to wthhodng of ta on
dvdends, rents, etc.) ; of the Interna Revenue Code are
amended by strkng out a contguous country and nsertng n eu
thereof any country In North, Centra, or South merca, or n the
West Indes, or of Newfoundand .

Sec. 118 Ta abe Years to Whch mendments ppcabe. (Reve-
nue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107. 115, 116.
and 117) sha be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Par. 2. Secton 19.1 3-1, as amended by Treasury Decson 50 6,
approved May 8, 19 1 C. . 19 1-1, 2G0 , s further amended as
foows:
( ) y strkng out 10 per cent (15 per cent on and after une 26,
19 0, e cept as otherwse provded heren) wherever appearng
theren and nsertng n eu thereof the foowng: 27 per cent
(161/2 per cent on and after une 26, 19 0, and pror to September
30,19 1, and 10 per cent pror to une 26,19 0).
( ) y nsertng n the frst paragraph thereof mmedatey after
a contguous country, the foowng: or (as to ta abe years
begnnng after December 31, 19 0) any country n North, Centra,
or South merca, or n the West Indes, or of Newfoundand, .
(C) y strkng out subsecton (c) thereof.
Par. 3. Secton 19.1 3-3, as amended by Treasury Decson 979,
approved uy 1, 19 0 C. . 19 0-2, 138 , s further amended by
strkng from the ast paragraph thereof 1,000, or 800 for ta -
abe years begnnng after December 31, 19.19, and nsertng n eu
thereof the foowng: 750 ( 800 for a ta abe year begnnng after
December 31, 1939, but before anuary 1, 19 1, and 1,000 for a ta -
abe year begnnng pror to anuary 1,19 0).
Par. . There s nserted mmedatey precedng secton 19.1 -1
the foowng:
Sec 107. Wthhodng of Ta at Source. (Revenue ct of 19 1,
Tte I.)
(a) Sectons 1 of the Interna Revenue Code are amended
by strkng out 15 per centum wherever occurrng theren and n-
sertng n eu thereof 27 per centum .
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19.1 3-1.1
1
(b) Secton 1 3(h) of te Interna Revenue Code s repeaed.
(c) Subsectons (a) and (b) of ths secton sha appy ony wth
respect to the perod begnnng wth the tenth day after the date of
the enactment of ths ct.
Sec. 108. Treaty Obgatons. (Revenue ct of 19 1, Tte I.)
No amendment made by ths tte sha appy n any case where ts
appcaton woud be contrary to any treaty obgaton of the Unted
States.
Sec. 100. Reducton n Pursuance of Treates of Rates of Ta and
Wthhodng on Nonresdent en Indvduas Resdent n, and
Corporatons Organzed Under Laws of. Western emsphere
Countres. (Revenue ct of 19 1, Tte I.)
(a) Secton 1 (reatng to payment of corporaton ncome
ta at source) ; of the Interna Revenue Code are amended
by strkng out a contguous country and nsertng n eu thereof
any country In North, Centra, or South merca, or n the West
Indes, or of Newfoundand .

Sec 118. Ta abe Years to Whch mendments ppcabe. (Rev-
enue ct of 19 1, Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116,
and 117) sha be appcabe ony wth respect to ta abe years begn-
nng after December 31, 19 0.
Par. 5. Secton 19.1 -1. as amended by Treasury Decson 50 6, s
further amended as foows:
( ) y strkng from the frst paragraph thereof 15 per cent
and nsertng n eu thereof the foowng: 27 fc per cent (16
per cent on and after une 26. 10 0, and pror to September 30, 19 1,
and 15 per cent pror to une 26, 19 0).
( ) y strkng from the thrd paragraph thereof 10 per cent
(15 per cent on and after une 26, 19 0, e cept as otherwse provded
heren) wherever appearng theren and nsertng n eu thereof the
foowng: 27y2 per cent (O1/. per cent on and after une 26, 19 0,
and pror to September 30, 19 1. and 10 per cent pror to une 26,
19 0).
(C) y nsertng n the thrd paragraph thereof after a con-
tguous country, the foowng: or (as to ta abe years begnnng
after December 31. 19 0) any country n North, Centra, or South
merca, or n the West Indes, or of Newfoundand, .
(D) y strkng out the ast paragraph thereof.
Par. 6. Secton 19.1 -2. as amended by Treasury Decson 50 6, s
further amended as foows:
( ) y strkng out mmedatey precedng the frst tabe of wth-
hodng rates the foowng: The foowng tabe of wthhodng
rates under the Interna Revenue Code and the ta conventon be-
tween the Unted States and Canada has been prepared for the pur-
pose of makng a summary of such rates ready avaabe to wth-
hodng agents: and nsertng n eu thereof the foowng: The
foowng tabes of wthhodng rates under the Interna Revenue
Code, as modfed by ta conventons between the Unted States and
other countres, have been prepared for the purpose of makng a
summary of such rates ready avaabe to wthhodng agents: .
( ) y strkng out mmedatey precedng the second tabe of
wthhodng rates the foowng: The foowng tabe of wthhod-
ng rates under the Interna Revenue Code as amended and the ta
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1 5 19.1 3-1.
conventons between the Unted States and Canada and Unted States
and Sweden has been prepared for the purpose of makng a summary
of such rates ready avaabe to wthhodng agents: .
(C) y strkng out of the capton of the second tabe thereof
anuary 1, 19 5, and nsertng n eu thereof September 30,
19 1.
(D) y nsertng at the end thereof the foowng tabe:
For the perod on fnd after September 30, 10 1.
Cor| orate bond Interest.
Other f ed
or deter-
mnabe
annua or
perodca
ncome,
ncudng
dvdends,
from
sources
wthn the
Unted
States.
C asses of ta payers.
Wth t -frec covenant
and ssued before
an. 1, 103 .
Wthout
ta -free
covenant
or ssued
on or after
an. 1, 193 ,
wth
ta -free
covenant.
Saary or
other com-
pensaton
If corpora-
ton
assumes
over 2 per
cent of the
ta .
If cor|wra-
ton
for
persona
servces.

assumes
not over 2
per cent of
the ta .
1. Ctzen or resdent ndvdua, fducary,
or partnershp
Per cent.
Per cent.
Per cent.
Per cent.
Per cent.
2. Nonresdent ndvdua, fducary, or
partnershp
2
2
2
27
27
3. Domestc corporaton or resdent for-
. Nonresdent foregn corporaton
2
2
S3
27
27
27
Saary or compensaton for persona servces rendered In the Unted States Is not sub|ect to wt hhodng
n the case of nonresdent aens, resdents of Canada or Me co, who enter and eave the Unted States at
frequent ntervas.
In the c|sc of a resdent of Sweden or a corporaton or other entty organzed under the aws of Sweden
the rate wth respect to dvdends s 10 per cent for at east two years begnnng anuary 1,19 0.
Interest on any noncorporate securty the owner of whch s unknown to the wthhodng agent s sub|ect
to wthhodng at the rate of 27) per cent.
Par. 7. Secton 19.262- , as amended by Treasury Decson 50 6,
s further amended as foows:
( ) y strkng from the frst paragraph thereof 10 per cent (15
er cent on and after une 26. 19 0, e cept as otherwse provded
eren) wherever appearng theren and nsertng n eu thereof
the foowng: 27 per cent (I6 2 per cent on and after une 26,
19 0, and pror to September 30, 19 1, and 10 per cent pror to une
26. 19 0).
( ) y nsertng after a contguous country wherever appear-
ng theren the foowng: or (as to ta abe years begnnng after
December 31, 19 0) any country n North, Centra, or South merca,
or n the West Indes, or of Newfoundand, .
(C) y strkng out the ast paragraph thereof.
(Ths Treasury decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat.. 32; 26 U. S. C,
Sup. . 62) and sectons 107, 108, 109(a), and 118 of the Revenue
ct of 19 1 (Pubc Law 250, Seventy-seventh Congress).)
Gut T. f.vf.rno,
Commssoner of Interna Revenue.
pproved September 27, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wtb the Dvson of the Federa Regster September 27, 19 1, 12.37 p. m.)
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19.113-1.|
1 6
Secton 19.1 3-1: Wthhodng ta at source.
( so Secton 1 , Secton 19.1 -1.)
19 1-51-10935
I. T. 3522
INT RN L R NI COD .
Where, pursuant to the Fnanca Powers (U. S. . Securtes)
ct, 19 1, the rtsh Government has obtaned mercan secur-
tes from ts sub|ects (nonresdents of the Unted States), the
ncome from such securtes s sub|ect to the wthhodng prov-
sons of sectons 1-13 and 1 of the Interna Revenue Code, as
amended by secton 107 of the Revenue ct of 19 1.
dvce s requested whether the ncome from mercan securtes
whch have been obtaned by the rtsh Government from ts sub|ects
under the Fnanca Powers (U. S. . Securtes) ct, 19 1, s sub-
|ect to the wthhodng provsons of sectons 1 3 and 1 of the
Interna Revenue Code, as amended by secton 107 of the Revenue
ct of 1911.
It appears that the rtsh Government, pursuant to the provsons
of the Fnanca Powers (U. S. . Securtes) ct, 19 1, has obtafhed
from certan of ts sub|ects (nonresdents of the Unted States) var-
ous securtes of corporatons organzed and dong busness wthn
the Unted States; that under the provsons of that ct, possesson
and contro of the securtes s odged wth the rtsh Treasury;
that the benefca ownershp of the securtes remans n the hands
of the sub|ects from whom they were obtaned; and that the ct
contempates that such owners are entted to the ncome of the
securtes, and utmatey to the securtes or cash n eu thereof.
The provsons of the ct wth respect to the transferred securtes
ndcate ceary that t s the concepton of the rtsh Government
that such securtes are for a mted perod oaned to or deposted
wth that Government and not sod to t. The fact that temporary
possesson and contro are odged wth the rtsh Treasury s not
nconsstent wth ths concepton of the transacton. Whatever may
be the nature of the obgaton of the rtsh Government to the
former hoders, t s cear that such hoders are regarded as the bene-
fca owners of the securtes and entted to the ncome therefrom,
and that the rtsh Government, athough dervng beneft from the
contro whch t has over these securtes, s a representatve of the rea
owners, the sub|ects from whom they were obtaned.
The provsons of secton 116(c) of the Interna Revenue Code
e emptng ncome of foregn governments from Federa ncome
ta were enacted to nsure that the ncome derved by such govern-
ments from nvestments n the Unted States shoud not be sub|ect
to an ncome ta mposed by the Unted States. Such provsons were,
n the opnon of ths offce, ntended to reeve foregn governments
and not ctzens of foregn countres, and must be so construed as to
effectuate that purpose. Whenever a foregn government s actng
merey as the representatve of ndvduas or corporatons, who are
the rea owners of the securtes and the utmate recpents of the n-
come, such ncome s not ncome of a foregn government wthn
the meanng of the e empton, but s sub|ect to Federa ncome ta
as the ncome of such ndvduas or corporatons.
In vew of the foregong, t s hed that ncome from mercan se-
curtes whch are n possesson or contro of the rtsh Treasury,
pursuant to the provsons of the Fnanca Powers (U. S. . Secur-
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1 7
19.1 3-1.
tes) ct, 19 1, s not e empt from Federa ncome ta under secton
116(c), supra, and s sub|ect to the wthhodng provsons of sectons
1 3 and 1 of the Interna Revenue Code, as amended by secton 107
of the Revenue ct of 19 1.
Secton 19.1 3-1: Wthhodng ta at source. 19 1-51-10932
( so Sectons 19.1 3- and 19.1 3-7; Secton T. D. 0103
1 , Secton 19.1 -1; Secton 1 7, Sectons
19.1 7-3 and 19.1 7- .)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 19.
INCOM T
Wthhodng of the ta under sectons 1 3 and 1 , and Informa-
ton at the source under secton 1 7, Interna Revenue Code, as
amended by the Revenue ct of 19 1. Reguatons 103 amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 103 Part 19, Tte 26, Code of Fed-
era Reguatons, 19 0 Sup. , reatng to the ncome ta under the
Interna Revenue Code, to secton 116 of the Revenue ct of 19 1
(Pubc aw 250, Seventy-seventh Congress), approved September 20,
19 1, amendng secton 1 7 of the Interna Revenue Code, such regua-
tons are amended as foows:
Paragraph 1. There s nserted mmedatey precedng secton
19.1 7-1 the foowng:
S :. 116. Informaton Returns Wth Rkspect to Federa Obga-
tons. (Revenue ct of 19 1.)
(a) Secton 1 7(d) of the Interna Revenue Code (e emptng n-
terest on obgatons of the Unted States from nformaton requre-
ment) s repeaed.
(b) Secton 1 7(b) of the Interna Revenue Code s amended by
strkng out and (2) and nsertng n eu thereof (2) n the case
of payments of nterest upon obgatons of the Unted States or any
agency or nstrumentaty thereof, and (3) .
(c) Subsectons (a) and (b) of ths secton sha take effect upon
the day after the date of the enactment of ths ct.
Pah. 2. Secton 19.1 3-1, as amended by Treasury Decson 5071,
approved September 27, 19 1 1 2. ths uetn , s further
amended by nsertng at the end of the frst paragraph the foowng:
Wthhodng Is requred n the case of nterest pad on obgatons ssued by the
Unted States or any agency or nstrumentaty thereof on or after March 1, 19 1.
(See sectons 19.22(h) ( )- and 19.22(b) ( )- , reatng to the ta aton of such
Interest, and secton 19.1 3- , reatng to ownershp certfcates.)
Par. 3. Secton 19.1 3- s amended as foows:
( ) y nsertng at the end of the frst paragraph the foowng:
Ownershp certfcates sha aso be fed n the case of nterest pad on or after
anuary 1, 19 2, on obgatons of the Unted States or any agency or nstru-
mentaty thereof, regardess of the date of ssuance of such obgatons.
( ) y nsertng at the end of the thrd paragraph the foowng:
Ownershp certfcates sha aso be fed In the case of nterest pad on or after
anuary 1, 19 2, on obgatons of the Unted States or any agency or nstru-
mentaty thereof, regardess of the date of Issuance of such obgatons.
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19.1 3-1.
1 8
(C) y strkng from the fourth paragraph debtor corporaton
and nsertng n eu thereof obgor.
(D) y changng the frst sentence of the ffth paragraph to read
as foows:
Ownershp certfcates need not be fed n the case of nterest payments on
obgatons of n State, Terrtory, or any potca subdvson thereof, or the
Dstrct of Coumba ; or the obgatons of possessons of the Unted States.
( ) y nsertng n the s th paragraph mmedatey after cor-
porate bonds the foowng: , or (as to coupons presented on or
after anuary 1, 19 2) from obgatons of the Unted States or of any
agency or nstrumentaty thereof, and by strkng on ne 3 from
ast sentence.
Par. . Secton 19.1 3-7, as amended by Treasury Decson 50 6,
approved May 8, 19 1 C. . 19 1-1, 260 , s further amended as
foows:
( ) y nsertng at the end of the frst sentence and nterest on
obgatons ssued by the Unted States or any agency or nstrumen-
taty thereof on or after March 1,19 1.
( ) y nsertng at the end of the frst paragraph the foowng:
In the case of nterest on obgatons of the Unted States or of any agency or
Instrumentaty thereof the wthhodng agents sha be: (1) the Commssoner of
the Pubc Debt for nterest pad by checks ssued through the ureau of the
Pubc Debt; (2) the Treasurer of the Unted States for a nterest pad by
hm, whether by check or otherwse; and (3) each Federa reserve bank for a
nterest pad by t, whether by check or otherwse.
Par. 5. Secton 19.1 -1, as amended by Treasury Decson 5071, ap-
proved September 27, 19 1, s further amended by nsertng mme-
datey after the frst paragraph a new paragraph readng as foows:
Wthhodng s requred n the case of nterest pad on obgatons ssued by
the Unted States or anv agency or nstrumentay thereof on or after March 1,
19 1. (See sectons 10.22(b) ( )- and 19.22(b) ( )-0, reatng to the ta aton
of such nterest, and secton 19.1 3- . reatng to ownershp certfcates.)
Par. 6. Secton 19.1 7-3 s amended by changng tem (a) to read as
foows:
(a) Payments pror to anuary 1. 19 2. of nterest on obgatons of the Unted
States (as to subsequent payments, see secton 19.1 7- ) ;
Par. 7. Secton 19.1 7- s amended to read as foows:
Sec. 19.1 7- . Return of nforma on a to certan ntere t. In the case of
payments of nterest, regardess of amount, upon bonds and smar obgatons
of corporatons, and nterest on obgatons of the Unted States or any agency
or nstrumentaty thereof, the ownershp certfcates, when duy fed, sha
consttute and be treated as returns of nformaton and n such cases no return
of nformaton on Form 1099 s requred. (See secton 19.1 3-, ;.)
(Ths Treasury decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat.. 32; 26 IT. S. C. Sup.
, 62) and secton 116 of the Revenue ct of 19 1 (Pubc aw 250,
Seventy-seventh Congress).)
Guy T. kverng,
Commssoner of Interna Revenue.
pproved December 13, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster December 15, 19 1, 11.09 a. m.)
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1 9 19.1 3-7.
Secton 19.1 3-3: empton from wthhodng.
INT RN L R NU COD .
Reguatons 103. amended. (See T. D. 5071, page 1 2.)
Secton 19.1 3- : Ownershp certfcates for
bond nterest.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5103, page 1 7.)
Secton 19.1 3-7: Return and payment of ta 19 1-32-10803
wthhed. G. C. M. 22820
nterna revenue code.
In vew of the amendment of secton 19.1 3-7 of Reguatons
103, as amended, by Treasury Decson 50 6 (C. . 19 1-1, 260),
the ast nformaton return on Form 10 215 (annua return of n-
come ta wthhed from Canadan addressees) requred to be fed
shoud be fed for the perod anuary 1, 19 1, to pr 29, 19 1, on
or before March 15, 19 2.
dvce s requested whether, n vew of the amendment of secton
19.1 3-7 of Reguatons 103, as amended, by Treasury Decson 50 6
(C. . 19 1-1, 260), an nformaton return on Form 10 2 (annua
return of ncome ta wthhed from Canadan addressees) shoud be
fed for the perod anuary 1, 19 1, to pr 29, 19 1, on or before
March 15, 19 2, and whether ths s the ast return on Form 10 2
requred to be fed.
Treasury Decson 50 6, supra, amended secton 19.1 3 7 of Regu-
atons 103, as amended by Treasury Decson 979 (C. . 19 0-2,
138), by strkng out the thrd sentence of the second paragraph
thereof and substtutng therefor the foowng sentence:
very Unted States wthhodng agent sha make and fe wth the coector,
n dupcate, an Informaton return on Form 10 2 , for the caendar year 1939,
the caendar year 19 0, and for the, perod anuary 1, 19 1, to pr 29, 19 1,
both dates Incusve, n addton to the wthhodng return on Form 10 2 wth
respect to the tems of ncome from whch a ta of ony 5 per cent was wth-
hed from Canadan addressees.
Treasury Decson 50 6, supra, was necesstated by the fact that
Canada, effectve pr 30, 19 1, ncreased to 15 per cent the ta rate
of 5 per cent theretofore mposed upon ncome derved from sources
wthn Canada by nonresdents thereof, ncudng persons resdent
n the Unted States. Under the provsons of rtce 1(c) of the
recproca ta conventon between the Unted States and Canada,
effectve ugust 13, 1937 (C. . 1937-2, 539), an ncrease n the rate
of ta aton by one of the contractng partes reeases the other con-
tractng party from the requrements of the conventon. On May 2,
19 1, the Canadan Mnster at Washngton formay notfed the
State Department of the ncrease n the rate of Canadan ta n ths
respect and of the recognton by Canada of the reease of the Unted
States from ts obgatons under the conventon. On May 3, 19 1,
the State Department and the Treasury Department severav ssued
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I 19.1 -1.1
150
press reeases nvtng the attenton of wthhodng agents to the
ncrease n the rate of ta to be wthhed at the source n the case
of resdents of Canada. The ncrease from 5 per cent to 16 per
cent became effectve as of pr 30, 19 1.
It s, therefore, hed that n vew of the amendment, of secton
19 1 3-7 of Reguatons 103, as amended, by Treasury Decson 50 6,
supra, the ast nformaton return on Form 10 2 requred to be fed
shoud be fed for the perod anuary 1, 19 1, to pr 29, 19 1, on
or before March 15, 19 2.
. P. enche,
Chef Counse, ureau of Interna Recenue.
Secton 19.1 3-7: Return and payment of ta wthhed.
I
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5103. page 1 7.)
Secton- 19.1 3-7: Return and payment of ta wthhed.
INT RN L R NU COD .
Payment wth Treasury notes of Ta Seres -19 3. (See I. T.
3521, page 122.)
S CTION 1 . P YM NT OF CORPOR TION INCOM
T T SOURC
Secton 19.1 -1: thhodng n the case of non-
resdent foregn corporatons.
INT RN L R NU COM .
Reguatons 103, amended. (See T. D. 5071, page 1 2.)
Secton 19.1 -1: Wthhodng n the case of non-
resdent foregn corporatons.
INT RN L R NU COD .
Income from mercan securtes hed by the rtsh Government
under the Fnanca Powers (U. S. . Securtes) ct, 19 1. (See
I. T. 3522, page 1 6.)
Secton 19.1 -1: thhodng n the case of non-
resdent foregn corporatons.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5103, page 1 7.)
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151 19.1 9-1.
Secton 19.1 -2: ds to wthhodng agents n
determnng abty for wthhodng of ta .
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5071, page 1 2.)
S CTION 1 7. INFORM TION T SOURC .
Secton 19.1 7-1: Return of nformaton as to
payments of 1,000 for 1939, 800 for 19 0,
and 750 for years thereafter.
INT RN L R NU COD .
cess of aggregate premums stated n an annuty pocy over
the dscounted vaue of prepad premums. (See I. T. 3513. page 75.)
Secton 19.1 7-3: Cases where no return of nfor-
maton requred.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5103, page 1 7.)
Secton 19.1 7- : Return of nformaton as to nterest
on corporate bonds.
INT RN L R NU COD .
Reguatons 103. amended. (See T. D. 5103, page 1 7.)
S CTION 1 9. R TURNS OF RO RS.
Secton 19.1 9-1: Return of nformaton by 19 1-52-109 3
brokers. T. D. 5105
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 10.
INCOM T .
mendng secton 19.1 9-1 of Reguatons 103, reatng to return
of nformaton by brokers.
Treasury Department,
Offce of Commssoner of Interna Revenue.
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Secton 19.1 9-1 of Reguatons 103 Part 19, Tte 2G. Code of Fed-
era Reguatons, 19 0 Sup. , as amended by Treasury Decson 5015,
approved October 22, 19 0 LC. . 19 0-2,1 7 ,s amended as foows:
(1) y strkng out n the frst paragraph the ast sentence and that
part of the ne t to the ast sentence whch reads as foows:
; and, e cept as provded In the fourth paragraph of ths secton, the form sha
aso show the tota of the saes, and the tota market vaue of the securtes
e changed for the customer or account.
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19.211-7.)
152
(2) y strkng out the thrd paragraph.
(Ths Treasury decson s ssued under the authorty contaned n
sectons 6 and 1 9 of the Interna Revenue Code (53 Stat., 32 and 65;
26 U. S. C, Sup. , 62, 1 9).)
Guy T. everng,
Commssoner of Interna Revenue.
pproved December 23, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster December 23, 10 1. 3.36 p. m.)
If a nonresdent aen resdng n Canada as no offce or pace of
busness n the Tnted Staes and s not engaged n a trade or bus-
ness theren, he s ta abe on f ed or determnabe annua or perod-
ca ncome receved efore pr 30, 19 1, from sources wthn the
I nted Sates at the rae of per cent. Such ncome receved on or
after that date, f not In e cess of 2 ,( ), s ta abe at he rate of
1 M per cent. If such ncome receved on or after pr . 0, 19 1,
e ceeds :M.0O(), such nonresdent aen w be abe for ta at the
rate of 16 | per cent on the gross amount of such ncome, or w be.
abe for the sum of the norma ta . surta , and defense ta . whch-
ever method of computng the ta resuts n the arger amouut.
dvce s requested whether Canadans who receve ncome from
1 e Unted States durng 19 1 are abe for a ta at the rate of 5 per
cent for the perod to pr 30, 19 1, and at the rate of 16 per cent
thereafter, or whether they are abe to ta at the rate of 16 per cent
for the entre year.
Pror to pr 30,19 1, the rate of 5 per cent was f ed by the recp-
roca ta conventon then e stng between the Unted States and
Canada. Under that conventon, the f ed or determnabe annua or
perodca ncome from sources wthn the Unted States of nonresdent
aens who were resdents of Canada was sub|ect to ta at the rate of
5 per cent, provded such nonresdent aens were not engaged n trade
or busness wthn the Unted States and dd not have an offce or pace
of busness theren. Snce, on pr 30, 19 1, the Government of the
Unted States was reeased by the Government of Canada from ts
obgatons under the a conventon, the rate of 5 per cent s appcabe
ony to such ncome receved pror to that date by nonresdent aens
resdng n Canada. If a nonresdent aen resdng n Canada has no
offce or pace of busness wthn the Unted States and s not engaged
n trade or busness theren, and receved f ed or determnabe annua
or perodca ncome from sources wthn t he Unted States on and after
pr 30,19 1. he w be abe to ta at the rate of I6 2 per cent upon
SUPPL M NT . NONR SID NT LI N INDI IDU LS.
S CTION 211. T O NONR SID NT
LI N INDI IDU LS.
Secton 19.211-7: Ta aton of nonresdent
aen ndvduas.
nterna revenue code
19 1-30-107 9
I. T. 3 9
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153
19.212-3.
such ncome, provded t does not e ceed 2 ,000. If such ncome
receved on or after pr 30,19 1, e ceeds 2 ,000, the nonresdent aen
w be abe to ta ether at the rate of 16 per cent upon the gross
amount of such ncome, or w be abe for the sum of the norma ta ,
surta , and defense ta , whchever method of computng the ta resuts
n the arger amount.
Income from sources wthn e Unted Stntes derved by nonres-
dent cn ndvduas nnd foregn corporatons from the operaton
of shps documented under the nws of the Commonweath of the
Phppnes s not e empt from Federa ncome ta under sectons
212(b) and 231 (d) of the Interna Revenue Code.
dvce s requested whether the ncome of nonresdent aen nd-
vduas and foregn corporatons derved from the operaton of shps
documented under the aws of the Commonweath of the Phppnes
s e empt from Federa ncome ta aton under sectons 212(b) and
231(d) of the Interna Revenue Code.
Under secton 212(b) and secton 231(d) of the Code, the ncome
from sources wthn the Unted States of nonresdent aen ndvduas
and foregn corporatons whch conssts of earnngs derved from the
operaton of a shp or shps documented under the aws of a foregn
country whch gants an equvaent e empton to ctzens of the Unted
States and to corporatons organzed n the Unted States need not be
ncuded n gross ncome and s e empt from Federa ncome ta aton.
ct No. 037. of the Commonweath of the Phppnes, approved
une 10, 19 1, entted n ct to e empt nonresdent ctzens of the
Unted States and corporatons organzed under the aws of the
Unted States from certan ta es, provdes n part as foows:
Sf ton 1. The ncome of nonresdent ctzens of the Unted States or cor-
poratons organzed under the aws of tte Unted States or any of Its potca
subdvsons, whch consst e cusvey of earnngs, derved from the operaton
of shps documented under the aws of the Unted States, e cept ncome derved
by them from the operaton of a shp or shps n the Phppne coastwse trade,
sha not be ncuded as a part of the gross ncome of such ctzens or corporatons
and sha be e empt from the ta estabshed under Tte II (Income Ta ) of the
Natona Interna Revenue Code.
Sec. 2. The ncome derved e cusvey by nonresdent ctzens of the Unted
States or by corporatons organzed under the aws of the Unted States or any
of ts potca subdvsons from the operaton of shps documented under the
aws of the Unted States, e cept ncome derved by such ctzens or corporatons
from the operaton of shp or shps n the Phppne coastwse trade, sha not
be ncuded n the computaton of the resdence ta coectbe under Common-
weath ct numbered 65, entted n act to mpose a resdence ta .
In the appcaton of the provsons of secton 212(b) and secton
231(d) of the Interna Revenue Code, the Phppne Isands can not
be consdered a foregn country snce they are a possesson of the
Unted States for Federa ncome ta purposes, notwthstandng the
1611 2 u
S CTION 212. GROSS INCOM .
Secton 19.212-2: cuson of earnngs of
foregn shps from gross ncome.
( so Secton 231, Secton 19.231-3.)
19 1 7-10903
I. T. 3517
1NT UN L NU COD .
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19.251-1.
15
estabshment of the Commonweath of the Phppnes under the
ct of March 2 , 193 ( 8 Stat., 56). (See secton 19.251- of Regu-
atons 103; see aso I. T. 2990, C. . -2,170 (1936).) Furthermore,
the above-quoted sectons of Commonweath ct No. 637 specfcay
e cude from the e empton provsons contaned theren ncome de-
rved from the operaton of a shp or shps documented under the
aws of the Unted States engaged n Phppne coastwse trade. Such
ncome s sub|ect to the ncome ta mposed by the Phppne Natona
Interna Revenue Code and to the resdence ta of the Commonweath
of the Phppnes.
In vew of the foregong, t s hed that ncome of nonresdent aen
ndvduas and foregn corporatons derved from the operaton of
shps documented under the aws of the Commonweath of the Php-
pnes s not e empt from Federa ncome ta under sectons 212(b)
and 231(d) of the Interna Revenue Code f such earnngs consttute
ncome from sources wthn the Unted States under secton 119 of the
Interna Revenue Code and the reguatons prescrbed thereunder.
SUPPL M NT I. FOR IGN CORPOR TIONS.
S CTION 231. T ON FOR IGN CORPOR TIONS.
Secton 19.231-3: cuson of earnngs of foregn
shps from gross ncome.
INT RN L R NG COD .
Shps documented under the aws of the Commonweath of the
Phppnes. (See I. T. 3517, page 153.)
SUPPL M NT . POSS SSIONS OF T UNIT D ST T S.
S CTION 251. INCOM FROM SOURC S WIT IN
POSS SSIONS OF UNIT D ST T S.
Secton 19.251-1: Ctzens of the Unted 19 1-27-10766
States and domestc corporatons dervng I. T. 3 88
ncome from sources wthn a possesson of
the Unted States.
INT RN L R NU COD .
The benefts of the provsons of secton 251 of the Interna
Revenue Code, reatng to ncome from sources wthn possessons
of the Unted States, may be apped to the personne attached
to Unted States nava vesses ony for such perods as the vesses
are wthn the terrtora waters of a Unted States possesson.
dvce s requested whether the benefts of secton 251 of the In-
terna Revenue Code may be apped for the fu ta abe year to
personne attached to Unted States nava vesses whch are based n
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155
19.251-1.
terrtora waters of a possesson of the Unted States even though
such vesses may be away from the terrtora mts of the possesson.
The pertnent provsons of secton 251 read as foows:
(a) Genera Ru.e. In the case of ctzens of the Unted States or domestc
corporatons, satsfyng the foowng condtons, gross ncome means ony gross
Income from sources wthn the Unted States
(1) If 80 per centum or more of the gross ncome of such ctzen or
domestc corporaton (computed wthout the beneft of ths secton), for
the 3-year perod mmedatey precedng the cose of the ta abe year (or
for such part of such perod mmedatey precedng the cose of such ta abe
year as may be appcabe) was derved from sources wthn a possesson of
the Unted States; and

(3) If, n case of such ctzen, 50 per centum or more of hs gross ncome
(computed wthout the beneft of ths secton), for such perod or such
part thereof was derved from the actve conduct of a trade or busness
wthn a posesson of the Unted States ether on hs own account or as
an empoyee or agent of another.
When compensaton s receved for servces rendered, the source
of the ncome s the pace where the servces are rendered rather than
the pace from whch payment s made for such servces. In other
words, the pace where the servces are rendered s the controng
factor n determnng the source of compensaton. Ths prncpe
of the source of compensaton s based upon the provsons of sec-
ton 119 of the Interna Revenue Code and the correspondng sec-
tons of pror Revenue cts. Secton 119 of the Code provdes n
part as foows:
(a) Gross Inccme from Somc S n Unted States. The foowng Items
of gross ncome sha be treated as ncome from sources wthn the Unted States I

(3) Persona servces. Compensaton for abor or persona servce
performed n the Unted States

(c) Gross Income from So-rces Wttho t Unted States. The foowng
tems of gross ncome sha be treated as ncome from sources wthout the
Unted States:

(3) Compensaton for abor or persona servces performed wthout
the Unted States .
(See aso secton 19.119-1 and secton 19.119-7 of Reguatons 103.)
ccordngy, t s hed that the benefts of the provsons of sec-
ton 251 of the Interna Revenue Code may be apped to the per-
sonne attached to Unted States nava vesses ony for such perods
as the vesses are wthn the terrtora waters of a possesson of the
Unted States.
Secton 19.251-1: Ctzens of the Unted States
and dmestc corporatons dervng ncome from
sources wthn a possesson of the Unted States.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5057, page 97.)
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I 19.291-1.
156
SUPPL M NT . C IN TR D CT CORPOR TIONS.
S CTION 262. CR DIT G INST N T INCOM .
Secton 19.262- : Wthhodng by a Chna Trade
ct Corporaton.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5071, page 1 2.)
SUPPL M NT M. INT R ST ND DDITIONS TO T T .
S CTION 291. F ILUR TO FIL R TURN.
Secton 19.291-1: ddton to ta n case 19 1-28-10777
of faure to fe return. T. D. 5058
TITL 20 INT RN L R NCR. C PT R I. SU C PT R , P RTS 8, 9,
ND 19. INCOM T .
mendng secton 19.201-1 of Reguatons 103 and artce 291-1 of
Reguatons 101 and 9 , reatng to addton to the ta n case of
faure to fe return.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Secton 19.291-1 of Reguatons 103 Part 19, Tte 26, Code of
Federa Reguatons, 19 0 Sup. , artce 291-1 of Reguatons 101
secton 9.291-1, Tte 26. Code of Federa Reguatons, 1939 Sup. ,
ard artce 291-1 of Reguatons 9 secton 3.291-1, Tte 26, Code of
Federa Reguatons , are amended as foows:
Paragraph 1. The frst sentence of secton 19.291-1 of Reguatons
103 s amended to read:
In case of faure to make and fe a return requred by chapter 1 wthn the
prescrbed tme, a certan per cent of the amount of the ta s added to the ta
uness faure to fe the return wthn the prescrbed tme s shown to the
satsfacton of the Commssoner to be due to reasonabe cause and not to wfu
negect.
Par. 2. The frst sentence of artce 291-1 of Reguatons 101 and 9
s amended to read:
In case of faure to make and fe a return requred by Tte I wthn the pre-
scrbed tme, a certan per cent of the amount of the ta s added to the ta uness
faure to fe the return wthn the prescrbed tme Is shown to the satsfacton
of te Commssoner to be due to reasonabe cause and not to wfu negect.
Par. 3. The thrd sentence of secton 19.291-1 of Reguatons 103
and artce 291-1 of Reguatons 101 and 9 s strcken out.
Par. . The fourth and ffth sentences of secton 19.291-1 of Regu-
atons 103 and artce 291-1 of Reguatons 101 and 9 are strcken
out and there s substtuted therefor the foowng:
ta payer who wshes to avod the addton to the ta for denquency must
make an affrmatve showng of a facts aeged as a reasonabe cause for
faure to fe the return on tme n the form of an affdavt whch shoud he fed
wth the coector, who, uness otherwse drected by the Commssoner, w
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157
19. 00-1.
forward the affdavt to the Commssoner, and, If the Commssoner determnes
that the denquency was due to a reasonabe cause, and not to wfu negect,
the addton to the ta w not be assessed.
(Ths Treasury decson s ssued under the authorty contaned n
sectons 62 and 291 of the Interna Revenue Code (53 Stat., 32, 88, 26
U. S. C, Sup. , 62, 291) and sectons 62 and 291 of the Revenue cts
of 1938 and 1936 ( 52 Stat., 80, 5 0, 26 U. S. C, Sup. , 62, 291; 9
Stat., 1673,1727, 26 U. S. C, Sup. II, 62, 291).)
Guy T. everng,
Commssoner of Interna Revenue.
pproved .Tdy 8. 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 9, 19 1, .23 p. m.)
SUPPL M NT T. INDI IDU LS WIT GROSS INCOM FROM C RT IN SOURC S OF
3,000 OR L SS.
S CTION 00. IMPOSITION OF T .
Secton 19. 00-1: Scope and appcaton of 19 1- 0-10851
Suppement T. T. D. 5079
( so Secton 01. Secton 19. 01-1; Secton
02, Secton 19. 02-1.)
TITL 26 INT RN L R NU . C PT R L. SU C PT R , P RT 19.
INCOM T .
Reguatons 103 amended. Optona ta on Indvduas wth
gross n -(ne from certan sources of 3,(100 or ess. Secton 102,
Revenue ct of 19 1 (Pubc Law 2.T0, Seventy-seventh Congress),
approved September 20, 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 103 Part 19, Tte 26, Code of
Federa Reguatons, 19 0 Sup. to the Revenue ct of 19 1 (Pubc
Law 250, Seventy-seventh Congress), approved September 20, 19 1,
such reguatons are amended as foows:
Paragraph 1. The foowng s nserted mmedatey after secton
19.396-1 (added by T. D. 5036 C. . 19 2-1, 276 ):
Sec. 102. Optona Ta on Indvduas Wth Ckrtan Gross Income
of 3,000 ob Less. (Revenue ct of 19 1, Tte I.)
(a) Optona Ta . The Interna Revenue Code Is amended by In-
sertng after secton 396 the foowng new Suppement:
Suppement T. Indvduas Wth Gross Income From Certan
Sources of 3,000 of Less.
Sec. 00. Imposton of Ta .
In eu of the ta mposed under sectons 11 and 12, an Indvdua
may eect, for each ta abe year, to pay the ta shown n the foowng
tabe f hs gross ncome for such ta abe year s 3,000 or ess and
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19- 00-.
158
conssts whoy of one or more of the foowng: Saary, wages, eom-
pensatoa for persona servces, dvdends, nterest, rent, annutes, or
royates:
1 If the gross Income ess 00 for each dependent Is
over
The ta sha be
ut not
over
Snge per-
ead of
son (not
famy or
head of a
marred
famy).
person.
750
0
0
775
1
0
800
2
0
825
3
0
850
5
0
875
7
0
900
9
0
925
11
0
950
1
0
975
16
0
1,000
18
0
1, 025
20
0
1, 050
22
0
1. 075
2
0
1. 100
26
0
1, 125
29
0
1, 150
31
0
1, 175
33
0
1, 200
35
0
1, 225
37
0
1, 250
39
0
1, 275
2
0
1,300

0
1, 325
6
0
1, 350
8
0
1, 375
. 50
0
1, 00
52
0
1, 25
55
0
1, 50
57
0
1, 75
59
0
1, 500
61
0
1, 525
63
1
1, 550
65
2
1, 575
68
3
1, 600
70
5
1, 625
72
6
1, 650
7
7
1, 675
76
9
1, 700
78
11
1, 725
80
13
1, 750
83
15
1, 775
85
17
1, 800
87
19
1, 825
89
22
1, 850
91
2
1, 875
93
26
1,900
96
28
1, 925
98
30
1,950
100
32
1,975
102
35
2, 000
10
37
2, 025
106
39
2, 050
109
1
2, 075
111
3
2, 100
113
3
2, 125
115
1...
750.
775-
825...
s.-,o_._
875
900..-
925-_
950
975
1,000.
1,025.
1,050.
1,075.
1,100.
1,125.
1,150.
1,175.
1,200.
1,225.
1,250.
1,275.
1,300_
1,325.
1,350.
1,375-
1, 00-
1, 25.
1, 50.
1, 75.
1,500.
1,525.
1,550.
1,575.
1,600.
1,625.
1,650.
1,675.
1,700.
1,725.
1,750.
1,775.
1,800.
1,825.
1,850.
1,875.
1,900.
1,925.
1,950.
1,975.
2,000.
2,025.
2,050.
2,075.
2,100.
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159
19. 00-1.
If the Rross ncome ess 00 for each dependent) s
The ta sha be
ut not
over
Snge per-
son (not
head of a
famy).
ead of
famy or
marred
person.
2, 150
117
50
2, 175
119
52
2, 200
122
5
2, 225
12
56
2, 250
126
58
2, 275
128
60
2, 300
130
63
2, 325
132
65
2, 350
13
67
2, 375
137
69
2, 00
139
71
2, 25
1 1
73
2, 50
1 3
76
2, 75
1 5
78
2, 500
1 7
80
2, 525
150
82
2, 550
152
8
2, 575
15
86
2, 600
156
89
2, 625
158
91
2, 650
160
93
2, 675
163
95
2, 700
165
97
2, 725
167
99
2, 750
169
102
2. 775
172
10
2,800
17
106
2, 825
177
108
2, 850
180
110
2, 875
183
112
2, 900
86
11
2, 925
189
117
2, 950
191
119
2, 975
19
121
3, 000
197
123
2.125
2,150-.,
2,175
2,200.
2,225
2,250
2,275
2,300
2,325.
2,350
2,375
2, 00
2, 25.
2, 50
2, 75...
2,500
2,525
2,550. - ---
2,575
2,600
2,625 -.
2,650 -.
2,675
2,700
2,725
2,750
2,775
2,800 -.
2,825
2,850
2,875
2,900
2,925
2,950
2,975
In appyng the above schedue to determne the ta of a ta payer
wth one or more dependents there sha be subtracted from hs gross
ncome 00 for each such dependent.

S . 118. Ta abe Years to Whch mkndmk ts ppcabe
(Revenue ct of 10 1. Tte I.)
The amendments made by ths tte (e cept sectons 107, 115, 116,
and 117) shn be appcabe ony wth respect to ta abe years begnnng
after December 31, 19 0.
Sec. 19. 00-1. Scope and appcaton of Suppement T. In eu of the ta
mposed under sectons 11 and 12, an ndvdua may eect to pay the ta Im-
posed under secton ()0, f hs gross ncome does not e ceed 3,000, and f hs
gross ncome conssts whoy of one or more of the foowng: Saary, wages,
compensaton for persona servces, dvdends, Interest, rent, annutes, or
royates. For the purpose of the 3,000 mtaton, the amount of an Indvdua s
gross ncome sha be determned wthout subtractng any amount on account
of such ndvdua s dependents. For e ampe, has a gross Income, consstng
of saary, of 3,200 for 10 1. e has two dependents. For the purpose of
the 3,000 mtaton, hs gross ncome s 3,200, not 2, 00, and consequenty
he may not compute hs ta under Suppement T. n ndvdua dervng any
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I 19. 00-1.
160
other knd of ncome such as ncome from the conduct of a busness or from
a trust of whch he s a benefcary, or gans from the sae or e change of
property, may not compute hs ta under Suppement T. If any ndvdua
derves ncome from a partnershp of whch he s a member or from a trust
of whch he s a benefcary, and the partnershp or trust prevousy derved
the ncome dstrbuted to hm from rent, he w be consdered to have
receved ncome from a partnershp or trust, rather than from rent, and con-
sequenty w not be entted to compute hs ta under Suppement T.
husband and wfe vng together on the ast day of the ta abe year may fe
separate returns on Form 10 0 , f the gross ncome of each s from the prescrbed
sources and does not e ceed 3.0(10, or they may fe a snge |ont return, f
ther combned gross ncome s from the prescrbed sources and does not e ceed
3,000. If they fe separate returns, the ta abty of each under secton
00 s the ta mposed upon a snge person. If such husband and wfe fe
separate returns and ony one eects to make a return on Form 10 0 , the ta
abty of the one so eectng s the ta mposed upon a snge person. If
they fe a snge |ont return or f ony one spouse makes a return because the
other spouse as no gross ncome, the ta abty Is the ta mposed upon a
marred person.
In order to determne the amount of hs ta an ndvdua merey ascertans
the amount of hs gross ncome, subtracts 00 for each dependent for whom a
credt s aowabe (see ampe (3) n secton 19. 01-1), and refers to the
schedue set forth n secton 00 to fnd the amount of hs ta . If the ta -
payer s a snge person who s not the head of a famy, hs ta s set forth
n the thrd coumn of the schedue. If he s a marred person or the head
of a famy, hs ta s set forth n the fourth coumn. Under the schedue no
ta Is mposed upon a snge person whose gross ncome ess credt for de-
pendents does not e ceed 750, or upon a marred person or the head of a famy
whose gross ncome ess credt for dependents does not e ceed 1,500.
Sec. 102. Optona Ta on Indvduas Wth Ckrtan Gross Incomb
of 3,000 or Less. (Revenue ct of 19 1, Tte I.)
(a) Optona Ta . The Interna Revenue Code Is amended by In-
sertng after secton 396 the foowng new Suppement:

Sec. 01. Rues for ppcaton of Secton 00.
For the purposes of ths Suppement
(a) Defntons
(1) Marred person means a marred person vng wth
husband or wfe.
(2) Dependent means a person (other than husband or
wfe) dependent upon and recevng hs chef support from the
ta payer f such dependent person s under eghteen years of age
or s ncapabe of sef-support because mentay or physcay de-
fectve, e cudng as a dependent, n the ense of a head of a famy,
one who woud be e cuded under secton 25(b) (2) ( ).
(b) Determnaton of Status. The determnaton of whether a
person s vng wth husband or wfe, Is a head of a famy, or Is a
dependent, sha be made as of the ast day of the ta payer s ta abe
year.
(c) Separate Return of usband and Wre If a husband and
wfe vng together fe separate returns, each sha be treated as a
snge person.
(d) Marred Persons Not Lrvmo Wth usband or Wfe.
marred person not a head of a famy and not vng wth husband or
wfe sha be treated as a snge person.

Seo. 19. 01-1. Rues for appcaton of schedue n secton 00. The deter-
mnaton of whether a ta payer s a marred person or the head of a famy,
or whether he has a dependent, s to be made as of the ast day of such ta -
payer s ta abe year. The fact that the ta payer s status changes durng such
ta abe year s not matera.
ampe (1). has a gross ncome of 1,6 0, derved whoy from wages. e
was marred on uy 1, 19 1, and he and hs wfe were vng together on the ast
day of the ta abe year. e has no dependents. s wfe has no gross ncome.
In order to ascertan the ta mposed upon hm for the caendar year 19 1 under
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161
19. 00-1.
secton 00, refers to coumn of the schedue (appcabe to a marred per-
son), and fnds that the ta eved upon a ta payer whose gross ncome fas
wthn the bracket runnng from 1,625 to 1,650 s 7. Snce 1,6 0 Is wthn
ths bracket. s ta s 7.
ampe (2). , an unmarred person, has a grosa Income of 2,636 derved
whoy from rent and dvdends. Durng the frst seven months of 19 1, s
status s that of head of a famy, but on the ast day of the ta abe year hs
status s that of a snge person not the head of a famy. To determne hs ta ,
refers to the thrd coumn of the schedue (appcabe to a snge person who
s not the head of a famy) and fnds that the ta eved upon an ndvdua
whose gross ncome fas wthn the bracket runnng from 2,625 to 2,650 s
160. Snce 2,636 s wthn ths bracket, s ta s 160.
ampe (3). C has a gross ncome of 2,080 for the caendar year 19 1,
derved whoy from wages. s wfe des on October 1, and on the ast day
of the ta abe year he s supportng and mantanng a home for two dependent
chdren both of whom are under the age of 18. Snce C woud not occupy
the stntus of head of a fmy e cept for the fact that he mantans a home
for such chdren no amount may be subtracted from gross ncome on account
of one of such chdren. ccordngy, to ascertan hs ta , C subtracts ony
00 from 2,680, refers to the fourth coumn of the schedue (appcabe to the
head of a famy), and fnds that the ta n the case of a ta payer whose gross
ncome fas n the bracket runnng from 2,275 to 2,300 Is 63. Snce 2,280
fas wthn ths bracket, C s ta s 83.
Skc. 102. Optona Ta on Indvduas Wth Ckbtan Gnoss Income of
3,000 ob Lkss. (Revenue ct of 19 1, Tte I.)
(a) Optona Ta . The Interna Revenue Code s amended by
nsertng after secton 396 the foowng new Suppement:

Skc. 02. Manner of |tton.
The eecton referred to n secton 00 sha be consdered to have
been made f the ta payer fes the return prescrbed for ths Suppe-
ment and such eecton sha be Irrevocabe. If the ta payer for any
ta abe year has fed a return computng hs ta wthout regard to
ths Suppement, he may not thereafter eect for such year to compute
hs ta under ths Suppement

Sec. 19. 02-1. Manner of eecton to compute ta under Suppement T.
ta payer eects to compute hs ncome ta under Suppement T by fng a
return of hs gross ncome on Form 10 0 , the form prescrbed for ths Suppe-
ment If a husband and wfe both make such an eecton, they may fe a |ont
return reportng ther aggregate gross ncome or they may fe separate returns
reportng ther respectve gross ncomes. If they fe separate returns, the ta
of each sha be computed by reference to the thrd coumn of the schedue set
forth n secton 00.
n eecton under Suppement T once made for the ta abe year may not be
revoked by an amended return or otherwse, but a new eecton s aowed for
each subsequent ta abe year. If for any ta abe year the ta payer makes a
return wthout regard to Suppement T, he may not thereafter eect to have hs
ta computed under such suppement for that ta abe year.
Sec. 102. Optona Ta on Indvduas Wth Certan Gross Income
of 3,000 or Less. (Revenue ct of 19 1, Tte I.)
(a) Optona Ta . The Interna Revenue Code s amended by n-
sertng after secton 396 the foowng new Suppement:

Sec. 03. Credts ganst Ta Not owed.
Secton 31 (reatng to foregn ta credt) and secton 32 (reatng
to credt for ta es wthhed at source) sha not appy wth respect to
the ta mposed by ths Suppement.
Sec. 0 . Certan Ta payers Not gbe.
Ths Suppement sha not appy to a nonresdent aen ndvdua,
cr an estate or trust.

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I 19. 02-1.
162
(Ths Treasury decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat., 32; 26 U. S. C,
Sup. , 62) and secton 102 of the Revenue ct of 19 1 (Pubc aw
250, Seventy-seventh Gongress).)
Gut T. everng,
Commssoner of Interna Revenue.
pproved October , 19 1.
erbert . Gaston,
ctng Secretary of the Tresaury.
(Fed wth the Dvson of the Federa Regster October 6, 19 1, 11.22 a. m.)
S CTION 01. RUL S FOR PPLIC TION
OF S CTION 00.
Secton 19. 01-1: Rues for appcaton of schedue
n secton 00.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5079, page 157.)
S CTION 02. M NN R OF L CTION.
Secton 19. 02-1: Manner of eecton to compute ta
under Suppement T.
INT RN L R NU COD .
Reguatons 103, amended. (See T. D. 5079, page 157.)
Secton 19. 02-1: Manner of eecton to 19 1-52-10938
compute ta under Suppement T. I. T. 352
nterna revenue code.,
II a ta payer fes an Income ta return for any ta abe year under
the smpfed method provded by Suppement T of the Interna
Revenue Code, as added by secton 102 of the Revenue ct of 19 1, he
may not thereafter, ether before, on, or after March 15, fe a return
for that year under the genera provsons of the ncome ta aw.
dvce s requested whether the frst sentence of the second para-
graph of secton 19. 02-1, Reguatons 103, as amended by Treasury
Decson 5079 (page 157, ths uetn), reatng to the optona ta
on ndvduas wth certan gross ncome of 3,000 or ess, whch pro-
vdes that n eecton under Suppement T once made for any ta -
abe year may not be revoked by an amended return or other-
wse , means that a ta payer s barred from fng an
amended return on or before the due date of the return after he has
fed a return under Suppement T of the Interna Revenue Code, or
whether ony the fng of an amended return after the due date s
prohbted.
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163
I 600.
Secton 00 of the Interna Revenue Code, as added by secton 102
of the Revenue ct of 19 1, provdes n part as foows:
Sec. 00. Imposton of Ta .
In eu of the ta mposed under sectons 11 and 12, an ndvdua may eect,
for each ta abe year, to pay the ta shown n the foowng tabe f hs gross
ncome for such ta abe year s 3,000 or ess and conssts whoy of one or more
of the foowng: Saary, wages, compensaton for persona servces, dvdends,
nterest, rent, annutes, or royates:
Secton 02 of the Code, as added by secton 102 of the Revenue ct
of 19 1, provdes that:
Sec. 02. Manner or ecton.
The eecton referred to n secton 00 sha be consdered to have been made f
the ta payer fes the return prescrbed for ths Suppement and such eecton
sha be rrevocabe. If the ta payer for any ta abe year has fed a return com-
putng hs ta wthout regard to ths Suppement, he may not thereafter eect for
such year to compute hs ta under ths Suppement.
Treasury Department press reease dated October 6, 19 1 (Press
Servce No. 27-88), reads n part as foows:
Ths smpfed method of computng the ta under Suppement T s at the
opton of the ta payer. new eecton may be made each year. Once an eecton
has een made for any year, however, t s rrevocabe for that year. Therefore,
f a ta payer has fed a return under the smpfed method for any ta abe year,
he may not thereafter (ether before, on or after March 15) fe a return under
the genera provsons for that year. Conversey, f he has fed a return under the
genera provsons for any ta abe year, he may not thereafter fe a return under
the smpfed method for that year. ( rackets supped.)
In vew of the foregong, the nqury whether the sentence n the
reguatons above referred to means tat a ta payer, who has fed a
return under Suppement T, s barred from fng an amended return
on or before the due date of the return s answered n the affrmatve.
SU C PT R . D CL R D LU C SS-PROFITS T .
S CTION 000. R T OF T .
19 1-50-10926
Mm. 5288
Computaton of decared vaue e cess-profts ta prescrbed by
secton : IL of the Revenue ct of 10 1, amendng secton t(00 of the
Interna Revenue Code corporaton ncome and decared vaue
e cess-profts ta returns for the fsca years endng uy 31, 19 1,
to November 30, 19 1, ncusve.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, November 22, 19 1.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. Secton 302 of the Revenue ct of 19 1, approved September
20, 19 1 (Pubc aw 250, Seventy-seventh Congress, frst sesson),
amends secton 600 of the Interna Revenue Code (53 Stat., Part I)
by ncorporatng nto the rate of the decared vaue e cess-profts
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600.
16
ta the 10 per cent defense ta prescrbed n the amendment to the
Code effected by secton 20 of the Revenue ct of 19 0. Secton
600, as now amended, reads:
Sec. 600. Rate of Ta .
If any corporaton s ta abe under secton 1200 wth respect to any year
endng une 30, there sha be mposed upon ts net ncome for the ncome-ta
ta abe year endng after the cose of such year, an e cess-profts ta equa to
the sum of the foowng:
6 o per centum of such porton of ts net ncome for such ncome-ta ta abe
year as s n e cess of 10 per centum and not n e cess of 15 per centum of
the ad|usted decared vaue;
137 k per centum of such porton of ts net ncome for such ncome-ta ta abe
year as s n e cess of 15 per centum of the ad|usted decared vaue.
2. Corporaton ncome and decared vaue e cess-profts ta return
forms for the caendar year 19 1 and fsca years endng n 19 2 are
n course of preparaton and w be prnted n due course. New
return forms w not be prnted for decared vaue e cess-profts
ta purposes for the fsca years uy 31, 19 1, to November 30, 19 1,
ncusve. The Form 1120 prnted for the caendar year 19 0 shoud
be utzed for the decared vaue e cess-profts ta appcabe to
such fsca years by aterng the rate of ta n coumn 2 on ne 6
n the schedue headed Decared aue cess-Profts and Decared
aue cess-Profts Defense Ta Computaton, appearng on page
2 of the form, to read 6 0 and the rate n coumn 2 on ne 7 n
such schedue to read 1Z /10 , by competng the computaton wth
the atered rates through ne 8 of such schedue, and by dsregardng
competey nes 9 and 10 of such schedue.
3. The amount appearng on ne 8 under the foregong nstruc-
tons w be the ony ta due under the schedue referred to, and
such amount shoud be entered as tem 0 on page 1 of the Form
1120.
. The return on Form 1120 for fsca years endng uy 31, 19 1,
to November 30, 19 1, w be gven the usua premnary e amna-
ton n the coectors offces, wth partcuar attenton beng gven
to the computaton of the decared vaue e cess-profts ta to nsure
that the correct amount thereof s computed n the schedue men-
toned and s carred forward to ne 0 on the face of the return.
5. Correspondence reatng to the provsons of ths mmeograph
shoud refer to ts number and the symbos IT: TM.
Gt|y T. evertng,
Commssoner.
C PT R 2. DDITION L INCOM T S.
SU C PT R C SS PROFITS T .
19 1- 3-10879
T. D. 5091
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 21.
D CL R D LU C SS-PROFITS T .
Reguatons reatng to the decared vaue e cess-profts ta m-
posed by Subchapter of Chapter 2 of the Interna Revenue Code,
as amended, for ncome-ta ta abe years endng after une 30,
19 1.
Sectons 21.0 to 21.9 ssued under the authorty contaned n sectons 62 and 808 of
the Interna Revenue Code (53 Stat.. 32, 111 ; 26 U. S. C, Sup. , 62, 603) and the statu-
tory provsons whch such sectons of the reguatons foow.
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165
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. O.
To Coectors of Interna Revenue and Others Concerned:
Tabus of Contents.
Sec. 21.0. Introductory.
Sec. 21.1. Defntons.
See. 21.2. Scope of ta .
Sec. 21.3. Measure and rate of ta .
Sec. 21. . Method of computaton, e ampe.
Sec. 21.5. Returns.
Sec. 21.6. Payment of ta .
Sec. 21.7. Credts aganst ta prohbted.
Sec. 21.8. Determnaton of tu , assessment, coecton.
Sec. 21.9. Ta abe years affected.
Secton 21.0. Introductory. (a) Chapter 6 (Capta Stock Ta )
of the Interna Revenue Code (53 Stat., Part 1), as amended, and
appcabe for capta stock ta years endng une 30. begnnng wth
the year endng une 30, 19 1, provdes n part as foows:
Seo. 1200. Ta . s amended by secton 205 of the Revenue ct of
19 0 and secton 301 of Ihe Revenue ct of 19 1.
(a) Domestc Corporatons. For each year endng une 30, begnnng
wth the year endng une 30, 1939, there sha be mposed upon every
domestc corporaton wth respect to carryng on or dong busness for
any part of such year an e cse ta of 1.25 for each 1,000 of the ad-
usted decared vaue of ts capta stock.
(b) Foregn Cobporatons. For each year endng une 30, begnnng
wth the year endng une 30, 1930, there sha be mposed npon every
foregn corporaton wth respect to carryng on or dong busness n the
Unted States for any part of such year an e cse ta equvaent to 1.25
for each 1,000 of the ad|usted decared vaue of capta empoyed n
the transacton of ts busness n the Unted States.
Sec. 301. Capta Stock Ta . Revenue ct of 19 1.

(d) ffectve Date. Ts secton sha be effectve ony wth respect
to the year endng une 30, 19 1, and succeedng years.
ec. 1201. emptons.
(a) The ta es mposed by secton 1200 sha not appy
(1) Corporatons empt fbom Income Ta . To any corporaton
enumerated n secton 101;
(2) Insurance Companes. To any nsurance company sub|ect
to the ta mposed by secton 201, 20 , or 207.
(b) Common Trust Funds.
For e empton of common trust funds from the capta stock
ta , see secton 169(b) of Chapter 1.
Sec. 1202. d|usted Decared aue. s amended by secton 301
of the Revenue ct of 1939 and secton 202 of the Revenue ct
of 19 1.
(a) Decaraton Year.
(1) The ad|usted decared vaue sha be determned wth respect
to three-year perods begnnng wth the year endng une 80, 1938,
and each thrd year thereafter. The frst year of each such three-
year perod, or, n case of a corporaton not sub|ect to the ta m-
posed for such year, te frst year of such three-year perod for whch
the corporaton s sub|ect to such ta , sha consttute a dec-
araton year.
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166
(2) For the decaraton year of the frst three-year perod the
ad|usted decared vaue sha be the vaue as decared by the cor-
poraton n Its return under secton 601 of the Revenue ct of 1938,
52 Stat. 505, for (he year ended une 30, 1038, or n the case of a
corporaton not sub|ect to the ta mposed for such year, the vaue
as decared n ts return fed under ths chapter for the frst year
wth respect to whch t s sub|ect to the ta . For each subsequent
three-year perod, the ad|usted decared vaue for a decaraton year
sha be the vaue as decared by the corporaton n ts return for
such decaraton year. The vaue decared by a corporaton n ts
return for a decaraton year (whch decaraton of vaue cannot
be amended) sha be as of the cose of ts ast ncome-ta ta abe
year endng wth or pror to the cose of such decaraton year (or
as of the date of organzaton n the case of a corporaton havng
no ncome-ta ta abe year endng wth or pror to the cose of
such decaraton year).
(b) Subskquent Years.
(1) Domestc corporatons. For each year of any three-year
perod subsequent to the decaraton year, the ad|usted decared
vaue In the case of a domestc corporaton sha be the vaue
decared n the return for the decaraton year pus
( ) the cash, and the far market vaue of property, pad
n for stock or shares,
( ) pad-n surpus and contrbutons to capta,
(C) ts net ncome, computed wthout the deducton of the
ta Imposed by Subchapter of Chapter 2,
(D) ts ncome whoy e empt from Federa ncome ta , and
( ) the amount, f any, by whch the deducton for depeton
e ceeds the amount whch woud be aowabe f computed
wthout regard to dscovery vaue or to percentage depeton,
under secton 11 (b) (2), (3), or ( ) of Chapter 1 or a
correspondng secton of a ater Revenue ct;
and mnus
() the cash, and the far market vaue of property, ds-
trbuted to sharehoders,
(II) the amount dsaowed as a deducton by secton 2 (a) (5)
of chapter 1 or a correspondng provson of a ater Revenue
ct, and
() the e cess of the deductons aowabe for ncome ta
purposes (not ncudng the deducton for the ta mposed
by Subchapter of Chapter 2) over ts gross ncome.
The ad|ustments provded n ths paragraph sha be made
for each ncome-ta ta abe year ncuded In the three-year
perod from the date as of whch the vaue was decared n the
return for the decaraton year to the cose of the ast ncome-
ta ta abe year endng wth or pror to the cose of the year
for whch the ta s mposed by ths secton. The amount of
such ad|ustment for each such year sha be computed (on the
bass of a separate return) accordng to the ncome ta aw
appcabe to such year.
(2) Foregn corporatons. For each year of any three-year
perod subsequent to the decaraton year, the ad|usted decared
vaue In the case of a foregn corporaton sha be the vaue de-
cared n the return for the decaraton year ad|usted (for the same
ncome-ta ta abe years as n the case of a domestc corporaton),
n accordance wth reguatons prescrbed by the Commssoner
wth the approva of the Secretary, to refect ncreases or decreases
n the capta empoyed n the transacton of Its busness n the
Unted States.
(c) Corporatons n ankruptcy ob Recevershp. The capta-stock
ta year begnnng wth or wthn an ncome-ta ta abe year wthn
whch bankruptcy or recevershp, due to nsovency, of a domestc
corporaton, s termnated sha consttute a decaraton year. In such
case the ad|usted decared vaue of any subsequent year of the three-
year perod sha be determned on the bass of the vaue decared n
the return for such decaraton year.
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167
(d) Credt fob Chna Trade ct Cohporato s. For the purpose of
tbe ta mposed by secton 1200 there sha be aowed n the case of a
corporaton organzed under the Chna Trade ct, 1922, 2 Stat. 8 9,
(U. S. C Tte 15, c. ), as a credt aganst the ad|usted decared
vaue of ts capta stock, an amount equa to the proporton of such
ad|usted decared vaue whch the par vaue of the shares of stock of
the corporaton, owned on the ast day of the ta abe year by (1) per-
sons resdent n Chna, the Unted States, or possessons of the Unted
States, and (2) ndvdua ctzens of the Unted States or Chna
wherever resdent, bears to the pur vaue of the whoe number of
shares of stock of the corporaton outstandng on such date. For the
purposes of ths subsecon shares of stock of a corporaton sha be
consdered to be owned by the person n whom the equtabe rght to
the ncome from such shares s n good fath vested; and as used n
ths subsecton the term Chna sha have the same meanng as
when used n the Chna Trade ct, 192 _
(e) ddtona Decaraton Years. In the case of any domestc
corporaton, the year endng une 30, 1939, and the year endng une 30,
19 0, sha each, f not otherwse a decaraton year, consttute an add-
tona decaraton year f wth respect to such year (1) the ta payer so
eects (whch eecton cannot be changed) n Its return fed before the
e praton of the statutory fng perod or any authorzed e tenson
thereof, and (2) the vaue decared by the ta payer s n e cess of the
ad|usted decared vaue computed under paragraph (1) of subsecton
(b). If, under ths subsecton, the year endng une 30, 1939, s a
decaraton year, the computaton, under paragraph (1) of subsecton
(b), of the ad|usted decared vaue for the year endng une 30, 19 0,
sha be made on the bass of the vaue decared for the year endng
une 30, 1939.

(b) Subchapter of Chapter 2 of the Interna Revenue Code, as
amended and appcabe to ncome-ta ta abe years endng after
une 30, 19 1, provdes as foows:
Sec. 00. Rate of Ta . s amended by secton 20 of the Revenue
ct of 10 0, secton 506 of the Second Revenue ct of 19 0, and secton
302 of the Revenue ct. of 1 : 1.
If any corporaton s ta abe under secton 1200 wth respect to any
year endng une 30, there sha be mposed upon ts net ncome for the
ncome-ta ta abe year endng after the cose of such year, a decared
vaue e cess-profts ta .equa to the sum of the foowng:
ff o per centum of such porton of ts net ncome for such Income-ta
ta abe year as s n e cess of 10 per centum and not n e cess of 15
per centum of the ad|usted decared vaue;
13 o pe centum of such porton of ts net ncome for such ncome-ta
ta abe year as s n e cess of 15 per centum of the ad|usted decared
vaue.
Sec. 601. d|usted Decared ave.
Tbe ad|usted decared vaue sha be determned as provded n sec-
ton 1202 as of the cose of the precedng ncome-ta ta abe year (or as
of the date of organzaton f t had no precedng ncome-ta ta abe
year). If the ncome-ta ta abe year n respect of whch the ta under
secton 000 s mposed s a perod of ess than 12 mouths, such ad|usted
decared vaue sha be reduced to an amount whch bears the same rato
thereto as the number of mouths n the perod bears to 12 months.
Sec. 602. Net Income. s amended by secton 202 of the Revenue
ct of 19 1.
For the purposes of ths subchapter the net ncome sha be the same
as the net ncome for ncome-ta purposes for the year n respect of
whch the ta under secton 000 s mposed, computed wthout the
deducton of the ta Imposed by secton 600 or the ta mposed by Sub-
chapter of Chapter 2, but wth a credt aganst net ncome equa to
the credt for dvdends receved provded n secton 26(b) of chapter 1.
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168
Sue. 603. Othkb Laws ppcabe.
provsons of aw (ncudng penates) appcabe In respect of
the ta es mposed by chapter 1, sha, nsofar as not nconsstent wth
ths subchapter, be appcabe n respect of the ta mposed by secton
600, e cept that the provsons of secton 131 of that chapter sha not be
appcabe.
Sec. 60 . Pubcty of Returns.
For provsons wth respect to pubcty of returns under ths sub-
chapter, see subsecton (a)(2) of secton 55.
(c) Secton 53 of Chapter 1 of the Interna Revenue Code provdes
n part:
Seo. 53. Tme and Pace fob Fng Returns.
(a) Tme fob Fng.
(1) Genkba bue. Returns made on the bass of the caendar
year sha be made on or before the 15th day of March foowng
the cose of the caendar year. Returns made on the bass of a
fsca year sha be made on or before the 15th day of the thrd
month foowng the cose of the fsca year.
(2) tenson of tme. The Commssoner may grant a rea-
sonabe e tenson of tme for fng returns, under such rues and
reguatons as he sha prescrbe wth the approva of the Secre-
tary. cept n the case of ta payers who are abroad, no such
e tenson sha be for more than s months.
(b) To Whom Return Made.

(2) Corporatons. Returns of corporatons sha be made to the
coector of the dstrct n whch s ocated the prncpa pace of
busness or prncpa offce or agency of the corporaton, or, f t has
no prncpa pace of busness or prncpa offce or agency n the
Unted States, then to the coector at atmore, Maryand.
(d) Secton 1 5 of Chapter 1 of the Interna Revenue Code provdes
n part:
Sec. 1 5. Penates.
(a) Faure to Fe Retubns, Submt Informaton, or Pay Ta . ny
person requred under ths chapter to pay any ta , or requred by aw
or reguatons made under authorty thereof to make a return, keep any
records, or suppy any nformaton, for the purposes of the computaton,
assessment, or coecton of any ta mposed by ths chapter, who wfuy
fas to pay such ta , make such return, keep such records, or suppy
such nformaton, at the tme or tmes requred by aw or reguatons,
sha, n addton to other penates provded by aw, be guty of a msde-
meanor and, upon convcton thereof, be fned not more than 10,000,
or mprsoned for not more than one year, or bo, together wth the
costs of prosecuton.
(b) Faure to Coect and Pay over Ta , or ttempt to Defeat or
vade Ta . ny person requred under ths chapter to coect, account
for, and pay over any ta mposed by ths chapter, who wfuy fas
to coect or truthfuy account for and pay over such ta , and any
person who wfuy attempts In any manner to evade or defeat any ta
mposed by ths chapter or the payment thereof, sha, n addton to
other penates provded by aw, be guty of a feony and, upon convc-
ton thereof, be fned not more than 10,000, or mprsoned for not more
than fve years, or both, together wth the costs of prosecuton.
(c) Person Defned. The term person as used n ths secton n-
cudes an offcer or empoyee of a corporaton or a member or empoyee
of a partnershp, who as such offcer, empoyee, or member s under
a duty to perform the act n respect of whch the voaton occurs.

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169
(e) Secton 62 of Chapter 1 of the Interna Revenue Code provdes:
Sec. 62. Rues and Reguatons.
The Commssoner, wth the approva of the Secretary, sha prescrhe
and pubsh a needfu rues and reguatons for the enforcement of ths
chapter.
(/) Pursuant to the above-quoted provsons of the Interna Reve-
nue Code and other provsons of the Code, the foowng reguatons
are hereby prescrbed wth respect to the decared vaue e cess-profts
ta mposed by the Interna Revenue Code for ncome-ta ta abe
years endng after une 30, 19 1:
Secton 21.1. Defntons. s used n these reguatons, the term
(a) d|usted decared vaue means n the case of a domestc corporaton
the ad|usted decared vaue of ts capta stock as determned under secton 1202
of the Interna Revenue Code, as amended, and the reguatons ssued respectng
the capta stock ta mposed by secton 1200 of such Code, as amended, and n the
case of a foregn corporaton the ad|usted decared vaue of capta empoyed n
the transacton of ts busness n the Unted States as determned under such
secton 1202, as amended, and the reguatons Issued n reference thereto.
(6) Tarn, e cept as otherwse ndcated, means the decared vaue e cess-
profts ta mposed by secton 600 of the Interna Revenue Code, as amended.
(c) Income-taw ta abe year means the caendar year, the fsca year endng
durng such caendar year, or the fractona part of a year, upon the bass of
whch the corporaton s net ncome s computed and for whch ts ncome ta
returns are made for Federa Income ta purposes.
(d) Net ncome means net ncome wthn the contempaton of secton
21 of the Interna Revenue Code. Nether the amount of ncome ta mposed
by the Interna Revenue Code or by pror aws, nor the amount of the ta
mposed by Subchapters or of Chapter 2 of the Interna Revenue Code, shaU
be deducted from net ncome n computng the decared vaue e cess-profts ta
and none of the credts aowed corporatons aganst net ncome for ncome
ta purposes are appcabe n respect of, the decared vaue e cess-profts ta
e cept the credt aganst net ncome equa to the credt for dvdends receved
provded n secton 2(3(b) of the Interna Revenue Code.
Sec. 21.2. Scope of tu . The decared vaue e cess-profts ta , mposed by
secton 600 of the Interna Revenue Code, as amended, s mposed upon the net
ncome of every corporaton for each ncome-ta ta abe year endng after the
cose of any year endng une 30 n respect of whch the corporaton s sub|ect
to the capta stock ta mposed by secton 1200 of the Interna Revenue Code,
as amended.
Sec. 21.3. Measure and rate of ta . (a) Domestc and foregn corporatons.
The ta s mposed n an amount equa to the sum of (1) 6 o per cent
of such porton of the corporaton s net ncome for the ncome-ta ta abe year
as Is n e cess of 10 per cent and not n e ress of 15 per cent of the ad|usted
decared vaue pus (2) 13 0 per cent of such porton of ts net ncome for the
ncome-ta ta abe year as s n e cess of 15 per cent of the ad|usted decared
vaue, as of the cose of the ast precedng ncome-ta ta abe year (or as of
the date of organzaton f the corporaton had no precedng ncome-ta ta abe
year).
(6) d|usted decared vaue. No varaton s permtted between the ad|usted
decared vaue set forth n the corporaton s capta stock ta return and the
ad|usted decared vaue set forth n ts decared vaue e cess-profts ta return,
e cept that In the case of a decared vaue e cess-profts ta return for an
ncome-ta ta abe year whch s a perod of ess than 12 months the ad|usted
decared vaue set forth n ts. capta stock ta return sha be reduced to an
amount whch bears the same rato thereto as the number of months n the
perod bears to 12 months.
Sec. 21. . Metod of computaton; e ampe. The appcaton of the provsons
of secton 21.3 of these reguatons may be ustrated generay by the foowng
e ampe:
ampe. The M Corporaton, the ncome-ta ta abe year of whch s the
caendar year, s sub|ect to the capta stock ta mposed by secton 1200, as
amended, of the Interna Revenue Code, for the year endng une 30, 19 L The
For footnote, see p. 18 .
1611 2 12
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170
vaue decared n ts capta stock.ta return for the year endng une 30, 19 1,
of ts capta stock as of the cose of ts precedng ncome-ta ta abe year (the
caendar year 19 0), s 100,000. The net ncome of the corporaton for the
caendar year 19 1, determned under the Interna Revenue Code, s 25,000.
Durng ts ta abe year the corporaton receved dvdends from corporatons
sub|ect to ta aton under Chapter 1 of the Interna Revenue Code, amountng to
5,000. The decared vaue e cess-profts ta for the caendar year 19 1 s
1,089, computed as foows:
Net ncome for caendar year 19 1 25,000
Less:
Credt for dvdends receved (85 per cent of 5,000) ,250
aance of net ncome 20, 750
Less:
10 per cent of the vaue decared n the capta stock ta return for
the year endng une 30, 19 1, of the capta stock as of December
31, 19 0 (10 per cent of 100,000) 10,000
Net ncome sub|ect to decared vaue e cess-profts ta 10,750
Less:
mount ta abe at 6 o per cent, porton of net ncome n e cess of
10 per cent and not n e cess of 15 per cent of the ad|usted decared
vaue of the capta stock as of December 31, 19 0 ( 15,000 mnus
10,000) 5,000
mount ta abe at 13 o P t cent 5,750
Decared vaue e cess-profts ta at 6 o per cent (6 o per cent of
5,000) 330
Decared vaue e cess-profts ta at S n per cent (13 ) per cent of
5,750) 759
Tota decared vaue e cess-profts ta ( 330 pus 759) 1,089
Skc. 21.5. Returns. very corporaton whch s sub|ect to the capta stock
ta mposed by secton 1200 of the Interna Revenue Code, as amended, for
any year sha make a decared vaue e cess-profts ta return for each ncome-
ta ta abe year whch ends after the cose of the year n respect of whch
t s sub|ect to such capta stock ta . There s no provson n the Interna
Revenue Code whch authorzes (he makng of a consodated return by an
affated group of corporatons for the purpose of the decared vaue e cess-
profts ta mposed by secton 600 of the Interna Revenue Code, as amended.
ccordngy, every corporaton whch s abe for the makng of a decared
vaue e cess-profts ta return under secton 600 of the Interna Revenue Code,
as amended (for any ncome-ta ta abe year endng after une 30, 19 1),
whether or not such corporaton s a member of an affated group of cor-
poratons, must make ts decared vaue e cess-profts ta return and compute
ts net Income separatey, wthout regard to the provsons of secton 1 1 of
the Interna Revenue Code, as amended.
The decared vaue e cess-profts ta return sha be made wthn the tme
prescrbed for makng the corporaton s Federa ncome ta return for the
ncome-ta ta abe year, and sha be made to the coector of nterna revenue
to whom such ncome ta return s requred to be made.
Sec. 21.0. Payment of ta . The decared vaue e cess-profts ta for any
ncome-ta ta abe year sha be pad wthn the tme prescrbed for payng
the Federa ncome ta for such ta abe year.
Sec. 21.7. Credts aganst ta prohbted. Foregn ncome and profts ta es
may not be credted aganst the decared vaue e cess-profts ta mposed by
secton 600 of the Code, as amended.
Sec. 21.8. Determnaton of ta-r, assessment, coecton. The determnaton,
assessment, and coecton of the ta , and the e amnaton of returns and
cams n connecton therewth, w be made under such procedure as may be
prescrbed from tme to tme by the Commssoner.
For footnote, see p. 16 .
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171 Regs. 109. | 30.722-5.
Sec. 21.9. Ta abe years affected. These reguatons reate soey to neome-
ta ta abe years endng after une 30, 19 1, and supersede any prevous regu-
atons reatve to decared vaue e cess-profts ta for such years.
Norman D. Cann,
ctng Commssoner of Interna Revenue.
pproved October 17, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 21, 19 1, 11.3 a. m.)
SU C PT R . C SS PROFITS T -
S CTION 718. UITY IN ST D C PIT L.
Reguatons 109, Secton 30.718-1: Determnaton of
day equty nvested capta Money and property
pad n.
C SS PROFITS T CT OP 19 0.
Reguatons 109, amended. (See T. D. 5059, page 125.)
Reguatons 109, Secton 30.718-2: Determnaton of
day equty nvested capta ccumuated earnngs
and profts.
e cess profts T CT OF 10 0.
Reguatons 109, amended. (See T. D. 5059, page 125.)
S CTION 722. D USTM NT OF NORM L
S P RIOD N T INCOM .
Reguatons 109, Secton 30.722-5: ppca- 19 1- 1-10853
ton for reef under secton 722. I. T. 3509
INT RN L R NU COD .
n e tenson of tme for fng Form 991 ( ppcaton for reef
under secton 722 of the Interna Revenue Code) may not be granted
where the tme for fng an e cess profts ta return has not been
e tended. Where the tme for fng an e cess profts ta return has
been e tended, the 6-month perod (prescrbed by secton 722(e)
of the Code) for fng Form 991 runs from the date to whch such
e tenson was granted.
dvce s requested whether an e tenson of tme may be granted
for fng Form 991 ( ppcaton for reef under secton 722 of the
Interna Revenue Code) whch s prescrbed by secton 30.722-5,
Reguatons 109, reatng to the e cess profts ta under the Interna
Revenue Code, as amended.
Secton 722 of the Interna Revenue Code, reatng to ad|ustment of
abnorma base perod net ncome, was added (by amendment) to the
For footnote, see p. 16 .
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Regs. 110, 33.11(a).
172
Code by secton 6 of the cess Profts Ta mendments of 19 1
(Pubc aw 10, Seventy-seventh Congress), approved March 7, 19 1
(C. . 19 1-1, 535). Secton 722(e) of the Code provdes n part
as foows:
(e) ppcaton for Reef Undfr Ths Secton. The ta payer sha com-
pute ts ta and fe ts return under ths subchapter wthout the appcaton
of ths secton. The benefts of ths secton sha not be aowed uness the ta -
payer, wthn s months from the date prescrbed by aw for the fng of ts
return, makes appcaton therefor In accordance wth reguatons to be pre-
scrbed by the Commssoner wth the approva of the Secretary . If
the appcaton s not fed wthn s months after the date prescrbed by aw
for tn fng of the return, the appcaton of tns secton sha not reduce the
ta otherwse determned under ths subchapter by an amount n e cess of the
amount of the defcency fnay determned under ths subchapter wthout the
appcaton of ths secton.
Secton 30.722-5 of Reguatons 109, reatng to the e cess profts
ta under the Interna Revenue Code, as amended, whch secton was
added to Reguatons 109 by Treasury Decson 50 5 (C. . 19 1-1, -9),
reads n part as foows:
Skc. 30.722-5. ppcaton for reef under secton 722. (a) In genera. The
ta payer s not permtted to cam the beneft of secton 722 n computng ts
e cess profts ta upon ts return, e cept as provded n (c) of ths secton.
In order o obtan the benefts of secton 722 for any ta abe year a ta payer
wthn s months after the tme prescrbed by aw for fng ts e cess profts
ta return for such year must fe under oath an appcaton on Form 991 for the
beneft of secton 722. uness the provsons of (6) or (c) of ths secton are
appcabe to -such ta payer. For the purposes of ths secton, the tme pre-
scrbed b;/ hv for fng the return ncudes the perod of any e tenson of tme
granted bp the Commssoner. Itacs supped.
Secton 30.729-1 of Reguatons 109, supra, provdes that e cess
profts ta returns, Form 1121, revsed, sha be fed at the same tme
and pace as the tme and pace prescrbed n sectons 53 and 235
and the ncome ta reguatons under such sectons for the fng
of ncome ta returns, wth an e cepton not deemed matera.
In vew of the foregong, t s hed that an e tenson of tme for
fng Form 991 ( ppcaton for reef under secton 722 of the In-
terna Revenue Code) may not be granted where the tme for fng
an e cess profts ta return, Form 1121, revsed, has not been e tended.
Where the tme for fng an e cess profts ta return has been e tended,
the 6-month perod (prescrbed by secton 722(e) of the Code) for
granted.
S CTION 730. CONSOLID T D R TURNS.
Secton 33.11 (Reguatons 110).
Reguatons 110 amended. (See T. D. 5087, page 1 1.)
fng Form 991 runs
whch such e tenson was
Reguatons 110, Secton 33.11(a): Conso-
dated returns requred for subsequent years.
19 1- 5-10889
I. T, 3515
INT RN L R NU COD .
ffated corporatons whch fed a consodated e cess profts ta
return for 19 0 may fe ether separate returns or a consodated
return for 19 1.
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173
3670.
dvce s requested whether affated corporatons whch fed a
consodated e cess profts ta return for the ta abe year of the group
begnnng n 19 0 may fe separate returns for the ta abe year be-
gnnng n 19 1.
Secton 33.11(a) of Reguatons 110, as amended by Treasury
Decson 50S7 (page 1 1, ths uetn), provdes:
(a) Consodated returns requred for subsequent years. If a consodated
return s made under these reguatons for any ta abe year, a consodated
return must be made for each subsequent ta abe year durng whch the affated
group remans n e stence uness (1) a corporaton (other than a corporaton
created or organzed, drecty or ndrecty, by a member of the group) has
become a member of the group durng such subsequent ta abe year, or (2)
Chapter 1 of the Code to the e tent appcabe to corporatons, or Subchapter
of Chapter 2 of the Code, or these reguatons whch have- been consented to,
have been amended and any such amendment s of a character whch makes
ess advantageous to affated groups as a cass the contnued fng of consodated
returns, or (3) the Commssoner, pror to the tme of makng the return, upon
appcaton made by the common parent corporaton and for good cause shown,
grants permsson to change.
It s the opnon of ths offce that Subchapter of Chapter 2 of the
Interna Revenue Code has been so amended by Tte II of the Revenue
ct of 19 1 as to make ess advantageous to affated groups as a cass
the contnued fng of consodated e cess profts ta returns for
ta abe years begnnng after December 31, 19 0, and that, therefore,
under the above-quoted reguaton, affated corporatons whch fed
a consodated e cess profts ta return for the ta abe year of the
group begnnng n 19 0 may, notwthstandng the fng of such
return, fe separate returns for the ta abe year begnnng n 19 1.
MISC LL N OUS.
S CTION 3670. PROP RTY SU CT TO LI N.
19 1-30-10790
Ct, D. 152
F D R L T S R IS D ST TUT S D CISION OF COURT.
1. Lens fob Federa Ta ks Lens fob State and Loca Ta es and
Speca ssessments Prorty.
Lens of the Unted States for Income ta es, whch become ens
upon property as of the dates when the assessment sts are receved
n the offce of the coector of nterna revenue, are effectve aganst
the property of the ta payer notwthstandng the property s not
specfcay descrbed. Federa ta ens have prorty over State,
county, and cty ens for ta es and speca assessments subsequenty
assessed aganst specfc property. The prncpe frst n tme, frst
n rght s appcabe to Federa and State ta ens. Secton 3180
of the Revsed Statutes (sectons 3 70-3G72, I. It. C.) does not per-
mt the States to nterfere wth Federa ta ens by subsequent
e ercse of ther ta ng powers.
2. Decson Reversed.
Decson of the Dstrct Court of the Unted States for the Western
Dstrct of South Carona (19 0) (3 Fed. Supp.. 281) reversed.
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3670.
17
Unted States Crcut Court of ppeas fob the Fourth Crcut.
Unted States of merca, appeant, v. Cty of Greenve, 8. ft, and County of
Greenve, S. ft, appeees. (In the case of Unted States of merca v. Robert
I. Woodsde ct a.)
Unted States of merca, appeant, v. Cty of Greenve, S. ft, and County of
Greenve, 8. ft, appeees. (In the case of Unted States of merca v. ohn
T. Woodsde et a.)
1118 Fed. (2d), 963.1
ppeas from the Dstrct Court of the Unted States for the Western Dstrct of South
Carona, at Greenve.
pr 7, 19 1.
OPINION.
Parker, Crcut udge: Ths s an appea n two suts nsttuted under R. S.
3207 ( 26 U. S. C. ., 3678), to forecose ens of the Unted States for ncome
ta es due by Robert I. Woodsde and ohn T. Woodsde on rea estate owned by
them. The court beow hed that ta cams of the State of South Carona and
the county of Greenve and ta and speca assessment cams of the cty of
Greenve were ens pror to the ens of the Unted States and accordngy
drected the dstrbuton of funds receved n the forecosure sut to the payment
of these cams to the e cuson of the cams of the Unted States. From ths
|udgment the Unted States has anr|eaed.
The facts are that ncome ta es due the Unted States were assessed aganst
Robert I. Woodsde for the years 1920, 1921, 192 , and 1925 n the aggregate
amount of 15,36 .03 and aganst ohn T. Woodsde for the years 1920, 1921, 1925,
and 1926 n the amount of 52,182.63. The assessment st, as to each ta payer,
was receved by the coector of nterna revenue for the dstrct and was fed
n hs offce May 20,1930, and demand upon ta payer for payment was duy made.
Subsequenty these suts were red for the forecosure of the ens so obtaned
and the ands sub|ect to the ens were sod by the marsha under order of court.
The ta cams of the State, cty, and county represent ta es assessed aganst
ths property subsequent to the year 1930, and the same s true as to the speca
assessment cams of the cty of Greenve, wth the e cepton of an tem of
835.75 assessed n 1929. as to whch the Unted States concedes prorty of en
to the cty. The proceeds of the ands sod are not suffcent to satsfy the cams
for ta es; and e queston s squarey presented whether the ens of the Unted
States have prorty over the ens of the State, county, and cty for ta es and
speca assessments subsequenty assessed or whether these are to be gven
prorty over the antecedent ens acqured by the Unted States.
The decson of the earned udge beow accorded prorty to the ens of the
State, county, and cty on the ground that they were specfc ens aganst the
property, whereas the ens of the Unted States were genera ens; but we see
no basLs for ths dstncton. It s true, of course, that the State, county, and
cty ta es were assessed aganst the specfc property and became ens upon t.
(S. C. Code of 1932, sectons 2569, 2571, and 7 70.) nd the same s true of the
pavng assessments made by the cty. (Code secton 7376.) ( catty v. Wtte-
kamp et a., 171 S. C, 326, 172 S. ., 122.) ut-these ens were acqured subse-
quent to the acquston of the ens of the Unted States for ncome ta es, whch
became ens upon the property, no ess vad than f they had been assessed
aganst the property tsef, as soon as the assessments were fed n the offce of
the coector of nterna revenue. R. S. 3186 (as amended by the ct of Mav 29,
1028, ch. 852, secton 613, 5 Stat., 875) (26 U. S. C. ., 3670-3672), provdes:
If any person abe to pay any ta negects or refuses to pay the same after
demand, the amount (ncudng any nterest, penaty, addtona amount, or
addton to such ta , together wth any costs that may accrue n addton thereto)
sha be a en n favor of the Unted States upon a property and rghts to
property, whether rea or persona, beongng to such person. Uness another
date s specfcay f ed by aw, the en sha arse at the tme the assessment
st was receved by the coector and sha contnue unt the abty for such
amount s satsfed or becomes unenforceabe by reason of apse of tme.
(b) Such en sha not be vad as aganst any mortgagee, purchaser, or
udgment credtor unt notce thereof has been fed by the coector
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175
3670.
(1) In accordance wth the aw of the State or Terrtory n whch the prop-
erty sub|ect to the en s stuated, whenever the State or Terrtory has by aw
provded for the fng of such notce; or
(2) u the offce of the cerk of the Unted States dstrct court for the.|udca
dstrct n whch the property sub|ect to the en s stuated, whenever the State
or Terrtory has not by aw provded for the fng of such notce; or
(3) n the offce of the cerk of the Supreme Court of the Dstrct of Coumba,
If the property sub|ect to the en s stuated n the Dstrct of Coumba.
To say that the en provded by ths statute s a genera en on a the
property of the ta payer does not hep n the souton of the probem presented;
for a en s not deprved of vadty because t attaches to a number of peces
of property nstead of to a snge pece, nor s t for that reason to be subord-
nated to a |unor en attachng to a snge pece of property. When propery
perfected, the en under the statute consttutes a charge upon specfc property
of the ta payer for the satsfacton of whch that property may be sod under
proceedngs nsttuted for the purpose. s sad n Metropotan Lfe Ins. Co. v.
Unted States (6 Cr., 107 Fed. (2d), 311, 313), The Federa statutes create
specfc ens for ta es and as a coroary gve a specfc remedy for ther remova
and when such ens once attach, they may be fted ony as provded thereunder.
Such en s ceary not a mere nchoate en, or rght to en, as hed n erson
et a. v. Shubert Theater Corporaton (7 Fed. Supp., 399) ; for not ony was t
deemed necessary n the statute tsef to provde that the en shoud not be
vad aganst any mortgagee, purchaser or udgment credtor unt the proper
fng of notce, but provson aso was made by the ct of une 29, 1939 (53
Stat, 882, 26 U. S. C. ., 3672(b)), that, notwthstandng the fng of such notce,
such en shoud not be a vad en upon certan descrbed securtes as aganst
mortgagees, pedgees or purchasers, f they were hoders for an adequate and
fu consderaton and wthout notce or knowedge of the e stence of such
en. No such provsons woud be necessary f the en were ntended to be
a mere nchoate rght to a en whch woud attach to specfc property ony after
proceedngs had been nsttuted for ts enforcement
fter the en provded by the statute attaches, the property has n a sense
two owners, the ta payer and, to the e tent of the en, the Unted States.
(Commssoner v. Coward, 3 Cr., 110 Fed. (2d), 725, 727 Ct. D. 1 58, C. . 19 0-1,
123 .) The en can not be affected by State egsaton respectng the recordng
or regsterng of mortgages or ens. (Unted States v. Snyder, 1 9 U. S., 210;
In re Dartmont Coa Co., Cr., 6 Fed. (2d), 55.) Nor can t be affected by
homestead, spendthrft trust or stock transfer acts of the States, (Staey v.
aughn, Te ., , 50 S. W. (2d), 907; Re state of Rosenberg, 209 N. Y.,
2 7, 199 N. ., 206, 105 . L. ., 1238; Unted Staes v. Rosenfed, 26 Fed. Supp.,
33; Cannon v. Nchoas, 10 Cr., 80 Fed. (2d), 93 .) nd we thnk t equay
cear that, wthout the consent of Congress, t can not be affected by the e ercse
of State ta ng power. (MvCuoch v. Maryand, Wheat., 316, 36; Unted
States v. Wrght, Cr., 53 Fed. (2d), 301.)
Whether vewed as an nterest of the Federa Government n the property to
whch t has attached or as an nstrumentaty of the Federa Government for
the coecton of ta es due that Government, t s beyond mparment by the e er-
cse of State power. In the frst vew, t must be remembered that property
of the Federa Government may not be ta ed by the States wthout the consent of
Congress, and, n the second, that Congress has power to ay and coect ta es
of the sort here nvoved and to make a aws necessary and proper for that
purpose, and that such aws, when made, are the supreme aw of the and.
(Consttuton, rtce I, secton 8, rtce I; 20 R. C. L., 107-108; McCuoch v.
Maryand, supra; Forda v. Meon, 273 U. S., 12, 17.) In the case ast cted,
whch nvoved the contenton that the Federa estate ta nterfered wth the
State s power of ta aton, the Court sad:
The ct assaed was passed by Congress n pursuance of ts power to ay
and coect ta es, and, foowng the decson of ths Court n respect of the pre-
cedng ct of 1916 (New York Trust Co. v. sner, 256 U. S., 3 5), must be hed
to be consttutona. If the ct Interferes wth the e ercse by the State of
ts fu powers of ta aton or has the effect of removng property from ts reach
whch otherwse woud be wthn t, that s a contngency whch affords no
ground for |udca reef. The ct s a aw of the Unted States made n
pursuance of the Consttuton and, therefore, the supreme aw of the and, the
consttuton or aws of the States to the contrary notwthstandng. Whenever
the consttutona powers of the Federa Government and those of the State come
nto confct, the atter must yed.
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I 3670.
176
In IfcCuOoch v. Maryand, supra, the Court, speakng through Chef ustce
Marsha, sad:
The Court has bestowed on ths sub|ect Its most deberate consderaton.
The resut s a convcton that the States have no power, by ta aton or otherwse,
to retard, Impede, burden, or n any manner contro, the operatons of the con-
sttutona aws enacted by Congress to carry nto e ecuton the powers vested
n the Genera Government Ths s, we thnk, the unavodabe consequence of
that supremacy whch the Consttuton has decared.
Whether the en provded by the statute s entted to prorty over antecedent
ens for ta es duy perfected by States or muncpates, Is a queston whch s
not before us and whch we need not decde. It woud seem, however, that the
en was ntended to attach to the property of the ta payer sub|ect to e stng
encumbrances; and ths s borne out by the provson that t sha not be vad
as aganst mortgagees, purchasers or |udgment credtors unt notce thereof
s duy fed as provded by the ct. Ths nterpretaton paces ens of the
Federa Government and ens of the States on an equa bass for the appcaton
of the prncpe frst n tme, frst n rght (Rankn v. Scott, 12 Wheat., 177, 179),
whch s the prncpe ordnary apped wth, respect to prorty of ens, and
the one apped between a ta en and other ens where the ta en s not
made paramount by statute. (61 C. ., 93 .) The contenton that prorty of
rght shoud not be accorded a en of the Federa Government pror n tme
because the statute contans no provson that the Federa ta sha be frst pad.1
Ignores the prncpe that a State may not burden the ta ng power of the Federa
Government wthout ts consent, and that, n the absence of such consent, no
ta upon the property of the Federa Government or any of ts nstrumentates
can be sustaned. The thng of sgnfcance to be noted-s, not that the statute
does not gve prorty to the Federa ta , but that t does not grant permsson
to the States to nterfere wth a en of the Federa Government by subsequent
e ercse of ther ta ng powers.
We have noted the cases of Cty of Wnston-Saem v. Powe Pavng Co. (7 Fed.
Supp., 2 ) and errymont Land Co. v. Davs Creek Coa Co. (119 W. a., 186,
192 S. ., 577) ; but, wth great respect to the courts by whch these decsons
were rendered, we are unabe to foow them. They fa to take account of the
fact that when the en created by the Federa statute has once attached to the
property of the ta payer t s as specfc a en on that property as the en for a
ta asserted aganst the property tsef; and they gnore the prncpe that, wth-
out the consent of the Federa Government, no acton of the States may affect ts
property or any nstrumentaty whch t has created for e ercse of Its awft
functons. s ponted out above, the en for ta es s a property rght of the
Federa Government. t the east, t s an nstrumentaty created by that
Government for the coecton of ts revenues. We know of no prncpe upon
whch t may be subordnated or ts vaue mpared by State acton, whether
through e ercse of the ta ng power or otherwse. The error of these cases
seems to have arsen from consderng the statutory en of the Federa Govern-
ment as anaogous to that of the hoder of a en under mortgage, whch s of
course sub|ect to the power of the State to ta the mortgaged property. The
dfference s that the rghts of the mortgagee as we as of the mortgagor n the
mortgaged property are hed sub|ect to the power of the State to ta t, whereas
the rghts of the Federa Government are not hed sub|ect to that power.
The deay n proceedng wth the forecosure of the ens presents no dffcuty.
It s not contended that the bar of the statute of mtatons has faen; and It Is
we setted that the rghts of the Government are not affected by aches of ts
offcers and that t s not estopped by ther conduct from assertng ts rghts.
(Unted States v. rkpatrck, 9 Wheat., 720, 735; Utah rower d Lght Co. v.
Unted States, 2 3 U. S., 389, 09; Chesapeake Deavare Cana Co. v. Unted
tates, 250 U. S., 123, 125.)
We agree wth the court beow that, as ho dstrbuton n an nsovency pro-
ceedng s nvoved, the provson of secton 3 66 of the Revsed Statutes (31
T . S. C. .. 191), provdng for prorty of payment of debts due the Unted States,
has no appcaton.
1 See In re Mount c uf Coa Co. (7 Fed. Supp., 603) and In re Wyey Co. (292 Fed.,
900). It a to be noted wth respect to the Wyey ease, however, that the queston
specfcay deat wth was not prorty of ens but of dstrbuton under the ankruptcy
ct.
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177
5 23(c), rt. 23(c)-.
For the reasons stated, the udgments appeaed from w be reversed, e cept
In so far as the |udgment In No. 7 8 accords prorty to the tem of 835.75 for
pavng assessments ratfed n 1929, and the causes w be remanded for further
proceedngs not nconsstent herewth.
Reversed.
. R NU CT OF 1938.
SU TITL . G N R L PRO ISIONS.
P RT II. COMPUT TION OF N T INCOM .
S CTION 23(b). D DUCTIONS FROM GROSS
INCOM : INT R ST.
rtce 23(b)-: Interest.
R NU CT OF 1938.
ccrua of nterest on addtona manufacturers e cse ta es for
the perod une 1932 to February 1936 not fnay determned unt
1938. (See I. T. 3 91, beow.)
S CTION 23(c). D DUCTIONS FROM GROSS
INCOM : T S G N R LLY.
rtce 23(c)-: Ta es. 19 1-29-10782
( so Secton 23(b), rtce 23(b)-.) I. T. 3 91
R NU CTS OF 1932, 193 , 1933, ND 1938.
For Federa ncome ta purposes, addtona manufacturers e cse
ta es for the perod une, 1932, to February, 1936, whch were not
fnay determned unt 193S, shoud be treated by the M Company,
whch keeps ts accounts and fes ts Federa ncome ta returns on
the accrua bass, as accrued abtes n the respectve (ncome
ta ) ta abe years n whch the saes gvng rse to the ta es were
actuay made. Interest on the addtona e cse ta es shoud he
accrued n accordance wth G. C. M. 9575 (C. . -, 381 (1931)),
whch hods that nterest on a defcency n ta shoud be accrued n
the year n whch the abty for the defcency s fnay determned,
ether by an agreement, fna order, or |udgment.
dvce s requested as to the proper year (or years) of accrua of
certan addtona manufacturers e cse ta es and nterest thereon
under the crcumstances heren stated.
The amount of manufacturers e cse ta es due from the ta payer,
the M Company, under secton 603 of Tte I of the Revenue ct of
1932 for the perod une, 1932, to February, 1936, was not determned
unt the year 1938. In December of that year, the ta payer agreed
to and pad addtona e cse ta es of 35a; doars and nterest thereon
of 12 doars. The ta payer, whch keeps ts accounts and fes ts
Federa ncome ta returns on the accrua bass, camed these amounts
as deductons n ts ncome and e cess profts ta return for the year
1938.
Secton 603 of Tte I of the Revenue ct of 1932 mposed a ta
equvaent to 10 per cent on specfed toet artces or preparatons sod
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23(c), rt, 23(c)- .
178
by a manufacturer, producer, or mporter, the ta beng based upon
the sae prce. Secton 619(b) 3 of that ct provdes that:
(b) If an artce s

(3) sod (otherwse than through an arm s-ength transacton) at ess than
the far market prce;
the ta under ths tte sha (f based on the prce for whch the artce s sod)
be computed on the prce for whch such artces are sod, n the ordnary course
of trade, by manufacturers or producers thereof, as determned by the Com-
mssoner.
In artce 15 of Reguatons 6, promugated under secton 619(b)
of the Revenue ct of 1932, t was provded, n reference to subdvson
(b)(3) thereof, that:
Where, through the e stence of speca arrangements between a manufacturer
and a purchaser (as n the case of ntercompany transfers at cost or at a fcttous
prce), the prce for whch artces are sod by the manufacturer does not refect
a far market prce, the sae s regarded as one made otherwse than through
on arm s-ength transacton. In such cases the ta sha be computed upon a
far market prce, whch, under the ct, the Commssoner s empowered to
determne.
The procedure outned n the foregong reguatons whereby the
Commssoner determnes a far market prce has been approved n
our|os, Inc., v. McGowan (85 Fed. (2d). 510, Ct. D. 12 2, C. .
1937-2, 502, certorar dened, 300 U. S., 682).
fter the enactment of the Revenue ct of 1932, the ta payer n the
nstant case organzed three whoy-owned subsdary corporatons to
whch t sod ts products at prces ower than current market prces.
It was necessary to ad|ust the seng prce of goods sod by the ta -
payer to ts subsdares to a far market prce so that the correct ta
due mght be determned. Ths computaton was competed and, as
prevousy stated, the ta was agreed to and pad n December, 1938.
The ssue presented s whether the amount of the addtona e cse
ta es became an accrued abty for Federa ncome ta purposes n
the years n whch the saes were actuay made or n the year 1938
when the amount of the e cse ta abty was fnay determned.
In Rawngs Manufacturng Co. v. Commssoner ( . T. ., 161),
the oard of Ta ppeas consdered a case, nvovng facts
smar to those n the nstant case. The ta payer n that case fed
e cse ta returns, reported saes of sportng goods, and pad a ta
thereon n accordance wth sect on 609 of the Revenue ct of 1932. n
e amnaton of the ta payer s returns and records for the perod uy
1, 1933, to une 30, 1936, dscosed addtona e cse ta es and nterest
n the amount of 10,605.02, whch were proposed aganst the ta -
payer n anuary, 1937. The addtona e cse ta es were accrued on
the ta payer s books and deducted n ts ncome ta return for the
fsca year ended February 28, 1937. In September, 1938, after con-
sderaton of the ta payer s protest as to the amount of ts abty,
addtona e cse ta es and nterest thereon for the perods n queston
were agreed to and pad by the ta payer n an amount ess than that
orgnay proposed. In the defcency notce determnng the ta abe
net ncome for ncome ta purposes for the fsca year ended February
28,1937, the ta payer was aowed a deducton of the addtona e cse
ta appcabe to the fsca year 1937 n the amount of 89.06, and the
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179
23(c), rt. 23(c)- .
baance was dsaowed. The oard uphed the Commssoner s deter-
mnaton for 1937 and stated that the addtona e cse ta es appcabe
to saes made n earer years were deductbe ony n the years for
whch the ta es were mposed.
In Foyd. Incorporated, v. Commssoner ( 3 . T. ., 101, acqu-
escence, C. . 19 1-1, ), the oard of Ta ppeas had occason to
consder a case nvovng the accrua of ncome ta es. In that case,
the oard, on October 9, 1935, found a defcency n ncome ta es for
the ta abe year 1930 under secton 10 of the Revenue ct of 1928.
The ta payer had, on December 31, 193 , set asde n a specay desg-
nated reserve fund the amount of 13, 5.25 (a of ts 193 net ncome)
to be apped to the payment of proposed defcences for 1930 and
1931, and t camed ths amount as a deducton under secton
351(b)2( ) of the Revenue ct of 193 n ts persona hodng com-
pany ta return for 193 on the theory that t represented an amount
used or set asde to retre ndebtedness ncurred pror to anuary 1,
193 . The ureau dsaowed ths deducton on the ground that the
proposed defcences for the years 1930 and. 1931 consttuted ony a
contngent abty and dd not become a f ed or absoute abty
unt fnay determned by the oard on October 9, 1935. On an
appea to the oard from the dsaowance of such deducton, the
oard sad n ts opnon:
the factua crcumstances e stng In 1930 and the then
appcabe statute had aready f ed pettoner s ta abty . The
defcency notce proposed the assessment of addtona ta es n a certan amount
and the oard s decson redetermned the amount by appyng the aw to the
facts as estabshed by events whch had occurred n 1930 .
The pettoner s correct ta abty, as Imposed by aw, was ascertanabe at
the cose of 1930 and the controversy between the pet-
toner and the Commssoner as to the amount thereof dd not serve to postpone
the tme when the abty, f any, became f ed, or to cause the abty to
reman contngent upon a future settement of the controversy. It Is we
setted that the abty for Federa ncome ta s ncurred In the year for whch
the ta s mposed, rrespectve of the tme the ta may be assessed or may become
due and payabe, for, a of the events upon whch the ta s predcated havng
occurred n that year, the amount of the ta abty s then f ed by aw and
ascertanabe.
In vew of the above decsons, t s cear that the abty for the
addtona e cse ta es n the nstant case became f ed n the years
n whch the saes were made. of the events necessary for the de-
termnaton and proper accrua of such ta es occurred n the years
the saes were made, and the fact that the specfc amount was not
fnay determned unt 1938 does not affect the years n whch the
abty was propery accruabe.
It s, therefore, hed that the addtona manufacturers e cse ta es
for the perod une, 1932, to February, 1936, whch were fnay de-
termned n 1938, represent accrued abtes n the respectve (ncome
ta ) ta abe years n whch the saes gvng rse to the ta es were
actuay made. Interest on the addtona e cse ta es shoud be ac-
crued n accordance wth G. C. M. 9575 (C. . -, 381 (1931)) whch
hods that nterest on a defcency n ta shoud be accrued n the year
n whch the abty for the defcency s fnay determned, ether
by an agreement, fna order, or |udgment.
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101, rt. 101(12)-1. 180
S CTION 23(h). D DUCTIONS FROM GROSS INCOM :
W G RING LOSS S.
rtce 23(h)-: Wagerng osses.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5057, page 97.)
S CTION 23(o). D DUCTIONS FROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS.
rtce 23(o)-1: Contrbutons or gfts by ndvduas.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5057. page 97.)
S CTION 25. CR DITS OF INDI IDU L
G INST N T INCOM .
rtce 25-2: arned ncome credt.
R NU CT O 1938.
Reguatons 101, amended. (See T. D. 5057, page 97.)
P RT . R TURNS ND P YM NT OF T .
S CTION 51. INDI IDU L R TURNS.
rtce 51-1: Indvdua returns.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5057, page 97.)
SU TITL C SUPPL M NT L PRO ISIONS.
SUPPL M NT . R T S OF T .
S CTION 101. MPTIONS FROM T
ON CORPOR TIONS.
rtce 101(12)-1: Farmers cooperatve 19 1 15-10890
marketng and purchasng assocatons. Ct. D. 1527
INCOM . C SS PROFITS. ND C PIT L STOC T S R NU CTS OF 1936
and 1938 decson of court.
empton Farmers Cooperatve Marketng ssocaton qua-
ty or Treatmknt wth Respect to Members and Nonmembers
ccumuaton or Reserve.
farmers cooperatve marketng assocaton was not conducted
In such a manner as to entte t to ta e empton under secton 101
o the Revenue cts of 1936 and 1938 where t had faed to accord
nonmember patrons equa treatment wth Its members. The prov-
sons of the statute and reguatons authorzng a reasonabe reserve
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181
101, rt. 101(12)- .
to be set up and mantaned for the erecton of budngs and other
factes, the purchase and nstaaton of machnery and equpment,
and the retrement of any Indebtedness Incurred for such purposes,
were not Intended as a waver n any respect of that equaty of treat-
ment whch s part of the necessary foundaton for the ta e empton.
If part of the proceeds of nonmembers products s to be used to
create or mantan a surpus and to make addtons to the capta
assets of the assocaton, wthout aowng them a proportonate ds-
trbutve nterest n the permanent vaue contrbuted by such surpus
accumuatons or capta assets addtons, the assocaton to that
e tent s beng operated for proft to ts members as aganst nonmem-
ber patrons. Such proft and the nequaty of treatment resutng
to nonmembers therefrom must be regarded as havng destroyed the
assocaton s rght to ta e empton.
Unted States Crcut Coubt of ppeas for the ghth Crcut.
Ferte Cooperatve Dary ssocaton, appeant, v. Chas. D. uston, Coector
of Interna Revenue for the Dstrct of Iowa, appeee.
119 Fed. (2d), 27 .
ppea from the Dstrct Court of the Unted States for the Northern Dstrct of Iowa.
pr 26, 1911.
OPINION.
ohnsen, Crcut udge, devered the opnon of the court
The queston presented Is whether the busness of a farmers cooperatve mar-
ketng assocaton was beng conducted n such a manner as to entte t to ta
e empton under secton 101 of the Revenue cts of 1936 and 1938 (26 U. S. C. .,
secton 101 ).
The Commssoner of Interna Revenue dened the assocaton s cam for
e empton and ts subsequent cams for refunds, and t then brought sut under
28 T . S. C. ., secton 1, to recover the amount of ncome, e cess profts, and
capta stock ta es whch t had been obged to pay for the years 1936 to 1939,
ncusve. The dstrct court hed that the assocaton was not e empt from
the payment of such ta es, because t had faed to accord nonmember patrons
equa treatment wth ts members, and dsmssed the acton. The assocaton
has appeaed.
The assocaton was engaged n coectng cream from producers, manufac-
turng t nto butter, and marketng the product. In 1936 29 per cent of Its
cream came from nonmember patrons, n 1937 25 per cent, and n 1 38 10 per
cent. The assocaton pad ts patrons, both members and nonmembers, the
same amount n cash per pound for the butterfat receved from them, such
payments beng made monthy by a dstrbuton of the net proceeds derved
from the butter sod, after deductng a operatng e penses and such sums
1 Ths secton provded :
The foowng organzatons sha be e empt from ta aton under ths chapter tte

(12 Farmers frut growers , or ke assocatons organzed and operated on a coopora-
tve bass (a) for the purpose of marketng the products of members or other producers,
and turnng back to them the proceeds of saes, ess the necessary marketng e cuses, on
the bass of ether the quantty or the vaue of the products furnshed by them, or (b)
for the purpose of purchasng suppes and equpment for The use of numbers or other
persons, and turnng over such suppes and equpment to them at actua cost, pug neces-
sary e penses. empton sha not be dened any such assocaton because t has capta
stock, f the dvdend rate of such stock s f ed at not to e ceed the ega rate of nterest
n the State of ncorporaton or 8 per centum per annum, whchever s greater, on the
vaue of the consderaton for whch the stock was ssued, and f substantay a such
stock (other than nonvotng preferred stock, the owners of whch are not entted or
permtted to partcpate, drecty or ndrecty, In the profts of the assocaton, upon
dssouton or otherwse, beyond the f ed dvdends) s owned by producers who market
ther products or purchase ther suppes and equpment through the assocaton ; nor sha
e empton be dened any such assocaton because there s accumuated and mantaned by
t a reserve requred by State aw or a reasonabe reserve for any necessary purpose. Such
an assocaton may market the products of nonnenbers n an amount the vaue of whch
does not e ceed the vaue of the products marketed for members, and may purchase sup-
pes and equpment for nonmembers n an amount the vaue of whch does not e ceed the
vaue of the suppes and equpment purchased for members, provded the vaue of the
purchases made for persons Who are nether members nor producers does not e ceed I per
centum of the vaue of a Its purchases. usness done for the Unted States or any
of ts agences sha b dsregarded n determnng the rght to e empton under thU
paragraph;
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101, rt. 101(12)- .
182
as the board of drectors deemed It advsabe to wthhod for busness needs.
Durng the 3-year perod here nvoved, besdes payng operatng e penses , the
board of drectors had wthhed and made addtons to the assocaton s surpus
n the sum of fS72.:7, and had ncreased ts pant and equpment account n
the amount of 2, 80.02. by the purchase of a new churn for 1,500 and an
e pendture of over 900 on addtons to the refrgeraton system. There Is a
suggeston n the testmony that the atter e pendture aso ncuded some
repars on the refrgeraton system, but snce the record before us does not
ndcate ther nature or e tent, and snce the entre amount was set up on the
books of the assocaton as a pant and equpment account augmentaton, t
must be treated as representng capta assets here.
The Revenue cts nvoved provded that such an assocaton shoud not be
dened ta e empton smpy because there s accumuated and mantaned
by It a reserve requred by State aw or a reasonabe reserve for any necessary
purpose. rtce 101(12)-1 of Treasury Reguatons 9 , promugated under
these Revenue cts, aso provded that The accumuaton and mantenance
of a reserve requred by State statute, or the accumuaton and mantenance
of a reasonabe reserve or surpus for any necessary purpose, such as to pro-
vde for the erecton of budngs and factes requred n busness or for the
purchase and Instament of machnery and equpment or to retre ndebtedness
ncurred for such purposes, w not destroy the e empton.
The assocaton contends that the addtons whch t made to ts surpus
and ts e pendtures for pant equpment durng the perod nvoved were
reasonabe and necessary, and under the provsons of the statute and the
Treasury reguatons woud not defeat ts rght to ta empton. The burden
of course woud rest on the assocaton to estabsh, by drect evdence or by
evdence from whch t was soundy nferabe, that any reserve or surpus
whch t had set up and any e pendtures for addtona equpment whch t had
made were reasonabe and necessary n the stuaton. (Wech v. ererng, 290
. S., I, 5 S. Ct, 8, 78 L. d., 212.) The proof before us s not very sats-
factory n ths respect, but the matter s In any event not controng here, so
t need not be further dscussed.
ven f t had been ncontrovertby estabshed that the surpus apporton-
ment and equpment e pendtures n queston were reasonabe and necessary,
they woud st have to nvove an equaty of treatment, as between non-
member and member patrons. The provson n the Revenue ct authorzng
a reasonabe reserve to be set up and mantaned for any necessary purpose,
and the Treasury reguatons construng the term necessary purpose to
ncude the erecton of budngs and other factes, the purchase and nstaa-
ton of machnery and equpment, and the retrement of any Indebtedness n-
curred for such purposes, were not ntended as a waver n any resect of that
equaty of treatment whch s part of the necessary foundaton for the ta
e empton. Uness the busness of nonmember patrons s beng handed whoy
on a nonproft bass, the equaty of treatment necessary for ta e empton
obvousy does not e st. (Farmers Unon Cooperatve Co. v. Commssoner of
Interna Revenue, 90 Fed. (2d), 88 (C. C. . 8).) If pnrfof the proceeds of
nonmembers products s to be used to create or mantan a surpus and to make
addtons to the capta assets of the assocaton, wthout aowng them a pro-
portonate dstrbutve nterest In the permanent vaue contrbuted by such
surpus accumuatons or capta assets addtons, t must e hed that the
assocaton to that e tent s beng o|erated for proft to ts members, as aganst
nonmember natrons, and that It s not e empt from ta aton.
The busness of nonmembers may of course propery be made to carry ts
|ust share of operatng e penses, actua deprecaton of pant and equpment,
and dvdends on e stng capta stock recognzed by the Revenue cts. ut,
If such busness s aso to be forced to bear part of the burden of accumuatng
other permssbe surpus, and of makng reasonabe and necessary addtons
to what consttute or are equvaent to capta assets of the assocaton, t s
cear that ths must be done n a manner that w permt no proft to nure
to assocaton members therefrom, on dssouton or otherwse, or ese the
assocaton can not reman e empt from ta aton. Provson must at east have
been made, by approprate enabng acton on the part of the assocaton and by
adequate protectve entres on ts books and records, for nonmembers In such
a stuaton as s here nvoved to share rataby wth members, n an utmate
qudaton of the assocaton s assets, on the bass of ther comparatve
contrbutons thereto.
Ths reguaton, whch s st In effect, appears n 26 C. F. ., 8.101(12)- .
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131, rt. 131-3.
It may be assumed here that the assocaton woud have power under the
statutes of Iowa, pursuant to whch t w;s organzed, and under ts artces
of ncorporaton, to make such a protectve recognton n favor of nonnember
patrons, on a parta sae or fna dstrbuton of ts assets, but whether t as
such power or not, s not controng on the queston before us. For nforma-
tona purposes, t may be stated that the assocaton s a nonstock corporaton,
ssung certfcates of membershp for 50 cents each to such producers of dary
products as t chooses to admt to membershp. It was the successor of another
cooperatve corporaton, whose capta stock t qudated at par vaue out of
such corporaton s assets, and whose pant and equpment t n practca effect
receved and hed as a gft. On any subsequent qudaton of these assets,
n part or n whoe, after payment of the charges recognzed by the statute
(Code of Iowa, 1939, secton 8512. 8), dstrbuton woud naturay be made
on some bass among the members of the assocaton. The sums e acted from
nonmember patrons for permanent surpus and capta assets addtons, durng
the perod here nvoved, woud consttute part of the assets so dstrbutabe, and,
as we have prevousy ponted out, woud be equvaent to a proft at the e pense
of nonmember patrons. Ths proft and the Inequaty of treatment resutng
to nonmembers therefrom must be regarded as havng destroyed the assocaton s
rght to ta e empton. (Farmers Unm Cooperatve Co. v. Commssoner of
Interna Revenue, 90 Fed. (2d), 88 (C. C. . 8) ; Farmers Cooperatve Co. v.
Unted States, 23 Fed. Supp., 123 (Ct. CI.) : urr Creamery Corporaton v.
Commssoner of Interna Revenue. 62 Fed. (2d), 07 (C. C. . 9).)
The assocaton rees prncpay upon Crooks v. ansas Cty ay Deaers
ssocaton (37 Fed. (2d), 83 (C. C. . 8)), but the bass of the court s
decson In that case seems to have been that, under the facts n the record,
the possbty of any dstrbuton was regarded as contngenty remote and
whoy specuatve. Ths was partcuary true, perhaps, under the stpuaton
n the record In that case, commented on n Northwestern obbers Credt ureau
. Commssoner of Interna Revenue (37 Fed. (2d), 880 (C. C. . 8)), that no
part of the surpus accumuated coud ever nure to the beneft of any member
or other Indvdua. Such s not the stuaton n the present case.
The |udgment of the dstrct court must be affrmed.
S CTION 117. C PIT L G INS ND LOSS S.
rtce 117-5: ppcaton of secton 117 n the
case of husband and wfe.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5057, page 97.)
S CTION 120. UNLIMIT D D DUCTION FOR C RI-
T L ND OT R CONTRI UTIONS.
rtce 120-1: Unmted deducton for chartabe and
other contrbutons.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5057, page 97.)
SUPPL M NT C CR DITS G INST T .
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S.
rtce 131-3: Condtons of aowance of credt.
R NU CT OF 1938.
Reguatons 101, modfed. (See T. D. 5056, page 139.)
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291, rt, 291-1. 18
rtce 131-9: ont return by husband and wfe.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5057, page 97.)
SUPPL M NT . POSS SSIONS OF T UNIT D ST T S.
S CTION 251. INCOM FROM SOURC S WIT IN
POSS SSIONS OF UNIT D ST T S.
rtce 251-1: Ctzens of the Unted States and
domestc corporatons dervng ncome from
sources wthn a possesson of the Unted States.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5057, page 97.)
SUPPL M NT M. INT R ST ND DDITIONS TO T T .
S CTION 291. F ILUR TO FIL R TURN.
rtce 291-1: ddton to ta n case of faure
to fe return.
R NU CT OF 1938.
Reguatons 101, amended. (See T. D. 5058, page 156.)
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185 23(a), rt. 23(a)-.
INCOM T RULINGS. P RT II.
R NU CTS OF 1937 ND 1936.
SU TITL . G N R L PRO ISIONS.
P RT I. R T S OF T .
S CTION 13. NORM L T ON CORPOR TIONS.
rtce 13-1: Norma ncome ta on corporatons. 19 1-37-1082
I. T. 3503
R NU CTS OF 193 ND 1936.
Revocaton of I. T. 3219 (C. . 1038-2, 12 ).
In I. T. 3219 (C. . 1938-2, 12 ) t was hed that the M Company,
a whoy-owned subsdary of the N Trust Co.. whch was entted to
the benefts of secton 22 of the ct of March 1, 1879, as amended,
reatng to assessment and coecton of ta es from nsovent banks or
trust companes, was not tsef entted to the benefts of that ct,
ether as orgnay enacted or as amended by secton 818 of the Reve-
nue ct of 1938, notwthstandng ts ncome was payabe to the trust
company and was to be used utmatey to pay depostors cams
aganst the trust company.
In The auaton Servce Co. v. Commssoner ( 1 . T. ., 811)
t was hed (syabus):
Pettoner s soe Indrect stockhoder beng an Insovent bank the rea estate
hodngs of whch were carred n pettoner s name, and qudaton of pettoner s
assets under supervson of the State superntendent of banks beng for the beneft
of the bank s depostors, hed, pettoner s e empt from ta to the same e tent
as the bank. ( ct of Congress of March 1, 1879, secton 22 (20 Stat., 351);
Revenue ct of a38, secton 818.)
I vew of the fact that I. T. 3219, supra, s contrary to the decson
n The auaton Servce Co. v. Commssoner, supra, n whch ac-
quescence has been pubshed (C. . 19 1-1,11) I. T. 3219 s revoked.
P RT II COMPUT TION OF N T INCOM .
S CTION 23(a). D DUCTIONS FROM GROSS
INCOM : P NS S.
rtce 23(a)-: usness e penses.
( so Secton 162, rtce 162-1.)
R NU CTS OP 1018. 1921, 192 , ND 19.16.
S. M. 2 63 (C. . III-2, 91 (192 )), hodng that commssons pad
to trustees for recevng and dsbursng the ncome and corpus of a
trust are deductbe as ordnary and necessary busness e penses, s
revoked, snce t s nconsstent wth the decsons of the Supreme
Court of the Unted States n f|ans v. Commnn nner (61 S. Ct.. 75,
Ct. D. 1 86, C. . 19 1-1, 339), Unted States v. Payne et a, ccu-
1611 2 -18
19 1-29-10783
G. C. M. 22799
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23(a), rt. 23(n -.
186
tors (61 S. Ct., 893, Ct D. 1509, C. . 19 1-3 2), and Cty ank
Farmers Trust Co., Trustee, v. everng (61 S. Ct., 896, Ct. D. 1511,
C. . 19 1-1, 3 ).
ecommended tht O. D. 537 (C. . 2, 175 (1920)) and I. T. 2238
(C. . I -2, 9 (1925)) be revoked, and that I. T. 1393 (C. . 1-2,
83 (1922)) and I. T. 3163 (C. . 1938-1, 202) be revoked n so far as
they are nconsstent wth the above-named Supreme Court decsons.
Reference s made to the decsons of the Supreme Court of the
Unted States n ggns v. Commssoner (61 S. Ct., 75, Ct. D. 1 86,
C. . 19 1-1, 339), Unted States v. Pyne et a ., ecutors (61 S. Ct.,
803, Ct. D. 1509. C. . 19 1-1, 3 2), and Cty ank Farmers Trust
Co., Trustee, v. everng (61 S. Ct.. 896, Ct. D. 1511, C. . 19 1-1,3 ).
In the ggns case, supra, the Supreme Court hed that e pend-
tures made n connecton wth the ta payer s nvestments n ncome-
producng securtes were not deductbe for Federa ncome ta pur-
poses because the ta payer was not carryng on a trade or busness
wthn the meanng of secton 23(a) of the Revenue ct of 1932, pro-
vdng for the. aowance as deductons of the ordnary and necessary
e penses ncurred durng the ta abe year n carryng on any trade or
busness.
In the Pyne case, supra, the Supreme Court hed that the e ecutors
n that case were not entted to deduct attorneys fees from the gross
ncome of the estate because t was not estabshed that the estate
was carryng on a trade or busness. The |udgment of the Court
of Cams (35 Fed. Supp., 81) was vacated and the cause was remanded
for proceedngs n accordance wth the vews e pressed by the
Supreme Court n ts opnon.
In the Cty ank Farmers Tnst Co. case, supra, the testamentary
trustee of two trusts camed that commssons pad to and receved
by t were deductbe from the gross ncome of the trusts. The oard
of Ta ppeas dsaowed the deducton on the ground that the trusts
were not carryng on any trade or busness. (39 . T. .. 29.)
The Crcut Court of ppeas for the Second Crcut affrmed that
decson. (112 Fed. (2d), 57.) The Supreme Court affrmed the
decson of the Crcut Court of ppeas upon the authorty of
Wggns v. Commssoner, supra. The Court ponted out that n com-
putng net ncome a trust s sub|ect to the same rues as an ndvdua.
Consderaton was prevousy gven to the effect on certan rungs
of the ureau of the decson rendered n the ggns case, supra.
s a resut of such consderaton, (). D. 877 (C. . ,123 (1921)), 1. T.
2579 (C. . -2, 129 (1931)), and I. T. 2751 (C. . III-1. 3
(193 )), whch were nconsstent wth the decson n the g-
gns case, were revoked by I. T. 3 52 (C. . 19 1-1. 205). It was
decded, however, to deay reconsderaton of severa other rungs
apparenty nconsstent wth that decson unt the Pyne and Cty
ank Farmers Trust Co. cases, supra, were decded. The foowng
rungs have now been reconsdered and are ceary nconsstent wth
the decsons n the ggns, Pyne, and Cty ank Farmers Trust
Co. cases:
S. M. 2 63 (C. . III-2, 91 (192 )) hods that where a trust was
created under the aws of the State of New York and the trustees were
authorzed to take possesson, contro, and management of a the trust
fund, to nvest and renvest the same and to keep t nvested, to coect
and receve the rents, ssues, profts, and ncome thereof durng a spe-
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187
23(b), rt. 23(b)-.
cfc perod, and to hod and dspose of same, after payng out of sad
ncome a reasonabe and proper charges and e penses of the trust,
the commssons pad to the trustees for recevng and dsbursng both
the ncome and the corpus of the trust are aowabe deductons from
the gross ncome of the trust estate as a busness e pense under the pro-
vsons of secton 21 (a) of the Revenue cts of 1918 and 1921.
0. D. 537 (C. . 2, 175 (1920)) hods that e penses havng a reason-
abe, pro mate reaton to the coecton of ncome due an estate are
deductbe.
1. T. 1393 (C. . 1-2, 83 (1922)) hods, nter aa, that trustees com-
mssons are aowabe deductons from the gross ncome of a trust
estate.
I. T. 2238 (C. . I -2, 9 (1925)) hods that fees, commssons, and
other compensaton of commttees for ncompetent persons, as we
as e penses propery ncurred by such commttees, are aowabe de-
ductons for ncome ta purposes f pad or ncurred wth respect to
the management or conservaton of ncome-producng property or
funds beongng to the ncompetent, or wth respect to the coecton or
securng of any ncome nurng to such ncompetent.
. I. T. 3163 (0. . 1938-1,202) hods that trustee s commssons for the
coecton and dsbursement of the ncome of an rrevocabe domestc
trust, such ncome beng receved party from sources wthn and
party from sources wthout the Unted States and a of t beng cur-
renty dstrbutabe to nonresdent aen benefcares e cept the trus-
tee s commssons, consttute aowabe, deductons n computng the
trust s net ncome n so far as they are aocabe on a rato bass to the
ncome from sources wthn the Unted States. t.
In vew of the foregong, S. M. 2 03, supra, s revoked, and t s
recommended that O. D. 537, supra, and I. T. 2238, supra, be revoked,
and that I. T. 1393, supra, and 1. T. 3103. supra, be revoked n so far
as they are nconsstent wth the above-named Supreme Court decsons.
. P. Wenche,
Chef Counse, ureau of Interna Revenue.
rtce 23(a)-1: usness e penses. 19 1-29-1078
( so Secton 162, rtce 102-1.) I. T. 3 92
R NU CTS OF 1918, 1921, 192 . ND 1036.
In vew of G. C. M. 22799 (p 185. ths uetn). O. D. 537 (C. .
2.175 (1920)) and I. T. 22:58 (C. . I -2, 9 (1925)) are revoked, and
I. T. 1393 (C. . 1-2, 83 (1922)) and I. T. 3103 (C. . 1938-1, 202) are
revoked n so far as they are nconsstent wth the decsons of the
Supreme Court of the Unted States cted n G. C. M. 22799.
S CTION 23(b). D DUCTIONS FROM GROSS
INCOM : INT R ST.
rtce 23(b)-1: Interest.
R NU CT OF 1936.
ccrua of nterest on addtona manufacturers e cse ta es for the
perod une, 1932, to February, 1936, not fnay determned unt 1938.
(See I. T. 3 91, page 177.)
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26, rt. 26-2. 188
S CTION 23(c). D DUCTIONS FROM GROSS
INCOM : T S G N R LLY.
rtce 23(c)-1: Ta es.
R NU CT OF 1938.
ccrua of addtona manufacturers e cse ta es for the perod
une, 1932, to February, 1936, not fnay determned unt 1938. (See
I. T. 3 91, page 177.)
S CTION 23(g). D DUCTIONS FROM GROSS INCOM :
W G RING LOSS S.
rtce 23(g)-: Wagerng osses.
R NU CT OF 1038.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
S CTION 23(o). D DUCTIONS FROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS.
rtce 23(o)-: Contrbutons or gfts by ndvduas.
R NU CT OF 1936.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
S CTION 25. CR DITS OF INDI IDU L
G INST N T INCOM .
rtce 25-2: arned ncome credt.
R NU CT OF 1936.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
S CTION 26. CR DITS OF CORPOR TIONS.
rtce 26-2: Credt n connecton wth con- 19 1-52-10939
tracts restrctng payment of dvdends. I. T. 3525
R NU CT OF 1936.
Stock certfcates contanng or referrng to restrctons upon the
payment of dvdends by the ssung corporaton do not consttute a
wrtten contract wthn the meanng of secton 2C(c) of the
Revenue ct of 1036.
I. T. 3139 (C. . 1037-2, 111) and I. T. 3152 (C. . 1038-1, oo)
revoked.
In I. T. 3139 (C. . 1937-2, 111) t was hed, n substance, that a pro-
vson contaned n the preferred stock certfcates of the M Company
to the effect that no dvdends shoud be decared on the common stock
wthout the wrtten consent of three-fourths of the preferred shares
outstandng consttuted a wrtten contract enttng the corporaton
to the credt provded n secton 26(c) 1 of the Revenue ct of 1936.
Smary, t was hed n I. T. 3152 (C. . 1938-1, 155), n substance,
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189
112(g), rt. 112(g)-2.
that a provson n the preferred stock certfcates of the M Company to
the effect that no dvdends shoud be pad on the common stock whe
any of the preferred stock remaned outstandng and no dvdends on
the preferred stock shoud be pad so ong as the corporaton owed on
wrtten evdence of debt n e cess of doars, consttuted a wrtten
contract wthn the purvew of secton 26(c) 1, supra.
In vew of the fact that the ureau s now mantanng the poston
that, generay speakng, stock certfcates contanng or referrng to
restrctons upon the payment of dvdends by the ssung corporaton
do not consttute a wrtten contract wthn the meanng of secton
26(c) 1 of the Revenue ct of 1936, I. T. 3139 and I. T. 3152, supra,
are revoked.
P RT . R TURNS ND P YM NT OF T .
S CTION 51. INDI IDU L R TURNS.
Secton 51-1: Indvdua returns.
R NU CT OF 1930.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
SU TITL C SUPPL M NT L PRO ISIONS.
SUPPL M NT . R T S OF T .
S CTION 101. MPTIONS FROM T
ON CORPOR TIONS.
rtce 101 (12) 1: Farmers cooperatve marketng
and purchasng assocatons.
R NU CT OF 1936.
quaty of treatment wth respect to members and nonmembers
(See Ct. D. r 27. page 180.)
SUPPL M NT . COMPUT TION OF N T INCOM .
S CTION 112(g). R COGNITION OF G IN OR LOSS:
D FINITION OF R ORG NIZ TION.
rtce 112(g)-2: Defnton of terms. 19 1-19-1092
Ct. D. 1529
INCOM ND C SS PROFITS T S R NU CTS OF 1932 ND 1936
D CISION OF COURT.
1. Reorganzaton cquston of Property by Notehoders at
Forecosure Sae and Transfer to New Corporaton aue
for pur|ose of deprecaton and proft upon sae by suo-
cf.8sob corporaton to be determned as ok date of acqu-
SITION.
In accordance wth a prearranged pan, frst mortgage notehoders
of a corporate mortgagor In recevershp pooed ther notes wth an
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112(g), rt. 112(g)-2. 190
ageut, who purchased the property at forecosure sae at a bd prce
consderaby ess than the far market vaue on that date, and con-
veyed tte to a. new corporaton n consderaton of the transfer of
the capta stork of such corporaton to the notehoders n amounts
proportonate to the face vaue of the notes pooed; the agent, wh
the authorty of the poong notehoders, setted wth the uonpoong
notehoders by payng them ther pro rata part of the sae prce of
the mortgaged property; the new corporaton ater sod a of the
property, made dstrbuton to ts stockhoders, ceased dong bus-
ness, and proceeded to qudate. ed: Under the authorty of
LeTuc v. Scofed (19 0) (308 U. S., 15) Ct. D. 1 32, C. . 19 0-1,
151 , there was no statutory reorganzaton wthn the meanng of
secton 112 ()()(2) and (g) (1) (2) of the Revenue cts of 1932
and 1936, n the absence of a contnuty of the same character of
nterest between the predecessor owner and the acqurng corpora-
ton. Therefore, the vaue of the property for the purpose of deter-
mnng deprecaton and proft Is to be determned as of the date of
acquston by the successor corporaton.
2. Gan or Loss ass auaton of Property Far Market
aue at Date of Forecosure Sah.
Under the facts stated, the purchase of corporate assets by the
agent at forecosure sae was actuay a purchase by the credtors of
the predecessor corporaton, and under the provsons of artce 193
of Reguatons 77 and artce 23(k)-3 of Reguatons 9 the bnss
for determnng gan or oss upon the subsequent sae by the suc-
cessor corporaton s the far market vaue of the property on the
date of the forecosure sae.
3. Decson ffrmed.
Memorandum opnon of the Unted States oard of Ta ppeas
(19 0) affrmed.
Unted States Crcut Court of ppeas for the ghth Crcut.
Chp T. everng, Commssoner of Interna Revenue, pettoner, v. The eto
Presdent Corporaton, a D sor.ed Corporaton, by Water W. nsworth, . .
Lambert, Peter . Lane, . . Farre, C. R. oey, Meae C. trnane, and .
Pantaeon, Trustees n Lqudaton, respondents.
112 Fed. (2d), 92.
On petton to revew decson of the Unted States oard of Ta ppeas.
uy 1 , 19 1.
opnon.
efore Gardner and ohnsen, Crcut udges, and Coet, Dstrct udge.
Coet, Dstrct udge, devered the opnon of the Court.
Two questons are presented for determnaton on ths appea from the oard
of Tu ppeas.
Frst: Dd the transactons nvoved heren consttute a corporate reorganza-
ton wthn the meanng of that term as apped to corporatons under the
Revenue ct,1 wth the resut that the vaue of the property acqured by the
successor corporaton n the reorganzaton s to be consdered at the vaue apped
to that property n the hands of the predecessor corporaton for the purpose of
determnng deprecaton and proft or oss, or, s the vaue of the property to
be determned as of the date of acquston by the successor corporaton wthout
regard to the vaue at whch t was hed by the predecessor corporaton
Second: If the transactons nvoved dd not amount to such a reorganzaton,
was the market vaue of that property f ed by the fgure at whch t was pur-
chased by the successor corporaton at a forecosure sae of the predecessor
corporaton s nterest theren, or shoud It be f ed at the actua market vaue
on the date of forecosure
Sectons 112 (a), (b) (3),( ),(5), ()() and 113(a) (7),(8) of the Revenue rt of
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191
112(g), rt. 112(g)-2.
1. The statute defnes reorganzaton as foows:
(1) Defnton of Reorganzaton. s used n ths secton and sectons 113
nd 115
(1) The term reorganzaton means ( ) a merger or consodaton
(Incudng the acquston hy one corporaton of at east a ma|orty of the
votng stock and at east a ma|orty of the tota number of shares of a
other casses of stock of another corporaton, or substantay a the prop-
ertes of another corporaton), or ( ) a transfer by a corporaton of a or
a part of ts assets to another corporaton f mmedatey after the transfer
the transferor or ts stockhoders or both are n contro of the corporaton
to whch the assets are transferred, or (C) a recaptazaton, or (D) a mere
change n dentty, form, or pace of organzaton, however effected.
The property nvoved consst s of rea estate and a hote budng ocated
thereon n ansas Cty, Mo. The budng was constructed n 1926 at a tota cost
of 2,265,1 .51. The company whch owned and constructed the budng was
decared a bankrupt In 1926. On the property there was a frst mortgage securng
rea estate god notes totang 883,000. Other credtors of the bankrupt com-
pany organzed a corporaton known as the Presdent ote Corporaton whch
purchased the property sub|ect to the frst en of 883,000. The Presdent
ote Corporaton pad the prncpa and nterest on the frst mortgage ndebted-
ness from tme to tme so that on December 1, 1931, there was outstandng
682,000 of that ndebtedness. The Presdent ote Corporaton defauted n the
IMyment of prncpa and nterest on the frst mortgage notes on December 1,
1931, and on anuary 1, 1932, defauted n the payments due on a second mort-
gage, the amount of whch at that tme was 683, 00. recever was apponted
for the Presdent ote Corporaton at the nstance of the second mortgage bond-
hoders. The recever o)erated the property unt September 15, 1933.
fter the defaut on the frst mortgage ndebtedness on December 1, 1931, a
arge ma|orty of the frst mortgage notehoders conceved the foowng pan:
new corporaton desgnated as The New Presdent Corporaton was to be cre-
ated ; an agent was to petton the court n whch the recevershp acton was
pendng for a forecosure of the property under the frst mortgage en; the agent
was to bd n the property for a prce up to but not e ceedng the amount of a
frst mortgage notes whch shoud be pooed wth the agent by such notehoders
and shoud thereafter convey the tte to the property acqured at the forecosure
sae to The New Presdent Corporaton n consderaton of the transfer of
the capta stock of that corporaton to the notehoders In amounts proportonate
to the face vaue of the notes pooed by each such notehoder. The new corpora-
ton was to hod the property unt an advantageous sae coud be made and then
pass out of e stence.
The court authorzed the forecosure and the entre arrangement was carred
out as panned the forecosure occurrng on September 7, 1933. The tota face
amount of the notes pooed wth the agent pror to the forecosure sae was
650,000.
The terms.upon whch the notehoders deposted ther notes wth the agent were
ncorporated n depost agreements whch were sgned by the ndvdua note-
hoders at the tme each note was deposted, and contaned, among others, the
foowng authorzaton:
To purchase or cause to be purchased at any sae ether n ts name or n the
name of the nomnee or nomnees the mortgaged property and n case of any such
purchase, to use the notes deposted hereby In payment or part payment thereof.
The authorzaton to use the deposted notes n part payment for the mort-
gaged property mpes that t was the understandng that the agent mght pay
more than the tota amount of the deposted notes for the property. owever,
the testmony ndcates that the agreements were construed as authorzng the
agent to bd ony the tota amount of a deposted notes and accumuated n-
terest. In vew of a the crcumstances, that constructon appears to be the
proper constructon of the agreements.
On uy 29, 1933, after the date of the forecosure sae had been set for Sep-
tember 7, the agent s representatve wrote a etter to a notehoders advsng
There Is Incosed herewth a etter from the ngent under the depost agroment. whch,
among other thngs, advses you of the fact that the agent has cosed the tme for reguar
depost of notes on September 5, 1933. Uness thereafter the agent determnes to accept
speca deposts, f you have not deposted your notes by that date you w ony be entted
to receve your pro rata share of the proceeds from the forecosure sae of the propertes.
The amount of ths share depends entrey upon the amount bd at the sae and t may be
a comparatvey sma percentage of the face vaue of your notes.
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112(g), rt. 112(g)-2.
192
them that the tme for depostng notes under the pan woud cose September 5,
1933, and advsed them that uness they deposted ther notes before that dare they
woud ony be entted to receve ther pro rata share of the sae prce of the
property whch mght be a comparatvey sma percentage of the face vaue of
the notes.
though the agent was authorzed by those notehoders to pay up to 650,000
pus accumuated nterest for the property at the forecosure sae, hs frst bd
was 350,000 for the rea estate and the budng. That was the ony bd and the
property was sod to hm at that prce. The bd prce was pad by the sur-
render of frst mortgage notes In the prncpa amount of 350,000.
The agent wth the authorty of the poong frst mortgage notehoders setted
wth the notehoders who had not pooed ther notes by payng them ther pro
rata part of the sae prce of the mortgaged property. e aso pad the e pense
of the forecosure, the tota outay for both purposes amountng to 25, 00.SS.
In addton, the agent purchased for the poong notehoders the hote furnshngs
for 50,000 and certan msceaneous hote equpment for 16,250.
The New Presdent Corporaton was created. The agent conveyed the tte
to the rea estate, budng, furnshngs and msceaneous hote equpment to
that corporaton and the corporaton transferred a of ts capta stock to the
poong notehoders n amounts proportonate to the amount of notes hed by
each.
The oard of Ta ppeas found that the market vaue of the property on
the date of the forecosure, to-wt: September 7, 1933, was 650,000. The evdence
s cear, convncng and undsputed that such was ts market vaue on that date.
On March 31, 1937, The New Presdent Corporaton sod a of the property
purchased by the agent and theretofore conveyed to t by hm for a net consdera-
ton of 668,8 6.18, n cash. It made dstrbuton to ts stockhoders, ceased
dong busness and proceeded to qudate.
In ts return The New Presdent Corporaton reported a net oss of 8,878.96
on the sae of a of ts assets on March 30, 1937, but deducted ony 2,000 of
ths amount from ncome as a oss upon sae of capta assets. The Comms-
soner determned that there was a proft of 239,785.15 upon such sae, whch
amount he ncuded n the ncome of the atter corporaton and assessed a
defcency.
The defcency determned by the Commssoner resuted from the dsaowance
of the cost bass of the assets for deprecaton as camed by the ta payer for
the ta abe perods nvoved and aso the ncuson by the Commssoner as
ncome of the dfference between the vaue as f ed by hm and the sae prce
of 66S,S G.18. The vaue for annua deprecaton purposes and the acquston
vaue determned by the Commssoner was f ed at the amount bd for the
property at the forecosure sae, to-wt: 350,000 pus certan addtons.
The oard of Ta ppeas found that the acquston of the property by The
New Presdent Corporaton was n connecton wth a reorganzaton of the Od
Presdent Corporaton and used the od corporaton s vaue for ta purposes as
the bass for determnng deprecaton and proft.
There was no statutory reorganzaton. Pror to the decson of the Supreme
Court n LeTue v. Scofed (308 U. S., 15 Ct. D. 1 32, C. . 19 0-1, 151 ), It
had frequenty been hed that under crcumstances smar to those nvoved here,
the acquston by a new corporaton organzed and owned by bondhoders of
an od corporaton after the equty of the od corporaton n the property had
been fuy e tngushed by deprecated vaues, coud be characterzed as a reor-
ganzaton of the od corporaton wthn the meanng of the Revenue ct, wth
the resut that the vauaton as f ed by and for the od corporaton woud be
apped to the property In the hands of the new. (De ots v. Commssoner,
36 Fed. (2d), 11(1) Ct. D. 157, C. . I -1, 28 (1930) ; Commssoner v. etse-
man (89 Fed. (2d), 58(7)).) In the atter case the Court sad:
It s cear that the bondhoders were the movng sprt and were treated
as the owners n fact, and t foows that they must be vewed as a cass of
stockhoders somewhat akn to preferred stockhoders wth cumuatve dvdend
rghts.
gan, n Commssoner v. Newberry L. O. Co. (9 Fed. (2d), 7, 1. c. 9),
quotng Commssoner v. Mnnesota Tea Co. (296 T . S., 378 Ct. D. 1060, C. .
-1, 189 (1936) ), the Court used the foowng anguage:
that athough the reatonshp of the ta payer to the assets transferred was
substantay changed, that crcumstance does not prevent the transacton from
consttutng a reorganzaton under the ct .
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193
112(g), rt. 112(g)-2.
(See aso, Commssoner v. Tyng, 106 Fed. (2d), 55 (2 Cr.) (reversed, 308 U. 8..
527, n memorandum opnon upon authorty of LeTue v. Srofed, supra).)
In the LeTue case the Supreme Court has effectvey emnated the theory
foowed n the cases noted by hodng that no reorganzaton may be contem-
pated absent a contnuty of the same character of nterest between the predeces-
sor owner and the acqurng corporaton. Pecuary appcabe to the facts
n the present case s the rung of the Supreme Court n the LeTue case
that the nterest of a bondhoder was that of a credtor as dstngushed from
a stockhoder, wth the resut that the two nterests were not of ke character
and coud not be |uned to create the contnuous and contnung smar nterest
between the predecessor and acqurng owners whch s a necessary ncdent
to the theory of reorganzaton.
In the present case the ownershp of the od Presdent Corporaton was com-
petey and effectvey termnated by the forecosure sae. That nterest was a
stockhoder s nterest. The nterest whch the notehoders acqured n the name
of The New Presdent Corporaton was a bondhoder s nterest pror to the fore-
cosure sae and an nterest of a purchaser at and subsequent to the forecosure
sae, hence under authorty of LeTue v. Scofcd, supra, there was no statutory
reorganzaton. (Ss|e aso Commt oner of Interna Revenue v. ondhoders
Commttee. 118 Fed. (2d), 511.)
On the queston of what vaue shoud be paced upon the property of the Pres-
dent ote Corporaton acqured by (he agent at the forecosure sae n September,
1933. t has been heretofore noted that the agent of the poong frst mortgage
notehoders purchased the assets of the od corporaton at the sae for those note-
hoders and then conveyed a of the property to the new corporaton whch n
turn transferred a of ts stock to those notehoders n accordance wth a prear-
ranged pan. The purchase at the forecosure sae was, therefore, actuay a
purchase by the poong notehoders credtors of the od corporaton, snce t
s of no consequence (hat the agent was the condut of the tte. The purchase
at the forecosure sae beng for a ntents and purposes a purchase by the
credtors of the former owner, the queston s whether ts bd of 350,000 at the
sae f es the acquston cost at that fgure or w the far market vaue of the
pro|erty on the date of the sae e used as the cost for the purpose of deter-
mnng pn ft or oss at the subsequent sae on March 31, 1937. If the bd prce
contros, the Commssoner s defcency assessment was proper. If the market
vaue contros, there was no subsequent proft and the oard s reversa of the
Commssoner . assessment was correct for reasons whch w be noted.
The method of determnng the vaue of property purchased at forecosure
when the credtor purchases the mortgaged property s set out n artce 193 of
Reguatons 77, promugated under the 1932 evenue ct, and artce 23(k)-3 of
Reguatons 9 under the 193(1 ct, as foows:
Where the credtor buys n the mortgaged or pedged property, oss
or gan s reazed measured by the dfference between the amount of those ob-
gatons of the debtor whch are apped to the purchase or bd prce of the prop-
erty and te far market vaue of the property. The far market vaue
of the property sha be presumed to be the amount for whch t s bd n by the
ta payer n the absence of cear and convncng proof to the contrary. If the
credtor subsequenty ses the property so acqured, the bass for determnng
gan or oss s the far market vaue of the property at the date of acquston.
The frst part of the quoted reguaton reates to the measurement of the gan
or oss of the acqurng credtor for the year n whch the sae occurred resutng
from the converson of hs securty nto the acqured property. Iustratve of
ts possbe appcaton f the notehoders had ony possessed notes havng a tota
face vaue of . 3.r.0,000, presumaby f they acqured property therefor durng the
year 1933 havng a far market vaue of t;.r 0.(00 they woud have been charged
wth a proft for that year of 300,000. If, however, the credtors hed 050,000
of secu-ed notes for whch they acqured property havng a far market vaue of
ony 35D,000 we may assume for ustratve purposes that a oss woud have
been recognzed. ut we are not now determnng the oss or proft of the note-
hoders for the year durng whch the converson of ther nterest as notehoders
nto a fee nterest occurred, and there s nothng n ths record to ndcate that
the notehoders paced any vaue upon the property n 1933 for ta purposes whch
woud precude them from showng the far market vaue of the property on the
date of ts acquston n ths proceedng. We now seek to ascertan what proft,
Commttoner of Interna Revenue v. Newberry L. t 0. Co. (9 Fed. (2d), 1. c. - 9).
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117, rt. 117-5.)
19
If any, nured to them n 1937 as a resut of the sae of the fee In March of that
year. Ths necesstates the appcaton of the second porton of the quoted regu-
aton, the ascertanment thereunder of the vaue of the property when acqured
n 1033, and the comparson of that vaue wth the sae prce of that property n
1937. The Commssoner used the bd prce as the far market vaue of the prop-
erty n 1933. The oard found that the far market vaue of the mortgaged
property at that tme was R50,000.
It may be suggested that by bddng 350,000 and settng wth nonpoong
notehoders upon that bass, the poong notehoders may not now assert a
dfferent amount as the market vaue. ut the amount whch the property
brought at the forecosure sae dd not determne ts market vaue snce the
sae prce of property at a forecosure sae s no crteron of market vaue.
(Weed v. Lyons Petroeum Co., 29 Fed., 725, 1. c, 73 ; Cty of 8t. Lous v.
Smth, 30 S. W. (2d), 729.) nd the fact that nonpoong notehoders ony
receved ther pro rata share of the bd prce dd not f that prce as the
market vaue of the property. There was no contractua obgaton between
the poong notehoders and those not poong ther notes whch requred the
former to pay the atter ther pro rata part of the market vaue of the mort-
gaged property In the event the former shoud be the successfu bdder. oth
had the same opportunty to bd. If ether preferred to buy n the property
upon the assumpton that the market vaue was more than tfe hghest bd at
the forced sae and take the attendng rsk of beng abe to vndcate ther
udgment by a I or dsposng of t at a prce greater than the bd prce, that
was a rfht the e ercse of whch n no manner commtted the purchaser to the -
theory that the bd prce was the market vaue, or estopped hm from ater
showng what the market vaue actuay was at the date of the forecosure.
Nor s the fact that the poong notehoders setted wth the nonpoong note-
hoders upon the bass of the sae prce at the forecosure sae nconsstent wth
the former s present contenton that the bd prce was not the market vaue.
The nonpoong notehoders were ony entted to receve ther pro rata part
of what the securty brought at the forced sae. That s what they receved
and In no way dd the poong notehoders represent that what was beng
pad was a pro rata part of the far market vaue of the property. The theory
upon whch the poong notehoders bought the property was that t was worth
more than t brought. That was ther theory at the tme of the forecosure
and t s ther theory now.
bsent the reguaton (artce 193 of Reguatons 77, supra), the bd
prce at the forecosure sae woud be entted to sght consderaton n the
determnaton of far market vaue. Ony by the e press terms of the regua-
ton s the bd prce made determnatve of the far market vaue at the date
of acquston, for ta purposes. ut, as noted, the bd prce Is not made
concusve evdence of that vaue. It s ony presumed to be the far market
vaue n the absence of cear and convncng proof of far market vaue.
Upon such proof the oard found the far market vaue on the date of ac-
quston was 050,000. The reguaton provdes that when the property was
subsequenty sod the bass for determnng gan or oss resutng from that
sae s the far market vaue of the property at the date of acquston.
s the far market vaue at the date of acquston pus the cost of necessary
addtons to the property subsequent to acquston and pror to ts sae n
1937, e ceeded the sae prce there was no proft derved from the sae In 1937.
The decson of the oard shoud therefore be, and s, affrmed.
ohnsen, Crcut udge, dssented.
S CTION 117. C PIT L G INS ND LOSS a
rtce 117 5: ppcaton of secton 117 n the
case of husband and wfe.
R NU CT OF 1936.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
Ma|eato Securtes Corporaton v. Commssoner of Interna Revenue (8 Cr.), decded
une 5, 19 1, but not yet offcay reported.
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195 1 3, rt. 1 3-2.
S CTION 120. UNLIMIT D D DUCTION FOR C RI-
T L ND OT R CONTRI UTIONS.
rtce 120-1: Unmted deducton for chartabe
and other contrbutons.
R NU CT OF 1036.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
SUPPL M NT C CR DITS G INST T .
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S.
rtce 131-3: Condtons of aowance of credt.
R NU CT OF 1933.
Reguatons 9 , modfed. (See T. D. 50b6, page 139.)
rtce 131-9: ont return by husband and wfe.
R NU CT OF 1936.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
SUPPL M NT D. R TURNS ND P YM NT OF T .
S CTION 1 3. WIT OLDING OF T T SOURC .
rtce 1 3-2: F ed or determnabe annua 19 1-30-10791
or perodca ncome. I. T. 3 95
R NU CT OF 1936.
domestc fducary s not requred to wthhod ncome ta at the
source from that porton of the ncome of a trust consstng of gan
from the sae of property n the Unted States whch s dstrbutabe
currenty to a nonresdent aen benefcary, or propery pad or
credted to such benefcary durng the ta abe year.
I. T. 3160 (C. . 1938-1, 199) revoked.
Reconsderaton has been gven to the queston as to whether a
domestc fducary s requred to wthhod ncome ta at the source
wth respect to that part of a trust s net ncome from sources wthn
the Unted States whch conssts of gans from the sae of property,
where the net ncome of the trust s to be dstrbuted currenty to a
nonresdent aen benefcary or s propery pad or credted to such
benefcary durng the ta abe year.
I. T. 3160 (C. . 1938-1, 199) answered the above queston n the
affrmatve, hodng that the share of the ncome of a trust from
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162, rt. 162-1.
196
sources wthn the Unted States (ncudng gans from the sae of
property) whch s dstrbutabe, whether dstrbuted or not, or whch
has been pad or credted durng the ta abe year to a nonresdent
aen benefcary of the trust, consttutes f ed or determnabe annua
or perodca ncome wthn the meanng of secton 1 3(b) of the
Revenue ct of 1936. (See artce 1 3-2 of Reguatons 9 .)
Certan anguage n artce 1 3-2 of Reguatons 9 s susceptbe
to the constructon adopted n I. T. 3160, supra. It s the vew of the
ureau, however, that such constructon s not consstent wth the
specfc provson n that artce to the effect that ncome derved from
the sae of property n the Unted States s not f ed or determnabe
annua or perodca ncome, snce that specfc provson s to be read
n the ght of the prncpe usuay apped by the ureau that trust
ncome dstrbutabe to a nonresdent aen benefcary retans n hs
hands the same dentty (as to source and character) as the ncome
possessed n the hands of the fducary. (See ence v. Unted States,
18 Fed. Supp., 8 8, Ct. D. 1255, C. . 1937-2, 3 : . R. M. 37, C. . 2,
172 (1920); I. T. 16 2. C. . II-, 81 (1923); G. C. M. 11221, C. .
I 2, 123 (1932); G. C. M. 13366, C. . III-2, 16 (193 ); I. T.
3 27, C. . 19 0-2, 1 3. Cf. ondermuM v. everng, 75 Fed. (2d),
656, Ct. D. 985, C. . I -2, 292 (1935); G. C. M. 9156, C. . -,
166 (1931).) (See aso everng v. Fok et a., e ecutors. 291 U. S.,
183, Ct. D. 78 . C. . III-1, 2 7 (193 ); I. T. 1622. C. . II-, 135
(1923); I. T. 16 1, C. . II-, 76 (1923).)
In vew of the foregong, I. T. 3160, supra, s revoked. Inasmuch
as ncome consstng of gan from the sae of property n the Unted
States s not f ed or determnabe annua or perodca ncome, a
domestc fducary s not requred to wthhod ncome ta at the
source from that porton of the trust ncome consstng of gan from
such sae whch s dstrbutabe currenty to a nonresdent aen bene-
fcary, or propery pad or credted to such benefcary durng the
ta abe year.
The revocaton of I. T. 3160. supra, does not affect the concuson
reached n I. T. 3207 (C. . 1938-2, 181), n whch t was hed, nter
aa, that I. T. 3160 s not appcabe to a revocabe trust, the ncome
of whch s ta abe to a nonresdent aen grantor.
SUPPL M NT . ST T S ND TRUSTS.
S CTION 162. N T INCOM .
rtce 162-1: Income of estates and trusts.
R NU CT OF 1036.
I. T. 3163 (C. . 1938-1,202) revoked, n vew of G. C. M. 22799 (page
185, ths uetn), n so far as t s nconsstent wth the decsons
of the Supreme Court of the Unted States cted n G. C. M. 22799.
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291, rt. 291-1.
SUPPL M NT . POSS SSIONS OF T UNIT D ST T S.
S CTION 251. INCOM FROM SOURC S WIT IN
POSS SSIONS OF UNIT D ST T S.
rtce 251-1: Ctzens of the Unted States and
domestc corporatons dervng ncome from sources
wthn a possesson of the Unted States.
R NU CT OF 1936.
Reguatons 9 , amended. (See T. D. 5057, page 97.)
SUPPL M NT M INT R ST ND DDITIONS TO T T .
S CTION 201. F ILUR TO FIL R TURN.
rtce 201-1: ddton to ta n case of faure
to fe return.
R NU CT OF 1936.
Reguatons 0 . amended. (See T. D. 5058, page 156.)
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13, rt. 13-1.)
19
INCOM T RULINGS. P RT III.
R NU CTS OF 1935 ND 193 O PRIOR CTS.
SU TITL . G N R L PRO ISIONS.
P RT I. R T S OF T .
S CTION 13. T ON CORPOR TIONS.
rtce 13-1: Income ta on corporatons.
R NU CT OF 193 .
I. T. 3219 (C. . 1938-2,12 ) revoked. (See I. T. 3503, page 185.)
rtce 13-1: Income ta on corporatons. 19 1- 7-1090
I. T. 3518
R NU CT OF 1026.
Modfcaton of I. T. 2 31 (C. . U-2, 1 6 (1928)).
In I. T. 2 31 (C. . II-2, 1 6 (1928)) t was hed n part that
secton 22 of the t of March 1, 1879, whch provdes that no ta
sha be assessed or coected, or pad nto the Treasury of the Unted
Sates, on account of a bank whch has ceased to do busness because
of nsovency or bankruptcy, does not e empt a corporaton from pay-
ment of ncome ta where the recever of the nsovent bank fore-
cosed on the corporaton s capta stock hed as coatera for a oan
and thereafter coected rents as the owner of the capta stock of the
corporaton.
I. T. 3503 (page. 185, ths uetn) revoked I. T. 3219 (C. . 1938-2,
12 ), based on the same prncpes as I. T. 2 31, supra, because t was
contrary to the decson n The auaton Servce Co. v. Commssoner
( 1 . T. ., 811), n whch acquescence Mas announced n Cumu-
atve uetn 19 1-1, 11.
In C. S. T. 11 (page 253. ths uetn), revokng C, S. T. 7 (C. .
1938-1,520) because the atter was contrary to the prncpes announced
n The auaton Servce Co. case, t was sad:
In vew of the acquescence n The auaton Servce Co. v. Commssoner,
supra, and the amendment of secton 5(6) of Treasury Decson 5)58
fC. . 19 0-1, 7 by Treasury Decson 5018 C. . 19 0-2, 173 , a separate
corporaton s entted to mmunty under secton 3798 of the Interna Revenue
Code, as amended, and the correspondng provsons of secton 22 of the ct of
March 1, 1879, as amended, where the separate corporaton and the nsovent
bank are parts of a snge organzaton, the separate corporaton beng n sub-
stance and effect a department of the bank, and consequenty a of the assets
of such corporaton are drecty or ndrecty sub|ect to the cams of the hank s
depostors. separate corporaton, the stock of whch s whoy owned ether
drecty or ndrecty by an nsovent bank (thus renderng ts operaton and
actvtes sub|ect to the drecton and contro of qudators of such bank), meets
the requrements for such mmunty. Under such crcumstances, a ta on the
subsdary woud, n effect, be a ta on account of such bank wthn the mean-
ng of the statute. It s mmatera that the bank Itsef woud be precuded by
aw from engagng n the actvtes carred on by the corporaton. Ownershp
by the bank of a of the capta stock of the separate corporaton s a condton
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199
23(c), rt. 23(e)- .
precedent to mmunty from ta . It must be ceary estabshed that the e acton
of the ta woud nevtaby dmnsh the assets of the nsovent bank necessary
for the fu payment of ts depostors.
Snce the above-stated hodng n I. T. 2 31, supra, s nconsstent
wth the decson n The auaton Servce Co. v. Commssoner,
supra, wth I. T. 3503, supra, and wth C. S. T. 11, supra, I. T. 2 31 s
modfed accordngy.
P RT II. COMPUT TION OF N T INCOM .
S CTION 23(a). D DUCTIONS FROM GROSS
INCOM : P NS S.
rtce 23(a)-: usness e penses.
R NU CTS OF 1918. 1921, ND 192 .
O. D. 537 (C. . 2, 175 (1920)) and I. T. 2238 (C. . I -2, 9
(1925)) revoked, and I. T. 1393 (C. . 1-2, 83 (1922)) revoked n
so far as t s nconsstent wth the decsons of the Supreme Court
of the Unted States cted n G. C. M. 22799 (page 185, ths uetn).
S CTION 23(b). D DUCTIONS FROM GROSS
INCOM : INT R ST.
rtce 23(b)-: Interest.
R NU CTS OF 1932 ND 103 .
ccrua of nterest on addtona manufacturers e cse ta es for
. the perod une, 1932, to February, 1936, not fnay determned unt
1938. (See I. T. 3 91. page 177.)
S CTION 23(c). D DUCTIONS FROM GROSS
INCOM : T S G N R LLY.
rtce 23(c)-1: Ta es.
R NU CTS OF 1932 ND 193 .
ccrua of addtona manufacturers e cse ta es for the perod
une. 1932. to Februarv, 1936, not fnay determned unt 1938.
(See I. T. 3 91, page 177.)
S CTION 23(e). D DUCTIONS FROM GROSS
INCOM : LOSS S Y INDI IDU LS.
rtce 23(e)-: Losses by ndvduas.
R NI CT OF 1921.
I. T. 2037 (C. . III-, 1 6 (192 )) modfed. (See L T. 3519,
page 96.)
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23(o), rt. 23(o)-2.
200
S CTION 23(g). D DUCTIONS FROM GROSS INCOM :
W G RING LOSS S.
rtce 23(g)-: Wagerng osses.
R NU CT OF 193 .
Reguatons 86, amended. (See T. D. 5057, page 97.)
S CTION 23(o). D DUCTIONS FROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS.
rtce 23(o)-1: Contrbutons or gfts by 19 1- 6-10900
ndvduas. I. T. 3516
R NU CT OF 193 .
Revocaton of I. T. 2872 (C. . I -1, 71 (193u)).
In I. T. 2872 (C. . I -1, 71 (1935)) t was hed that the 15
per cent mtaton n secton 23 (o) of the Revenue ct of 193 on
the amount of contrbutons deductbe from net ncome reates to
the contrbutons of each ndvdua and s based on the separate net
ncome (before deductng contrbutons) of the spouse makng the
contrbutons, regardess of whether the husband and wfe fe a
|ont return or separate returns.
In Taft et u . v. everng (311 U. S., 195, Ct. D. 1 78, C. .
19 0-2, 218) the Supreme Court of the Unted States hed that where
a husband and wfe fe a |ont return, ther aggregate ncome s the
bass to whch the percentage mtaton n secton 23 (o) of the Reve-
nue ct of 193 s apped n determnng the deducton aowabe
on account of ther chartabe contrbutons.
In vew of the fact that I. T. 2872, supra, s contrary to the decson
n Taft et u- . v. everng, supra, and artce 23(o)- of Reguatons
86, as amended, and as further amended by Treasury Decson 5057
(page 97, ths uetn), I. T. 2872 s revoked.
rtce 23(o)-1 : Contrbutons or gfts by ndvduas.
R NU CT OF 193 .
Reguatons 86, amended. (See T. D. 5057, page 97.)
rtce 23(o)-2: Donatons by corporatons. 19 1-51-10933
Ct. D. 1532
ncome ta revenue act of 1928 |udca code decson of
supreme court.
1. Crcut Court of ppeam Number of udges uthorzed bt
Law Court of More Than Three udges Mat St en banc.
crcut court of appeas may be composed of a the crcut |udges
of the crcut In actve servce, more than three n number, sttng
en bane. The purpose of secton 118 of the udca Code, as
amended, that the sze of each crcut court of appeas was not
to be ess than the number of crcut udges authorzed by aw was
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201
f 23(o), rt. 23(o)-2
not defeated b.v secton 117 of thp udca CodP, whch provdes
merey the permssbe compement of |udges for n.crcut court of
appeas.
2. penses Incurred n- Procurement and nactment of Legs-
aton ORDIN RY ND NkCF.88 .RY USIN SS P NS aI -
ty and ppcabty of Reguatons.
penses ncurred under contracts n connecton wth the presen-
taton of cams to Congress on behaf of former enemy aens for
the procurement and enactment of amendatory egsaton author-
zng the payment of the cams are not deductbe as ordnary
and necessary e penses wthn the meanng of secton 23(a) of
the Revenue ct of 1928. rtce 202 of Reguatons 7 s a vad
and appcabe reguaton.
3. Decson ffrmed. ,
Decson of the Unted States Crcut Court of ppeas, Thrd Cr-
cut (19-10) (117 Fed. (2d), 02). reversng decson of the Unted
States oard of Ta ppeas (1938) (38 . T. ., 623), affrmed.
Supreme Court of the Unted States.
Te te Ms Securtes Corporaton, pettoner, v. Commssoner of Interna
Revenue.
62 S. Ct., 272.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Thrd Crcut.
December 8, 19 1.
OPINION.
Sr. ustce Dougas devered the opnon of the Court.
Ths case presents two probems: (1) whether a crcut court of appeas may
be composed of a the crcut |udges of the crcut n actve servce, more than
three n number, sttng en banc; (2) whether pettoner may deduct under the
Revenue ct of 1928 ( 5 Stat., 791) certan e penses ncurred by It under con-
tracts n connecton wth the presentaton of cams to Congress on behaf of
former enemy aens for the procurement and enactment of amendatory egsa-
ton authorzng the payment of the cams. We grant d the petton for certo-
rar because of the pubc mportance of the frst probem and the contrarety of
the vews of the court beow (117 Fed. (2d), 62) and |udges of the Crcut Court
of ppeas for the Nnth Crcut (Lang s state v. Commssoner, 97 Fed. (2d),
807) as respects ts souton.
Frst: There are ve crcut |udges, n actve servce,1 of the Crcut Court of
ppeas for the Thrd Crcut. fve heard and decded ths case. Though
they dvded three to two on the deductbty of the e penses n queston, they
were unanmous In the concuson that fve were authorzed to hear and decde
the case.
The probem arses because secton 117 of the udca Code (28 U. S. C,
fecton 212; 30 Stat., 1131) provdes that There sha be In each crcut a cr-
cut court of appeas, whch sha consst of three |udges, of whom two sha
consttute a quorum, whch sha be a court of record, wth appeate |ursdcton,
as herenafter mted and estabshed. That provson derves from secton 2
of the ct of March 3, 1891 (26 Stat., 826), whch estabshed the crcut court
of appeas. Though Congress by that ct created these new courts, t dd not
udca Code, secton 118 (28 U. S. C, secton 213) ; ct of une 10. 1030 (ch. .18.
6 Stat., 538, 28 II. S. C. secton 213d) ; ct of une 2 , 1936 (ch. 753. Stat., 11)03.
28 U. S. C. secton 213d-).
s dstngushed from |udges retred under the provson of secton 260 of the udca
Code (28 IT. S. ( .. secton 375).
The Crcut Court of ppeas for the Thrd Crcut has promugated rues n accord
wth that vew. Rue (1) provdes: The court conssts of the crcut |ustce, when n
attendance, and of the crcut |udges of the crcut who are n actve servce. Dstrct
|udges and retred crcut udges of the crcut st n the court when specay desgnated or
assgned as provded by aw. Three udges sha st In the court to hear n matters, e cept
those whch the court by speca order drects to be heard by te court en banc.
Secton 2 provded n part: That there Is hereby created In euch crcut a crcut
court of appeas, whch sha consst of three udges, of whom two sha consttute a
quorum, and whch sha be a court of record wth appeate ursdcton, as Is her fter
mted and estabshed.
1011 2 1
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I 23(o), rt. 23(o -2.
202
make provson for the appontment to them of a new group of |udges. It pro-
vded, however, by secton 3 of that ct that the Chef ustce and ssocate
ustces of the Supreme Court assgned to each crcut and the crcut udges
and dstrct |udges wthn each crcut sha be competent to st as |udges of
the crcut court of appeas wthn ther respectve crcuts. Thus t s apparent
that the newy created crcut court of appeas was to be composed of ony three
|udges who were to be drawn from the three e stng groups of |udges the
crcut |ustce, the crcut |udges, and the dstrct |udges.
That arrangement contnued unt enactment of the udca Code. ( ct of
March 3, 1911, ch. 231, 36 Stat., 1087.) The udca Code aboshed the e stng
crcut courts. (Secton 297.) It carred over nto secton 117 wthout sub-
stanta change the provson of secton 2 of the ct of March 3, 1891, that there
shoud be a crcut court of appeas n each crcut whch sha consst of three
|udges. Though ths secton was sad merey to represent e stng aw, sec-
ton 118 of the udca Code provded for four crcut |udges n the Second,
Seventh, and ghth Crcuts, two n the Fourth Crcut, and three n each of
the others. n anomaous stuaton was presented f secton 117 were to be
taken at that uncture as meanng that the crcut court of appeas woud con-
tnue to be composed of ony three, n face of the fact that there were more
than three crcut |udges n some crcuts. Though secton 3 of the ct of March
3, 1891, made the crcut |udges competent to st as |udges of the crcut court
of appeas wthn ther respectve crcuts, secton 120 of the udca Code
nto whch the provsons of secton 3 were carred emnated the crcut |udges
from the groups of |udges competent to st. Yet t retaned the provson that
the crcut |ustces and the dstrct udges were so quafed. We agee, however,
wth the vew of the court beow that the crcut |udges became e offco |udges
of the respectve crcut courts of appea when the crcut courts were aboshed.
Though secton 120 dd not desgnate them as competent to st, ts other pro-
vsons made cear that they were ntended to st. Thus, t was provded that
the dstrct |udges shoud e drawn upon ony n case the court coud not be
made up by the crcut |ustces and the crcut |udges. Yet f secton 117 were
to be read teray, the crcut court of appeas was to consst of ony three
|udges n spte of the fact that Congress had aready provded n some crcuts
for more than three crcut |udges. Ceary where there were four, a coud
not be members of a court of three. Yet there was pany nferabe a Congres-
sona purpose to consttute n some crcuts a crcut court of appeas of four
|udges.8
ny doubts on that score were resoved by the ct of anuary 13, 1912 (ch. 9,
37 Stat., 52), whch amended secton 118 of the udca Code by the addton of
the provson that The crcut |udges n each crcut sha be |udges of the crcut
court of appeas n that crcut, and It sha be the duty of each crcut |udge to
st as one of the |udges of the crcut court of appeas In that crcut from tme
to tme accordng to aw. Senator Sutherand who had charge of the b n the
Senate stated on the toor: It makes no change whatever n the e stng aw
e cept to make t cear that the crcut udges n the varous crcuts of the Unted
5 Secton 3 of that ct provded : In case the fu court at any tme sha not be made
up by the attendance of the Chef ustce or an ssocate ustce of the Supreme Court
and crcut |udges, one or more dstrct udges wthn the crcut sha be competent to
st n the court accordng to such order or provson among the dstrct |udges as ether
by genera or partcuar assgnment sha be desgnated by the court . nd t
shoud e noted that after the passage of the ct of March 3, 1801, there were three
crcut |udges In the Second Crcut and two n each of the others. ( ct of pr 10,
18C9. ch. 22. secton 2, 16 Stat., ; ct of March 3, 1887, ch. 8 7, 2 Stat., 92; ct of
March 3. 1801. ch. 517. secton 1. 28 Stat.. 826.)
S. ept. No. 388. S ty-frst Congress, second sesson, part 1, page 0, part 2. page 310.
7 In case the Chef ustce or un assocate |ustce of the Supreme Court sha attend
at any sesson of the crcut court of appeas, he sha presde. In the absence of such
Chef ustce, or assocate ustce, the crcut |udges n attendance upon the court sha
presde n the order of the senorty of ther respectve commssons. In case the fu
court at any tme sha not be made up by the attendance of the Chef ustce or the
assocate |ustce, and the crcut |udges, one or more dstrct udges wthn the crcut
ha st In the court accordng to such order or provson among the dstrct |udges as
cther by genera or partcuar assgnment sha be desgnated by the court .
Thus the Senate report, supra, note 6, In sneakng of secton 118 (secton 116 In the
b) stated, page 50 : the secton states n concse anguage the number of
|udges now provded bv aw for the severa |udca crcuts.
See the etter by bert . Waker n 7 Centra L. ., 12.
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203
23(o), rt. 23(o)-2.
States sha consttute the crcut court of appeas. 10 The purpose seems pan:
the sze of each crcut court of appeas wa not to be ess than the number of
crcut |udges authorzed by aw.
nd so we reach the queston as to whether the avowed purpose of secton 118
was defeated by secton 117. We do not thnk t was.
That purpose was not thwarted by the provson n the 1912 amendment to
secton 118 that t sha be the duty of each crcut |udge n each crcut to st as
one of the |udges of the crcut court of appeas n that crcut from tme to tme
accordng to aw. It has been suggested that accordng to aw refers to sec-
ton 117. In our vew, however, t s the tme of te stng whch s to be ac-
cordng to aw. ence the reference must be to secton 126 of te udca Code
(28 U. S. C, secton 223) whch reguates te tmes when the crcut courts of
appea sha st.
If secton 117 coud reasonaby be construed to provde that the court, when
tt tng, shoud consst of three |udges drawn from a pane of such arger number
as mght from tme to tme be authorzed, reconcaton wth secton 118 woud
be obvous. Secton 117, however, contans no such quafcaton. nd snce t
estabshes the court as a court of record, wth appeate |ursdcton, t can
uot ready be nferred that the provson for three |udges s a mtaton ony on
the number who may hear and decde a case. There are numerous functons of
the court, as a court of record, wth appeate |ursdcton, other than hearng
and decdng appeas. Under the udca Code these embrace prescrbng the
form of wrts and other process and the form and stye of ts sea (secton 122) ;
the makng of rues and reguatons (secton 122) ; the appontment of a cerk
(secton 12 ) and the approva of the appontment and remova of deputy cerks
(secton 12.1) ; and the f ng of the tmes when court sha be hed. (Secton
126.) Furthermore, those varous sectons of the udca Code provde that each
of these functons sha be performed by the court. In that connecton t shoud
be noted that most of them derve, as does secton 117, from secton 2 of the t
of March 3, 1891. The frst sentence of secton 2 provded that the court sha
consst of three |udges. The ne t sentence stated that Such court sha pre-
scrbe the form and stye of ts sea and the form of wrt s and other process and
procedure, etc. In that settng t s dffcut to perceve how the word court
n the second sentence was used n a dfferent sense than In the precedng sentence.
nd we ook n van for any Indcaton that when those separate sentences were
sectonazed n the Code, they acqured a meanng whch they dd not have n
secton 2 of the ct of March 3, 1891.
We can not concude, however, that the word court as used n those other
provsons of the udca Code means ony three |udges. That woud not ony
produce a most awkward stuaton; t woud on n matters dsenfranchse some
crcut |udges aganst the cear Intendment of secton 118. Nor can we concude
10 7 Congressona Record, Tart 3. pace 2736. Senator Sutherand aso sad: It has
been thought, as I sad, that the e stng aw dd not make t qute cear that Ihe crcut
udges sha bo the consttuent mouthers of the crcut court of appeas, and t s to remove
that doubt, and that, ony, that ths b has been re orted from the udcary Commttee.
(Id., page 2736.) II. ept. No. 199, S ty-second Congress, second sesson, stated, Ths
b deas wth a detect n e stng aw. It makes t cear that the crcut |udges sha
consttute the crcut court of appeas. nd see the statements on the foor of the ouse
by Representatve Cayton, charman of the ouse udcary Commttee ( 8 Congressona
Record, art 1, page 667) and Representatve Moon, charman of the ouse Commttee
on the Revsons of the Laws, who bad Iteen n charge of the ouse b provdng for the
udca Code. (7d.. page (ds.)
Possbe nferences ookng the other way are such statements by Representatve Mann
that n those crcuts where there were four crcut |udges, one of them mght be put
at work n the dstrct court. ( 8 Congressona Record. Part 1, page 667.) nd see
8 Congressona Record, Part 2, page 1272. et such statements are not nconsstent
wth the concuson that whe the ordnary compement of crcut |udges woud be three,
a mght st.
11 In ths connecton t shoud be noted that secton 120 of the udca Code makes the
Chef ustce and the assocate |ustces of the Supreme Court assgned to each cr-
cut competent to st as |udges of the crcut court of appeas wthn ther
respectve crcuts. Thus whe the crcut court of appeas s composed prmary of
crcut |udges, the crcut |ustce s made a component part of that court. See state-
ment by Representatve Moon, op ct., supra, note 10, page 668.
Secton 122 of the udca Code (secton 120 n the b) gvng the court power to
prescrbe the form of wrts and other process and the form and stye of ts sea, and the
power to make rues and reguatons waa stated n S. Rept. No. 3S8, supra, note 6, page 51,
to represent e stng aw.
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23(o), rt. 23(o)-2.
20
that the word court means ony three |udges when the court s sttng, but a
the |udges when other functons are. performed. Certany there s no specfc
authorty for that constructon. nd t s dffcut to reach that concuson by
nference. For to do so woud be to mpy that Congress prohbted some crcut
|udges from partcpaton n the most mportant functon of the court (the
hearng and the decson of appeas), though aowng a of them to perform the
other functons. Such a prohbton as respects the ordnary responsbtes of
a |udca offce shoud be nferred ony under compeng necessty, snce a court
usuay w consst of a the |udges apponted to t. That necessty s not present
here. The ambguty n the statute s doubtess the product of nadvertence.
Though the probem of constructon s beset wth dtcutes, the concuson that
secton 117 provdes merey the permssbe compement of |udges for a crcut
court of appeas resuts n greater harmony n the statutory scheme than f the
anguage of secton 117 s taken too teray. nd any sacrfce of teraness for
common sense does no voence to the hstory of secton 117. That hstory s
argey negatve n the sense that there s no cear statement by sponsors of ths
egsaton that secton 118 read n ght of secton 117 prevents the concuson
whch we have reached. Certany the resut reached makes for more effectve
|udca admnstraton. Confcts wthn a crcut w be avoded. Fnaty of
decson In the crcut courts of appea w be promoted. Those consderatons
are especay mportant n vew of the fact that n our Federa |udca system
these courts are the courts of ast resort n the run of ordnary cases. Such con-
sderatons are, of course, not for us ts wegh n case Congress has devsed a sys-
tem where the |udges of a court are prohbted from sttng en ban . ut where,
as here, the case on the statute Is not forecosed, they ad n tppng the scaes n
favor of the more practcabe nterpretaton.
u It Is suggested by respondent that f the crcut court of appeas may stt en banc,
dffcutes arse n connecton wth that provson of secton 120 of the udca Code
whch reads : In case the fu court at any tme sha not be made up by the attendance
of the Chef ustce or the assocate ustce, and the crcut udges, one or more dstrct
|udges wthn the crcut sha st n the court accordng to such order or provson among
the dstrct udges as ether by genera or partcuar assgnment sha be desgnated by
the court . The dffcuty suggested s that secton 120 woud mpy that. If
a the crcut udges compose the court, then dstrct |udges shoud be caed n when-
ever the court was composed of ess than that number. nd the argument goes further
and suggests that snce the crcut ustce s competent to st (see note 11, supra)
then a dstrct court |udge coud he brought n, when the crcut ustce s absent, to make
up the fu court even though a crcut udges sat. The answer, however, Is that
fu court as used In secton 120 refers to the court whch contans the permssbe
compement of |udges as dstngushed from a quorum of two. t nder our Interpretaton a
bench of three udges Is the permssbe compement under secton 117.
1 egnnng In 19118 the udca Conference of Senor Crcut udges recommended
an amendment to the Code whch woud enabe a ma|orty of the crcut udges In crcuts
where there were more than three to provde for a court of more than three |udges.
(Report of the ttorney Genera (10118), page 23; d. (1930), pages 15-16; Report of the
udca Conference of Senor Crcut udges (19 0)page 7.) b was Introduced dur-
ng the present sesson of Congress n both the ouse ( . R. 3390) and the Senate
(S. 10.13) to amend secton 117 of the udca Code by addng thereto the foowng : Pro-
vded, That, n a crcut where there are more than three crcut udges, the ma|orty of
the crcut udges may provde for a court of a the actve and avaabe crcut |udges
of the crcut to st en banc for the hearng of partcuar cases, when n ther opnon
uch acton s advsabe.
Ths h has passed the ouse. (87 Congressona Record, 8328.) In the ouse, the
Commttee on the udcary reported the b favoraby ( . Rept. No. 1218, Seventy-seventh
Congress, frst sesson), statng:
Under e stng aw provson s made that there sha be In each crcut a crcut court
of appeas whch sha consst of three udges, of whom two sha consttute a quorum.
The b adds a provson that n a crcut where there are more than three crcut |udges,
the ma|orty of the crcut |udges may provde for a court of a the actve and avaabe
crcut udges of the crcut to st en banc for the hearng of partcuar cases, when n ther
opnon such acton s advsabe.
If the court can st n banc the stuaton where two 3-|udge courts may reach confct-
ng concusons s obvated. It aso w obvate the stuaton where there are seven
members of the court and as sometmes happens a decson of two |udges (there havng
been a dssent) sets theTprecedent for the remanng |udges. smar resut woud be
avoded wth a court of fve |udges.
It seems desrabe that where the udges fee It advsabe they mght st n banc for
hearng partcuar cases. Legsaton to ths effect has been recommended by the udca
conference of senor crcut udges snce 1938, and at Its anuary, 19 1, sesson the con-
ference approved the form of the present b.
ut we do not deduce that ths effort at carfcaton was or purported to be any defn-
tve nterpretaton that secton 117 as t stands prohbts a crcut court of appeas of
more than three |udges from sttng en banc.
See II. Rept. No. 12 6. supra, note 1 ; 69 Centra L. ., 217. nd see the testmony
of Chef ustce Taft and Mr. ustce an Devanter, earngs, Commttee on the udcary,
ouse of Representatves, Seventeth Congress, second sesson, Sera 23, Part 2, on
. R. 5090, 13567, 13757, pages 69, 72.
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205
23(o), rt. 23(o)-2.
Second: The e penses In queston are sought to be deducted as ordnary and
necessary e penses wthn the meanng of secton 23(a) of the Revenue ct of
1928. Pettoner, a Deaware corporaton, was empoyed to represent certan
German te te Interests, whose propertes n ths country had been sezed durng
the Word War under the provsons of the Tradng wth the nemy ct. ( 0
Stat., 11.) Pettoner s empoyment was made wth a vew towards procurng
egsaton whch woud permt utmate recovery of the propertes. The est-
mated aggregate vaue of the propertes was 60,000,000. Pettoner was to be
compensated on a percentage bass n case t was successfu. It, however, was
to bear a the costs and e penses. Pettoner aunched ts campagn. pubcst
was retaned to arrange for speeches, news tems, and edtora comment. Two
ega e perts were retaned to prepare propaganda concernng nternatona
reatons, treaty rghts and the pocy of ths Naton as respects aen property
n tme of war. The ob|ectve of the campagn was accompshed by the passage
of the Settement of War Cams ct of 1928 ( 5 Stat., 25 ). Deductons for
the amount pad to the pubcst and the two awyers were taken n 1929 and
1930, thereby producng a net oss In each of those years. Pursuant to secton
117 of the 1928 ct, the net oss was carred forward two years and apped
aganst ncome for 1931. The Commssoner dsaowed te deductons and
determned a defcency. The oard of Ta ppeas dsagreed, hodng that there
was no defcency. (38 . T. ., 623.) The crcut court of appeas reversed the
oard.
We agree that the e penses n queston were not deductbe. rtce 262 of
Treasury Reguatons 7 , promugated under the 1928 ct was entted 1 na-
tons by corporatons and provded:
Corporatons are not entted to deduct from gross ncome contrbutons or
gfts whch ndvduas may deduct under secton 23(n). Donatons made by a
corporaton for purposes connected wth the opernton of ts busness, however,
when mted to chartabe nsttutons, hosptas, or educatona nsttutons
conducted for the beneft of ts empoyees or ther dependents are a proper deduc-
ton as ordnary and necessary e penses. Donatons whch egtmatey repre-
sent a consderaton for a beneft fowng drecty to the corporaton as an ncdent
of ts busness are aowabe deductons from gross ncome. For e ampe, a street
raway corporaton may donate a sum of money to an organzaton ntendng to
hod a conventon n the cty n whch t operates, wth the reasonabe e pectaton
that the hodng of such conventon w augment Its ncome through a greater
number of peope usng the cars. Sums of money e pended for obbyng pur-
poses, the promoton or defeat of egsaton, the e potaton of propaganda,
ncudng advertsng other than trade advertsng, and contrbutons for cam-
pagn e penses, are not deductbe from gross ncome.
If ths s a vad and appcabe reguaton, the sums n queston were not
deductbe as ordnary and necessary e penses under secton 23(a), snce
they ceary run afou of the prohbton In the ast sentence of the reguaton.
Pany, the reguaton was appcabe. The ban aganst deductons of amounts
spent for obbyng as ordnary and necessary e penses of a corporaton
derved from a Treasury decson n 1915. (T. D. 2137, 17 Treasury Decsons,
Interna Revenue, pages 8, 57-58.) That prohbton was carred nto artce
1 3 of Treasury Reguatons 33 (revsed, 1918) under the headng of penses
n the secton on Deductons. 18 egnnng n 1921 the reguaton was entted
Donatons. ( rtce 562, Treasury Reguatons 5.) nd n the reguatons
here n queston artce 262 appeared under secton 23(n) whch covered Charta-
be and other contrbutons by ndvduas. It assumed that form and content
n 1921 and appeared snce then wthout change n a successve reguatons.1
Secton 23(n) and secton 23(a) both dea wth deductons; and a donaton
by a corporaton though not deductbe under the former mght be under the
atter. rtce 262 purports to specfy when a certan type of e pendture or
donaton by a corporaton may or may not be deducted as an ordnary and
necessary e pense. The argument that t was not appcabe because t was
not specfcay ncorporated under secton 23(a) s frvoous.
rtce 1 3 provded : Lobbyng e pennee. Sumf of money e pended for obbyng
purposes, the promoton or defeat of egsaton, the e potaton of propaganda, and con-
trbutons for campagn e penses are hed not to be an ordnary and necessary e pense
In the operaton and mantenance of the busness of a corporaton, and are therefore not
deductbe from gross Income n arrvng at the net ncome upon whch the ncome ta
s computed.
rtce 562, Reguatons 62, Revenue ct of 1021 : artce r R2, Reguatons 65. Revenue
ct of 192 ; artce 562, Reguatons 69, Revenue ct of 11)26; artce 262, Reguatons
7 , Revenue ct of 1928.
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51, rt. 51-1.1
206
Pettoner s argument tnt the reguaton Is nvad kewse acks substance.
The words ordnary and necessary are not so cear and unambguous n ther
meanng and appcaton as to eave no room for an nterpretatve reguaton.
The numerous cases whch have come to ths Court on that ssue bear wtness
to that. (Wech v. everng, 2D0 U. S., I Ct. D. 755, C. . II-2.112 (1938) ;
Deputy v. du Pont, 308 U. S., 88. and cases cted Ct. D. 1 35, C. . 19 0-1, 118 .)
Nor has the admnstratve agency usurped the egsatve functon by carvng out
ths speca group of e penses and makng them nondeductbe. We fa to fnd
any ndcaton that such a course contravened any Congressona pocy. Con-
tracts to spread such nsdous nfuences through egsatve has have ong been
condemned. (Trst v. Chd, 21 Wa., 1; azeton v. Sheckes, 202 U. S-, 71.)
Whether the precse arrangement here In queston woud voate the rue of those
eases s not matera. The pont s that the genera pocy Indcated by those
cases need not be dsregarded by the rue-makng authorty n ts segregaton
of nondeductbe e penses. There s no reason why, n absence of cear Con-
gressona acton to the contrary, the rue-makng authorty can not empoy that
genera pocy n drawng a ne between egtmate busness e penses and those
arsng from that famy of contracts to whch the aw has gven no sancton.
The e cuson of the atter from ordnary and necessary e penses certany
does no voence to the statutory anguage. The genera pocy beng cear t s
not for us to say that the ne was too strcty drawn.
ffrmed.
Mr. ustce ackson took no part n the consderaton or dsposton of ths case.
S CTION 25. CR DITS OF INDI IDU L
G INST N T INCOM .
rtce 25-2: arned ncome credt.
R NU CT OF 193 .
I. T. 2855 (C. . I -1, 72 (1935)) revoked, n vew of G. C. M.
22853 page 207, ths uetn , n so far as t s nconsstent wth the
prncpes of the decsons of the Supreme Court of the Unted States
and the reguatons cted n G. C. M. 22853. (See I. T. 3501, page 209.)
rtce 25-2: arned ncome credt.
R NU CT OF 103 .
Reguatons 86, amended. (See T. D. 5057, page 97.)
P RT . R TURNS ND P YM NT OF T .
S CTION 51. INDI IDU L R TURNS.
rtce 51-1: Indvdua returns.
R NU CT OF 193 .
Reguatons 86, amended. (See T. D. 5057, page 97.)
MIn the Revenue ct of 1036 (26 U. S. C, secton 23(q), 9 Stat.. 10 S) Const-ess
specfcay provded for deductons of certan contrbutons by corporatons to specfed
corporatons, trusts, funds, or foundatons, no substanta part of the actvtes of whch
Is carryng on propaganda, or otherwse attemptng, to unuence egsaton. nd see
the Revenue ct of 1038 (2G . S. C, secton 23(q), 52 Stnt., 7).
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207
51, rt. 51-1.
rtce 51-1: Indvdua returns.
( so Secton 25, rtce 25-2; Secton 117,
rtce 117-5.)
19 1-35-10813
G. C. M. 22853
R NU CTS OP 1932 ND 103 .
G. C. M. 15 38 (C. . I -2, 156 (1935)), hodng that where hus-
band and wfe fed a |ont return for the year 1032, osses sustaned
by the wfe from saes or e changes of securtes whch were not
capta assets may not be aowed as an offset aganst gans derved
by the husband from ke transactons, and that such osses may
not be apped aganst other ncome of the husband, s revoked,
snce t s contrary to the prncpes of the decsons of the Supreme
Court of the Unted States n everng v. anney et a . and Ganes
et u . v. everng (311 U. S., 189, Ct. D. 1 79, C. . 19 0-2, 220)
and Taft et u . v. everng (311 U. S., 195, Ct. D. 1 78, C. . 19 0-2,
218) and to the reguatons as amended by Treasury Decson 5057
(page 97, ths uetn).
Recommended that I. T. 2868 (C. . T -1, 111 (1935)) be re-
voked, and that I. T. 2855 (C. . I -1, 72 (1935)) and I. T. 2875
(C. . I -1, 81 (1935)) be revoked n so far as they are ncon-
sstent wth the prncpes of the above-named Supreme Court
decsons and the above-mentoned reguatons.
Reference s made to the decsons of the Supreme Court of the
Unted States n everng v. anney et u . and Gams et u . v.
everng (311 U. S., 189, Ct. D. 1 79, C . 19 0- 2, 220) and Taft
et u . v. everng (311 U. S., 195, Ct. D. 1 78, C. . 19 0-2, 218).
In the anney and Ganes cases, supra, the Supreme Court hed that
where a husband and wfe vng together fe a |ont return, gans
from the sae of capta assets by one spouse may be offset by osses
from the sae of smar assets by the other spouse under the prov-
sons of sectons 51(b)2 and 117(d) of the Revenue ct of 193 .
In the Taft case, supra, the Supreme Court hed that where a husband
and wfe fe a |ont return, ther aggregate ncome s the base to
whch the percentage mtaton provded n secton 23(o) of the
Revenue ct of 193 s apped n determnng the deducton aow-
abe on account of ther chartabe contrbutons. In the course of
ts opnons, the Court cted wth approva So. Op. 90 (C. . , 236
(1921)), n whch t was stated that a |ont return of husband and
wfe s treated as the return of a ta abe unt and the ta s to be
ad as though the return were that of a snge ndvdua.
In order to conform Reguatons 103, 101, 9 , and 86, reatng to
ncome ta under the Interna Revenue Code and the Revenue cts
of 1938, 1936, and 193 , respectvey, to the prncpes set forth n
the above-cted decsons, Treasury Decson 5057 (page 97, ths u-
etn), approved uy 2,19 1, was promugated.
G. C. M. 15 38 (C. . I -2,156 (1935)) hods that where husband
and wfe fed a |ont return for the year 1932, osses sustaned by
the wfe from saes or e changes of securtes whch were not capta
assets may not be aowed as an offset aganst gans derved by the
husband from ke transactons, and that such osses may not be
apped aganst other ncome of the husband. G. C. M. 15 38 was
romugated under secton 23 (r) of the Revenue ct of 1932, reatng
) mtaton on stock osses.
I. T. 2855 (C. . I -1, 72 (1935)) hods, nter aa, that the
earned ncome credt under secton 25(a) of the Revenue ct of 193
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S 112(g), rt. 112(g)-2.
208
s aganst the net ncome of each ndvdua n the case of a husband
and wfe, and that ther earned ncome credts under that ct may be
computed separatey even though they fe a |ont return.
I. T. 2868 (C. . I -1, 111 (1935)) hods that where a |ont return
s fed and the wfe takes nto account under secton 117(a) of the
Revenue ct of 193 a oss of 7,000 n e cess of gans on saes of
capta assets, she s mted to a deducton of 2,000 under secton
117(d) of that ct, and that where the wfe s ncome from other sources
was ony 00, the baance of the deductbe oss amountng to 1,600
may be apped aganst the net ncome of the husband n computng
the combned net ncome of the husband and wfe n the |ont return.
I. T. 2875 (C. . I -1. 81 (1935)) hods, nter aa, that the
earned ncome credt aowabe under the Revenue ct of 193 s
aganst the net ncome of each ndvdua, that such a credt s based
on the earned net ncome of the respectve ndvdua even though a
husband and wfe fe a |ont return, and that n the atter case, where
ony the husband had ncome but the wfe had an aowabe deducton
or deductons, the husband ony s entted to an earned ncome credt
and t s based on hs earned net ncome.
Inasmuch as the concusons reached n G. C. M. 15 38. supra, are
contrary to the prncpes of the decsons n the anney, Ganes, and
Taft cases, supra; and to the reguatons as amended by Treasury De-
cson 5057, supra, G. C. M. 15 38 s revoked. For the same reason,
t s recommended that I. T. 2 68, supra, be revoked, and that I. T.
2855, supra, and I. T. 2875, supra, be revoked n so far as thev are
nconsstent wth the prncpes of the above-named Supreme Court
decsons and the above-mentoned reguatons.
M. . Lemno,
ctng Chef Counse, ureau of Interna Revenue.
btce 51-1: Indvdua returns.
R NU CT OF 193 .
I. T. 2875 (C. . I -1, 81 (1935)) revoked, n vew of G. C. M.
22853 (page 207, ths uetn), n so far as t s nconsstent wth the
rncpes of the decsons of the Supreme Court of the Unted
tates and the reguatons cted n G. C. M. 22853. (See I. T. 3501,
page 209.)
SU TITL C SUPPL M NT L PRO ISIONS.
SUPPL M NT . COMPUT TION OF N T INCOM .
S CTION 112(g). R COGNITION OF G IN OR LOSS:
D FINITION OF R ORG NIS TION.
rtce 112(g)-2: Defnton of terms.
NU CT OF 1032.
cquston of property by notehoders at forecosure sae and
transfer to new corporaton. (See Ct. D. 1529, page 189.)
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209
119, rt. 119-10.
S CTION 117. C PIT L G INS ND LOSS S.
rtce 117-5: ppcaton of secton 117 n 19 1-35-1081
the case of husband and wfe. I. T. 3501
( so Secton 25, rtce 25-2; Secton 51,
rtce 51-1.)
R NU CT O 193 .
In vew of G. C. M. 22853 (page 207, ths uetn), I. T. 28G8 (C. .
I -1, 111 (1935)) s revoked, and I. T. 2855 (C. . I -1, 72
(1935)) and I. T. 2875 (C. . I -1, 81 (1935)) are revoked n so
far as they are nconsstent wth the prncpes of the decsons of
the Supreme Court of the Unted States and the reguatons cted
n G. C. M. 22853.
rtce 117-5: ppcaton of secton 117 n the
case of husband and wfe.
R NU TT OF 193 .
Reguatons 86, amended. (See T. D. 5057, page 97.)
S CTION 119. INCOM FROM SOURC S WIT IN
UNIT D ST T S.
rtce 119-10: pportonment of deductons. 19 1-30-10793
Ct. D. 1525
INCOM T R NU CT OF 1932 D CISION OF COURT.
1. foregn cortohaton deductons net ncome from sources
Wthn the Unted States Determnaton ok Ratabe
Part of penses, Losses, and Other Deductons Incu-
son of Dvdends.
The ratabe part of e penses, osses, or other deductons to
whch a foregn corporaton s entted n determnng ts net Income
from sources wthn the Unted States, under the provsons of sec-
ton 119(b) of the Revenue ct of 1932, s the rato between ts
tota gross ncome from sources wthn the Unted States, ncudng
dvdends, and ts tota gross ncome from a sources. London and
Lancashre Ins. Co., Ltd., v. Commssoner (3 . T. ., 29f )
dstngushed.
2. Foregn Corporaton Deductons Net Income from Sources
Wthn the Unted States Ratabe Part of ome Offce
Genera pense, rtsh Income Ta , and Interest Pad to
Debenture oders and Debenture Stockhoders Payments
on Debentures Consttute Interest Rather Than Dvdends.
In determnng the net ncome of a foregn corporaton from
sources wthn the Unted States, deducton may be aowed for
a ratabe part of home offce genera e penses, rtsh ncome
ta es, and nterest pad to debenture hoders and debenture stock-
hoders. The returns on the debenture stock certfcates were nter-
est payments rather than dstrbutons n the nature of dvdends.
Interest on such certfcates was payabe rrespectve of the suff-
cency of the earnngs or surpus of the corporaton, and both
prncpa and nterest due thereon were entted to share n the assets
of the corporaton on qudaton par passu wth unsecured credtors.
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119, rt. 119-10.
210
CouT of Cams of the Unted States.
The Thrd Scottsh mercan Trust Co., Lmted, v. The Unted States.
37 Fed. Supp., 279.
March 3, 19 1.
OPINION.
Wutakeb. udge, devered the opnon of the conrt.
I. The pantff s a foregn corporaton chartered under the aws of Great
rtan. Durng the year 1033 t derved ncome from sources wthn the Unted
States consstng of nterest and dvdends. It seeks to deduct from such gross
ncome a ratabe part of ts home offce e penses, nterest, and rtsh ncome
ta es. The frst queston presented s the proper method of determnng ths
ratabe part.
The pantff says that ths ratabe part s the rato between a of ts gross
ncome n the Unted States, ncudng dvdends, and ts tota gross ncome from
a sources. The defendant says that the ratabe part s the rato between pan-
tff s ncome from sources wthn the Unted States, e cusve of dvdends, and
ts tota ncome from a sources) n the atter of whch, strangey enough, t
Incudes the same dvdends whch t e cudes n determnng ncome from sources
wthn the Unted States.
Secton 119(b) of the Revenue ct of 1932 ( 7 Stat., 209) s the basc secton
to be consdered. It reads:
(b) Net Income From Sources n Unted States. From the tems of gross
ncome specfed In subsecton (a) of ths secton there sha be deducted the
e penses, osses, and other deductons propery apportoned or aocated thereto
and a ratabe part of any e penses, osses, or other deductons whch can not
defntey be aocated to some tem or cass of gross ncome. The remander, f
any. sha e ncuded n fu as net Income from sources wthn the Unted States.
The tems of gross ncome specfed n subsecton (a) are tems to be ncuded
n determnng ncome from sources wthn the Unted States. From these
tems subsecton (b) permts the deducton of e penses, etc., propery appor-
toned or aocated thereto : that s to say, e penses ncurred n the earnng of
the ncome specfed. Further t was recognzed that the ta payer woud ncur
e penses attrbutabe to the earnng of both ts Unted States and ts other ncome,
and that t woud not be possbe to say wth any degree of accuracy |ust how
much of t was ncurred n the earnng of Unted States ncome and how much
In the earnng of other ncome. So, n such case t was provded that the ta payer
mght deduct a ratabe part thereof. Ths meant, of course, such part as the
rato of ts gross ncome from Unted States sources bore to ts tota gross ncome.
that t Is necessary for us to do, therefore, to decde the ssue between the
partes s to ook to the ct to see f dvdends are Incuded n what the statute
defnes as gross ncome from sources wthn the Unted States. We fnd they are
specfcay ncuded.
ut the defendant says Congress coud not have Intended to Incude dvdends
because they are not sub|ect to the ta . e that as t may, Congress nevertheess
e pcty dd ncude them. The ct says: The foowng Items of gross
ncome sha he treated as Income from scurces wthn the Unted States.
It frst sts nterest, and then dvdends from two casses of corporatons
and t s conceded the corporatons from whch these dvdends were receved
come wthn one of the casses named and then other tems wth whch we
are not concerned.
Ths beng true, we have no opton but to appy the ct as It s wrtten.
If Congress faed to provde for a contngency for whch t shoud have pro-
vded, the courts are poweress to suppy the omsson. If the statute Is pan
and unambguous, t must be enforced as wrtten, athough the resut be ogca.
In support of ts poston the defendant ctes London and Lancashre Ins. Co.,
Ltd.. v. Commssoner (3 . T. .. 295). The queston there was the same
as the queston here, but t arose not under the sectons of the ct we have
under consderaton, but under those sectons appcabe to nsurance companes.
Secton 20 (a) of the Revenue ct of 1928 ncuded dvdends wthn an nsurance
company s gross ncome, but subsecton (c) permtted the deducton of the
amount receved as dvdends from corporatons as provded n secton 23(p).
There s no such provson n secton 119(b) of the Revenue ct of 1932; nor
was there any such provson n secton 119(b) of the Revenue ct of 1928.
Furthermore, subsecton (e) of secton 20 of the Revenue ct of 1928 provded
that Nothng In ths secton sha be construed to permt the same tem to
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211
5 119, rt. 119-10.
be twce deducted, and the oard e pressy rested ts decson on ths subsecton,
hodng that to permt dvdends to be taken nto consderaton n determnng
the ratabe part of e penses, etc., to be deducted woud be tantamount to
permttng them to be deducted twce. Ths subsecton reates aone to nsurance
companes and has no appcaton to a ta payer of the character of pantff
n the case at bar.
The anguage of the sectons before us s so e pct that we have no opton
but to hod that n determnng the ratabe part of the deductons to whch
pantff s entted, we must take that part of them whch pantff s tota
gross ncome from sources wthn the Unted States, ncudng dvdends, bears
to ts tota ncome from a sources.
II. The defendant n ts bref says that the pantff has not shown that the
foowng camed deductons are connected wth ncome from sources wthn
the Unted States, to wt: (1) home offce genera e penses; (2) rtsh
ncome ta ; (3) nterest pad to debenture hoders and debenture stockhoders.
1. It s no doubt true that the genera e penses of the home offce were ncurred
prmary n the carryng on of the busness of the company outsde of the
Unted States, but t can not be sad that some part of these e penses were
not spent n connecton wth the makng and supervson of the pantffs n-
vestments n ths country, from whch t receved nterest and dvdends. ust
what part was spent n connecton wt Unted States nvestments t s m-
possbe to say. Ths contngency was recognzed by Congress when provson
was made for the deducton of a ratabe part of any e penses, osses, or other
deductons whch can not defntey be aocated to some tem or cass of gross
ncome. The pantff s entted to ths deducton.
2. The defendant concedes that the rtsh ncome ta was eved on the
pantffs entre ncome, ncudng ts ncome from sources wthn the Unted
States. It s, therefore, manfesty proper that a ratabe part of these ta es
shoud be deducted from Unted States ncome n determnng the ta to be
pad the defendant.
3. The defendant concedes In ts bref that the nterest pad the debenture
hoders and debenture stockhoders were nterest payments, rather than dstr-
butons n the nature of dvdends. We have carefuy e amned the debenture
certfcates and the debenture stock certfcates and the nstrument securng
them. We have no doubt that the payments made on the debenture certfcates
were nterest, but the nature of the payments on the debenture stock certfcates
s not so easy to determne. fter carefu consderaton, however, and upon the
authorty of the cases cted on ths pont n the pantffs e ceent bref, we
hod that the returns on the debenture stock were aso nterest and not dvdends.
In so hodng we are nfuenced prmary by the fact that nterest on these
certfcates was payabe rrespectve of the suffcency of the earnngs or of the
surpus of the company, and aso by the fact that both the prncpa and nterest
due on these certfcates were entted to share n the assets of the company on
qudaton par passu wth unsecured credtors. It s true that the hoders of
these certfcates coud not demand a return of the prncpa so ong as the
company was not n defaut n the payment of nterest and so ong as t
comped wth the other condtons of the ndenture securng them; but ths
aone s not suffcent to characterze the transacton as a purchase of shares
n the company rather than a oan of money to t. The hoder rsked nether hs
capta nor the return thereon on the fortunes of the company. s return was
payabe whether the company made profts or not, and he secured the return of
hs prncpa on a party wth other unsecured credtors of the company. Such
are the characterstcs of a oan to the company, rather than of a purchase of a
propretary nterest n t. See n partcuar the opnon of the Fourth Crcut
Court of ppeas n everng v. Rchmond, Fredercksburg rf Potomac Raroad
Co. (00 Fed. (2d), 1171) ; and aso of the Second Crcut Court of ppeas n
Commssoner v. O. P. P. odng Corporaton (7(3 Fed. (2d), 11) ; and of the
Chancery Dvson of the Supreme Court of udcature of Great rtan n
In re odman, L. R. (18 1) (3 Ch. Dv., 135).
Interest pad on borrowed money, of course, has a connecton wth a of the
rompnny s Investments, ncudng ts nvestments n the Unted States, and,
therefore, pantff s entted to deduct a ratabe part of ths nterest.
ntry of |udgment w be deayed unt the fng of a stpuaton by the
partes, or, n the absence of a stpuaton, unt the ncomng of a report by
a commssoner as to the correct amount due pantff, computed In accordance
wth ths opnon. It s so ordered.
Madden, udge; ones, udge; Lrrf. ton, udge, concur.
Whaey, Chef ustce, concurs n the concuson.
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1131, rt. 131-1-1
212
S CTION 120. UNLIMIT D D DUCTION FOR C RI-
T L ND OT R CONTRI UTIONS.
rtce 120-1: Unmted deducton for chartabe and
oter contrbutons.
R M CT OF 193 .
Reguatons 86, amended. (See T. D. 50.|7. page 97.)
SUPPL M NT C CR DITS G INST T .
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S.
ktce 131-1: nayss of credt for ta es. 19 1-28-1077
Ct. D. 1522
INCOM T R NU CT OF 193 D CISION OF COL RT.
1. Credt for Forhgn Ta es Domestc Stock Insurance Com-
pact Canadan cse Ta ( 3 rrn ganst Canadan
Income Ta Credt ganst Unted States Income Ta ;
Ony n mount of Dffdence etween Canadan cse and
Income Ta es.
domestc stock nsurance company dong busness n the Unted
States and Canada, and whch n 1931 pad Canadan e cse ta on
premums (concededy not wthn the provsons of secton 131(a)
of the Revenue ct of 193 ) by credtng such ta aganst Canadan
ncome ta n accordance wth the provsons of the Canadan Income
War Ta ct of 1917, s entted to credt for foregn ta es ony
n the amount of the dfference between the Canadan ncome and
e cse ta es, n computng Unted States hcoue ta for the vear
193 .
2. Decson Reversed.
Decson of the Unted States oard of Ta ppeas (1939)
( 0 . T. ., 8 ) reversed.
3. Certorar Dened.
Petton for certorar dened March 31. 19 1.
Unted States Crcut Court of ppeas for the Second Crcut.
Ouy T. IIcvcrng, Commstoner of Interna Revenue, pettoner, v. ueen
Insurance Co., respondent.
115 Fed. (2d), 3 1.
ppea from an order of the oard of Ta ppea e punznR a defcency n the respondent
ncome ta for the year 193 .
efore L. and, ugustus N. and, and Chase, Crcut udges.
November , 19 0.
opnon.
Per curam: The ony queston n ths case Is as to the meanng of secton 7
of Part III of the Canadan Income War Ta ct of 1917, whch reads as foows:
ta puyer sha be entted to deduct from the ta that woud otherwse be
payabe by hm under ths act, the amount pad for correspondng perods under
the provsons of Parts II and III of the Speca War Revenue ct of 1915. y
secton 131 (a) of the Unted States Revenue ct of 193 , a ta payer may credt
u k hs Income ta the amount of any ncome, war-profts, and e cess-profts
ta es pad or accrued durng the ta abe year to any foregn country. The
ta payer at bar, a domestc stock nsurance company dong a fre and marne
busness n the Unted States and Canada, became abe n the year 193 for
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213
1 3, rt. 1 3-1.
Canadf e cse upon Irs Canadan premums of 5, 0 .9 ; and t s conceded
that ths ta was not wthn secton 131 (a )1. It was aso abe n the name
year for a Canadan ncome ta of 6,92 .05. The dfference between ths sum
and the e cse was 1,519.11, whch was a that the Commssoner aowed as a
credt upon the ta payer s ncome ta , on the theory that ody so much Canadan
ncome ta had accrued or had been pad. The ta payer mantaned on the
other hand that, athough the Canadan e cse was apped as a credt upon the
amount due as Canadan ncome ta , the whoe ncome ta had nevertheess
been pad, and shoud be credted upon the Unted Sates ncome ta . The oard
agreed wth ths poston, and the Commssoner appeaed.
The ta payer s poston must be that the same sum pad both the Canadan
e cse and the Canadan ncome ta . Theoretcay that mght be true, but the
Canadan act dd not say so; on the contrary t sad the ta payer mght deduct
the e cse from the ncome ta that woud otherwse be payabe by hm,
whch meant that as thngs were the ncome ta was not payabe pro tano.
If so, t dd not accrue, and he dd not pay t. If the Canadan statute had
happened to say that the ta payer mght deduct the ncome ta from what woud
otherwse be payabe as e cse, the opposte resut woud have foowed; and
that, no doubt, s somewhat caprcous, but the caprce, f there s any, s that
of our own aw, whch aows the one credt and not the other. That puts t
upon the ta payer to prove that he has pad an actua ncome ta , not that an
ncome ta woud have been payabe, If facts had been otherwse.
Order reversed.
rtce 131-3: Condtons of aowance of credt.
R NU CTS OF 1918, 1921, 192 , 1020, 1928, 1932, ND 103 .
Reguatons 86, 77,7 , 69, 65, 62, and 5, modfed. (See T. D. 5056,
page 139.)
rtce 131-9: ont return by husband and wfe.
R NU CT O 193 .
Reguatons 86, amended. (See T. D. 5057, page 97.)
SUPPL M NT D. R TURNS ND P YM NT OF T .
S CTION 1 3. WIT OLDING OF T T SOURC .
rtce 1 3-1: Wthhodng ta at source. 19 1-28-10775
( so rtce 1 3-10.) G. C. M. 22798
R NU CT OF 1932.
The bondhoders commttee, whch took over the assets of the
M Company but dd not assume the company s obgaton as to
payment of prncpa and nterest on ts ta -free covenant bonds,
and dd not make dstrbutons of nterest as agent of the obgor,
s not requred, under secton 1 3(a) of the Revenue ct of )3-2,
to wthhod the ta on the nterest dstrbutons. ccordngy,
there s no bass for the credt under secton 1 3(d) to the bond-
hoders of the M Companv on account of ta wthhed at the source.
G. C. M. 1 5 9 (C. . I -1, 15 (1935)) revoked.
Ths offce has reconsdered G. C. M. 1 5 9 (C. . I -1, 15
(1935)) wheren t was hed that a bondhoders protectve commttee,
whch receved rentas from the mortgaged property under an assgn-
ment from the corporate mortgagor and dstrbuted sums so receved
to the hoders of ta -free covenant bonds, assumed the corporaton s
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322, rt. 322-3.1
21
obgaton to pay prncpa and nterest on the bonds, and was, there-
for, sub|ect to the wthhodng provsons of secton 1 3(a) of the
Revenue ct of 1932.
Upon reconsderaton, t now appears that the bondhoders com-
mttee dd not assume the payment of the nterest and prncpa of
the bonds, and snce dstrbutons of nterest were not made by the
bondhoders commttee as agent for the obgor, no wthhodng by
the commttee s requred.
In cases where a corporaton sub|ect to the wthhodng provsons
of secton 1 3(a) of the Interna Revenue Code fas to compy there-
wth and such obgaton s not assumed by an assgnee, there e sts
no bass for the aowance to the bondhoders of a credt under secton
1 3(d) on account of ta wthhed at the source and such credt shoud
not be aowed.
ccordngy, G. C. M. 1 5 9, supra, s revoked.
. P. Wenche,
Chef Counse, ureau of Interna Revenue.
rtce 1 3-10: Return of ncome from whch ta
was wthhed.
R N CT OF 19.S2.
Interest pad by bondhoders commttee. (See G. C. M. 22793,
page 213.)
SUPPL M NT POSS SSIONS OF T UNIT D ST T S.
S CTION 251. INCOM FROM SOURC S WIT IN
POSS SSIONS OF UNIT D ST T S.
rtce 251-1: Ctzens of Unted States and
domestc corporatons dervng ncome from sources
wthn a possesson of the Unted States.
R N CT OF 103 .
Reguatons 86, amended. (See T. D. 5057, page 97.)
SUPPL M NT O. O RP YM NTS.
S CTION 322. R FUNDS ND CR DITS.
rtce 322-3: Cam for refund by ta payers. 1911-51-109:1
Ct. D. 1531
1. Cam for Refund Letter ok Protest Informa Cam Per-
fected by Forma Cam.
etter dated March 23, 1925, wrtten by the ta payer to the
coector and odged wth the Commssoner, protestng aganst a
|eopardy defcency assessment on the ground that the Commssoner
was wthout authorty n aw to reopen and set asde the March 1,
1913, vauaton of stock as determned n 1919 by the then Comms-
soner (on the bass of whch vauaton she had sod her stock), and
satng that, f t shoud be hed that such revauaton may e hnd,
then she w nsst that the vauaton f ed by the Commssoner
was ess than the far market vaue as of March 1, 1913, that the ta
pad was correspondngy e cessve, and that she w cam the
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215
322, rt. 322-3.
rght to a refund to the e tent of such e cess, consttutes a vad
and tmey nforma cam for refund, snce t was fed wthn fve
years of the e praton of the tme for fng return, as e tended, and
was subsequenty perfected by the fng of an amended forma cam
n September, 1928, makng more specfc the aegatons of the earer
nforma cam. If the pont were doubtfu, t woud be resoved by
the consstent admnstratve treatment of the etter and the ater
amendment as a cam for refund. The entre course of depart-
menta acton was a waver of the requrements of the reguatons as
to the formaty and partcuarty wth whch the grounds for refund
are requred to be stated.
2. Sut Recovery of Overpayments udgment Refundng Ta es
Not a ab to Later Sut fob Further Recovery Whebe Ta es
Pad to Dfferent Co ectobs.
udgment for refund of ta es pad to a coector n 1925 upon
profts from the sae n 1919 of certan shares of stock does not bar
a ater sut for a further recovery of 1919 ta es overpad n 1920 to
a dfferent coector, even though the two coectons were for ta es
arsng out of the same transacton.
3. Decson ffrmed.
Decson of the Unted States Crcut Court of ppeas, S th
Crcut (19 0) (115 Fed. (2d), 97) affrmed.
Supreme Court of the Unted States.
Unted States of merca, appeant, v. ee Gray aes.
62 S. Ct., 21
On wrt of certorar to the Unted States Crcut Court of ppeas for the S th Crcut.
62 S. Ct., 21 .
opnon.
Mr. Chef ustce Stone devered the opnon of the Court.
Two questons are presented for decson by the record n ths case. Frst,
was a etter wrtten to the ta coector by respondent ta payer and odged
wth the Commssoner a cam for refund of overpad ta es so as to stop
the runnng of the statute of mtatons aganst the cam Second, dd a
|udgment refundng ta es pad to the coector In 1925 upon profts from the
sae of certan shares of stock n 1919 bar a ater sut for a further recovery
of 1919 ta es overpad n 1920 to a dfferent coector upon profts from the same
tra nsacton
In 1919 respondent was the owner of 525 shares of the stock of the Ford
Motor Co. whch she had acqured before March 1, 1913. In antcpaton of
the sae of the stock she requested and obtaned n 1919 from the Commssoner
of Interna Revenue a rung that the March 1, 1913, vaue of the stock was
9, 89 per share. She then sod the stock for 12,5110 a share and reported n
her ncome ta return for 1919 the proft over the March 1, 1913. vaue thus
estabshed. In 1920 she pad the ta so computed, amountng to 1,21C,0S6, to
Coector Grogan, snce deceased.
In March, 1925, the Commssoner made a eopardy defcency assessment
aganst respondent for an ncrease of proft on the sae of the stock n 1919,
on the ground that respondent had overstated the 1913 vaue of the stock n her
1919 ta return. Respondent pad the addtona assessment, amountng to
2,627,309, to Coector Woodworth on March 2 , 1925. t the same tme she
odged wth the coector and the Commssoner a wrtten protest, dated
March 23, 1925, aganst the |eopardy assessment on the ground, among others,
that the Commssoner was wthout authorty n aw to reopen and set asde
the 1913 vauaton of the stock as determned n 1919 by the then Commssoner,
on the bass of whch respondent had sod her stock. y paragrap 9 of the
protest respondent aso advsed the coector, the Commssoner and the Gov-
ernment, that whe t was respondent s poston that the defcency assess-
ment was Iega and vod for ths and other reasons stated, f the Interna
Revenue Department, the oard of Ta ppeas or any court havng urs-
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216
dcton shoud hod that the assessment of March 1, 1013, vaue of her stock,
made n 1919, shoud be vacated, set asde, reopened or reversed, then re-
spondent woud nsst that the vauaton ed by the Commssoner n 1919
was ess than the far market vaue as of March 1, 1913, that the 1919 ta
whch she had pad n 1920 was correspondngy e cessve and that she shoud
recover the ta to the e tent of such e cess when the far vaue had been
determned. She added n paragraph 1(1 that f for any reason a revauaton
sha e had, she w nsst that the stock was greaty undervaued by
the Department aud w cam the rght to a refund of the e cess ta
coected.
fter a cam duy fed for refund of the amount of the |eopardy assessment,
pad n 192. ), respondent brought sut n the dstrct court aganst Coector
Woodworth, whch resuted n a |udgment for the ta payer for the fu amount
of the assessment wth nterest. The Crcut Court of ppeas for the S th
Crcut affrmed the |udgment (Woodworth v. ae , 26 Fed. (2d), 178), whch
was satsfed n November, 1928.
September 2 , 1928, respondent fed a forma cam for refund of the ta es
pad n 1919. stated to be an amendment of the cam for refund contaned n
her etter of protest of March 23, 1925. y the amendment respondent sought
an addtona refund of ncome ta es, pad for the year 1919, n the amount
of 196,710 wth nterest, upon the ground that the Ford stock, as the oard
of Ta ppeas had then determned n ames Conzrns (11 . T. ., 1010), had
a March 1. 1913, vaue of 10,000 per share, and that she shoud accordngy
have the beneft of ths hgher bass n computng her proft. t a hearng
granted by the Genera Counse for the ureau of Interna Revenue on une
13, 1929, the amended cam was consdered on the merts. gan n anuary,
1933, a member of hs staff, at a conference wth respondent s attorney, advsed
the atter that the nforma cam was ted n tme and was good as an nforma
cam.
y etter of une , 193. , however, the Commssoner decned to act upon t,
on the snge ground that because respondent s |udgment for refund of the
eopardy assessment for 1919 ta es had been satsfed the ureau s precuded
from gvng further consderaton u any re| ect to.the matter of your ncome
ta abty for the ta abe year 1919. Ths was foowed by the Deputy
Commssoner s etter of ugust 20, 193T , to respondent, statng that the re-
fund cam fed n 1925 was meged nto the |udgment and yon
were, therefore, precuded from fng an amendment to the earer cam whch
had been fnay ad|udcated. The etter added The ad|udcaton by the
court removed ths matter from the ream of admnstratve acton other than,
to make refund as drected by the udgment.
Coector Grogan havng retred from offce and havng ded, the present sut
for refund of the overpayment of the ta camed was brought n the dstrct
com aganst the Unted States under the provsons of secton 1122(c) of
the evenue ct of 1920. Ths secton authorzes suts n the dstrct court
for the refund of overpayment of revenue ta es even f n e cess of 10,000
to be brought aganst the Unted States where the coector to whom the over-
payment was made s dead or s not n offce when the sut s brought. The
|udgment of the dstrct court dsmssng the sut on moton was reversed by the
crcut court of appeas (115 Fed. (2d), 97), whch hed that the etter of
March 2. . 1925, was a tmey nforma cam for refund whch had been perfected
by the forma amended cam fed n September, 1928, that consequenty the
respondent s cause of acton was not barred by mtaton and that recovery was
not precuded by the prevous |udgment for recovery of the |eopardy assessment
for 1919. We granted certorar (313 U. S., 553), upon petton of the Govern-
ment, whch urged that any further recovery for overpayment of the 1919 ta
was barred by the |udgment u the respondent s sut and recovery of the
|eopardy assessment for that year, a queston of mportance n the admnstra-
ton of the revenue aws. The Government urges as grounds for reversa that
f respondent s etter of March 23. 1925, be consdered a cam for refund any
recovery s barred by the 192S |udgment, and that n any event the etter was
not a cam for refund and does not support the present sut.
Frst: Concedcdy recovery of the 1919 ta , pad u 1920, s not barred by
mtaton f respondent s etter of March 23, 1925, be treated as a cam for
refund. The coector of nterna revenue e tended the respondent s tme to make
return of her 1919 ncome ta es for 30 days from March 15, 1920, and her etter
was paced wth the Commssoner wthn fve years of the e praton of the
e tended tme. Secton 28 (h) of the 1926 Revenue ct ( Stat., 9) provdes
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217
322, rt. 322-3.
that a cam for refund of 1919 ta es sha not be barred by a apse of tme f
ed wthn fve years from the date when the return was due. Revsed Statutes
secton 3226 ( 26 U. S. C, secton 1672) makes the fng of a cam for refund
In accordance wth the aw and Treasury reguatons a condton precedent to
sut to recover t. rtce 1306 of Treasury Reguatons 65, promugated under
the 192 Revenue ct and appcabe here, provdes that cams for refund sha
be made upon Form 8 3, settng forth a the facts reed on under oath. ut
Treasury Decson 266, promugated March 27, 1929 C. . III-1, 111 (1929)1,
authorzes the Commssoner to make a refund after the e praton of the statu-
tory perod of mtaton, even though no forma cam has been fed before ttnt
tme, n any case n whch an nforma or defectve cam, duy fed pror to
the e praton of the perod of mtaton and statng specfcay the grounds for
the refund, Is perfected by the fng of a cam pror to May 1, 1929.
Ths Court, appyng the statute and reguatons, has often hed that a notce
fary advsng the Commssoner of the nature of the ta payer s cam, whch
the Commssoner coud re|ect because too genera or because t docs not compy
wth forma requrements of the statute and reguatons, w nevertheess be
treated as a cam where forma defects and ack of specfcty have been rem-
eded by amendment fed after the apse of the statutory perod. (Unted Mates v.
Memphs Cotton O Co., 288 U. S., 02 Ct. D. 626, C. . II-1, 307 (1933) ;
Unted States v. Factors d Fnance Co., 288 U. S., 89 Ct. D. 628, C. . IW,
315 (1933) ; ons ro. ag Co. v. Unted States, 289 U. S., 28 Ct. D. 619,
C. . II-1, 338 (1933) ; Moore Ice Cream Co. v. Rose, 289 U. S., 373, 38 Ct. D.
676, C. . II-1, 3 1 (1933) .) Ths s especay the case where such a cam
has not msed the Commssoner and he as accepted and treated t as such.
( onct Teer Co. v. Unted States, 283 U. S., 258 Ct. D. 33 , C. -, 328
(1931) ; Unted States v. Memphs Cotton O Co., supra, 70.)
In appyng these gudng prncpes to the case n hand t Is necessary to read
the etter of March 23, 1925, n the ght of the pecuar crcumstances then we
known to the Commssoner and referred to n the etter. The etter deat wth
two dstnet sub|ects. One was the |eopardy assessment whch the ta payer was
about to pay and dd n fact pay to the coector on the foowng day when the
etter In dupcate was gven to the coector and the Commssoner. The other,
stated n paragraphs 9 and 10 of the etter, reated to the abty of the Govern-
ment for overpayments of 1919 ta es made to Coector Grogan n 1920 In the
event that the Commssoner s 1919 assessment of the Ford stock shoud be set
asde by the courts or admnstratve acton. In that event the etter rectes that
the 1919 vauaton was too ow, the ta pad n 1920 was too hgh, and asserts
(he ta payer s consequent rght to a refund of sad ta to the e tent of such
e cess.
The etter states correatve aternatve rghts on whch the ta payer reed.
One wns the chaenge to the vadty of the 1925 eopardy assessment on the
ground that the apprasa n 1919 of the then Commssoner was unaterabe.
The other was respondent s rght to a refund of ta es pad n 1920 In the event
that the 1919 npprascment of the stock shoud be set asde by the ureau or e
determned to be erroneous. Whether the Commssoner woud nsst upon
changng the 1919 apprasa of her stock, and whether n any case the oard
of Tu ppeas woud fnd a dfferent 1913 vaue for the stock, were matters
for future determnaton. When respondent fed her etter the tme wthn
whch a cam for refund coud e fed was about to e pre, and the occurrence
of the contngences on whch a recovery coud be had by respondent remaned
uncertan. ut the Commssoner coud have been eft n no doubt that she
was settng forth her rght to a refund n the event of a departmenta revson
of ts 1919 vauaton of her stock. er etter was present notce that f the
Department nssted upon changng ts orgna decson as to the 1913 vaue, she
asserted that the stock had been undervaued and n consequence of the under-
vauaton she had a rght to a refund of sad 1919 ta to the e tent of
sttch e cess. er concudng paragraph made the ke asserton If for any
reason a revauaton sha be hud of the Ford stock. t that tme the Com-
mssoner had assessed defcences aggregatng 31,000,000 aganst former Ford
stockhoders who had sod Stock whch they hud acqured before March 1,
1913. (See ames Conzcns, 11 . T. .. 10 3-10 .) Respondent s amended
forma cam of September 11, 1928, ony made more specfc the aegatons of
her earer nforma cnu by statng that the oard of Ta ppeas had found
the 1913 vaue of the stock to be 10,000 per share and by computng the e cess
ta , the rght to whch had been asserted n the earer cam.
1611 2 15
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218
The fact that respondent had orgnay stated her cam n the future tense,
sayng that n the event of departmenta revson of the vauaton of the sto-k
she w nsst on a hgher vauaton and w cam the rght to a refund,-
does not n the crcumstances of ths case end even grammatca support to
the Government s contenton. Such a use of the future tense n statng a cam
may, wth due regard to the crcumstances of makng t, rghty be taken as an
asserton of a present rght. (See Georga, Forda abama Ry. Co. v.
Wsh Mng Co., 2 1 U. S., 190, 197-198; cf. Moore Ice Cream Co. v. Rose,
supra, 38 , reversng 61 Fed. (2d), 605.) ere the cam s aternatve and
contngent upon future events. The statement that upon the happenng of the
contngency the cam w be prosecuted s not nconsstent wth the present
asserton of t. It s ndeed an approprate, f not the necessary phraseoogy for
the present asserton of an aternatve cam wth respect to whch a ta payer
n hs presentaton of an nforma ta refund cam, shoud be n no ess favor-
abe poston than the pantff n a sut at aw who s. permtted to pead hs
cause of acton n the aternatve. (See rue 8(e) of the Federa Rues of Cv
Procedure; Unted States v. Rkhards, 79 Fed. (2d), 797.)
If the pont were more doubtfu than we thnk t s, It woud be resoved by
the consstent admnstratve treatment of respondent s etter of March 23, 1925,
and the ater amendment as a cam for refund. Nether the orgna nor the
amended cam has ever been re|ected as nadequate by the Commssoner or
the ureau. There has been no ob|ecton to the cam on the ground that t
was nforma, defcent In ts content, or untmey. cknowedgment of the
etter of March 23, 1925, by the Commssoner referred to the eopardy assess-
ment, but made no menton of the asserted rght to refund of ta es pad n
1920. fter the amendment was fed n September, 1928, the cam was hed
under advsement by the ureau for neary seven years. s we have sad, t
was consstenty treated n correspondence by the ureau and at hearngs
durng ths perod as a cam for refund. The Commssoner fnay by hs
etters of une , 1935, and ugust 25, 1935, decned to consder the cam on
the soe ground that t was no onger a sub|ect of admnstratve acton because
the refund cam fed n 1925 was merged nto the |udgment for refund f
the ta pad on the |eopardy assessment. Not ony do we thnk that ths entre
course of departmenta acton was an admnstratve constructon of respond-
ent s etter of March 23, 1925, conformng to our own Interpretaton of ts words,
but we thnk t was a waver of the requrements of the reguatons as to the
formaty and partcuarty wth whch the grounds for refund are requred to
be stated. (Ionwt Teer Co. v. Unted States, supra. 26 ; Unted States v.
Memphs Cotton O Co., supra. 70; cf. Tucker v. e ander, 275 U. S., 228, 231
T. D. 3973. C. . I-1, 2S7 (1927) ; Unted States v. Garber O Co., 302 U. S.,
528, 533.)
Second: The Government argues that the rght to recover for overpayment
of ncome ta es n any ta year consttutes a snge cause of acton aganst the
Government and that the present sut by the respondent, seekng recovery of
1919 ta es, after havng recovered the amount of the |eopardy assessment for
the same year nvoved an nadmssbe spttng of her cause of acton. In any
event t nssts that no cause of acton for recovery of overpayment of 1919
ta es coud survve the recovery of the amount of the |eopardy assessment,
snce the |udgment for that recovery merged a cams for overpayment of
1919 ta es and so forecosed the present sut for addtona overpayments of
ta es growng out of the same transacton.
ut we thnk these contentons dsregard the statutory scheme whch has been
set up for the recovery from an nterna revenue coector, of ta es whch he
had unawfuy coected. (See Sage v. Unted States, 250 U. S., 33.) Org-
nay payment under protest to an nterna revenue coector of egay e acted
ta es gave rse to a common aw cause of acton aganst the coector for
resttuton of the overpayment. ott v. Scarthwout, 10 Pet, 137, 153, 156;
Moore Ice Cream Co. v. Rose, supra, 375, and cases cted.) y the protest the
coector was nformed of the contenton of the ta payer and was thus pre-
cuded from reevng hmsef, by payment nto the Treasury of the moneys
coected, from abty to make resttuton. ( ott v. Swarthcout, supra;
Smetanka v. Indana Stee Co., 257 U. S., 1, .) y a seres of Congressona
cts t was made the duty of the coector to pay to the Government the moneys
coected, regardess of a protest. (12 Stat., 2; 13 Stat., 83; R. S., secton
3210; 26 U. S. C, secton 1761.) ut wth mposton of ths duty on the
coector to pay over, the Government undertook to ndemnfy hm upon cer-
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219
322, rt. 322-3.
tfcaton by the court ether that there was probabe cause for the act done
by the coector or that he acted under drectons of the Secretary of the
Treasury or other proper offcers of the Government. (12 Stat., 7 1, secton
12.) In that event no e ecuton was to ssue aganst hm but the amount of
recovery was to be pad out of the Treasury. These provsons, carred nto
Revsed Statutes, secton 089, are contnued as 28 U. S. C, secton 8 2. y
secton 101 of the Revenue ct of 102 ( 3 Stat., 253, 3 3), amendng Revsed
Statutes, secton 322t, the requrement for protest f the payment was aboshed.
Whe the effect of the certfcate n ndemnfyng the coector has been sad
to convert the sut aganst hm nto a sut aganst the Government, at east so
far as the utmate ncdence of the abty Is concerned (Unted States v.
Sherman, OS U. S., 5G5, .167; Moore ee Cream Co. v. Rose, supra, 381), the
statutory provsons have not atered the nature and e tent of the cams
whch the ta payer s authorzed to prosecute n suts aganst the coector.
Orgnay t was the payment of the egay e acted ta whch gave rse to
the cause of acton. It was the payment whch desgnated the person nganst
whom the sut mght be brought and whch measured the rght of recovery.
Payments made to one coector coud not be recovered from another, and snce
the causes of acton aganst the two coectors were dfferent recovery upon
one coud not bar recovery upon the other.
fter the enactment of egsaton requrng coectors of customs to pay
over to the Government dutes coected under protest (5 Stat., 3 8; R. S.,
secton 3010), doubts arose whether sut coud, n such crcumstances, be man-
taned aganst them, snce t was thought that the statutory command had
reeved the coectors from persona abty. (See Cory v. Curts, 3 ow.,
235.) ut those doubts were put at rest by ater cts of Congress estabshng
the contnued rght of the ta payer to mantan a sut aganst such a coector
notwthstandng payment over of hs coectons to the Treasury. (5 Stat., 727,
R. S., secton 3011; Curts dmnstratr v. Feder, 2 ack, 01, 79;
rnson v. Murphy, 109 U. S., 238, 2 1.) ke uncertanty as to the effect of
the statutes requrng nterna revenue coectors to pay moneys coected to
the Government was resoved by ths Court s decsons n Phadepha v. Co-
ector (5 Wa., 720, 731) ; Coector v. ubbard (12 Wa., 1, 13). s Congress
had enacted provsons for ndemnfcaton of the coector by the Government,
the mpcaton necessary arose that the ta payer coud mantan an acton
aganst hm. (See 12 Stnt., 3 , 729, 7 1; 13 Stat.. 239.)
The rght of acton thus contnued s Identca wth that whch e sted
before Congress had acted. Notwthstandng the provson for ndemnfyng
the coector and protectng hm from e ecuton, the nature and e tent of the
rght asserted and the measure of the recovery reman the same. It was
payment to the coector whch gave rse to the sut nganst hm and mted
the amount of the recovery. The |udgment nganst the coector Is a persona
|udgment, to whc the Unted States s a stranger e cept as t has obgated
tsef to pay t. (See Sage v. Unted States, supra; Smetanka v. Indana
Stee Co.. supra, , 5.)
Whe the statutes have for most practca purposes reduced the persona
abty of the coector to a cton, the course of the egsaton ndcates
ceary enough that t s a fcton ntended to be acted upon to the e tent
that the rght to mantan the sut and ts ncdents, unt |udgment rendered, are
to be eft undsturbed. mong ts ncdents nre the rght to a |ury tra,
whch s not avaabe n suts aganst the Unted States. (28 U. S. C, secton
1(20).)
y no possbty coud the respondent n the sut brought aganst Coector
Woodworth n 1925 recover ta es pad to Coector Grogan n 1920, whch she
demands here. Recovery from one coector of the payment to hm does not
bar recovery on the dfferent cause of acton arsng upon payment to the
other, even though the two coectons are for ta es arsng out of the same
transacton. (Sage v. Unted States, supra ; ankers Pocahontas Coa Co. v.
urnet, 287 U. S., 308; Cf. Graham Foster v. oodccU. 282 U. S., 09, 30 TCt.
D. 2S7, C. . -, 191 (1931) ; Sunshne, Coa Co. v. dkns, 310 U. S., 381, 03.)
The rght to pursue the common aw acton aganst the coector s too deepy
mbedded n the statutes and udca decsons of the Unted States to admt
of so radca a departure from ts tradtona use and consequences as the
Government now urges, wthout further Congressona acton.
ffrmed.
Mr. ustce ackson took no part n the consderaton or decson of ths case.
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MPLOYM NT T S.0
INT RN L R NU COD .
C PT R 9, SU C PT R . F D R L INSUR NC CONTRI UTIONS
CT.
Secton 1 26: Defntons.
Reguatons 91 (as amended), rtce 16: Items
ncuded as wages.
Dsmssa payments. (See m. T. 2 , page 229.)
Secton 1 26: Defntons. 19 1-29-10786
Reguatons 1C6, Secton 02.20 : Who are empoyees. Mm. 5217
( so Subchapter C (Federa Unempoyment Ta ct),
Secton 1607; Reguatons 107, Secton 03.20 .)
Drectors of banks performng servces on commttees of banks
are empoyees for soca securty and emp oyment ta pur-
poses. Rung effectve anuary 1, 10 1, and does not requre pay-
ment of ta es wth respect to servces rendered pror to that date.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, uy 15,19 1.
Coectors of Interna Revenue and Others Concerned:
Inqury has been made of the ureau whether drectors of banks
who serve on varous commttees, such as e ecutve commttees, ds-
count commttees, e amnng commttees, etc., are empoyees wthn
the meanng of Ttes III and I of the Soca Securty ct and
Subchapters and C, Chapter 9, of the Interna Revenue Code, as
amended, wth respect to the servces performed by them n ther
capactes as commttee members.
The by-aws of a bank generay provde that the board of drectors
may appont from ts own members an e ecutve commttee, a ds-
count commttee, an e amnng commttee, and such other commt-
tees as are deemed necessary for the proper conduct of the busness.
The e ecutve commttee s authorzed to e ercse the power of the
board of drectors n the management of the busness affars and
property of the bank durng ntervas between the meetngs of the
board of drectors, and that commttee s requred to keep mnutes
and to submt a report of ts actons at every reguar meetng of the
board. The dscount commttee meets once a week and gves con-
sderaton to, and acts upon, recommendatons of the offcers wth
respect to the grantng of credt. The e amnng commttee s re-
qured to make under such drecton and supervson as t sha de-
termne an e amnaton of the affars of the bank at east every s
months, or more often f requred by the board, and to make a report
thereof to the board wth such recommendatons as may seem desr-
NOT . Rungs pubshed n the Interna Revenue uetn subsequent to uy 1. 19 1. wth
respect to the ta es mposed by the Soca Securty ct, the Carrers Ta ng ct of 1937, and
Subchapters , , and C of Chapter 9 of the Interna Revenue Code, as amended, bear the symbos
m. T. S. S. T. 19 (I. R. . 19 1-29) has been chanced to m. T. 19.
(220)
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221
Regs. 106, 02.20 .
abe. In some case members of a commttee are compensated for
ther servces.
Secton 02.20 of Reguatons 106 and secton 03.20 of Regua-
tons 107, ssued pursuant to Subchapters and C, respectvey, of
Chapter 9 of the Interna Revenue Code, as amended, provde that
a drector of a corporaton, as such, s not an empoyee of the cor-
poraton. owever, a drector who performs servces for the cor-
poraton other than those requred by attendance at and partcpaton
n meetngs of the board of drectors may be an empoyee of the
corporaton. Reguatons 91 and 90, ssued pursuant to Ttes III
and I , respectvey, of the SocW Securty ct, contan smar
provsons.
In anuary, 19 1, the ureau hed that the ega reatonshp of
empoyer and empoyee e sts between banks and the drectors
thereof wth respect to servces performed by them as members of the
varous commttees and, accordngy, that such ndvduas are em-
poyees for soca securty and empoyment ta purposes.
Pursuant to the authorty granted n secton 3791(b) of the In-
terna Revenue Code, the rung hodng drectors of banks to be
empoyees wth respect to servces performed as members of com-
mttees was made appcabe ony to servces performed on or after
anuary 1, 19 1, and does not requre payment of the ta es mposed
under Ttes III and I of the Soca Securty ct and Subchap-
ters and C, Chapter 9, of the Code, as amended, wth respect to
servces performed pror to such date. owever, for the purpose of
mantanng proper wage records, every bank whch pad wages to
drectors for servces performed as commtteemen pror to anuary
1, 19 1, and whch dd not ncude such amounts as wages on returns
fed pursuant to Tte III of the Soca Securty ct and Subchap-
ter , Chapter 9, of the Interna Revenue Code, w be requred to
fe wth the coector of nterna revenue for ts dstrct statements
on Form SS-c.
The rung set forth above shoud not be construed as authorzng
refund, credt, or other ad|ustment of any ta es pad by reason of
a bank havng consdered that drectors servng as members of com-
mttees were ts empoyees for soca securty and empoyment ta
purposes.
Correspondence n regard to the contents of ths mmeograph
shoud refer to ts number and to the symbos C: RR: 1.
Guy T. evekng, Commssoner.
Secton 1 26: Defntons. 19 1-37-10826
Reguatons 106, Secton 02.20 : Who are empoyees. m. T. 20
( so Subchapter C (Federa Unempoyment Tu ct),
Secton 1C07; Reguatons 107, Secton 03.20 .)
bnr pot engaged by the M Steamshp Co. to pot a vesse nto
and out of the port of Y s not an empoyee of that company for
purposes of the ta es Imposed by Subchapters and (I, Chapter 9,
of the Interna Revenue Code, as amended by the Soca Securty
ct mendments of 1939.
dvce s requested whether a bar pot engaged by the M Steamshp
Co. to pot a vesse nto and out of the port of Y s an empoyee of
that company for empoyment ta purposes.
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Regs. 106, 02.20 .
222
The M Steamshp Co. engaged a censed pot to drect the handng
of ts vesse upon enterng and eavng the port of Y n the State of R.
The pot s a member of an organzaton of censed pots known as
the N Pots ssocaton and s censed by the State of R and by the
Federa Government. Through the medum of such assocaton the
pots own and operate pot boats whch take them to and from the
vesses. potage fee of 150a doars was receved by the pot.
Under the statutes of the State of R, potage nto the port of Y
s compusory for shps engaged n foregn commerce. Owners of
poted vesses or ther representatves n charge have no rght of
seecton of a partcuar pot and no rght of barganng as to hs
compensaton. The bar pot s requred to serve a engthy apprentce-
shp; he s engaged n a dstnct occupaton or busness; hs servces
are of a hghy sked character; he hods hmsef out to a shpowners
and operators who requre such potage servces; and each engagement
s of a mted duraton. e renders a specazed type of servce not
ordnary performed by an empoyee. Furthermore, t appears that
for a practca purposes the pot assumes fu and e cusve contro
over the navgaton of the vesse and s not sub|ect to the dscpne
of the master.
It s hed that the bar pot engaged by the M Steamshp Co. to pot
ts vesse nto and out of the port of Y s not an empoyee of that com-
pany for purposes of the ta es mposed by Subchapters and C,
Chapter 9, of the Interna Revenue Code, as amended by the Soca
Securty ct mendments of 1939.
The above rung has no bearng upon the status for Federa em-
poyment ta purposes of a pot reguary empoyed as an offcer or
member of a crew of a vesse.
Secton 1 26: Defntons. 19 1-52-109 0
Reguatons 106, Secton 02.20 : Who are em- m. T. 25
poyees.
( so Subchapter C (Federa Unempoyment Ta ct),
Secton 1607; Reguatons 107, Secton 03.20 )
pot engaged by the N Steamshp Co. to pot ts vesse on a
rver s an empoyee of that company for purposes of the ta es
mposed by Subchapter , Chapter 9, of the Interna Revenue Code,
as amended by the Soca Securty ct mendments of 1939.
The queston s presented whether a pot engaged by the N Steam-
shp Co. to pot ts vesse on a rver s an empoyee of that company
for empoyment ta purposes.
The N Steamshp Co. engaged a pot, censed by the Federa
Government, to drect the rver navgaton of ts ocean-gong vesses.
The company engaged the pot at an agreed fee and he boarded the
vesse upon ts arrva at the mouth of the rver.
In m. T. 20 (page 221, ths uetn), t was hed, under the facts of
that case, that a bar pot engaged by the M Steamshp Co. to pot a
vesse nto and out of the port of Y s not an empoyee of that company
for empoyment ta purposes.
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223
Regs. 106, 02.205.
In the present case the N Steamshp Co. s not requred to engage
a partcuar pot but may seect an ndvdua of ts choce. In some
nstances the potage s performed by a reguar member of the crew
of the vesse who hods a pot s cense. The company bargans wth
the pot as to the amount of hs compensaton and the pot s sub|ect
to the utmate drecton and contro of the master of the vesse. The
facts n the present case are such as to dstngush t from m. T. 20,
supra. Under the facts of ths case, t s ned that the pot s an
empoyee of the company for purposes of the ta es mposed by
Subchapter , Chapter 9, of the Interna evenue Code, as amended
by the Soca Securty ct mendments of 1939.
Inasmuch as the pot here n queston s consdered to be an offcer
or member of the crew of a vesse whe performng hs servces,
compensaton receved for such servces s not sub|ect to the ta
mposed by Subchapter C, Chapter 9, of the Code, as amended.
Secton 1 26: Defntons. 19 1-29-10785
Reguatons 106, Secton 02.205: Who are 1 m. T. 19
empoyers.
The eauty Servce Co. Is the empoyer for soca securty and
empoyment ta purposes of the empoyees performng servces n
a department eased by t from the Department Store.
In S. S. T. 99 (C. . 19 1-1. 15) t was hed that the N De-
partment Store s the empoyer for soca securty and empoyment
ta purposes of the empoyees n a department eased by t to the
M Company. The Y eauty Servce Co. requests to be advsed
whether S. S. T. 09 s appcabe n determnng the status of nd-
vduas performng servces n beauty shops operated by t n varous
department stores.
The Y eauty Servce Co. eases space n 60 department stores
ocated n varous parts of the country. In each of the eased depart-
ments, t mantans a beauty shop where, n addton to renderng the
customary servces to patrons, t ses cosmetcs and other beauty ads,
tnder the ease agreement wth the Department Store, whch s
typca of the eases entered nto wth other stores, t s provded that
the essee, n consderaton of an agreed percentage of the recepts of
the shop, s to be furnshed wth certan descrbed space n the store
and s to receve heat and ght, and eevator, devery, and |antor
servce. advertsng for the shop, athough sub|ect to revew by
the essor, s authorzed, prepared, and pad for by the essee. The
essor, as agent of the essee, pays the wages of empoyees n the eased
department n accordance wth pay ros prepared by the manager of
the beauty shop, and pays e press, shppng charges, and other ncden-
ta e penses. The essee remburses the essor for a charges pad by
t, ncudng the cost of paper, packagng matera, and other suppes
used n the eased department. The essee owns a equpment ntay
nstaed n the shop and furnshes any equpment and suppes there-
after needed. The essee carres pubc abty and workmen s com-
1 Pubshed orgnay as S. S. T. 19.
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Regs. 106, 02.208.
22
pensaton nsurance n ts own name and pays property ta es on equp-
ment ocated n the .shop, as we as franchse ta es.
The Y eauty Servce Co. operates ndependent beauty shops n
many ocatons other than n those eased from department stores.
operators empoyed by t are specay traned, so that empoyees
of other departments n the store may not be transferred to the
beauty department, nor may the beauty shop empoyees be trans-
ferred to other store departments. The manager of each beauty shop
and a operators theren are seected by the essee through ts em-
poyment offce and are furnshed wth manuas of nstructons gov-
ernng the conduct of beauty shops. mpoyees are frequenty trans-
ferred by the Y eauty Servce Co. from one of ts shops to another.
personne matters, such as transfers, vacatons, promotons,
eave, commssons, bonuses, and pensons, are determned by the Y
eauty Servce Co. wthout regard to poces governng personne n
effect at the varous department stores n whch essee operates.
Whe a department store may ob|ect to the conduct of a partcuar
empoyee and may requre hs remova from that store, t may not
compe the dscharge of such empoyee. mpoyees n the eased
departments consder the Y eauty Servce Co. as ther empoyer
and a questons reatng to the means and methods of performng
servces are taken up wth the centra offce of the company ether
drecty or through the manager of the shop.
Frt m the foregong facts, t s apparent that the empoyees n the
eased department of the Department Store are sub|ect to the drec-
ton and contro of the Y eauty Servce Co., and that the concu-
son reached n S. S. T. 09, supra, does not appy. It s therefore
hed that the Y eauty Servce Co. s the empoyer for soca
securty and empoyment ta purposes of the empoyees performng
servces for t n the department eased from the Department
Store.
Secton 1 26: Defntons. 19 1-39-1083
Reguatons 106, Secton 02.208: grcutura m. T. 21
abor.
( so Subchapter C (Federa Unempoyment Ta ct),
Secton 1607; Reguatons 107, Secton 03.208.)
Servces performed by empoyees of on or after anuary 1, 19 0,
n connecton wth breedng, rasng, and carng for dogs do not const-
tute agrcutura abor wthn the meanng of Subchapters and
C. Chapter 9, of the Interna Revenue Code, as amended by the Soca
Securty ct mendments of 1939.
dvce s requested whether servces performed by empoyees of
on or after anuary 1, 19 0, n connecton wth the operaton of dog
kennes consttute agrcutura abor wthn the meanng of Sub-
chapters and C, Chapter 9, of the Interna Revenue Code, as amended
by the Soca Securty ct mendments of 1939. The servces n ques-
ton ncude servces rendered n connecton wth the breedng, rasng,
and carng for the dogs.
Secton 1 26(h) of Subchapter and secton 1607(1) of Subchapter
C, Chapter 9, of the Interna Revenue Code provde n part as foows:
The term agrcutura abor ncudes a servces performed
(1) On a farm, n the empoy of any person, n connecton wth cutvatng
the so, or n connecton wth rasng or harvestng any agrcutura or hort-
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225
Regs. 106, 02.209.
cutura commodty, Incudng the rasng, shearng, feedng, carng for, tran-
ng, and management of vestock, bees, poutry, and fur-bearng anmas and
wdfe.
It s the opnon of the ureau that docs do not come wthn the
meanng of any of the words vestock, Dees, poutry, fur-bearng
anmas, or wdfe, as used n paragraph (1) of sectons 1 26(h)
and 1607(1), supra, when the words are consdered separatey; nor
are dogs propery ncuded wthn the meanng of the quoted phrase
when consdered n ts entrety.
It s hed that servces performed by empoyees of on or after
anuary 1, 19 0, n connecton wth breedng, rasng, and carng for
dogs do not consttute agrcutura abor wthn the meanng of
Subchapters and C, Chapter 9, of the Interna Revenue Code, as
amended by the Soca Securty ct mendments of 1939.
Secton 1 26: Defntons. 19 1- 0-108 5
Regtatons 106, Secton 02.209: Domestc m. T. 22
servce.
( so Subchapter C (Federa Unempoyment Ta ct),
Secton 1607; Reguatons 107, Secton 03.209.)
Servces performed by a housemother for the M Sororty durng
the summer schoo term e tendng from une to ugust ,
19 0, are not e cepted from empoyment under sectons 1 26(b)2
and 1607(c)2, Subchapters and C, respectvey, of Chapter 9 of
the Interna Revenue Code, us amended by the Soca Securty ct
mendments of 1939.
The queston s presented whether servces performed durng the
summer schoo term from une to ugust , 19 0, by a house-
mother for the M Sororty are e cepted from empoyment under
sectons 1 26(b)2 and 1607(c)2, Subchapters and C, respectvey,
of Chapter 9 of the Interna Revenue Code, as amended.
The M Sororty house s devoted e cusvey to the use of the
sororty members durng the norma schoo term. owever, durng
the summer schoo term the sororty house furnshed board and odg-
ng factes to a number of students attendng the N Unversty,
ony three of whom were members of the M Sororty.
Secton 1 26(b), Subchapter , Chapter 9, of the Interna Revenue
Code, as amended, provdes n part:
The term empoyment means any servce, of whatever nature,
performed after December 31, 1939, by an empoyee for the person empoyng
hm e cept:

(2) Domestc servce n a prvate home, oca coege cub, or oca chapter
of a coege fraternty or sororty .
Secton 1607(c), Subchapter C. Chapter 9. of the Interna Revenue
Code, as amended, contans a smar provson.
Secton 02.209 of Reguatons 106, ssued pursuant to Subchapter
of Chapter 9 of the Code, as amended, provdes n part:
Servces of a househod nature performed by an empoyee In or
about the cub rooms or house of a oca coege cub or oca chapter of a coege
fraternty or sororty by whch he s empoyed, are ncuded wthn the above
e cepton.
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Regs. 106. 02.225.
226
In genera, servces of a househod nature In or about the cub rooms or house of
a oca coege cub or oca chapter of a coege fraternty or sororty ncude
servces rendered by cooks, mads, buters, aundresses, furnacemen, waters,
und housemothers.
Secton 03.209 of Reguatons 107, ssued pursuant to Subchapter
C of Chapter 9 of the Code, as amended, contans the same provsons.
The M Sororty house durng the summer schoo term was utzed
prmary for the purpose of suppyng board and odgng, as a
busness enterprse, to students attendng the N Unversty who were
not members of the sororty. It s hed, therefore, that servces per-
formed by the housemother durng the summer schoo term do not
consttute domestc servce n a oca chapter of a coege sororty
wthn the meanng of sectons 1 26(b)2 and 1607(c)2, supra. c-
cordngy, such servces consttute empoyment for Federa em-
poyment ta purposes uness e cepted therefrom by sectons 1 26(c)
and 1007(d) of Subchapters and C, respectvey, of the Code, as
amended, whch provde n part as foows:
Incuded and c.rD D Servce. If the servces performed durng one-haf
or more of any pay perod by an empoyee for the person empoyng hm con-
sttute empoyment, a the servces of such empoyee for such perod sha be
deemed to be empoyment; but If the servces performed durng more than
one-haf of any such pay perod by an empoyee for the person empoyng hm
do not consttute empoyment, then none of the servces of such empoyee for
such perod sha be deemed to be empoyment. s used In ths subsecton the
term pay perod means a perod (of not more than thrty-one consecutve
days) for whch a payment of remuneraton Is ordnary made to the empoyee
by the person empoyng hm.
Secton 1 26: Defntons.
Reguatons 106, Secton 02.211: Famy empoyment.
Servces performed for famy partnershp. (See T. D. 5062,
page 239.)
Secton 1 26: Defntons. 19 1- 1-1085
Reguatons 106, Secton 02.225: Fshng. m. T. 23
( so Subchapter C (Federa Unempoyment Ta ct),
Secton 1607; Reguatons 107, Secton 03.211.)
Servces performed on and after anuary 1, 19 0, In the operaton
of a vesse of ess than 10 net tons engaged n carryng Indvduas
to am from fshng grounds where they fsh from the vesse are
e cepted from empoyment under sectons 1 26(b)1 and
1607(c) , Subchapters and C, respectvey, of Chapter 9 of the
Interna Revenue Code, as amended by the Soca Securty ct
mendments of 1939.
The queston s presented whether servces performed on and after
anuary 1, 19 0, n the operaton of a regstered passenger vesse
of ess than 10 net tons engaged n carryng ndvduas to and from
fshng grounds where they fsh from the vesse are e cepted from
empoyment under sectons 1 26(b)1 and 1607(c) , Subchapters
and C, respectvey, of Chapter 9 of the Interna Revenue Code, as
amended.
The vesse s censed as a passenger vesse of 9 net tons and s
operated day to carry ndvduas for a fee of 2 doars per person
to and from certan fshng grounds. The ndvduas fsh from the
vesse durng the day and keep the fsh whch they catch. The crew
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227
Regs. 107, 03. 01.
conssts of a master and two deckhands. The master steers the vesse
to and from the fshng grounds and the deckhands assst n the genera
operaton of the vesse.
Secton 1 26(b), Subchapter , Chapter 9, of the Interna Revenue
Code, as amended, provdes n part as foows:
The term empoyment means any servce performed after De-
cember 31, 1939, by an empoyee for the person empoyng hm ( )
wthn the Unted States, or ( ) on or n connecton wth an mercan vesse
under a contract of servce whch s entered nto wthn the Unted States or
durng the performance of whch the vesse touches at a port n the Unted States,
f the empoyee Is empoyed on and n connecton wth such vesse when outsde
the Unted States, e cept

(1 ) Servce performed by an ndvdua n (or as an offcer or member of
the crew of a vesse whe t s engaged n) the catchng, takng, harvestng,
cutvatng, or farmng of any knd of fsh, shefsh, Crustacea, sponges, seaweeds,
or other aquatc forms of anma and vegetabe fe (ncudng servce performed
by any such ndvdua as an ordnary ncdent to any such actvty), e cept ( )
servce performed n connecton wth the catchng or takng of samon or habut,
for commerca purposes, and ( ) servce performed on or n connecton wth a
vesse of more than 10 net tons (determned n the manner provded for deter-
mnng the regster tonnage of merchant vesses under the aws of the Unted
States); .
It s hed that servces performed on and after anuary 1, 19 0, n
the operaton of the vesse here n queston, whch s engaged n the
carryng of ndvduas to and from the fshng grounds where they
fsh from the vesse, are e cepted from empoyment for purposes
of Subchapter , Chapter 9, of the Code, as amended.
Secton 1607(c) of Subchapter C, Chapter 9, of the Code, as
amended, provdes n part as foows:
The term empoyment means any servce performed after Decem-
ber 31, 1939, wthn the Unted States by an empoyee for the person empoyng
hm, e cept

( ) Servce performed as an offcer or member of the crew of a vesse on the
navgabe waters of the Unted States; .
Snce the servces of the master and deckhands are performed as
an offcer and as members of the crew of the vesse ether on the nav-
gabe waters of the Unted States or outsde the Unted States, such
servces do not consttute empoyment for purposes of Subchapter C
of Chapter 9 of the Code, as amended.
C PT R 9, SU C PT R C F D R L UN MPLOYM NT T CT.
Secton 1601: Credts aganst ta .
Reguatons 90 (as amended), rtce 211(1): Credt
aganst ta for caendar year 1939 for contrbutons
pad.
Credt aganst ta for caendar year 1939. (See T. D. 5088, page
230.)
Secton 1601: Credts aganst ta .
Reguatons 107, rtce 03. 01: Credt aganst ta
for contrbutons pad.
Credt aganst ta mposed by the Federa Unempovment Ta ct
(Subchapter C, Chapter 9, of Interna Revenue Code) for the caendar
years 1939 and 19 0. (See T. D. 5088, page 230.)
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Roas. 90, rt. 503 .1
228
Secton 1607: Defntons.
Reguatons 90 (as amended), rtce 209: Items ncuded
as wages.
Dsmssa payments. (See m. T. 2 , page 229.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.20 : Who are empoyees.
Drectors of bank performng servces as commttee members.
(See Mm. 5217, page 220.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.20 : Who are empoyees.
ar pot drectng the handng of a vesse on enterng and eavng
a port. (See m. T. 20, page 221.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.20 : Who are empoyees.
Pot drectng the rver navgaton of a vesse. (See m. T. 25,
page 222.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.205: Who are empoyers.
Status of essee of a department n the Department Store. (See
m. T. 19, page 223.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.208: grcutura abor.
reedng, rasng, and carng for dogs. (See m. T. 21, page 22 .)
Secton 1607: Defntons.
Reguatons 107, Secton 03.209: Domestc servce.
Servces performed by a housemother durng the summer schoo
term for the M Sororty. (See m. T. 22, page 225.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.211: Offcers and members of crew.
Servces performed n the operaton of a fshng vesse. (See
m. T. 23, page 226.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.212: Famy empoyment.
Servces performed for famy partnershp. (See T. D. 5062,
page 239.)
Recu-atons 90 (as amended), etce 503 : Refund,
under secton 1601 (a) 5 of Federa Unempoyment Ta
ct or secton 701(b) of Second Revenue ct of 19 0,
of ta for caendar year 1939.
Credt aganst, refund, or abatement of ta mposed by Federa
Unempoyment Ta ct (Subchapter C, Chapter 9, of the Interna
Revenue Code) for the caendar year 1939. (See T. D. 5088, page 230.)
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229 Regs. 91, 90, rts. 16, 209.
Secton 1610: Other aws appcabe.
Reguatons 107, Skcton 03.602: Refund or credt
of overpayments; abatement of overassessments.
Credt aganst, refund, or abatement of ta mposed by the Federa
Unempoyment Ta ct (Subchapter C, Chapter 9, of the Interna
Revenue Code) for the caendar year 19 0. (See T. D. 5088, page 230.)
T S UND R SOCI L S CURITY CT.
Sectons 811 and 907: Defntons. 19 1- 5-10891
Reguatons 91 and 90, rtces 16 and 209: m. T. 2
Items ncuded as wages.
( so Interna Revenue Code, Subchapter , Secton
1 26; Reguatons 91 (as amended), rtce 16; Sub-
chapter C. Secton 1607; Reguatons 90 (as amended),
rtce 209.)
dsmssa wage whch ceary represents remuneraton for
servces performed pror to dsmssa s aocabe to the ta abe
perods durng whch the servces were performed. In other n-
stances a dsmssa wage s ta abe In ts entrety n the ta abe
perod of recept.
S. S. T. 5 (C. . -2, 21 (1936)) and S. S. T. 123 (C. .
1937-1, 83) modfed.
S. S. T. 5 , tem 3 (C. . -2, 21 (1930)), hods that where
an empoyee upon beng dscharged s pad one, two, three, or four
months saary, dependng upon hs ength of servce, such payments
beng made under a genera pocy of the frm, whch pocy, however,
s unknown to the empoyee and s not hed out to hm as nduce-
ment to empoyment, the amount pad to the empoyee consttutes
wages under artce 209(b) of Reguatons 90, and s sub|ect to
the ta mposed by Tte I of the Soca Securty ct.
S. S. T. 123 (C. . 1937-1, 83) hods that the words dsmssa
wages, as used n artce 209(b) of Reguatons 90, contempate wages
pad to an empoyee because of hs dscharge from empoyment and
a reease by the empoyer of hs servces rather than as a bonus for
fathfu servces: and that whe such a payment s remuneraton
for empoyment wthn the meanng of secton 907(b), t shoud
not ordnary be consdered as a payment, for servces performed
pror to dsmssa. S. S. T. 123 further hods (hat f such remunera-
ton pad at the tme of dsmssa does represent payment for servces
performed pror thereto, then such payment s not a dsmssa wage
wthn the meanng of artce 209(b) and must be aocated to the
caendar year n whch the servces were performed.
Upon reconsderaton, t s hed that the term dsmssa wages
ncudes amounts pad to an empoyee because of the termnaton of
empoyment even though such amounts represent payment for pror
servces. The term aso ncudes amounts pad n eu of notce of
termnaton of empoyment. ( s to the treatment of amounts pad
to ndvduas who have been pensoned or who are totay and per-
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Regs. 90, rt. 211.
230
manenty dsabed, see S. S. T. 81 (C. . 1937-1, 61) and S. S. T.
201 (C. . 1937-2, 57), respectvey.)
When a dsmssa wage ceary represents payment for servces
performed pror to the tme of dsmssa, as, for e ampe, where the
ength of servce or the number of years of contnuous servce s
the prmary factor n determnng whether a payment w be made
and the amount thereof, the amount shoud be aocated to the ta -
abe perods n whch the servces were performed. Where an ao-
caton s proper, any porton of the dsmssa wage attrbutabe to
servces performed pror to anuary 1, 1937, and anuary 1, 1936,
does not consttute wages under Ttes III and I , respectvey,
of the Soca Securty ct and the correspondng provsons of the
Interna Revenue Code n effect pror to anuary 1, 19 0. On the
other hand, for e ampe, where an amount equa to two weeks saary
s pad to a dscharged empoyee n eu of notce, no aocaton s
proper and the amount consttutes wages for the ta abe perod or
perods n whch payment s made.
Snce the concusons reached n S. S. T. 5 , tem 3, supra, and
S. S. T. 123, supra, are not entrey n accord wth the concusons
reached heren, those rungs are modfed accordngy.
TITL I T ON MPLOY RS OF IG T OR MOR .
Secton 902: Credt aganst ta . 19 1- 3-10876
Reguatons 90 (as amended), rtce 211: T. D. 5088
Credt of contrbutons aganst ta for caen-
dar years 1936. 1937, and 1938.
( so Secton 905, rtce 503/2; Interna Rev-
enue Code, Chapter 9, Subchapter C (Federa
Unempoyment Ta ct), Sectons 1601 and
1610; Reguatons 90 (as amended), rtces
211(1), a and 503 ; aso reguatons 107, rt-
ces 03. 01 and 03.602.)
TITL 20 INT RN L R NU . C PT R I. SU C PT R D, P RTS 00 ND
03. F D R L UN MPLOYM NT T .
Reguatons 90, such reguatons as made appcabe to the
Interna Revenue Code by Treasury Decson 885 C. . 1939-1
(Part 1), 39(1 , and Reguatons 107, amended to conform to sec-
ton 701 of the Revenue ct of 19 1.
Credt aganst the ta mposed by Tte I of the Soca Securty
ct for the caendar years 193(5, 1937, and 1938, and the ta m-
posed by the Federa Unempoyment Ta ct (Subchapter C,
Chapter 9, of the Interna Revenue Code) for the caendar years
1939 and 19 0, for contrbutons pad nto State unempoyment
funds.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Paragraph . Credt aganst ta for 1936, 1937, and 1938. -In
order to conform Reguatons 90 Part 00, Tte 26, Code of Federa
Reguatons , reatng to the e cse ta on empoyers under Tte I
of the Soca Securty ct ( 9 Stat,, 639; 2 U. S. C, Sup. , 1101 to
1110, ncusve), to secton 701 of the Revenue ct of 19 1, approved
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231
Regs. 90, rt. 211.
September 20, 19 1 (Pubc aw 250, Seventy-seventh Congress),
such reguatons are amended as foows:
(1) Immedatey precedng artce 211 secton 00.211, Tte 26,
Code of Federa Reguatons , as amended by Treasury Decson
812 fC. . 1938-1, 62 secton 00.211 of such Tte 26, 1938 Sup. ,
by Treasury Decson 937 C. . 1939-2, 320 secton 00.211 of
such Tte 26, 1939 Sup. , and by Treasury Decson 5022 C. .
19 0-2, 275 secton 00.211 of such Tte 26, 19 0 Sup. , reatng
to credt of contrbutons aganst the ta for the caendar years 1936,
1937, and 1938, the foowng s nserted:
Secton 701(a) of the Revenue ct of 19 1.
owance of Credt ganst Ta for 1936, 1937, and 1938.
ganst the ta mposed by secton 901 of the Soca Securty ct for
the caendar year 1936, 1937, or 1938, any ta payer sha be aowed
credt (If credt s not aowabe under secton 902 of such ct) for
the amount of contrbutons pad by hm nto an unempoyment fund
under a State aw
(1) efore the s teth day after the date of the enactment
of ths ct, f such credt s camed before the e praton of s
months after such date of enactment;
(2) Wthout regard to the date of payment, wth respect to
wages pad after September 19, 1939;
(3) Wthout regard to the date of payment, f the assets of the
ta payer are, at any tme durng the ffty-nne-day perod foow-
ng such date of enactment, or were at any tme durng the perod
ugust 11, 1939, to October 8, 1939, ncusve, or the perod Octo-
ber 9, 19 0, to December 6, 19 0, ncusve, n the custody or con-
tro of a recever, trustee, or other fducary apponted by, or under
the contro of, a court of competent ursdcton.
The provsons of the Soca Securty ct n force pror to February 11,
1939 (e cept the provson mtng the credt to amounts pad before
the date of fng returns), sha appy to aowance of credt under
ths subsecton; e cept that the amount of credt aganst the ta for
the caendar year 1936, 1937, or 1938, for contrbutons pad after
December 6, 19 0, sha not (uness the credt s aowabe on account
of paragraph (2) or (3)) e ceed 90 per centum of the amount whch
woud have been aowabe as credt on account of such contrbutons
had they been pad before the ast day upon whch the ta payer was
requred under secton 905 of such ct to fe a return for such year.
The terms used In ths subsecton sha have the same meanng as
when used In tte I of such ct pror to February 11, 1939. The
tota credt aowabe aganst the ta mposed by secton 901 of such
ct for the caendar year 1936, 1937, or 1938 sha not e ceed 90 per
centum of such ta .
(2) rtce 211 secton 00.211, Tte 26, Code of Federa Regu-
atons , as amended by Treasury Decson 812 secton 00.211 of
such Tte 26,1938 Sup. , by Treasury Decson 937 secton 00.211
of such Tte 26, 1939 Sup. , and by Treasury Decson 5022 secton
00.211 of such Tte 26, 19 0 Sup. , reatng to credt of contrbu-
tons aganst the ta for the caendar years 1936, 1937, and 1938, s
further amended to read as foows:
bt. 211 Sec. 00.211, Tte 26, Code of Federa Reguatons, 19 1 Sup..
Credt aganst ta for caendar year 1936, 1937, or 1938 for contrbutons pad.
(a) In genera. Sub|ect to the mtatons herenafter prescrbed n para-
graphs (6), (c), (d), and (e), the ta payer may credt aganst the ta for the
caendar year 1936, 1937, or 1938 the tota amount of hs contrbutons under
a State aws whch have been found by the Soca Securty oard to con-
tan the provsons specfed n secton 903(a) of the Soca Securty ct; pro-
vded that no credt may be taken for a contrbuton under a State aw If
such State has not been duy certfed for the caendar year to the Secretary
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Regs. 90, rt. 211.
232
by the Soca Securty oard. (See, however, artce 503 (e) and (d) secton
00.503 (c) and ( /), Tte 26, Code of Federa Reguatons , reatng to the
statutory perod of mtatons appcabe to refunds and credts.)
(6) Lmtaton on amount of credt aowabe. The tota credt aowed to
any ta payer for contrbutons to State unempoyment funds wth respect to
empoyment durng any one year sha not e ceed 90 per cent of the ta aganst
whch such credt s apped.
(c) Lmtaton on servces wth respect to whch credt t aowabe.
Contrbutons must have been pad wth respect to empoyment as defned n
secton 907(c) of the Soca Securty ct, that s, wth respect to servces
performed by an empoyee wthn the Unted States and not e cepted by such
ct. (See rtces 206 to 206(7) sectons 00.206 to 00.206(7), Tte 26, Code
of Federa Reguatons , ncusve.)
(d) Lmtaton on the ta abe year n whch servces are performed. Con-
trbutons must have been pad wth respect to servces performed durng the
caendar year covered by the return.
(e) I mtaton on the tme wthn whch contrbutons may be pad n order
to be aowabe as credt. (1) Genera rue. Contrbutons must have been
nctuay pad nto a State unempoyment fund before the ast day upon whch
the return for the ta abe year s requred to be fed, e cept that under the
condtons descrbed n subparagraph (2), (3), ( ), (5), or (6), beow, credt
may be aowed for contrbutons pad on or after such ast day. (The ast
day for fng the return s anuary 31 ne t foowng the cose of the ta abe
year uness the tme for fng the return s e tended. See artce 303 secton
00 303. Tte 26, Code of Federa Reguatons , artce 30 secton 00.30 of
such Tte 20 , and artce 305 secton 00.305 of such Tte 26 .)
(2) cepton when contrbutons are pad on or after the ast day for fng
the return but before, December 7, 19 0. Contrbutons pad nto a State unem-
poyment fund on or after the ast day upon whch the return for the ta abe
year s requred to be fed but before December 7, 19 0, may be credted aganst
the ta , provded such credt s camed before March 21, 19 2. The amount
of such credt s the same amount that woud have been aowabe as credt
had such contrbutons been pad before such ast day. (See artce 503
secton 00.503 , Tte 26, Code of Federa Reguatons, 19 1 Sup. , reatng
to refund, credt, or abatement based on credt for contrbutons pad.)
(3) cepton when contrbutons are pad after December G, 19 0, but before
November 19, 1911. Contrbutons pad Into a State unempoyment fund after
December 6, 19 0, but before November 19, 19 1, may be credted aganst the
ta , provded such credt s camed before March 21, 19 2. The amount of
such credt sha not e ceed 90 per cent of the amount whch woud have been
aowabe as credt on account of such contrbutons had they been pad before
the ast day upon whch the return for the ta abe year was requred to be fed.
.(See artce 503 secton 00.503 , Tte 26, Code of Federa Reguatons,
19 1 Sup. , reatng to refund, credt, or abatement based on credt for
contrbutons pad.)
( ) cepton when ta payers assets are n custody or contro of certan
fducares. Contrbutons of a ta payer whose assets, at any tme durng the
perod ugust 11, 1939, to October 8, 1939, ncusve, or the perod October 9,
1C 0, to December 6, 19 0, ncusve, or the perod September 21, 19 1, to Novem-
ber 18, 19 1, ncusve, are In the custody or contro of a recever, trustee, or other
fducary apponted by, or under the contro of, a court of competent ursdcton,
may be pad nto a State unempoyment fund at any tme, and upon such pay-
ment may be credted aganst the ta n the same amount that woud have been
aowabe as credt had the contrbutons been pad before the ast day upon
whch the return for the ta abe year was requred to be fed.
(5) cepton when wages are pad after September 19, 19S9, for empoyment
durng 1936, /y. 7, or 1938. Contrbutons wth respect to wages pad after Sep-
tember 19, 1939, for empoyment durng the caendar year 1936, 1937, or 1938,
may be pad nto a State unempoyment fund at any tme, and upon such pay-
ment may be credted aganst the ta n the same amount that woud have been
aowabe as credt had the contrbutons been pad before the ast day upon
whch the return for such year was requred to te fed.
(6) cepton when contrbutons are pad to wrong State. Contrbutons
pad nto the unempoyment fund of a State whch are requred under the
unempoyment compensaton aw of that State, wth respect to remuneraton
on the bass of whch the ta payer had, pror to suc payment, erroneousy pad
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233
Regs. 90, rt. 21L
an amount as contrbutons under another unempoyment compensaton aw,
sha be deemed to have been made at the tme of the erroneous payment. If,
by reason of such other aw, the ta payer was entted to cease payng con-
trbutons wth respect to servces sub|ect to such other aw, the payment
nto the proper fund sha be deemed to have been made on the date the return
for the ta abe year was actuay fed under secton 905 of the Soca Securty
ct.
(f) Contrbutons. The term contrbutons for purposes of credt aganst
the ta means payments requred to be made by an empoyer pursuant to a
State aw nto the unempoyment fund of such State, to the e tent that such
payments are made by the empoyer wthout any part thereof beng deducted
or deductbe from the wages of ndvduas n hs empoy. Notwthstandng
the provson mtng the term to payments requred by a State aw, the
term aso ncudes so much of any payments made as contrbutons for the
caendar year 1030 or 1937 nto the unempoyment fund of a State whfh
payments are hed by the hghest court of such State not to be requred pay-
ments under the unempoyment compensaton aw of such State, as are not
returned to the ta payer.
( 7) Refund of State contrbutons. If, subsequent to the fng of the return,
a refund s made by a State to the ta payer of any part of hs contrbutnns
whch had been credted aganst the ta , the ta payer s requred to advse
the Commssoner under oath of the date and amount of such refund and the
reason therefor, and to pay the ta , f any, due as a resut of such refund,
together wth nterest from the date when the ta was due.
(3) Immedatey precedng artce 5031/2 added by Treasury De-
cson 812 secton 00.503y2, Tte 2G, Code of Federa Reguatons,
1938 Sup. , us amended by Treasury Decson 937 secton 00.503
of such Tte 26, 1939 Sup. , and by Treasury Decson 5022 secton
00.503/2 of such Tte 26, 19 0 Sup. , reatng to certan refunds
of the ta for the caendar years 1936, 1937, and 1938, the foowng
s nserted:
Secton 701(c) of the Revenue ct of 10 1.
Refund. Refund, credt, or abatement of the ta (ncudng penaty
and nterest assessed or coected wth respect thereto, f any), based
on any credt aowabe under subsecton (a) , may be made
n accordance wth the provsons of aw appcabe n the case of
erroneous or ega assessment or coecton of the ta (ncudng
Statutes of mtatons). No nterest sha be aowed or pad on the
amount of any such credt or refund. On and after the date of the
enactment of ths ct no refund, credt, or abatement sha be aowed
based on any credt aowabe under secton 810 of the Revenue ct of
1938, secton 902(a) of the Soca Securty ct mendments of 1939,
or secton 701 of the Second Revenue ct of 19 0.
( ) rtce 5031/2, added by Treasury Decson 812 secton
00.503/2, Tte 26, Code of Federa Reguatons, 1938 Sup.|, as
amended by Treasury Decson 937 secton 00.503 of such Tte
26, 1939 Sup. , and by Treasury Decson 5022 secton 00.503y2 of
such Tte 26, 19 0 Sup. , reatng to certan refunds of the ta for
the caendar years 1936, 1937, and 1938, s amended to read as
foows:
bt. 503 Sec. 00.503 , Tte 26, Code of Federa Reguatons, 19 1 Sup.
Refund, credt, or abatement of ta for caendar year 1936, 19S7, or IS. f,
based on credt aganst such ta for contrbutons pad. If the ta for the
caendar year 1936, 1937, or 1938, aganst whch an amount s aowabe as
credt, for contrbutons pad, under secton 701 of the Revenue ct of 19 1,
has been pad wthout the beneft of such credt, the ta payer sha be en-
tted to a refund or credt of the ta equa to the amount of such aowabe
credt for contrbutons pad. (See secton 701(a)(1) of the Revenue ct
of 19 1, whch requres as a condton of the aowance of credt thereunder
that the credt be camed before March 21, 19 2.) The ta payer sha aso
1611 2 16
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Regs. 90, rt. 211.1
23
be entted to a refund or credt of the amount of nterest or penaty, f any,
coected from hm wth respect to the ta refunded or credted. No nterest,
however, sha be aowed or pad by the Government on the amount of any
such refund or credt. very cam for such refund or credt sha be made
on F|rn 8 3 n accordance wth the provsons of ths artce and artce 503
secton 00.503, Tte 26, Code of Federa Reguatons , reatng to refund and
credt of ta es erroneousy coected. cam whch does not compy wth
these requrements w not be consdered for any purpose as a cam for
refund or credt.
On and after September 20, 19 1, no refund, credt, or abatement sha be
aowed based on any credt aowabe under secton 810 of the Revenue ct
of 1938, secton 902(a) of the Soca Securty ct mendments of 1939. or
secton 701 of the Second Revenue ct of 19 0.
Par. . Credt aganst ta for 1939. In order to conform
Reguatons 90 Part 00, Tte 26, Code of Federa Reguatons ,
ony as made appcabe to the Interna Revenue Code (53 Stat.,
Part 1; 26 U. S. C, Sup. ) by Treasury Decson 885 Chapter I,
note, Tte 26, Code of Federa Reguatons, 1939 Sup. , to secton
701 of the Revenue ct of 19 1, approved September 20,19 1 (Pubc
aw 250, Seventy-seventh Cdngress), such reguatons are amended
as foows:
(1) Immedatey precedng artce 211(1), added by Treasury
Decson 953 C. . 1939-2, 297 secton 00.211(1), Tte 26,
Code of Federa Reguatons, 1939 Sup. , as amended by Treasury
Decson 5022 C. . 19 0-2, 275 and by Treasury Decson 5028
C. . 19 1-1, 20 secton 00.211(1) of such Tte 26, 19 0 Sup. ,
reatng to credt aganst the ta for the caendar year 1939 for
contrbutons pad, the foowng s nserted:
Secton 701(b) ot the Revenue ct of 19 1.
owance ok Cbedt ganst Ta fob 1939 . ganst the
ta mposed by the Federa Unempoyment Ta ct for the caendar
year 1939 , any ta payer sha be aowed credt (f cedt
s not aowabe under secton 1601 of such ct) for the amount of
contrbutons pad by hm nto an unempoyment fund under a State
aw
(1) efore the s teth day after the date of the enactment
of ths ct, f such credt s camed before the e praton of s
months after such date of enactment;
(2) Wthout regard to the date of payment, f the assets of
the ta payer are, at any tme durng the ffty-nne-day perod fo-
owng such date of enactment, or were at any tme durng the
perod from the ast day upon whch the ta payer was requred
under secton 160 of the Federa Unempoyment Ta ct to fe a
return of the ta aganst whch credt Is camed to une 30 ne t
foowng such ast day, ncusve, or (n the case of credt aganst
the ta for the caendar year 1939) the perod October 9, 19 0,
to December 6, 19 0, ncusve, In the custody or contro of a re-
cever, trustee, or other fducary apponted by, or under the contro
of, a court of competent |ursdcton.
The provsons of the Federa Unempoyment Ta ct (e cept secton
1601(a)(3)) sha appy to aowance of credt under ths
subsecton. The amount of such credt aganst the ta for the caendar
year 1039 , n the case of contrbutons pad after the ast
day upon whch the ta payer was requred under secton 160 of the
Federa Unempoyment Ta ct to fe a return for such year, sha
not (uness the credt s aowabe on account of paragraph (2)) e ceed
90 per centum of the amount whch woud have been aowabe as credt
on account of such contrbutons had they been pad on or before such
ast day. The terms used n ths subsecton sha have the same
meanng as when used In the Federa Unempoyment Ta ct. The
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235
Regs. 90, rt. 211.
tota credt aowabe aganst the ta Imposed by such ct for the
caendar year 1039 sha not e ceed 90 per centum of such
ta .
(2) rtce 211(1), added by Treasury Decson 053 secton
00.211(1), Tte 26, Code of Federa Reguatons, 1939 Sup. , as
amended by Treasury Decson 5022 and by Treasury Decson 5028
secton 00.211(1) of such Tte 26, 19 0 Sup. , reatng to credt
aganst the ta for the caendar year 1939 for contrbutons pad,
s further amended to read as foows:
bt. 211(1) Sec. 00.211(1), Tte 26, Code of Federa Reguatons, 19 1
Sup. . Credt aganst ta for caendar year 19S9 for contrbutons pad. (a) In
genera. Sub|ect to the mtatons herenafter prescrbed n paragraphs (6),
(e) and (d), the ta payer may credt aganst the ta for the caendar year
1939 the tota amount of contrbutons pad by hm Under a State aws whch
have been found by the Soca Securty oard to contan the provsons specfed
n secton 1603(a) of the Federa Unempoyment Ta ct; provded that no
credt may be taken for a contrbuton under a State aw f such State has
not been duy certfed for the caendar year to the Secretary by the Soca
Securty oard. (See, however, artce 503 (c) and (d) secton 00.503 (r)
and ( f). Tte 26, Code of Federa Reguatons , reatng to the statutory
perod of mtatons appcabe to refunds and credts.) The contrbutons
may be credted aganst the ta whether or not they are pad wth respect to
empoyment as defned n the Federa Unempoyment Ta ct.
(6) Lmtaton on amount of credt aowabe. The tota credt aowed to
any ta payer for contrbutons to State unempoyment funds sha not e ceed
90 per cent of the ta aganst whch such credt s apped.
(c) Lmtaton on the ta abe year wth respect to whch contrbutons are
aowabe. Contrbutons must have been pad wth respect to the caendar
year 1939.
(d) Lmtaton on the tme wthn whch contrbutons may be pad n order
to be aowabe as credt. (1) Genera rue. Contrbutons must have been
actuay pad nto a State unempoyment fund on or before the ast day upon
whch the return for the ta abe year s requred to be fed, e cept that under
the condtons descrbed n subparagraph (2), (3), ( ), or (5), beow, credt
may be aowed for cpntrbutons pad after sneh ast day. (The ast day for
fng the return Is anuary 31, 19 0, uness the tme for fng the return s
e tended. See artce 303 secton 00.303, Tte 20, Code of Federa Regua-
tons , artce 30 secton 00.30 of such Tte 26, and 1939 Sup. , and artce
305 secton 00.305 of such Tte 26 .)
(2) cepton when contrbutons are pad after the ast day for fng a return
but before uy 1, 19 0. Contrbutons may be pad nto a State unempoyment
fund after the ast day upon whch the return for the ta abe year Is requred
to be fed but before uy 1, 19 0, and, n such case, may be credted, under
secton 1601(a) (3) of the Federa Unempoyment Ta ct, aganst the ta n an
amount not to e ceed 90 per cent of the amount whch woud have been aow-
abe as credt on account of such contrbutons had they been pad nto the
State unempoyment fund on or before such ast day.
(3) cepton when contrbutons are pad after une SO, 19 f, but before
November 19. 19 1. Contrbutons may be pad nto a State unempoyment fund
after une 30, 19 0. but before November 19, 19 1. and, n such case, may be
credted, under secton 701 of the Revenue ct of 19 1, aganst the ta , provded
suc credt s camed before March 21, 19 2. The amount of such credt sha
not e ceed 90 per cent of the amount whch woud have been aowabe as credt
on account of such contrbutons had they been pad nto the State unempoyment
fund on or before the ast day upon whch the return for the ta abe year was
requred to be fed. (See artce 503 secton 00.503 , Tte 26, Code of
Federa Reguatons, 19 1 Sup. , reatng to refund, credt, or abatement based
on credt wth respect to contrbutons.)
( ) cepton when ta payers assets are n the custody or contro of certan
/ duear . Contrbutons of a ta payer whose assets, at any tme durng the
perod from the ast day upon whch the return for the caendar year 1939 s
requred to be fed to une 30, 19 0, ncusve, or the perod October 9, 19 0,
to December 6, 19 0. Incusve, or the perod September 21, 19 1, to November 18,
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Regs. 90, rt. 211.
236
10 1. Incusve, are n the custody or contro of a recever, trustee, or other
fducary apponted by, or under the contro of, a court of competent |ursdcton,
may be pad nto a State unempoyment fund at any tme, and upon such pay-
ment may be credted aganst the ta In the same amount that woud have been
aowabe as credt had the contrbutons been pad on or before the ast day
upon whch the return for the ta abe year was requred to be fed.
(5) cepton when contrbutons are pad, to wrong State. Contrbutons for
the caendar year 1939 pad Into the unempoyment fund of a State whch nre
requred under the unempoyment compensaton aw of that State, but whch
are pad wth respect to remuneraton on the bass of whch the ta payer had,
pror to such payment, erroneousy pad an amount as contrbutons under an-
other unempoyment compensaton aw, sha be deemed for purposes of credt
to have been pad at the tme of the erroneous payment. If, by reason of such
other aw, the ta payer was entted to cease payng contrbutons wth respect
to servces sub|ect to such other aw, the payment nto the proper fund sha be
reemed for purposes of credt to have been made on the date the return was
actuay fed under secton 160 of the Federa Unempoyment Ta ct.
(See, however, secton 7(b) of the ct approved ugust 13, 19 0 (Pubc.
No. 70 , Seventy-s th Congress, thrd sesson), for a speca provson reatng
to credt for certan contrbutons pad wth respect to certan servces affected
by such ct; and see sectons 1, 3, , and 6 of such ct quoted mmedatey
precedng artce 200(8) secton 00.206(8), Tte 20, Code of Federa Regua-
tons, 1910 Sup. , reatng to such servces.)
(e) Refund of State contrbutons. If, subsequent to the fng of the return
for the caendar year 1939, a refund s made by a State to the ta payer of
any part of hs contrbutons for such year whch had been credted aganst
the ta , the ta payer s requred to advse the Commssoner under oath of
the date and amount of such refund and the reason therefor, and to pay the
ta , f any, due as a resut of such refund, together wth Interest from the
date when the ta was due.
(3) Immedatey precedng artce 503 , added by Treasury
Decson 953 secton 00.503 Tte 26, Code of Federa Regu-
atons, 1939 Sup. , as amended by Treasury Decson 5022 secton
00.503 of such Tte 26, 19 0 Sup. , reatng to certan refunds of
the ta for the caendar year 1939, the foowng s nserted:
SectOD 701(c) of the Revenue ct of 19 1.
Refund. Refund, credt, or abatement of the ta (Incudng penaty
and nterest assessed or coected wth respect thereto, f any), based
on any credt aowabe under subsecton (b), may be
made n accordance wth the provsons of aw appcabe n the case
of erroneous or ega assessment or coecton of the ta (ncudng
statutes of mtatons). No nterest sha be aowed or pad on the
amount of any such credt or refund. On and after the date of the
enactment of ths ct no refund, credt, or abatement sha be aowed
based on any credt aowabe under secton 701 of the
Second Revenue ct of 19 0.
( ) rtce 503 , added by Treasury Decson 953 secton
00.503 , Tte 26, Code of Federa Reguatons, 1939 Sup. , as
amended by Treasury Decson 5022 secton 00.503 of such
Tte 26, 1910 Sup. , reatng to certan refunds of the ta for the
caendar year 1939, s amended to read as foows:
rt. 503 Sec. 00.503 , Tte 26, Code of Federa Reguatons, 19 1
Sup. . Refund, credt, or abatement of ta for caendar year 19S9, based on
credt aganst sueh ta wth respect to contrbutons. If the ta for the ca-
endar year )39, aganst, whch an amount s aowabe as credt under secton
1601 of the Federa Unempoyment Ta ct or secton 701 of the Revenue ct
of 19 1, has been pad wthout the beneft of such credt, the ta payer sha
be entted to a refund or credt of the ta equa to the amount of such aowa-
be credt. (See secton 701(b)(1) of the Revenue ct of 19 1, whch requres
as a condton of the aowance of credt thereunder that the credt be camed
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237
Regs. 90, rt. 211.
before March 21, 19 2.) The ta payer sha aso be entted to a refund or
credt of the amount of nterest or penaty, f any, coected from hm wth
respect to the amount of ta refunded or credted. No nterest, however, sha be
aowed or pad by the Government on the amount of any such refund or credt.
very cam for such refund or credt sha be made on Form 8 3 n accordance
wth the provsons of ths artce and artce 503 secton 00.503, Tte 26,
Code of Federa Reguatons , reatng to refund and credt of ta es errone-
ousy coected. cam whch does not compy wth these requrements w
not be consdered for any purpose as a cam for refund or credt.
On and after September 20. 19 1, no refund, credt, or abatement sha be
aowed based on any credt aowabe under secton 701 of the Second Revenue
ct of 19 0.
Pah. C. Credt aganst ta for Of. In order to conform Regu-
atons 107 Part 03, Tte 26, Code of Federa Reguatons, 19 0
Sup. , reatng to the e cse ta on empoyers under the Federa
Unempoyment Ta ct (53 Stat., 183,1387; 26 U. S. C, Sup. , 1600
to 1611, ncusve), to secton 701 of the Revenue ct of 19 1,
approved September 20, 19 1 (Pubc aw 250, Seventy-seventh
Congress), such reguatons are amended an foows:
(1) Immedatey precedng secton 03. 01, reatng to credt
aganst the ta for the caendar year 19 0 and subsequent years for
contrbutons pad, the foowng s nserted:
Secton 701(b) o( the Revenue ct of 1011.
owance of Crfut ua.nst Ta fok 19 0. gnnst
the ta mposed by the Federa Unempoyment Ta ct tor the
caendar year 19 0, any ta payer sha be aowed
credt (f credt s not aowabe under secton 1601 of such ct)
for the amount of contrbutons pad by hm nto an unempoyment
fund under a State aw
(1) efore the s teth day after the date of the enactment
of ths ct, f such credt Is camed before the e praton of
s months after such date of enactment;
(2) Wthout regard to the date of payment, If the assets of
the ta payer are, at any tme durng the ffty-nne day perod
foowng such date of enactment, or were at any tme durng
the perod from the ast day upon whch the ta payer was
requred under secton 160 of the Federa Unempoyment Ta
ct to fe a return of the ta aganst whch credt s camed
to une 30 ne t foowng such ast day, Incusve,
n the custody or contro of a recever, trustee, or other
fducary apponted by, or under the contro of, a court of
competent |ursdcton.
The provsons of the Federa Unempoyment Ta ct (e cept
secton 1601(a)(3)), Incudng such provsons as modfed by
secton 902(e) of the Soca Securty ct mendments of 1939,
sha appy to aowance of credt under ths subsecton. The
amount of such credt aganst the ta for the caendar year
19 0, n the ease of contrbutons pad after the ast day upon whch
the ta payer was requred under secton 160 of the Federa Unem-
poyment Ta ct to fe a return for such year, sha not (uness
the credt s aowabe on account of paragraph (2)) e ceed 90
per centum of the amount whch woud have been aowabe as
credt on account of such contrbutons had they been pad on or
before such ast day. The terms used n ths subsecton sha have
the same meanng as when used n the Federa Unempoyment Ta
ct. The tota credt aowabe aganst the ta mposed by such
ct for the caendar year 19 0 sha not e ceed 90
per centum of such ta .
(2) Secton 03. 01(c), reatng to the mtaton on the tme
wthn whch contrbutons may be pad n order to be aowabe
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Regs. 90, rt. 211.
238
as credt, s amended by addng at the end of subparagraph (1)
thereof the foowng new sentence:
See aso subparagraphs (5) and (6), beow, for speca provsons reatng to
credt, aganst the ta for the ta abe year 10 0 ony, for contrbutons pad.
(3) Secton 03. 01(c), reatng to the mtaton on the tme
wthn whch contrbutons may be pad n order to be aowabe
as credt, s amended by addng at the end thereof the foowng
new subparagraphs:
(5) Credt, aganst tan for ta abe year 19 0 ony, for contrbutons pad
after une SO, 19 1, but before November 19, 191,1. Notwthstandng the pre-
cedng provsons of paragraph (c), contrbutons may be pad nto a State
unempoyment fund after une 30, 19 1, but before November 19, 19 1, and
n such case may be credted, aganst the ta for the ta abe year 19 0 ony,
n an amount not to e ceed 90 per cent of the amount whch woud have
been aowabe as credt on account of such contrbutons had they been pad
nto the State unempoyment fund on or before the ast day upon whch the
return for the ta abe year 19 0 Is requred to be fed, provded such credt
a camed before March 21, 19 2.
(6) Credt, aganst ta for ta abe year 19 0 ony, when ta payers assets
are n custody or contro of certan fducares. Contrbutons of a ta payer
Whose assets, at any tme durng the perod prescrbed n subparagraph (3),
above, or durng the perod September 21, 19 1, to November 18, 19 1, both
dates ncusve, are In the custody or contro of a recever, trustee, or other
fducary apponted by, or under the contro of, a court of competent |ursdc-
ton, may be pad Into the State unempoyment fund at any tme (sub|ect,
however, to the provsons of secton 03.602(c), reatng to the statutory perod
of mtatons appcabe to credts), and upon such payment, may be credted,
aganst the ta for the ta abe year 19 0 ony, In the same amount that woud
have been aowabe as credt had the contrbutons been pad on or before
the ast day upon whch the return for such year was requred to be fed.
( ) Immedatey foowng the provsons of aw under the capton
Secton 1601 (a) (5) of the ct precedng secton 03.602, the foow-
ng s nserted:
Secton 701(c) of the Revenue ct of 19 1.
Refund. Refund, credt, or abatement of the ta (ncudng penaty
and nterest assessed or coected wth respect thereto, f any), based on
any credt aowabe under subsecton (b), may be made n
accordance wth the provsons of aw appcabe n the case of erroneous
or ega assessment or coecton of the ta (ncudug statutes of m-
tatons). No Interest sha be aowed or pad on the amount of any
such credt or refund.
(5) Secton 03.602, reatng to cams for refund, credt, or abate-
ment, s amended by addng at the end thereof the foowng new
paragraph:
(g) Refund, credt, or abatement of ta for caendar year 19 0, based on credt
aganst such ta for contrbutons pad. The provsons of ths secton of these
reguatons sha appy n the case of cams for refund, credt, or abatement,
based on credt, for contrbutons pad, aowabe under secton 701 of the Revenue
ct of 1911. (See secton 701(b) (1) of the Revenue ct of 19 1, whch requres
as a condton of the aowance of credt thereunder that the credt be camed
before March 21, 19 2.)
(Paragraph of ths Treasury decson s ssued under the author-
ty contaned n sectons 902 and 908 of the Soca Securty ct ( 9
Stat., 039, 6 3; 2 U. S. C, Sup. , 1102, 1108); secton 902 (b), (c),
(d), and (h) of the Soca Securty ct amendments of 1939 (53 Stat,
1399; 2 U. S. C, Sup. , 1102, note); and secton 701 of the Revenue
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239
Regs. 90, rt. 206( ).
ct of 19 1 (Pubc aw 250, Seventy-seventh Congress). Para-
graphs and C of ths Treasury decson are ssued under the author-
ty contaned n secton 1601 of the Interna Revenue Code, as amended
by secton 609 of the Soca Securty ct mendments of 1939 (53
Stat., 1387; 26 U. S. C, Sup. , 1601): secton 1G09 of the Interna
Revenue Code (53 Stat., 188; 26 U. S. C., Sup. , 1609); and secton
701 of the Revenue ct of 19 1 (Pubc aw 250, Seventy-seventh
Congress).)
Norman D. Cann,
ctng Commssoner of Interna Revenue.
pproved October 17,19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 21, 19 1, 11.33 a. m.)
Secton 905: dmnstraton, refunds, and penates.
Reguatons 90 (as amended), rtce 503 : Refund,
under secton 902(d) of Soca Securty ct mend-
ments of 1939 or secton 701 (b) of Second Revenue
ct of 19 0, of ta for caendar year 1936,1937, or 1938.
Credt aganst, and refund of, ta for the caendar years 1936, 1937,
and 1938. (See T. D. 5088, page 230.)
Secton 907: Defntons. 19 1-30-10795
Reguatons 90 (as amended), rtce 206( ): T. D. 5062
Famy empoyment.
( so Interna Revenue Code, Chapter 9, Subchapter
(Federa Insurance Contrbutons ct), Secton 1 26;
Reguatons 106, Secton 02.211; and Subchapter C
(Federa Unempoyment Ta ct), Secton 1607; Reg-
uatons 107, Secton 03.212.)
TITL 2G INT RN L R NU . C PT R I, SU C PT R D, P RTS 00, 02,
ND 03. SOCI L S CURITY ND MPLOYM NT T S.
Reguatons 90, such reguatons as made appcabe to the Interna
Revenue Code by Treasury Decson 885 C. . 1939-1 (Part 1),
396 , Reguatons 106, and Reguatons 107, amended wth respect
to famy empoyment.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned;
rtce 206( ) of Reguatons 90 secton 00.206( ), Tte 26, Code
of Federa Reguatons , that artce of such reguatons as made
appcabe to the Interna Revenue Code (53 Stat.. Part 1; 26 U. S. C,
Sup. ) by Treasury Decson 885 C. . 1939-1 (Part 1), 396
Chapter I, note, Tte 26, Code of Federa Reguatons, 1939 Sup. ,
secton 02.211 of Reguatons 106 Part 02, of such Tte 26, 19 0
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Regs. 91, rt. 16.
2 0
Sup. , and secton 03.212 of Reguatons 107 Part 03, of such Tte
26, 19 0 Sup. , are amended by strkng out the ast sentence n each
of such artces and sectons, and by substtutng n eu thereof the
foowng new paragraph:
Servces performed In the empoy of a corporaton are not wthn the e cep-
ton. Servces performed n the empoy of a partnershp are not wthn the
e cepton uness the requste famy reatonshp e sts between the empoyee
and each of the partners comprsng the partnershp.
(Ths Treasury decson s ssued under the authorty contaned n
sectons 907(c) and 908 of the Soca Securty ct ( 9 Stat., 6 3;
2 U. S. C, Sup. , 1107(c) , 1108), sectons 1 29, 1609, and 3791 of
the Interna Revenue Code (53 Stat., 178.188, 67; 26 U. S. C, Sup. ,
1 29, 1609, 3791), secton 1607(c) of the Interna Revenue Code n
effect pror to anuary 1, 19 0 (53 Stat., 187; 26 U. S. C, Sup. ,
1607, note), and sectons 1 26(b) and 1607(c)5 of the Interna Reve-
nue Code as amended by sectons 606 and 61 of the Soca Securty
ct mendments of 1939 (53 Stat., 1383, 1392; 26 U. S. C, Sup. ,
1 26 (b) , 1607(c) 5.)
Gut T. everno,
Commssoner of Interna Revenue.
pproved uy 22, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 2 , 19 1, 11. a. m.)
C PT R 9, SU C PT R C T ON MPLOY RS OF IG T OR MOR .
Secton 1607: Defntons.
Reguatons 90 (as amended), rtce 209: Items ncuded as
wages.
Dsmssa payments. (See m. T. 2 , page 229.)
C PT R 9, SU C PT R . MPLOYM NT Y OT RS T N
C RRI RS.
Secton 1 26: Defntons.
Reguatons 91 (as amended), rtce 16: Items ncuded as
wages.
Dsmssa payments. (See m. T. 2 , page 229.)
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MISC LL N OUS T RULINGS.
ST T T .
INT RN L R NU COD .
C PT R 3.
Reguatons 80 (1937).
( so Chapter -Gft Ta ; and Reguatons
79 (1936).)
ppcaton of the Federa estate an gft ta es to Unted States
savngs bonds. Mmeograph 5103 (C. . 10 0-2, 2S3) superseded.
Tre vsubt Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, une h 19 1.
Coector - of Interna Revenue, Interna Revenue gents n Charge,
and. Others Concerned:
Numerous nqures are beng receved by the ureau, partcuary
from ta payers, regardng the status of Unted States savngs bonds
for Federa estate and gft ta purposes. The purpose of ths
mmeograph s to furnsh such nformaton as w apprse persons
concerned of the appcaton and effect of such ta es on savngs
bonds and thereby make unnecessary many nqures.
IN G N R L.
arous statutory provsons, whch e empt bonds, notes, bs,
and certfcates of ndebtedness of the Federa Government or ts
agences and the nterest thereon from ta aton, are not appcabe
to estate and gft ta es, snce these ta es are e cses mposed on the
transfer of property and not on the property tsef. Under e stng
aw, transfers of the property n Unted States savngs bonds are
not e empt from Federa estate and gft ta es (e cept n respect
of any such bonds ssued pror to March 1 19 1, f benefcay owned
by a nonresdent aen not engaged n busness n the Unted States).
Whether a partcuar transfer of the property n such bonds entas
abty for Federa estate or gft ta , and, f so, the amount thereof,
depends upon the vaue of the property transferred, the specfc e -
empton, etc., aowabe under the aw, and the ta rates n effect at
the tme of the transfer.
when purchased and regstered n certan authorzed forms.
If ohn ones purchases wth hs separate funds savngs bonds
and has them regstered n hs name as owner and the bonds are so
hed at the tme of hs death, the redempton vaue of the bonds con-
sttutes a part of hs gross estate for Federa estate ta purposes.
19 1-28-10776
Mm. 5202
C2 D
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Regs. 80, (1937).
2 2
If ohn ones purchases wth hs separate funds savngs bonds
and has them regstered n hs name as owner, payabe on death to an
ndvdua as benefcary, for e ampe, ohn ones, payabe on death
to Mss Mary ones, no gft resuts from the transacton. In such
case ohn ones aone, as the regstered owner, may durng hs fe-
tme redeem the bonds and retan the proceeds. For Federa estate
ta purposes, however, upon the death of ohn ones whe the
bonds are so hed, ther entre redempton vaue at the tme of death
woud form a part of hs gross estate.
If ohn ones purchases wth hs separate funds savngs bonds
and has them gratutousy regstered n the name of Mary ones
as owner, the transacton resuts n a gft from ohn ones to
Mary ones durng the year n whch the bonds are purchased
and regstered, and the cost of the bonds must be consdered n deter-
mnng the donor s gft ta abty for such year. If Mary ones
des whe the bonds are so regstered, the redempton vaue of the
bonds at the tme of her death woud be ncudbe n her gross estate
for Federa estate ta purposes.
If ohn ones purchases wth hs separate funds savngs bonds
and gratutousy has them regstered n the name of Mss Mary ones,
payabe on death to Mss een ones, he has made a gft n the
amount of the purchase prce and such amount must be consdered n
determnng hs gft ta abty, f any, for the caendar year n whch
the gft was made. ohn ones havng made, durng hs fetme,
a grt of hs nvestment n the bonds (and provded the transfer was
not made n contempaton of death), hs estate w not be sub|ect
to any Federa estate ta abty n respect of the bonds.
If ohn ones purchases wth hs separate funds savngs bonds
and gratutousy has them regstered n the name of Mss Mary
ones or Mss een ones, he has made a gft, for Federa gft ta
purposes, to each of them of one-haf of the amount of the purchase
prce of the bonds, and (provded the gfts were not made n con-
tempaton of death) hs estate w not be sub|ect to any Federa
estate ta abty n respect of the bonds.
If ohn ones purchases wth hs separate funds savngs bonds
and has them regstered n hs name and that of another ndvdua
n the aternatve as coowners, for e ampe, ohn ones or Mrs. a
S. ones, there s no gft for Federa gft ta purposes, uness and
unt he durng hs fetme gratutousy permts Mrs. a S. ones
to redeem them and retan the proceeds as her separate property, n
whch event a gft of the then redempton vaue of the bonds woud
be made. Of course, such bonds f not prevousy redeemed woud,
on the death of ohn ones be ncudbe n hs gross estate for
estate ta purposes at ther fu redempton vaue.
If savngs bonds are purchased wth the separate funds of two n-
dvduas and regstered n ther names as coowners, for e ampe,
ohn ones or a S. ones, the amount ncudbe n the gross
estate, for Federa estate ta purposes, of the frst coowner to de (f
the bonds were not prevousy redeemed) s the fu redempton vaue
of the bonds ess such part thereof as s proportonate to the amount
of the purchase prce furnshed by the survvor and not acqured from
the decedent for ess than an adequate and fu consderaton n money
or money s worth.
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2 3 Regs. 80 (1937), rte. 1, 7, and 8.
ST T ST T , IN RIT NC , L G CY, OR GIFT T S.
Statutory provsons e emptng bonds and other obgatons of the
Federa Government from certan ta aton are not appcabe to
estate, nhertance, egacy, or gft ta es mposed by a State govern-
ment. The e tent to whch Unted States savngs bonds are sub|ect
to such State ta es depends upon the appcabe State aw. Inqures
regardng such aws shoud be addressed to the proper State ta
offcas.
Ths mmeograph supersedes Mmeograph 5109, dated September
9, 19 0 (C. . 19 0-2, 283).
Inqures wth regard to the provsons of ths mmeograph shoud
be addressed to the Commssoner of Interna Revenue, Washngton,
D. C, for the attenton of MT: T: RR.
Gut T. everng,
Commssoner.
Reguatons 80 (1937), rtces 1, 7, and 8. 19 1 3-10877
T. D.5089
TITL 26 INT RN L R NU SU C PT R , P RT 80. ST T T .
Reguatons 80 (1937 edton) amended to conform to the Revenue
ct of 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 80 (1937 edton) Part 80, Tte
26, Code of Federa Reguatons , as made appcabe to the Interna
Revenue Code (53 Stat., Part 1) by Treasury Decson 885, approved
February 11,1939 C. . 1939-1 (Part 1), 396 Chapter I, note, Tte
26, Code of Federa Reguatons, 1939 Sup. , to the Revenue ct of
19 1 (Pubc aw 250, Seventy-seventh Congress), approved Septem-
ber 20, 19 1, such reguatons are amended as foows:
Paragraph 1. The foowng s nserted mmedatey precedng
artce 1 secton 80.1 of such Tte 26 :
S . 01. state Ta Rates. (Revenue ct of 19 1; enacted September
20.19 1.)
(a) Rates. Secton 935(b) of the Interna Revenue Code Is amended
to read a.s foows:
(b) The tentatve ta referred to n subsecton (a)(1) of ths sec-
ton sha be the tentatve ta shown n the foowng tabe:
If the net estate s:
Not over 5,000
Over 5,000 but not over
10,000.
Over 10,000 but not over
20,000.
Over 20,000 but not over
30,000.
Over 30,000 but not over
0,000.
Over 0,000 but not over
50,000.
The tentatve ta sha be:
. 3 of the net estate.
150, pus 7 of e cess over
5,000.
500, pus 11 of e cess over
10,000.
1,000, pus 1 of e cess over
20,000.
3,000, pus 18 of e cess over
30,000.
,800, pus 22 of e cess over
0,000.
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Regs. 80 (1937), rts. 1, 7, and 8 2
The tentatve ta sha be Cont.
7,000, pus 25 of e cess over
50,000.
9,500, pus 28 of e cess over
00,000.
20,700, pus 30 of e cess
over 100,000.
65,700, pus 32 of e cess
over 250,000.
1 5,700, pus 35 of e cess
over 500,000.
233,200, pus 37 of e cess
over 750,000.
325,700, pus 39 of e cess
over 1,000,000.
23,200, pus 2 of e cess
over 1,250,000.
528,200, pus 5 of e cess
over 1,500,000.
753,200, pus 9 of e cess
over 2,000,000.
998,200, pus 53 of e cess
over 2,500,000.
1,263,200, pus 56 of e cess
over 3,000,000.
1,5 3,200, pus 59 of e cess
over 3,500,000.
,S3S.2O0, pus 03 of e cess
over ,000,000.
2, (58.200, pus 67 of e cess
over 5,000,000.
3,138,200 pus 70 of e cess
over 6,000,000.
3,S38,200. pus 73 of e cess
over 7,000,000.
,568,200, pus 76 of e cess
over 8,000,000.
6,088,200, pus 77 of e cess
over 10,000,000.
(b) Defense Ta Repeaed. Subchapter C of Chapter 3 of the
Interna Revenue Code Is repeaed.
(c) ffectve Date. Subsectons (a) and (b) sha be effectve ony
wth respect to estates of decedents dyng after the date of the enact-
ment of ths ct.
Par. 2. rtce 1 secton 80.1 of such Tte 26 , as amended by
Treasury Decson 995, approved ugust 1, 19 0 C. . 19 0-2, 282 ,
s further amended as foows:
( ) y changng the frst sentence to read as foows:
Federa estate ta aton under Chapter 3 of the Interna Revenue Code, as
amended, conssts of, frst, the basc estate ta , second, the addtona estate
ta , and thrd, f the decedent ded after une 25, 19 0, and on or before Sep-
tember 20, 19 1 (the date of the enactment of the Revenue ct of 19 1), the
defense ta .
( ) y nsertng at the end thereof the foowng paragraph:
The Revenue ct of 19 1 amended the Interna Revenue Code by Increasng
the rates for the computaton of the addtona ta wth respect to the estates
of decedents dyng after September 20, 19 1 (the date of the enactment of
such ct), and, as to such estates, repeaed the defense ta Imposed by secton
951 (Subchapter C of Chapter 3) of the Interna Revenue Code, as added by
the Revenue ct of 19 0.
If the net estate s Contnued.
Over 50,000 but not over
60,000.
Over 150,000 but not over
100,000.
Over 100,000 but not over
250,000.
Over 250,000 but not over
500,000.
Over 500,000 but not over
750,000.
Over 750,000 but not over
1,000,000.
Over 1,000,000 but not over
1,250,000.
Over 1,250,000 but not over
1,500,000.
Over 1,500,000 but not over
2,000,000.
Over 2,000,000 but not over
2,500,000.
Over 2,500,000 but not over
3,000,000.
Over 3,000,000 but not over
3,500,000.
Over 3,500,000 but not over
,000,000.
Over ,000,000 but not over
5,000,000.
Over 5,000,000 but not over
6,000,000.
Over 6,000,000 but not over
7,000,000.
Over 7,000,000 but not over
8,000,000.
Over 8,000,000 but not over
10,000,000.
Over 10,000,000
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2 5 Regs. 80 (1937), rts. 1, 7, and 8.
Par. 3. The ast two sentences of artce 7 secton 80.7 of such
Tte 26 are strcken out, and the foowng s nserted n eu
thereof:
The rates prescrbed by the Revenue ct of 1935 for the computaton of the
addtona ta are appcabe to estates of decedents dyng after ugust 30,
1935, and on or before February 10, 1939, the date of the enactment of the
Interna Revenue Code. The rates prescrbed by secton 935(b) of the Interna
Revenue Code, as enacted on February 10, 1939, for computaton of the add-
tona ta are the same as those prescrbed by the Revenue ct of 1935 and
are appcabe to estates of decedents dyng after February 10. 1939, and on
or before September 20, 19 1, the date of the enactment of the Revenue ct of
19 1. The rates prescrbed by secton 935(b) of the Code as amended by
secton 01 of the Revenue ct of 19 1 for computaton of the addtona ta
are app cabe to estates of decedents dyng after September 20, 19 1. See
Tabe I, and Tabe II, contaned n the foowng artce, for the varous
rates n effect pror to September 21, 19 1, and such artce for an e panaton
of the use of the tabes.
Par. . rtce 8 r secton 80.8 of such Tte 26 , as amended by
Treasury Decson 995, s further amended as foows:
( ) y nsertng mmedatey after the second sentence of the frst
paragraph the foowng:
In the case of decedents dyng after February 10, 1939, and on or before Septem-
ber 20, 19 1, the addtona ta s obtaned by subtractng the basc estate ta
mposed by the Interna Revenue Code (correspondng to the ta mposed by the
Revenue ct of 192G) from an amount computed on the vaue of the approprate
net estate at the rates set forth n secton 935(b) of the Interna Revenue Code
when enacted (correspondng to the rates set forth n the Revenue ct. of 1932
as amended by the Revenue ct of 1935), or, f the decedent ded after September
20. 1 M, at the rates set forth n secton 935(b) of the Interna Revenue Code
as amended by the Revenue ct of 1SI 1.
( ) y nsertng or under the Interna Revenue Code or the In-
terna Revenue Code as amended, mmedatey after Revenue ct of
1932 as amended, n the ne t to the ast sentence of the frst paragraph.
(C) y changng the second paragraph to read as foows:
The defense ta , appcabe f the decedent ded after une 25, 19 0, and on or
before September 20,10 1, s obtaned by computng 10 per cent of the tota net ta
(the tota net ta beng the sum of the net basc ta and the net addtona ta ).
(D) y changng the headng n coumn (1) of Tabe I to read
as foows:
In effect from ugust 31,1935, to September 20,19 1, ncusve. (Tentatve ta .)
(Ths Treasury decson s ssued under authorty contaned n
secton 01 of the Revenue ct of 19 1 (Pubc aw 250, Seventy-
seventh Congress), approved September 20, 19 1, and n secton 3791
(a) of the Interna Revenue Code (53 Stat., 67, 26 U. S. C, Sup. ,
3791(a)).)
Norman D. Cann,
ctng Commssoner of Interna Revenue.
pproved October 17, 19 1.
ohn L. St|tvan,
ctng Secretory of the Treasury.
(Fed wth the Dvson of the Federa Regster October 21, 19 1, 11.3 a. m.)
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Regs. 70 (1929), rt. 15.
2 6
TITL III. ST T T . (1926)
S CTION 302, S M ND D.
Reguatons 70 (1929), rtce 15: Transfers 19 1-30-10792
durng fe. Ct. D. 1523
( so Secton 303 and rtce 36.)
ST T T R NU CT OP 1926 D CISION OF COURT.
Gboss state Communty Property Caforna Law gree-
ment etween Spouses Defnng. Wfe s Interest Deducton
of Debts of Decedent.
Where a husband and wfe, resdents of Caforna, entered nto nn
agreement n 1931 grantng to the wfe a present, e stng, and equa
nterest n persona and rea property owned by them as communty
property, the vaue of ony one-haf of the communty property s
ncudbe n the gross estate of the decedent husband, who ded n
1933. The communty property aw of the State s appcabe n de-
termnng the amount of the gross estate under secton 302 of the
Revenue ct of 1920; the agreement was suffcent n form to operate
as a conveyance and was vad to change the ega rghts of the wfe
from a mere e pectancy to a present and equa nterest n the prop-
erty ; vestng of the nterest was not a transfer ntended to take ef-
fect n possesson or en|oyment at or after death wthn the meanng
of the statute; athough the property was sub|ect to the management
and contro of the husband, he dd not possess and en|oy hs wfe s
nterest theren; the transfer does not come wthn the meanng of
secton 302(d) ; and, a stpuated amount representng 100 per cent
of the debts of the decedent was hs persona obgaton and not that
of the communty, and s therefore a proper deducton.
Unted States Crcut Court of ppeas for thb Nnth Crcut.
Unted States of merca, appeant, v. Ida P. Goodyear, ecutr of the state
of W. . Goodyear, Deceased, appeee.
99 Fed. (2d), 523.
Upon appea from the Dstrct Court of the Unted States for the Southern Dstrct of
Caforna, Centra Dvson.
October 18, 1938.
OPINION.
aney, Crcut udge: Refund of estate ta es pad the Unted States was
obtaned by the |udgment appeaed from.
Ida P. Goodyear and W. . Goodyear were marred n Caforna on ugust
IS, 1891. They were at that tme, and contnued to be thereafter, resdents of
Caforna. They acqured certan communty property whe marred pror
to uy 29, 1927. Snce the wfe had ony an e pectancy In communty prop-
erty pror to 1927 (Stewart v. Stewart, 20 Ca., 5 0, 209 Pac, 39), t was hed
that communty ncome coud not be dvded between the spouses for Income
ta purposes. (Unted States v. Robbns, 269 U. S., 315 T. D. 3817, C. . -,
188 (1926) .) t that tme Caforna Cv Code secton 172 provded that The
husband has the management and contro of the communty persona property,
wth ke absoute power of dsposton, other than testamentary, as he has of hs
separate estate sub|ect to certan e ceptons. Lkewse at that tme, Caforna
Cv Code secton 172a provded that The husband has the management and
contro of the communty rea property, but the wfe, ether personay or by
duy authorzed agent, must |on wth hm n e ecutng any nstrument by whch
such communty rea property or any nterest theren s eased for a onger perod
than one year, or s sod, conveyed, or encumbered sub|ect to certan e -
ceptons.
Lkewse It was hed that a of the communty property for estate ta pur-
poses, must be ncuded n the vaue of a decedent s estate. (WardeU v. um
(C. C. . 9), 276 Fed., 226, certorar dened, 268 U. S., 617; Tacott v. Unted
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2 7
Regs. 70 (1929), rt. 15.
Staes (C. C. . 0), 23 Fed. (2d), 897, certorar dened, 277 U. S., 60 T. D. 137,
C. . II-1, 319 (1928) ; Tte Insurance d Trust Co. v. Ooodce (C. C. . 9),
60 Fed. (2d), 803, certorar dened, 288 U. S., 613.)
In 1923 there was an amendment to the Cv Code, secton 1 01 (now sec-
ton 201 of the Probate Code) provded that Upon the death of ether husband
or wfe, one-haf of the communty property beongs to the survvng spouse;
the other one-haf s sub|ect to the testamentary dsposton of the decedent, and
In the absence thereof goes to the survvng spouse sub|ect to certan e cep-
tons.
On uy 29, 1927, secton 161(a), an amendment to the Cv Code became
effectve. It provded:
The respectve nterests of the husband and wfe n communty property
durng contnuance of the marrage reaton are present, e stng and equa nter-
ests under the management and contro of the husband as s provded n sectons
172 and 172a of the Cv Code. Ths secton sha be construed as defnng the
respectve nterests and rghts of husband and wfe n communty prop-
erty .
fter that amendment, tgaton ensued over the queston as to whether the
ncome of the communty coud then be dvded for ncome ta purposes. The
queston was answered n the affrmatve on anuary 19,1931, n The Unted States
v. Macom (282 U. S., 792).
Ida P. Goodyear and W. . Goodyear entered Into an agreement as of anuary
1, 1931, on uy 9, 1931. The nstrument provded n part:
Whereas, the partes hereto are the owners of certan persona and rea prop-
erty, herenafter descrbed, as communty property, a of the same havng been
acqured by them after ther marrage on the 18th day of ugust, 1891; and,
Whereas, a of sad property was acqured by the partes hereto prevous to
uy 29, 1927, or from ncome from property acqured prevous to uy 29, 1927;
and,
Whereas, It s the desre of the party of the frst part to vest, In the party
of the second part, a present, e stng and equa Interest In such communty
property and n a property acqured by them from Income derved therefrom,
the same as f sad property had been acqured by the partes hereto as commu-
nty property after uy 29, 1927;
Now, therefore, the sad party of the frst part, n consderaton of the ove
and affecton whch he has and bears unto the sad party of the second part, does
hereby gve, grant, convey and confrm unto the party of the second part such
an nterest n the persona and rea property heren descrbed and referred to as
w vest n her, wth the party of the frst part, a present, e stng nnd equa
Interest In sad persona and rea property.

It s not the ntenton of ths Instrument to create n the partes hereto a
tenancy n common n sad property to whch reference Is heren made, but rather
to vest n the party of the second part such an Interest n the communty property
as she woud have at the present tme were the property to be acqured now from
earnngs of ether of the partes hereto accumuated or earned snce uy 29,1927.
That nstrument was acknowedged on uy 9, 1931, and recorded n the proper
county In Caforna on the foowng day.
On September 3, 1933, W. . Goodyear ded In Caforna. On October 2, 1933,
Ida P. Goodyear was apponted e ecutr of hs estate, quafed, and snce has
acted as such. On une 12, 1931, the e ecutr , hereafter caed appeee, fed
an estate ta return, Incudng theren ony one-haf of the vaue of the com-
munty property, and on that day pad the amount of ta shown to be due by the
return. The Commssoner of Interna Revenue audted the return, and deter-
mned that the entre vaue of the communty property shoud have been ncuded
In the return. On December 21, 1935, appeee pad the addtona ta and Interest
demanded, n the sum of 7,071.22.
On anuary 22, 1936, appeee fed a cam for refund, whch was dened on
pr 10, 1936. On pr 18, 1936, ths acton aganst appeant was commenced
to recover the amount of the addtona ta pad wth Interest. The tra court
hed that the agreement gave Ida P. Goodyear the same Interest In the com-
munty property as she woud have had f the property had been acqured after
the effectve date of secton 161a of the Cv Code. udgment was entered on
uy 21, 1937. Ths appea foowed.
The appcabe statute s secton 302 of the Revenue ct of 1926 ( Stat, 9).
The ct of March 3, 1931 ( 6 Stat., 1516) amended subdvson (c) of that
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Regs. 70 (1929), rt. 15.
2 8
secton. In quotng that secton the mutter added to the amendment Is shown
n tacs. Secton 302 provdes n part:
The vaue of the gross estate of the decedent sha be determned by Incudng
the vaue at the tme of hs death of a property, rea or persona, tangbe or
ntangbe, wherever stuated
(c) To the e tent of any nterest theren of whch the decedent has at any
tme made a transfer, by trust or otherwse, In contempaton of or ntended to
ake effect n possesson or en|oyment at or after hs death, ncudng a transfer
under whch the transferor has retaned for hs fe or any perod not endng
before hs death (1) the possesson or en|oyment of, or the ncome from, the
property or (2) the rght to desgnate the persons who sha possess or en|oy
the property or the ncome therefrom; e cept n case of a bona fde sae for
an adequate and fu consderaton n money or money s worth.
(d) To the e tent of any nterest theren of whch the decedent has at any
tme made a transfer, by trust or otherwse, where the en|oyment thereof was
sub|ect at the date of hs death to any change through the e ercse of a power,
ether by (he decedent aone or In con|uncton wth any person, to ater, amend,
or revoke, or where the decedent renqushed any such power n contempaton
of hs death, e cept n case of a bona fde sae for an adequate and fu consdera-
ton n money or money s worth.
Frst, though t had been decded that oca aw was controng n deter-
mnng who owned communty earnngs wth regard to ncome ta , the Supreme
Court had not. unt recenty rued wth respect to estate ta es. In urnet v.
arme (287 U. S., 103, 110 Ct. D. G, C. . I-2, 210 (1932) ), t was sad
that State aw may contro ony when the Federa ta ng ct, by e press
anguage or necessary mpcaton, makes ts own operaton dependent upon
State aw. 1 In accordance wth that rue, the Supreme Court had apped that
rue, and hed wth respect to ownershp of property, and the e tent thereof,
that genera aw woud appy, rather than oca aw, and had reached a resut
opposte to what t woud have reached had oca aw been apped. See cases
cted n Wech v. crckhof (C. C. . 9) (8 Fed. (2d), 295, 298).
The prmary queston was, then, whether secton 302 was to depend on owner-
shp, as defned by oca aw. Construng that secton, t was sad n Putter v.
Commssoner (288 U. S., 3C, 1 Ct. D. 6 7, C. . II-1, 35 (1933) ) :
The net estate as.there used does not mean an amount to be ascertaned as
such under any genera rue of aw or under statutes governng the admnstra-
ton of estates, but s the gross estate as specfcay defned n secton 302
ess deductons permtted by secton 303 .
It Is obvous that statutes reatng to communty property govern the admns-
traton of estates and therefore, under the anguage used, t woud seem that
such statutes woud not be appcabe. We so hed n ank of merca Nat. T. t
Sav. ssocaton . Commssoner of Interna Revenue (C. C. . 9) (90 Fed. (2d),
981, 983 Ct. D. 1298, C. . 1938-1, 50 ), sayng that we beeved oca aw to be
Immatera. Thereafter, that statement was sad to be naccurate and com-
munty property aw was apped under secton 302, n Lang v. Commssoner (30
U. S., 26 , May 1G, 1938 Ct. D. 13 2, O. . 1938-1, 507 ), the opnon makng no
e panaton of, or reference to, Porter v. Commssoner, supra. In vew of Lang
v. Commssoner, supra, the present rue seems to be that communty property
aw s appcabe n determnng the amount of the gross estate under secton 302,
and we consder the nstant case on that assumpton.
Second. ppeant contends that the agreement dd not operate as a transfer
because t merey attempted to defne a tenancy wthout creatng one and dd
not estabsh an nterest n and to property by any recognzed conveyance. In
vew of the grantng words, we thnk the agreement was suffcent n form to
operate as a conveyance.
ppeant further contends that there was no transfer because decedent gave
up none of hs statutory ghts, powers or prveges wth regard to communty
property acqured n Caforna pror to 1927, and she by the same token ganed
no addtona rghts, powers or prveges n and to such property. We beeve
ths contenton can not e sustaned.
Caforna Cv Code secton r provdes that ther husband or wfe may
enter nto any engagement or transacton wth the other respectng
property, whch ether mght f unmarred . S ton 159 provdes:
husband and wfe can not, by any contract wth each other, ater ther ega
Te effect of re Itahoad Co v. Tompknn (80 D. S., 6 , pr 25, 1038) and
Ruhn v. ew York Lfe Ins. Co. (30 U. S., 202, May 2, 1038), If any, on ths e a
yet to be determned.
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2 9
Regs. 70 (1929), rt. 15.
reatons, e cept rr to property . Thus, It s apparent that husband
and wfe may make a Tad contract wth each other, and may ater ther ega
reatons wth respect to property. ere decedent granted a present and equa
Interest n the property to whch hs wfe then became entted by vrtue of the
grant. er ega rghts were changed from an e pectancy to a present and
equa nterest n the communty property. The grant took effect, we thnk, upon
devery of the grant by vrtue of secton 105 of the Cv Code, whch provdes:
grant takes effect, so as to vest the nterest ntended to be transferred, ony
upon ts devery by the grantor.
Thrd. ppeant further contends that even f the agreement dd consttute
a transfer, t was ntended to take effect n possesson or en|oyment at or after
death and therefore the entre vaue shoud have been ncuded n the gross
estate pursuant to secton 302(c), before amendment. estng of the nterest,
however, took pace upon e ecuton and devery of the agreement, and was
Intended as such, and not at the death of the decedent. Whe such nterest
vested Immedatey, other rghts, such as dsposa, accrued to her upon the death
of decedent. There s here no contenton that such rghts were suffcent to
authorze ta aton of the prvege of dsposng of them. Compare Tyer v.
Unted States (281 U. S., 97 Ct. D. 190, C. . I -1, 383 (1930) ) ; Ocnn v.
Commssoner (287 U. 8., 22 ).
Fourth. ppeant further contends that decedent retaned for hs fe
the possesson or en|oyment of the property and there-
fore the entre vaue shoud have been ncuded n the gross estate under secton
302(c) as amended. mnatng redundant parts of the statute, we fnd that
there must be ncuded n the vaue of the gross estate a property .
To the e tent of any nterest theren of whch the decedent has at any tme
made a transfer under whch the transferor has retaned for hs
fe the possesson or en|oyment of the property. We
thnk what decedent retaned was hs own Interest. oth spouses had possesson
and en|oyment of the property and owned the ncome therefrom, athough the
property was sub|ect to management and contro by decedent. The terms
management and contro are not synonymous wth possesson and en|oy-
ment. That one may manage and contro property wthout ether possesson
or en|oyment s Iustrated by the stuaton where an agent manages rea prop-
erty for the owner. In such case athough the agent may have absoute contro
In managng and rentng the property and n coectng rents, the rents beong to
the owner who en|oys them. We thnk that theoretcay each spouse had
possesson and en|oyment of hs partcuar nterest. Decedent, therefore, dd not
possess and en|oy hs wfe s nterest. If n controng and managng the prop-
erty, decedent transferred possesson and en|oyment to a thrd person, the fruts
receved for such transfer, were then owned by both spouses. See the cases
n the dssentng opnon n ank of merca tfat. T. d Sav. ssocaton v.
Commssoner of Interna Revenue, supra, 985.
Ffth. ppeant further contends that whe the agreement Is rrevocabe,
decedent coud have used the property so as to ater, amend or revoke the
enwt of the agreement, and therefore the entre vaue shoud be ncuded pur-
suant to secton 302(d). We do not understand that decedent had such power,
however. y Cv Code secton 172, he coud not make a gft of, or dspose of, the
communty persona property, e cept for a vauabe consderaton, wthout the
wrtten consent of the wfe. Cv Code secton 172a, quoted above, dscoses
that e cept for eases for ess than a year, the wfe s requred to on n
e ecutng an nstrument. If on dsposa of ether knd of property, consdera-
ton Is receved, then such consderaton becomes communty property. See the
dssent n ank of merca Nat. T. d 8av. ssocaton v. Commssoner of In-
terna Revenue, supra, 985.
S th. The remanng contenton of appeant Is that f ony one-haf of the
communty property Is Incuded, then ony one-haf of the communty debts
shoud be deducted. Secton 303 of the ct In queston, permts deducton of
cams aganst the estate. rtce 36 of Reguatons 80 s appcabe, and
provdes that there may be deducted amounts whch represent persona ob-
gatons of the decedent e stng at the tme of hs death. It was stpuated
by the partes that the deducton was the amount of 5,096.91, representng
100 per cent of the dehts of sad W. . Goodyear at the date of hs death. Snce
those debts were persona debts of decedent, and not debts of the communty,
the deducton was propery made.
ffrmed.
1611 2 17
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egs. 79 (1936), rts. 5, 6, and 7. 250
GIFT T .
Reguatons 79 (1936), rtces 5, 6, and 7. 19 1 3-10878
T. D. 5O90
TITL 26 INT RN L R NU . C PT R I, SU C PT R . P RT 85. OI T
T .
Reguatons 79 (1936 edton) amended to conform to the Reve-
nue ct of 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 79 (193G edton) Part 85, Tte
26, Code of Federa Reguatons , as made appcabe to the Interna
Revenue Code 53 Stat., Part 1 by Treasury Decson 885, approved
February 11, 1939 C. . 1939-1 (Part 1), 396 Chapter I, note,
Tte 26, Code of Federa Reguatons, 1939 Sup. , to the Revenue
ct of 19 1 (Pubc aw 250, Seventy-seventh Congress), approved
September 20, 19 1, such reguatons are amended as foows:
Paragraph 1. The foowng s nserted mmedatey precedng
artce 5 secton 85.5 of such Tte 26 :
Sec. 02. Gft T. Rates. (Revenue ct of 19 1).
(a) Rates. The Rate Schedue of secton 1001 of the Interna
Revenue (|ode s amended to read as foows:
If the net gfts are:
Over 5,000
but
not
over
10,01)0.
Over 10,000
but
not
over
20,000.
Over 20,000
but
not
over
30,000.
Over 30,000
but
not
over
0,000.
Over 0,000
but
not
over
50,000.
Over 50,000
but
not
over
130,000.
Over 00,000
but
m.
over
100,000.
Over 100,000
but
not
over
250,000.
Over 250,000
but
not
over
500,000.
Over 500,000
but
not
over
750,000.
Over 75O. 00
but
not
over
1,000,000.
Over 1,000,000 hut not
over
SI,250,000.
Over 15-50,000 but
not
over
1,500,000.
Over 1,500,000 but
not
over
2,000,000.
Over 2,000,000 but not
over
2,500,000.
The t; sha be:
2 of the net gfts.
112.50, pus 5 of e cess
over 5,000.
375, pus 8 of e cess over
10,000.
1,200, pus 10 of e cess
over 20,000.
2,250, pus 13 of e cess
over 30,000.
3,000, pus 10 of e cess
over 0,000.
5,250. pus 18 of e cess
over 50,000.
7,125, pus 21 of e cess over
60,000.
15,525, pus 22 of e cess
over 100,000.
9,275, pus 2 of e cess over
250,000.
109,275, pus 26 of e cess
over 500,000.
17 ,900, pus 27 of e cess
over 750,000.
2 ,275, pus 29 of e cess
over 1,000,000.
317, 00, pus 31 of e cess /
over 1,250,000.
396,150, pus 33 of e cess
over 1,500,000.
56 ,900, pus 36 of e cess
over 2,000,000.
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251 Regs. 79 (1936), rts. 5, 6, and 7.
If the net gfts are Contnued.
Over 2,500,000 but not over
3,ooo,oro.
Over 3.( tO,000 but not over
3,500,000.
Over 3,500,000 but not over
.000.0CO.
Over ,000,000 but not over
5,000,000.
Over 5,000,000 but not over
6,000,000.
Over 6,000,000 but not over
7,000,000.
Over 7,000,000 but not over
8,000,000.
Over 8,000,000 but not over
10,000,000.
Over 10,000,000
The ta sha be Contnued.
7 8,650, pus 89 of e cess
over 2,500,000.
9 7, 00, pus 2 of e cess
over 3,000,000.
1,157, 00, pus of e cess
over 3,500,000.
1,378,650, pus 7 of e cess
over ,000,000.
1,851,150, pus 50 of e cess
over 5,000,000.
2,353,650, pus 52 of e cess
over 6,000,000.
2,878,650, pus 5 of e cess
over 7,000,000.
3, 26,150, pus 57 of e cess
over 8,000,000.
,566,150, pus 57 of e cess
over 10,000,000.
(b) Ykabs to Whch mendments ppcabe. The amendments
made by ths secton sha be apped n computng the ta for the
caendar year 19 2 and each caendar year thereafter (but not the ta
for the caendar year 19 1 or a prevous caendar year), and such
amendments sha be apped In a computatons In respect of the
caendar year 19 1 and prevous caendar years for the purpose of
computng the ta for the caendar year 19 2 and any caendar year
thereafter.
(c) Defense Ta Repeaed. Secton 1001(d) of the Interna Revenue
Code (reatng to defense ta for fve years on gfts) Is repeaed.
Par. 2. rtce 5 secton 85.5 of such Tte 26 , as amended by
Treasury Decson 996, approved ugust 1,19 0 C. . 19 0-2, 295 ,
s further amended as foows:
( ) y strkng pror to 19 0 or subsequent to 19 5 n the ast
sentence of the frst paragraph and substtutng n eu thereof
other than the caendar year 19 0 or 19 1.
( ) y strkng 19 2 , 19 3, 19 , or 19 5, n the frst sentence
of the second paragraph.
(C) y strkng any n the second sentence of the second
paragraph.
(D) y nsertng mmedatey foowng the ast paragraph the
foowng:
The defense ta Imposed by subsecton (d) of secton 1001 of the Interna
Revenue Code, as added by secton 207 of the Revenue ct of 19 0 (repeaed
by secton 02 of the Revenue ct of 19 1) s not appcabe to the caendar
year 19 2 or any caendar year thereafter but remans In effect for the caendar
years 19 0 and 19 1.
Par. 3. rtce 6 secton 85.6 of such Tte 26 s amended as foows:
( ) y substtutng the foowng for the thrd sentence and the
statement precedng the Tabe for Computng Gft Ta :
The rates were agan ncreased by the Revenue ct of 1935, and the rate schedue
n such ct (secton 301) Is appcabe In the computaton of the ta for the
caendar years 1936 to 1939, ncusve. The rate schedue n the Interna Revenue
Code (secton 1001), as enacted on February 10, 1939, s the same as the rate
schedue In the Revenue ct of 1935 and s appcabe n the computaton of the
gft ta for the caendar years 19 0 and 19 1. The rates were further Increased
by the Revenue ct of 19 1, approved September 20, 19 1, and the rate schedue
under secton 1001 of the Code, as amended by such ct, s appcabe In the
computaton of the ta for the caendar year 19 2 and each caendar year there-
after. There foows a tabuaton of the severa rate schedues n effect for
caendar years pror to 19 2.
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Regs. 79 (1936), rte. 5, 6. and 7. 252
( ) y changng the headng n coumn (1) of the Tabe for Com-
putng Gft Ta to read as foows: In effect for caendar years 1936
to 19 1, ncusve.
Par. . rtce 7 secton 85.7 of such Tte 26 s amended by chang-
ng the second sentence of the thrd paragraph to read as foows:
Ony coumn 1 shoud be used n the computaton of the ta for the years 193C
to 19 1, ncusve.
(Ths Treasury decson s ssued under the authorty contaned
n secton 02 of the Revenue ct of 19 1 (Pubc aw 250, Seventy-
seventh Congress), approved September 20, 19 1. and n sectons 1029
and 3791(a) of the Interna Revenue Code (53 Stat., 157, 67, 26
U. S. C, Sup. , 1029, 3791(a)).)
Norman D. Cann,
ctng Commssoner of Interna Revenue.
pproved October 17, 19 1.
ohn L. Sdvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 21, 19 1, 11.3 a. m.)
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253
Regs. 6 (1938), rt. 1.
C PIT L STOC T .
INT RN L R NU COD .
S CTION 1200, S M ND D Y S CTION 205 OF T R NU CT
OF 19 0. T .
Reguatons 6 (1938), rtce 1: Nature 19 1-37-10825
and rate of ta . C. S. T. 11
( so Secton 3798, as amended by secton
06 of the Revenue ct of 1939; and sec-
ton 22 of the ct of March 1, 1879 (20
Stat., 327). as amended by secton 818 of
the Revenue ct of 1938.)
The M Corporaton, a whoy-owned subsdary of an Insovent
bank, and the N Corporaton, a of the capta stock of whch s
owned by the M Corporaton, are entted to mmunty from capta
sock ta under secton :7 IN of the Interna Revenue Code, as
amended, or under secton 22 of the ct of March 1,187 ), as amended,
snce the nsovent bank as nsuffcent assets to pay ts depostors
n fu.
C. S. T. 7 (C. . 19S8 1, 520) s revoked.
dvce s requested whether the M Corporaton, a whoy-owned
subsdary of an nsovent bank, and the N Corporaton, a of the
capta stock of whch s owned by the M Corporaton (the whoy-
owned subsdary of the nsovent bank), are entted to mmunty
from capta stock ta under the provsons of secton 3798 of the
Interna Revenue Code, as amended by secton 06 of the Revenue
ct of 1939, or under the correspondng provsons of secton 22 of
the ct of March 1, 1879 (20 Stat., 327). as amended by secton 818
of the Revenue ct of 1938. The assets of the nsovent bank are
nsuffcent to pay the depostors n fu. Nether the M Corporaton
nor the N Corporaton s engaged n the bankng busness.
Secton 3798 of the Interna Revenue Code, as amended, and the
correspondng provsons of secton 22 of the ct of March 1, 1879,
supra, as amended, provde n substance that under certan prescrbed
condtons no ta sha be assessed or coected on account of any bank
or trust company whch has ceased to do busness by reason of n-
sovency or bankruptcy, f the payment of such ta woud dmnsh
the assets of such bank or trust company necessary for the fu payment
of a ts depostors.
In C. S. T. 7 (C. . 1938-1. 520) t was hed that a whoy-owned
subsdary of an nsovent bank was not entted to the benefts of
secton 22 of the ct of March 1, 1879, snce the subsdary was not
tsef a bank whch had ceased to do busness by reason of nsovency
or bankruptcy.
In The auaton Servce Co. v. Comms -wner ( 1 . T. ., 811;
acquescence. C. . 19 1-1, 11). nvovng a defcency n ncome ta ,
the Unted States oard of Ta ppeas hed that a corporaton whose
soe ndrect stockhoder was an nsovent bank was e empt from
ta to the same e tent as the nsovent bank. The auaton Servce
Co. was organzed to hande forecosures on rea estate hed by a bank
as securtv. It was to take tte to the property and operate, manage,
and se the same at the request of the bank. It thus acted as a rea
estate broker and deaer n handng the rea estate of the bank and
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Regs. 6 (1938), rt. 1.
25
rea estate taken over from the bank, a functon whch the bank coud
not perform under the aw.- of the company s stock was owned
by another corporaton, a of the stock of whch was owned by the
bank, and ts affars were absoutey controed by the bank. The
oard, n hodng that no defcency n ta was due from the
pettoner, stated n part:
f respondent s successfu n ths proceedng, the entrey coatera
eement of the form of pettoner s organzaton as a separate corporaton, nstead
of as the bank s rea estate department, w resut n dena to the depostors
of that reef whch t seems evdent t was the purpose of Congress to afford :
reef whch they woud have obtaned wthout queston n the absence of
pettoner s ntervenng presence.
In that vew we can not avod the concuson that t w most neary effectuate
the evdent egsatve purpose to treat these ta es as beng due ony on account
of such bank ; to treat pettoner and the bank as parts of a snge organzaton,
a of whose assets are sub|ect to the cams of the bank s depostors,
Treasury Decson 5018 (C. . 19 0-2, 173) amended secton
16 .5() of Treasury Decson 958 (C. . 19 0-1, 7 ) by strkng
out the second paragraph thereof. The deeted paragraph provded
that:
Property of a separate corporaton not conveyed to t by the bank pursuant to
an agreement wth depostors, s not wthn the mmunty of the secton, even
though the corporaton s stock s owned by the bank. Ta due from a separate
corporaton to whch assets of an nsovent bank are conveyed s coectbe, even
though such ta be due to the property so conveyed, e cept n so far as ta
coecton w dmnsh assets conveyed by the bank for beneft of depostors or
the earnngs from such assets to whch the depostors are entted, and whch
are necessary for payment of the depostors cams. Other assets and earnngs
of a separate corporaton are avaabe for coecton of the ta es of such cor-
poraton even though the assets and earnngs of such corporaton f receved
by the bank woud be avaabe for satsfacton of cams of the bank s depostors
and such cams can not otherwse be pad.
In vew of the acquescence n The auaton Servce Co. v. Com-
mssoner, supra, and the amendment of secton 6 5( ) of Treasury
Decson 958 by Treasury Decson 5018, a separate corporaton s
entted to mmunty under secton 3798 of the Interna Revenue Code,
as amended, and the correspondng provsons of secton 22 of the
ct of March 1, 1879, as amended, where the separate corporaton
and the nsovent bank are parts of a snge organzaton, the separate
corporaton beng n substance and effect a department of the bank,
and consequenty a of the assets of such corporaton are drecty
or ndrecty sub|ect to the cams of the bank s depostors. sepa-
rate corporaton, the stock of whch s whoy owned ether drecty
or ndrecty by an nsovent bank (thus renderng ts operaton and
actvtes sub|ect to the drecton and contro of qudators of such
bank), meets the requrements for such mmunty. Under such cr-
cumstances, a ta on the subsdary woud, n effect, be a ta on ac-
count of such bank wthn the meanng of the statute. It s
mmatera that the bank tsef woud be precuded by aw from en-
gagng n the actvtes carred on by the corporaton. Ownershp
by the bank of a of the capta stock of the separate corporaton s
a condton precedent to mmunty from ta . It must be ceary es-
tabshed that the e acton of the ta woud nevtaby dmnsh the
assets of the nsovent bank necessary for the fu payment of ts
depostors.
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255
Regs. 6 (1938), rt. 6.
In accordance wth the foregong, t s hed that the M Corporaton
and the N Corporaton are entted to mmunty from capta stock
ta under the provsons of secton 3798 of the Interna Revenue Code,
as amended, or under the correspondng provsons of secton 22 of
the ct of March 1, 1879, as amended.
C. S. T. 7 (C. . 1938-1, 520) s revoked.
S CTION 1202, S M ND D Y S CTION 301 OF T R NU CT
OF 1939, ND S CTION 202() OF T R NU CT OF 19 1. D-
UST D D CL R D LU .
Reguatons 6 (1938), rtce 6: d|usted 19 1 12-10871
vaue. C. S. T. 12
The net ncome requred by secton 1202(b)(C)
of the Interna Revenue Code, as amended by secton 202(1)1 of
the Revenue ct of 19 1, to be added n determnng the
ad|usted decared vaue for capta stock ta purposes s the
net ncome whch resuts after the proper deducton
for ncome ta purposes of a net operatng oss. The (mnus)
ad|ustment, the e cess of the deductons aowabe for ncome ta
purposes over Its gross ncome, requred by secton
1202(b)() of the Interna Revenue Code, as amended by secton
202()2 of the Revenue ct of 19 1, ncudes any e cess resutng
from a proper ncome ta deducton of net operatng oss under
secton 23(s).
dvce s requested as to what effect s to be gven, for capta
stock ta purposes, to the net operatng oss deducton provded
n secton 23(s) of the Internatona Revenue Code, and to the net
operatng oss carry-over provsons of secton 122 of the Interna
Revenue Code, as added by secton 211 of the Revenue ct of 1939,
where ether a separate return or a consodated return s fed for
ncome ta purposes.
Secton 1202(b) of the Interna Revenue Code, as amended, pre-
scrbes the manner of determnng the ad|usted decared vaue of a
corporaton s capta stock. That secton makes no provson for
drect ad|ustment of the capta stock decared vaue by reason of a
net operatng oss deducton and a net operatng oss carry-
over. owever, such tems affect the ad|usted decared vaue of
the capta stock of a corporaton to the e tent that they enter nto
the computaton of the net ncome to be added under
secton 1202(b) 1(C), as amended, and the e cess of deductons
aowabe for ncome ta purposes over ts gross ncome
to be deducted under secton 1202(b) 1 (), as amended.
For capta stock ta purposes, net ncome means the gross ncome
computed under secton 22 of the Interna Revenue Code ess the
deductons aowed by secton 23. Snce secton 23(s) provdes for
the deducton of a net operatng ossv computed under secton 122,
t foows (1) that the net ncome requred by secton
1202(b) 1(C), as amended, to be added n determnng the ad|usted
decared vaue for capta stock ta purposes s the net ncome
whch resuts after the proper deducton for ncome ta
purposes of a net operatng oss ; and (2) that the phrase the
e cess of the deductons aowabe for ncome ta purposes
over ts gross neome ncudes any e cess resutng from a proper
ncome ta deducton under secton 23(s).
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Regs. 6 (1938), rts. 36, 81.1 256
In so far as separate capta stock ta returns of corporatons
whch make consodated returns for ncome ta purposes are con-
cerned, a ad|ustments for capta stock ta purposes shoud be com-
puted on a separate bass and n the same manner as f separate
ncome ta returns had been fed. See ast paragraph of secton
1202(b) of the Interna Revenue Code.
S CTIONS 1203 (R TURNS) ND 1205 (P YM NT OF T ).
Reguatons 6 (1938), rtce 36: Pace and 19 1-30-1079
tme for fng returns. T. D. 5061
rtce 81: Tme for payment of ta .
TITL 26 INT RN L R NU . C PT R I. SU C PT R C, T RT 137,
SU P RT . C PIT L STOC T .
Sectons 12 3 and 1205, Interna Revenue Code tenson of
tme for rng capta stock ta returns and payng ta .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. O.
To Coectors of Interna Revenue and Others Concerned:
Genera e ternum. Returns of capta stock ta under Chapter
6 of the Interna Revenue Code (53 Stat., Part 1), as amended, for
the year ended une 30, 19 1, are requred to be fed and the ta
pad on or before uy 31, 19 1, uness the tme for fng returns
and payng tre ta s e tended under the provsons of sectons 1203
and 1205 of the afore-mentoned chapter.
In accordance wth the provsons of these sectons, the perod
durng whch the returns of capta stock ta may be fed and the
ta pad by a corporatons s e tended to September 29, 19 1.
Coectors of nterna revenue are authorzed to accept returns wth-
out asserton of penates for denquency or of nterest f the returns
are fed and the ta pad on or before the e tended date. (Sectons
1203, 1205, 3791, 53 Stat., 171, 67; 26 U. S. C, Sup. , 1203, 1205,
and 3791.)
Gut T. everng,
Commssoner of Interna Revenue.
pproved uy 21, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 22, 19 1, 11. 7 a. m.)
Reguatons 6 (1938), rtce 36: Pace and 19 1-39-108 0
tme for fng returns. T. D. 5069
rtce 81: Tme for payment of ta .
TITL 2f nterna revenue. chapter I, SU C PT R C, P RT 13T,
SU P RT . C PIT L STOC T .
Sectons 1203 and 1203, Interna Revenue Code. tenson of
tme for fng capta stock ta returns and payng ta .
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257 Regs. 6 (1938), rts. 36, 1, 6,61.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Genera e tenson. Under the authorty of secton 1203(b)(2) of
the Interna Revenue Code, as amended by secton 301(c) of the
Revenue ct of 1911, the perod wthn whch returns of capta stock
ta for the year ended une 30, 19 1. may be fed wthout asserton
of penates for denquency, as e tended to September 29, 19 1, by
Treasury Decson 5001, approved uy 21, 19 1 page 256, ths ue-
tn , s hereby further e tended to October 29,19 1.
Under the authorty of secton 120; )(b) of the Interna Revenue
Code, the | erod wthn whch payments of capta stock ta for the
year ended une 30, 19 1, may be made wthout asserton of nterest
accruas thereon, as e tended to- September 29, 19 1, by Treasury
Decson 5001, s hereby further e tended to December 28, 19 1. In
any case, however, where a notce and demand for payment of capta
stock ta for the year ended une 30, 19 1, s ssued and payment s
made on or efore December 28, 19 1, such payment sha be con-
sdered tmey ony f made wthn 10 days from ssuance of the
notce and demand. If the ta s not pad wthn such 10-day perod,
nterest sha be accrued thereon as requred by aw. (Sectons 1203,
1205, 3655, 3791, 53 Stat., 171, 6. 67; 26 U. S. C, Sup. , 1203,
1205. 3655, and 3791; and secton 301(c) of the Revenue ct of 19 1
(Pubc Law 250, Seventy-seventh Congress).)
Gut T. everng,
Commssoner of Interna Revenue.
pproved September 2 , 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster September 2 , 19 1, 2. p. m.)
Reguatons 6 (1938), rtces 36, 1, 6, 19 1- 1-10855
and 61. T. D. 5081
TITL 28 INT RN L R NU C PT R I, SU C PT R C, T RT 137.
C PIT L STOC T .
rces 36 and 0, nrtees 1 and 01, as amended, of Reguatons
6 (1038), amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 6 , approved February , 1939
Part 137, Tte 26, Code of Federa Reguatons, 1939 Sup. , as made
appcabe to the Interna Revenue Code by Treasury Decson 885,
approved February 11, 1939 C. . 1939-1 (Part 1), 396 Chapter
I, note, Tte 26, Code of Federa Reguatons, 1939 Sup. , and as
amended by Treasury Decson 912, approved uy 2 , 1939 C. .
1939-2, 3 7 and Treasury Decson 983, approved uy 16, 19 0
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Regs. 6 (1938), rte. 36, 1, 6, 61. 258
C. . 19 0-2, 298 , to the provsons of sectons 202 (), 205, and 301
of the Revenue ct of 19 1 (Pubc aw 250, Seventy-seventh Con-
gress), approved September 20, 19 1, such reguatons are amended
as foows:
Paragraph 1. There s nserted mmedatey precedng artce 31
secton 137.31 the foowng:
Secton 30 (c) of the Revenue ct of 10 1.
(c) Returns for 19 1. Secton 1203(b) (2) of the Interna Revenue
Code (reatng to e tensons of tme for fng capta-stock ta returns)
s amended by nsertng at the end thereof the foowng: Wth respect
to the year endng une 30, 19 1, the e tenson may be for not more
than nnety days.
Par. 2. The frst sentence of artce 36(b) secton 137.36(6) s
amended by strkng out the perod at the end and by nsertng n
eu thereof the foowng:
, e cept that for the year endng une 30, 19 1, the e tenson of the tme for
fng returns may be for not more than 90 days.
Par. 3. There s nserted mmedatey precedng artce 1 secton
137. 1 the foowng:
Secton 202(1), Tte II, of the Revenue ct of 19 1.
() d|usted Dect.ared aue.
(1) Secton 1202(b)(1)(C) of the Interna Revenue Code s
amended to read as foows:
(C) ts net ncome, computed wthout the deducton of the
ta mposed by Subchapter of Chapter 2, .
(2) Secton- 1202(b) (1) () s amended to read as foows:
() the e cess of the deductons aowabe for ncome ta
purposes (not ncudng the deducton for the ta mposed by
Subchapter of Chapter 2) over ts gross ncome,
Secton 205, Tte II, of the Revenue ct of 19 1.
The amendments made by ths tte sha be appcabe ony wth
respect to ta abe years begnnng after December 31, 19 0.
Secton 301 of the Revenue ct of 19 1.
(a) Incbea.se n Rate of Ta . Secton 1200 (a) and (b) of the
Interna Revenue Code (reatng to rate of capta stock ta ) s
amended by strkng out 1 and nsertng In eu thereof 1.25 .
(b) Defense Ta Rate. Secton 1200(c) of the Interna Revenue
Code s repeaed.

(d) ffectve Date. Ths secton sha be effectve ony wth respect
to the year endng une 30, 19 1, and succeedng years.
Par. . The fourth sentence of artce 1 secton 137. 1 , as
amended by Treasury Decson 983, s further amended to read as
foows:
The ta for each fu 1,000 of the ad|usted decared vaue of the capta stock
s Imposed at the rate of 1 for the ta abe years endng une 30, 1988, and
une 30, 1939, 1.10 for the ta abe year endng une 30, 19 0, and 125 for
the ta abe year endng une 30, 19 1, and years subsequent thereto.
Par. 5. The second sentence of subdvson (C) of artce 6 sec-
ton 137. 6 s amended by strkng out the perod at the end and by
nsertng n eu thereof the foowng
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259 Regs. 6 , (1938), rts. 36, 1, 6, 61.
, e cept that, fop the ta abe year endng une 30, 19 2. and subsequent ad|ust-
ment years, the net Income for ths addton sha be computed wthout the
deducton of the ta mposed by Subchapter of Chapter 2 of the Interna
Revenue Code.
Par. 6. Subdvson () of artce 6 secton 137. 6 s amended
by strkng out the perod at the end and by nsertng n eu thereof
the foowng:
, e cept that, for the ta abe year endng une 30, 19 2, and subsequent ad|ust-
ment years, the deducton of the ta Imposed by Su)chapter of Chapter 2
of the Interna Revenue Code sha not be ncuded.
Par. 7. There s nserted mmedatey precedng artce 61 secton
137.61 the foowng:
Secton 301 of the Revenue ct of 10 1.
(a) Increase n Rate or Ta . Secton 12 O (a) and (b) of the Inter-
na Revenue ( ode (reatng to rate of capta stock ta ) s amended by
strkng out 1 and nsertng n eu thereof 1.25 .
(b) Defense Ta Rate. Secton 1200(c) of the Interna Revenue Code
Is repeaed.

( ) ffectve Dvte. Ths secton sha be effectve ony wth respect
to the year endng une 30, 10 1, and succeedng years.
Pak. 8. The second sentence of artce 61 secton 137.61 , as amended
by Treasury Decson 983, s further amended to read as foows:
The ta for each fu . 1,000 of the ad|usted decared vaue of capta empoyed
by a foregn corporaton n the transacton of busness n the Unted States s
mposed at the rate of 1.00 for the ta abe years endng une 30, 1938. and une
30. 1939. 1.10 for the ta abe year endng une 30. 19 0. and 1.25 for the ta abe
| ear endng une 30, 19 1, and years subsequent thereto.
(Ths Treasury decson s ssued under the authorty contaned n
sectons 202(0- 2 05, and 301 of the Revenue ct of 19 1 (Pubc Law
250, Seventy-seventh Congress) and secton 3791 of the Interna
Revenue Code (53 Stat., 67; 26 U. S. C, Sup. , 3791).)
Gut T. everng,
Commssoner of Interna Revenue.
pproved October 3,19 1.
erhert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 6, 19 1, 3.32 p. m.)
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Regs. 3 (19 0).
260
DMISSIONS ND DU S T S.
INT RN L R NU COD .
S CTION 1700.
Reguatons 3 (19 1), Secton 101.2: Meanng 19 1- 5-10895
of admsson. T. D. 5096
TITL 26 INT RN L R NU . C PT R I, SU C PT R C. P RT 101.
T S ON DMISSIONS, DU S, ND INITI TION F S.
Secton 101.2 of Reguatons 3 (19 1 edton) amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 3 Part 101, Tte 26, Code of Federa Reguatons,
19 1 Sup. , approved October 17, 19 1, reatng to the ta es on ad-
mssons, dues, and ntaton fees under Chapter 10 of the Interna
Revenue Code, as amended, are hereby amended as foows:
Secton 101.2 s amended by addng the foowng at the end thereof:
mounts pad or contrbuted for the prvege of attendng an e cusvey
regous servce conducted n a pace of worshp are not consdered amounts
pad for admsson.
(Ths Treasury decson s ssued pursuant to the authorty con-
taned n secfon 3791 of the Interna Revenue Code (53 Stat., 67;
26 U.S. C. Sup. , 3791).)
Guy T. everng,
Commssoner of Interna Revenue.
pproved November 1, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 3, 19 1, 11.57 a. m.)
S CTIONS 1700, 1701, 1710, ND 1712, S M ND D Y S CTIONS 5 1,
5 2, ND 5 3 OF T R NU CT OF 19 1, R SP CTI LY.
Reguatons 3 (19 0). 19 1 2-10870
Mm.5255
Changes wth respect to the ta es on admssons and dues effected
by the Revenue ct of 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngtan, D. C, September 26, 19 1.
Coectors of Interna Revenue and Others Concerned:
The Revenue ct of 19 1, approved September 20, 19 1, effected
certan changes wth respect to the ta es on admssons and dues, and
t s beeved desrabe that approprate nformaton regardng these
changes shoud be crcuated at the earest practcabe moment to
a persons n your dstrcts who may be concerned wth the coecton
of the ta es on admssons and dues or the ta es appcabe to cabarets
and smar paces of amusement.
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261
Regs. 3 (19 0).
of the changes n the e stng aw wth respect to the ta es on
admssons and dues whch are brought about by the Revenue ct of
19 1 are effectve as of the frst moment of October 1, 19 1 (10 a. m.
of October 1,19 1, n the case of cabarets, roof gardens, etc.).
Secton 1700(a)1 of the Interna Revenue Code s amended by
secton 5 1 of the Revenue ct of 19 1 to make the present rate of
ta on admssons appcabe to the amount pad for admsson to
any pace regardess of the amount of such admsson charge, e cept
that any admsson charge of ess than 10 cents made to a chd under
12 years of age w be e empt from the ta . Under the amendment,
a persons admtted free or at a reduced rate (e cept bona fde empoy-
ees, muncpa offcers on offca busness, chdren under 12 years of
age, members of the mtary and nava forces of the Unted States
when n unform, and members of the Cvan Conservaton Corps
when n unform) are abe for a ta based on the estabshed prce of
admsson to other persons for the same or smar accommodatons.
Therefore, empoyees, muncpa offcers on offca busness, members
of the mtary and nava forces of the Unted States, and members
of the Cvan Conservaton Corps when n unform are not abe
for ta f admtted free, and f admtted at a reduced prce are abe
for ta on the reduced prce. The e cepton wth respect to free
or reduced-rate admssons to spoken pays s emnated.
Secton 1701 of the Interna Revenue Code, under whch there are
a number of e emptons, such as where the proceeds of the adms-
sons nure to regous, educatona, or chartabe organzatons,
agrcutura fars, veterans organzatons, etc., and admssons to
certan concerts, s repeaed n ts entrety. Consequenty, no further
e emptons sha be aowed for entertanments to be hed on or after
October 1, 19 1, regardess of the dsposton whch may be made
of the proceeds from the admssons. If any e empton certfcates
have aready been ssued by your offce for entertanments to be hed
on or after October 1, 19 1, the approprate partes shoud be advsed
that they w be requred to overstamp ther tckets and to coect
and account for the ta on a admsson charges coected on and
after October 1, 19 1. Ths nformaton shoud be gven the wdest
pubcty, partcuary as to churches, schoos, posts of the mercan
Legon, and other organzatons whch have heretofore been entted
to e empton n respect of admssons nurng to ther beneft.
Secton 1700(e) of the Interna Revenue Code, under whch a ta
was mposed on amounts charged at cabarets, roof gardens, etc., has
been amended n three mportant respects, namey, (a) the ta rate
w be 5 per centum of the tota amount pad for admsson, refresh-
ment, servce, or merchandse, f the amount so pad, or any porton
thereof, enttes the patron to be present durng any porton of a
performance at a root garden, cabaret, or smar pace furnshng a
pubc performance for proft, ( ) the provson e emptng the
admsson charge f the amount pad was 50 cents or ess (that s, f the
amount pad for refreshment, servce, or merchandse was under 2.50)
has been emnated, and (c) the ta s mposed upon, and sha be
returned and pad by, the person recevng such payments. Ths ta
s not requred to be coected from the patron, as heretofore, but
there s no ob|ecton to the cabaret, etc., passng t on to the patron
f bed separatey and n the e act amount.
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Regs. 3 (19 0).
262
Snce there are a number of moton pcture theaters, skatng rnks,
dance has, etc., the admssons to whch were not ta abe before
October 1,19 1, but whch w be ta abe on that date and thereafter,
approprate nformaton shoud be crcuated to such theaters, skatng
rnks, dance has, etc., at the earest practcabe moment; and they
shoud be advsed that a admsson charges are sub|ect to the ta
e cept n the case of admssons of ess than 10 cents charged to
chdren under 12 years of age.
Form 729 used n reportng the ta on admssons w be revsed
at the earest practcabe date n order to ncorporate the changes
made necessary by the Revenue ct of 19 1. It s e pected that the
new forms w be avaabe n tme for ta payers to prepare ther
October returns and fe them wth the coector by the end of
November.
Wth respect to admsson tckets whch were prevousy not ta -
abe, ether by reason of the fact that the admsson charges were
under 21 cents or due to the e emptons formery aowed by secton
1701 of the Interna Revenue Code, the foowng procedure has
been approved:
(a) In a nstances where t s practcabe new tckets must be
provded or the tckets on hand overprnted or overstamped to show
the estabshed prce and the ta appcabe thereto.
() Secton 1702 of the Interna Revenue Code specfcay provdes
that the prce for whch every admsson tcket or card s sod sha be
prnted, stamped, or wrtten on the tcket. ccordngy, n every case
where the estabshed prce of admsson s changed new tckets w
have to be provded or the tckets on hand must be overprnted or over-
stamped.
( ) Where the estabshed prce s not changed, for a mted tme
unt propery prnted tckets can be obtaned, the use of tckets now
on hand whch do not show the ta due under the Revenue ct of 19 1
w be permtted. owever, the manager or propretor must keep
conspcuousy posted at the outer entrance and near the bo offce
one or more sgns accuratey statng each of the estabshed prces of
admsson, and n the case of each such prce the ta due and the sum
tota.
Soca, athetc, and sportng cubs n your dstrcts shoud be advsed
that under sectons 1710 and 1712 of the Interna Revenue Code, as
amended by secton 5 .3 of the Revenue ct of 19 1, a dues or member-
shp fees pad on or after October 1,19 1, are sub|ect to the ta of 11 per
cent f the dues or fees pad by actve resdent annua members are n
e cess of 10 a year; and that amounts pad as ntaton fees are ta -
abe f such fees are n e cess of 10 a year, or f the dues or member-
shp fees of actve resdent annua members amount to more than 10
a year.
The varous cubs shoud, kewse, be notfed of the change n the
meanng of the phrase dues or membershp fees, whch now ncudes
any charges for soca prveges or for gof, tenns, poo, swmmng,
or other athetc or sportng prveges or factes f made for any
perod of more than s days.
ny correspondence n reference to ths mmeograph shoud refer
to the symbos MT: M.
Gut T. eveeno,
Corwmmower.
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263 Regs. (1939), 31 .2, etc
M NUF CTUR RS CIS T S.
INT RN L R NU COD .
T S ON G SOLIN , LU RIC TING OIL, ND M TC S.
Reguatons (1930), Sect.ons 31 .2, 31 .3, 19 1- 1-10857
31 . , 31 .35, 31 . . 31 .50, and 31 .52. T. D. 5082
TITL 26 INT RN L R NU . C PT I. SU C PT R C, P RT 31 .
T S ON G SOLIN , LU RIC TING OIL, ND M TC S.
Sectons 31 .2. 31 .3. 31 . . 31 .35. 31 . , 31 .50, and 31 .52 of
Reguatons (193 ) edton), as amended by Treasury Decson
990, approved uy 19, 19 0 G. . 1C 0-2, 306 , further amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. O.
To Coectors of Interna Revenue and Others C once rved:
In order to conform Reguatons Part 31 , Tte 26, Code of
Federa Reguatons, 1931) Sup. , as amended by Treasury Decson
990, approved uy 19. 19 0 C. . 19 0-2, 306 , reatng to ta es
on gasone, ubrcatng os, and matches under the Interna Revenue
Code, as amended, to sectons 501, 521 (a) (20) and (21) and (b),
5 7, 5 9. 550, and 553 of the Revenue ct of 19 1 (Pubc aw 250,
Seventy-seventh Congress, approved September 20, 19 1, such regua-
tons are further amended as foows:
Paragraph 1. There s nserted mmedatey precedng secton
31 .1 the foowng:
Skc. 553. dmnstratve Changes n Manufacturers cse Ta
Tte of Code. (Revenue ct of 19 1.)
(a) Leases. Secou 3 0 of the Interna Revenue Code s amended
to read us foows:
Sec. 3 0. Defnton of Sae.
For the purposes of ths chapter the ease of an artce (ncudng
any renewa or any e tenson of a ease or any subsequent ease of such
artce) by the manufacturer, producer, or mporter sha be consdered
u ta abe sae of such artce.

Par. 2. There s nserted mmedatey precedng secton 31 .2 the
foowng:
Skc. 501. 1932 cse Ta es Made Permanent. (Revenue ct of
19 1.)
Secton 3 52 of the Interna Revenue Code (reatng to e praton of
1932 e cse ta es) s repeaed.
Sec. 521. Defense cse Ta Rates Made Permanent Whch re
Not Increased by Ths ct. (Revenue ct of 19 1.)

(b) The rates specfed n subsecton (a) sha be appcabe ony wth
respect to the perod after the date of the enactment of ths ct, and
the rates specfed In secton 1650(a) of the Interna Revenue
ode sha not appy wth res|ect to such perod.
Sec. 550. ffectve Date of Part I . (Revenue ct of 19 1, Tte .)
(a) The amendments made by ths Part sha be appcabe ony
wth respect to the perod begnnng wth the effectve date of ths Part,
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Regs. (1939), 31 .2, etc. 26
and the rates specfed n secton 1050(a) sha not appy
wth respect to such perod. Ths Part sha take effect on October 1,
19 1.

Par. 3. Secton 31 .2 as amended by Treasury Decson 990 s
further amended to read as foows:
Sec. 31 .2. ffectve perod. Ta es on the sae of gasone, ubrcatng os,
and matches became effectve under Tte I of the Revenue ct of 1932, on
une 21, 1932. The appcabe provsons of the Revenue ct of 1932, as
amended, were superseded as of March 1, 1939, by provsons of the Interna
Revenue Code. The Code provsons were amended by subsequent cts, ncud-
ng the Revenue ct of 19 1.
Secton 521(b) of the Revenue ct of 19 1 Is appcabe to gasone and ubr-
catng os, and secton 550(a) to matches. Secton 501 s appcabe to a
three. Wth respect to gasone and ubrcatng os, the effect s to contnue
ndefntey the ncreases of ta rates mposed by secton 1650(a) of the Interna
Revenue Code, added by secton 210 of the Revenue ct of 19 0. Under secton
1050(a) the ta ncreases were effectve after une 30, 19 0, and before uy 1,
19 5.
Pror to enactment of the Revenue ct of 19 0, there was a ta , Imposed by
secton 3 09 of the Interna Revenue Code, on fancy wooden matches and
wooden matches havng a staned, dyed, or coored stck or stem. Secton
1050(a) of the Interna Revenue Code ncreased the ta on these matches
aso. The ncreased ta rate on these matches s contnued ndefntey. ow-
ever, secton 5 7 of the Revenue ct of 19 1 aso mposes a ta on other
matches at a ower rate. Ths atter ta , by vrtue of secton 550(a) of the
Revenue ct of 19 1. takes effect on October 1, 19 1. The resut then s that
the ta rates on gasone, ubrcatng os, and fancy wooden matches and wooden
matches havng a staned, dyed, or coored stck or stem whch have been n
effect snce uy 1, 19 0, contnue n effect ndefntey, and a new ta on other
matches s appcabe for an ndefnte perod begnnng October 1, 19 1.
The ta attaches upon sae or use by the manufacturer rrespectve of when
the artce was manufactured, produced, or mported.
Pak. . There s nserted mmedatey foowng the subtte La-
bty for Ta , whch foows secton 31 .2, the foowng:
Sec. 553. dmnstratve Changes n Manufacturers csk Ta
Tte of Code. (Revenue ct of 19 1.)

(b) stng Contracts. Chapter 29 of the Interna Revenue Code
Is amended by addng at the end thereof the foowng new secton:
Sec. 3 53. stng Contracts.
(a) Ta Payabe by endue. If (1) any person has, pror to the
effectve date of Part of Tte of the Revenue ct of 19 1, made a
bona fde contract for the sae on or after such date, of any artce
wth respect to the sae of whch a ta s mposed by that ct or an
e stng rate of ta s ncreased by that ct, and (2) such contract does
not permt the addng to the amount to be pad under such contract
of the whoe of such ta or ncreased rate of ta , then (uness the
contract prohbts such addton) the vendee sha, n eu of the vendor,
pay so much of the ta as s not so permtted to be added to the contract
prce.
(b) Ta Pad to endor. Ta es payabe by the vendee sha be
pad to the vendor at the tme the sae s consummated, and sha be
coected and pad to the Unted States by the vendor n the same
manner as provded n secton 3 07. In case of faure or refusa by
the vendee to pay such ta es to the vendor, the vendor sha report te
facts to the Commssoner who sha cause coecton of such ta es to
be made from the vendee.
Par. 5. There s nserted mmedatey precedng secton 31 .3 the
foowng:
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265
Regs. (1939), 31 .2, etc.
Sec. 5 9. Instament, tc., Payments. (Revenue ct of 19 1.)
Secton 3 1(c) of the Interna Revenue Code s amended to rend us
foows:
(c) (1) In the case of ( ) a ease. ( ) a contract for the sae of an
artce wheren It s provded that the prce sha he pad by nsta-
ments and tte to the artce sod does not pass unt a future date
notwthstandng parta payment by nstaments, or (C) a condtona
sae, there sha be pad upon each payment wth respect to the artce
that porton of the tota ta whch s proportonate to the porton of
the tota amount to be pad represented by such payment.
(2) In the appcaton of paragraph (1) to the artces wth respect
to whch the rate of ta s ncreased by the Revenue ct of 19 1 or by
the Revenue ct of 19 0, where the ease, contract of sae, or condtona
sae, and devery thereunder
( ) was made before uy 1, 19 0. the tota ta referred to n
paragraph (1) sha be the ta at the rate n force on une 30. 19 0,
and not at any greater rate; or
( ) was made after une 30, 19 0, and before October 1, 19 1,
the tota ta referred to n paragraph (1) sha be the ta at the
rate n force on September 30,19 1, and not at any greater rate.
(3) Despte the provsons of paragraph (1). no ta sha be mposed
wth respect to any artce not ta abe under the aw n e stence on the
day before the date of the enactment of the Revenue ct of 1911. f wth
respect to such artce the ease, contract for sae, or condtona sae,
and devery thereunder, was made before October 1, 19 1.
Par. 6. Secton 31 .3 s amended by addng thereto the foowng
paragraph:
The amendment of secton 3 0 of the Interna Revenue Code by secton 553 of
the Revenue ct of 19 1 carfes e stng anguage. The term ease ncudes
any renewa or e tenson of a ease or any subsequent ease of an artce.
Par. 7. Secton 31 . as amended by Treasury Decson 990 s fur-
ther amended by substtutng the foowng for paragraph 5:
Where an artce s eased by the manufacturer, or sod under an nstament-
payment contract, or under a condtona-sae contract wth payments to be made
n nstaments, a proportonate part of the tota ta sha be pad upon each
payment receved wth respect to the artce. The ta must be returned and
pad to the coector durng the month foowng that n whch such payment s
receved.
In the case of artces wth respect to whch the rate of ta s ncreased by
the Revenue ct of 19 0 or by the Revenue ct of 19 1
. ( ) f the ense, contract for sae, or condtona sae, and devery there-
under, were made before uy 1, 19 0, the ta on a payments made after
September 30,19 1, s at the rate n force on une 30,19 0;
( ) f the ease, contract for sae, or condtona sae, nnd devery there-
under, were made after une 30. 19 0, and before October 1, 19 1. the ta
on a payments after September 30, 19 1, s at the rate n force on September
30, 19 1.
In the case of artces not sub|ect to ta on September 30. 19 1, f the ease,
contract for sae, or condtona sae, and devery thereunder, were made on or
before that date, no ta Is due on payments made on or after October 1, 19 1.
Par. 8. There s nserted mmedatey precedng secton 31 .30 the
foowng:
Sec. 521. Defense cse Ta Rates Made Permanent Whch re
Not Increased by Tns ct. (Revenue ct of 19 1.)
(a) The foowng sectons of the Interna Revenue Code are amended
as foows:

(20) Gasone. Secton 3 12(a) s amended by strkng out 1
cent and nsertng n eu thereof / cents .

1611 2 18
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Regs. (1939), 31 .2, eto. 266
Par. 9. Secton 31 .35 as amended by Treasury Decson 990 s
further amanded to read as foows:
Sec. 31 .35. Rate of ta . The ta payabe by the Importer or producer thereof,
or by any producer of gasone wth respect to the perod after une 30, 19 0, s
at the rate of 1 cents a gaon.
Par 10. There s nserted mmedatey precedng secton 31 . 0 the
foowng :
Sec. 521. Defense cse Ta Rates Made Permanent Whch be Not
Increased by Ths ct. (Revenue ct of 19 1.)
(a) The foowng sectons of the Interna Revenue Code are amended
as foows:

(21) Lubrcatng os. Secton 3 13 s amended by strkng out
cents and nsertng n eu thereof cents .

Par. 11. The frst sentence of secton 31 . as amended by Treasury
Decson 990 s further amended to read as foows:
The ta payabe by the manufacturer wth respect to the perod after une 30,
19 0, s at the rate of cents a gaon.
Par. 12. There s nserted mmedatey precedng secton 31 .50
the foowng:
Sec. 5 7. Matches. (Revenue ct of 19 1, Tte , Part I .)
Secton 3 09 of the Interna Revenue Code s amended to read as
foows:
Sec. 3 09. Ta on Matc hes.
(a) Manufacturers Ta . There sha be mposed upon matches
sod by the manufacturer, producer, or mporter, a ta of 2 cents per
1,000 matches, e cept that n the case of fancy wooden matches and
wooden matches havng a staned, dyed, or coored stck or stem, packed
n bo es or n buk, the ta sha be 5 . cents per 1,000 matches.

Par. 13. Secton 31 .50 s amended to read as foows:
Sec 31 .50. Scope of ta . The ta mposed by secton 3 09 of the Interna
Revenue Code, as amended by secton 5 7 of the Revenue ct of 19 1, appes to
a types of matches, ncudng wa ed matches, paror matches, safety matches,
book matches, vestas, etc., regardess of whether sod n buk, bo es, books, or
n any other manner.
Par. 1 . Secton 31 .52 as amended by Treasury Decson 990
s further amended to read as foows:
Sec. 31 .52. Rate of ta . In the case of fancy wooden matches and wooden
matches havng a staned, dyed, or coored stck or stem, the ta payabe by
the manufacturer wth respect to the perod after une 30, 19 0, s at the rate
of 5 /| cents per thousand.
In the case of a other matches the ta payabe by the manufacturer wth
respect to the perod on and after October 1, 19 1, s at the rate of 2 cents
per thousand.
(Ths Treasury decson s prescrbed pursuant to sectons 501, 521
(a) (20) and (21) and (b), 5 7, 5 9, 550, and 553 of the Revenue ct
of 19 1. approved September 20.19 1. and secton 3791 of the Interna
Revenue Code (53 Stat., 67; 26 U. S. C, Sup. , 3791).)
Guy T. everng,
Commssoner of Interna Revenue.
pproved October 3, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 6, 19 1, 3.31 p. m.)
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267
Regs. 6 (19 0).
Reguatons 6 (19 0). 19 1- 8-10919
T. D.5099
TITL 26 INT RN L R Nt . C PT R I, SU C PT R C, P RT 316.
M NUF CTUR RS CIS T S.
Reguatons 6 (19 0 edton) as amended bv Treasury Decson
098, approved ugust 1, 19 0 U. . 19 0-2, 300 , further amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 6 Part 316, Tte 26, Code of
Federa Reguatons, 19 0 Sup. , as amended by Treasury Decson
998, approved ugust 1, 19 0 C. . 19 0-2, 300 , reatng to e cse
ta es on saes by the manufacturer under the Interna Revenue Code,
as amended, to sectons 501, 521, 535, 536, 5 , 5 5, 5 6, 5 9, 550,
551, 552(b), 553, and 558 of the Revenue ct of 19 1 (Pubc aw
250, Seventy-seventh Congress), and to ncude secton 3 11 of the
Interna Revenue Code as amended by secton 521 of the Revenue
ct of 19 1 wthn the scope thereof, such reguatons are further
amended as foows:
Paragraph 1. The frst and second paragraphs of secton 316.0
are amended to read as foows:
These reguatons dea wth e cse ta es mposed by Chapter 29, Subchapter
, of the Interna Revenue Code, as amended, on saes
(a) by the manufacturer, producer, or mporter of
(1) Tres and nner tubes:
(2) utomobes, tractors, busses, traers, etc.;
(3) Rados and components, phonographs, phonograph records, and
musca nstruments;
( ) Mechanca refrgerators, ar-condtonng unts, and components;
(5) Frearms, shes, and cartrdges;
(6) Sportng goods;
(7) Luggage;
(8) ectrc, gas, and o appances;
(9) Phonographc apparatus;
(10) ectrc sgns;
(11) usness and store machnes;
(12) Rubber artces;
(13) Commerca washng machnes;
(1 ) Optca equpment;
(15) ectrc ght bubs and tubes; and
(6) by the vendor of
(10) ectrca energy for domestc and commerca consumpton.
The reguatons wth respect to the mposton, manner of appcaton, and
computaton of ta abty are set forth n Subparts to T, ncusve.
The reguatons reatng to the return and coecton of ta and the Imposton
of penates and other matters are contaned n Subpart. U.
Par. 2. There s nserted mmedatey precedng secton 316.1, the
foowng:
Sec. r r 3. dmnstratve Changes n Manufacturers cse Ta
Tte of Code. (Revenue ct of 19 1, Tte , Part .)
(a) Leases. Secton 3 0 of Oe Interna Revenue Code Is amended to
read as foows:
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Regs. 6 (19 0).
268
Sec. 3 0. Defnton of Sae.
For the purposes of ths chapter the ease of an artce (ncudng
any renewa or any e tenson of a ease or any subsequent ease of such
artce) by the manufacturer, producer, or mporter sha be consdered
a ta abe sae of such artce.

Par. 3. There s nserted mmedatey precedng secton 316.2 the
foowng:
Sec. 501. 1932 cse Ta es Made Permanent. (Revenue ct of 19 1,
Tte , Part I.)
Secton 3 52 of the Interna Revenue Code (reatng to e praton of
1932 e cse ta es) s repeaed.
Sec. 521. Defense cse Ta Rates Made Permanent Whch re Not
Increased by Ths ct. (Revenue ct of 19 1, Tte , Part II.)

(b) The rates specfed n subsecton (a) sha be appcabe ony
wth respect to the perod after the date of the enactment of ths ct,
and the rates specfed n secton 1650(a) of the Interna
Revenue Code sha not appy wth respect to such perod.
Sec. r 36. ffectve Date of Part III. (Revenue ct of 19 1, Tte .)
The amendments made by ths Part sha be appcabe ony wth re-
spect to the perod begnnng wth October 1, 19 1, and the rates specfed
n secton 1650(a) of the Interna Revenue Code sha not
appv wth respect to such perod. Ths Part sha take effect on Octo-
ber 1, 19 1.
Sec. 550. ffectve Date of Part I . (Revenue ct of 19 1, Tte .)
(a) The amendments made by ths Part sha be appcabe ony
wth respect to the perod begnnng wth the effectve date of ths
Part, and the rates specfed n secton 1050(a) of the Inter-
na Revenue Code sha not appy wth respect to such perod. Ths
Part sha take effect on October 1, 19 1.

Sec. 551. New Manufacturers cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Sec. 3 06. cse Ta es Imposed by the Revenue ct of 19 1.

(c) ffectve Date. Ths secton sha take effect on October 1,
19 1.
Sec. 55S. ffectve Date of Part . (Revenue ct of 19 1, Tte .)
Ths part sha take effect on October 1, 19 1.
Par. . Secton 316.2 as amended by Treasury Decson 998, s
further amended to read as foows:
Sec 310.2. ffectve perod. Ta es on the manufacturer s sae of tres and
nner tubes; automobe truck chasss and bodes, other automobe chasss and
bodes and motorcyces, and parts and accessores therefor; rado components;
househod type mechanca refrgerators and components therefor; and fre-
arms, shes, and cartrdges became effectve under Tte I of the Revenue ct
of 1932, on une 21, 1932. The ta on the vendor s sae of eectrca energy
became effectve under secton 6 of the ct of une 16, 1933 (Pubc, No. 73,
Seventy-thrd Congress), amendng secton 616 of the Revenue ct of 1932, on
September 1, 1933. The ta on the manufacturer s sae of tractors of the knd
chefy used for hghway transportaton n combnaton wth a traer or sem-
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209
Regs. 6 (1 90).
traer became effectve under Tte I of the Revenue ct of 1938, on uy 1,
1938. The appcabe provsons of the Revenue ct of 1932, as amended, were
superseded as of March 1, 1939, by provsons of the Interna Revenue Code. The
Code provsons were amended by subsequent cts, ncudng the Revenue ct
of 19 1.
The change In the bass of the ta on automobe bus chasss, bus bodes, bus
traer and semtraer chasss and bodes therefor; the ta on the manufac-
turer s sae of chasss and bodes for traers and semtraers sutabe for use
n connecton wth passenger automobes and motorcyces; the ta es on the
manufacturer s sae of compete rado recevng sets; phouogruphs, phonograph
records; musca nstruments; mechanca refrgerators (other than househod
type refrgerators, and components therefor) ncudng commerca refrgerators,
cooers, etc.; refrgeratng apparatus; ar-condtoners, and components therefor;
and, the new manufacturers e cse ta es on saes of sportng goods; uggage;
eectrc, gas, and o appances; photographc apparatus; eectrc sgns; busness
and store machnes; rubber artces; washng machnes; optca equpment; and
eectrc ght bubs and tubes, became effectve under Tte of the Revenue
ct of 19 1, on October 1, 19 1.
Secton 521(b) of the Revenue ct of 19 1 s appcabe to frearms, shes, and
cartrdges, and to eectrca energy; secton 536 s appcabe to tres and nner
tubes; secton 550(a) Is appcabe to the automobe, truck, bus, and parts
ta , to rados, phonographs, records, and musca nstruments, and to refrgera-
tors, refrgeratng apparatus, and ar-condtoners; and secton 3 0((c) added
by secton 551, and ecton 558 are appcabe to sportng goods, uggage,
eectrc, gas, and o appances, photographc apparatus, eectrc sgns, busness
and store machnes, rubber artces, washng machnes, optca equpment, and
eectrc ght bubs and tubes. Secton 501 s appcabe to a of the ta es
covered by these reguatons.
The fna resut s that under Tte of the Revenue ct of 19 1 a of the
manufacturers ta rates whch have been n effect snce uy 1, 19 0, and the
ncreased rates and new ta es mposed under Tte are appcabe for an
Indefnte perod begnnng October 1, 19 1.
Par. 5. There s nserted mmedatey precedng secton 316.3 the
foowng:
Sec. 553. dmnstratve Changes n Man|ta tukr h cse Ta
Tte of Code. (Revenue ct of 19 1, Tte , Fart .)

(b) stng Contracts. Chapter 29 of the Interna Revenue Code s
amended by addng at the end thereof the foowng new secton:
Sec. 3 53. stng Contracts.
(a) Ta Payabe by endee. If (1) any person has, pror to the
effectve date of Part of Tte of the Revenue ct of 19 1, made a
bona fde contract for the sae on or after such date, of any artce wth
respect to the sae of whch a ta Is mposed by that ct or an e stng
rate of ta s ncreased by that ct, and (2) such contract does not permt
the addng to the amount to be pad under such contract of the whoe of
such ta or ncreased rate of ta , then (uness the contract prohbts such
addton) the vendee sha, n eu of the vendor, pay so much of the ta
as s not so permtted to be added to the contract prce.
(b) Ta Pad to endor. Ta es payabe by the vendee sha be
pad to the vendor at the tme the sae Is consummated, and sha be co-
ected and pad to the Unted States by the vendor n the same manner
as provded n secton 3 07. In case of faure or refusa by the vendee to
pay such ta es to the vendor, the vendor sha report the facts to the
Commssoner who sha cause coecton of such ta es to be made from
the vendee.

Par. 6. Secton 316.3 s amended by addng thereto the foowng
new paragraphs:
The amendment of secton 3 00 by secton 553(a) of the Revenue ct of 19 1
carfes e stng anguage. The term ease ncudes any renewa or e tenson
of a ease or any subsequent ease of an artce.
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Regs. 6 (19 0).
270
The purpose of secton 3 53, added by secton 553(b) of the Revenue ct of
19 1, s to shft under certan condtons the Labty for a ta , or for an ncrease
n e stng rate of ta , mposed by the Revenue ct of 19 1, from the manufac-
turer to the vendee. The condtons under whch such abty s shfted are as
foows: Frst, there must be a bona fde contract made by the manufacturer por
to October 1, 19 1, for the sae on or after such date of an artce wth respect to
whch a manufacturers e cse ta s mposed, or the rate of an e stng manu-
facturers e cse ta s ncreased, by the Revenue ct of 19 1; second, the contract
does not provde for the nddtou of such ta or ncrease n ta to the amount
payabe thereunder; and, thrd, the contract does not e pressy or by mpcaton
prohbt such addton to the contract prce. Where these condtons are present,
the vendee becomes abe for the ta or addtona ta mposed by the Revenue
ct of 19 1. In a other cases, the abty remans upon the manufacturer and
the fu amount of the ta s payabe by hm.
contract whch provdes that the ta sha be pad by the vendor, or otherwse
negatves any addton to the contract prce, Is regarded as prohbtng an addton
of the p to such prce.
vendee who s requred to pay the ta sha make payment thereof to
the vendor at the tme the sae s consummated, and the ta sha be returned
and pad to the coector by the vendor. (See secton 316.200.) In case of
faure or refusa by the vendee to pay the ta to the vendor, the vendor sha
report the facts to the Commssoner, for drect coecton of the ta from
the vendee.
Par. 7. There s nserted mmedatey precedng secton 316.8
the foowng:
Sec. 5 9. Instament, tc.. Payments. (Revenue ct of 19 1, Tte
, Part I .)
Secton 3 1(c) of the Interna Revenue Code s amended to read as
foows:
(c)(1) In the case of ( ) a ease. ( ) a contract for the sae
of an artce wheren t s provded that the prce sha be pad by
Instaments and tte to (he artce sod does not pass unt a future
date notwthstandng parta payment by nstaments, or (C) a con-
dtona sae, there sha be pad upon each payment wth respect to the
artce that porton of the tota ta whch s proportonate to tbe
porton of the tota amount to be pad represented by such payment.
(21 In the appcaton of paragraph (1) to the artces wth respect
to whch the fate of ta s ncreased by the Revenue ct of 19 1 or by
the Revenue ct of 19 0, where the ease, contract of sae, or cond-
tona sae, and devery thereunder
( ) was made before uy 1, 19 0, the tota ta referred to n
paragraph (1) sha be the ta at the rate n force on une 30,
19 0, and not at any greater rate; or
( ) was made after une 30, 19 0, and before October 1, 19 1,
the tota ta referred to n paragraph (1) sha be the ta at the rate
n force on September 30, 19 1, and not at any greater rate.
(3) Despte the provsons of paragraph (1), no ta sha be mposed
wth respect to any artce not ta abe under the aw n e stence on tbe
day efore the date of the enactment of the Revenue ct of 19 1, f wth
respect to such artce the ease, contract for sae, or condtona sae, and
devery thereunder, was made before October 1, 19 1.
Par. 8. Secton 316.9 as amended by Treasury Decson 998 s fur-
ther amended by substtutng the foowng new paragraphs for the
second paragraph thereof:
Where artces are eased by the manufacturer, or sod under an nstament-
payment contract wth tte reserved, or under a condtona-sae contract wth
payments to be made n nstaments, a proportonate part of the tota ta sha
be pad upon each payment made wth respect to the artce. The ta must be
returned and pad to the coector durng the month foowng that n whch such
payment s made.
u the case of artces wth respect to whch the rate of ta s ncreased by the
Revenue ct of 19 0 or by the Revenue ct of 19 1
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271
Regs. 6 (19 0).
(a) the ta s payabe at the rate n force on une 30, 19 0, upon a payments
where the ease, contract for sae, or condtona sae, and the devery thereunder
were made before uy 1, 19 0;
(6) the ta s payabe at the rate n force on September 30, 19 1, upon a pay-
ments where the ease, contract for sae, or condtona sae, and the devery
thereunder were made after une 30, 19 0, and before October 1, 19 1.
In the case of artces not sub|ect to ta on September 30, 19 1, no ta s pay-
abe upon payments made on and after October 1, 19 1, where the ease, contract
for sae, or condtona sae, and the devery thereunder were made before
October 1, 19 1.
Pah. 9. Immedatey precedng the subtte rtces Manufactured
or Produced by Indans appearng at the end of secton 316.29, there
s nserted the foowng:
MPTION OF RTICL S T L S W LRY.
Sec. 551. New Manufactubebs cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Seo. 3 06. cse Ta es Imposed by the Revenue ct of 19 1.

(b) empton f btce Ta abe as ewery. No ta sha be m-
posed under ths secton on any artce ta abe under secton 2 00 (reat-
ng to ewery ta ).

Sec. 316.29 . rupton of artces tamabe as |ewery. The manufacturers
e cse ta es Imposed by secton 3 06 of the Interna Revenue Code, as added by
secton 551 of the Revenue ct of 19 1, do not appy wth respect to any artce
the sae of whch at reta s sub|ect to the ta (reatng to |ewery) mposed by
secton 2 00 of the Code, as added by secton 552 of the Revenue ct of 19 1.
Par. 10. There s nserted mmedatey precedng secton 316.30 the
foowng:
Sec. 535. Tres and Tubes. (Revenue ct of 19 1, Tte , Part III.)
(a) Rate on Tres. Secton 3 00(1) of the Interna Revenue Code Is
amended by strkng out 2 cents and nsertng n eu thereof 5
cents .
(b) Rate on Tubes. Secton 3 00(2) of the Interna Revenue Code s
amended by strkng out cents and nsertng n eu thereof 9
cents .

Par. 11. The frst paragraph of secton 316.32 as amended by Treas-
ury Decson 998, s further amended to read as foows:
The ta s payabe by the manufacturer at the foowng rates: (o) tres, 5
cents a pound on tota weght (e cusve of meta rms or rm bases) ; and (6)
nner tubes (for tres), 9 cents a pound on tota weght.
Pak. 12. There s nserted mmedatey precedng secton 316. 0, the
foowng:
Sec. 552. New Retaers cse Ta es. (Revenue ct of 19 1, Tte ,
Part .)

(b) Termnaton of Manufacturers Ta on Toet Preparatons.
The ta mposed by secton 8 01 of the Interna Revenue Code sha not
appy to artces sod on or after October 1, 19 1.
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Regs. 6 (19 0).
272
Par. 13. Sectons 316. 0, 316. 1 as amended by Treasury Decson
998, 316. 3, and 316. are emnated and the foowng secton s
substtuted n ther pace:
Sec. 316. 0. Termnaton of ta . The ta mposed by secton 3 01 as amended
upon saes of toet preparatons by the manufacturer does not appy to saes made
on and after October 1, 19 1.
See Reguatons 51 reatve to the ta on saes of toet preparatons by retaers
mposed by secton 2 02 as added to the Code by secton 552 of the Revenue ct of
19 1, effectve as of October 1, 19 1.
Par. 1 . There s nserted mmedatey precedng secton 316.50, the
foowng:
Sec. 5 . utomobe, Truck, us, and Tarts Ta . (Revenue ct of
19 1, Tte , Part I .)
(a) Increase of Rate and Cassfcaton of usses. Secton 3 03 (a)
and (b) of the Interna Revenue Code are amended to read as foows:
(a) utomobe truck chasss, automobe truck bodes, automobe
bus chasss, automobe bus bodes, truck and bus traer and semtraer
chasss, truck and bus traer and semtraer bodes, tractors of the knd
chefy used for hghway transportaton In combnaton wth a traer or
semtraer (ncudng n each of the above cases parts or accessores
therefor sod on or n connecton therewth or wth the sae thereof), 5
per centum. sae of an automobe truck, bus. or truck or bus traer or
semtraer, sha, for the purposes of ths subsecton, be consdered to
be a sae of the chasss and of the body.
(b) Other automobe chasss and bodes, chasss and bodes for
traers or semtraers sutabe for use n connecton wth passenger
automobes, and motorcyces (ncudng n each case parts or accessores
therefor sod on or u connecton therewth or wth the sae thereof),
e cept tractors, 7 per centum. sae of an automobe, traer, or sem-
traer sha, for the purposes of ths subsecton, be consdered to be a sae
of the chasss and of the body.

Par. 15. The frst paragraph of secton 316.50 s amended to read as
foows:
The ta Is mposed on the sae by the manufacturer of (1) automobe truck
chasss and bodes, (2) other automobe chasss and bodes, (3) tractors, and
( ) motorcyces.
Par. 16. The frst sentence of the ast paragraph of secton 316.50 s
amended to read as foows:
ny parts or accessores for automobe truck chasss and bodes, other auto-
mobe chasss and bodes, tractors, and motorcyces, sod on or n connecton
therewth, or wth the sae thereof, are ta abe at the rate appcabe to the sae
prce of the compete artces.
Par. 17. new secton s nserted at the end of secton 316.50 as
foows:
Sec. 316.50 . Defnton . s used n ths subpart, uness from the conte t It
s cear that a dfferent meanng s ntended
(a) The term automobe truck sha ncude automobe trucks, automobe
busses, and truck and bus traers and semtraers.
(6) The term other automobe sha mean a automobes other than
automobe trucks, and sha ncude traers and semtraers sutabe for use n
connecton wth passenger automobes.
(c) The term tractor sha mean the knd of tractors chefy used for hgh-
way transportaton n combnaton wth a traer or semtraer.
(d) The term motorcyce sha mean a types of motorcyces and sha
ncude sde cars as parts of motorcyces.
Par. 18. Secton 316.51 as amended by Treasury Decson 998, s
further amended to read as foows:
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273
Regs. G (19 0).
Sec. 316.51. Rate of ta . The ta Is payabe by the manufacturer at the rate
of 5 per cent of the sae prce of automobe truck chasss, bodes, or tractors, and
at the rate of 7 per cent of the sae prce of other automobe chasss or bodes or
motorcyces as determned under sectons 316.8 to 316.15, ncusve.
Par. 19. The frst and second sentences of secton 316.52 as amended
by Treasury Decson 998, are further amended to read as foows:
If the manufacturer of a truck body nstas t on an other automobe
chasss manufactured by hm, he must record and b the sae of the body and
chasss separatey, and pay ta on the sae prce at the rates of 5 per cent and 7
per cent, respectvey. In case a passenger body s nstaed by the manufacturer
thereof on an automobe truck chasss manufactured by hm, the transacton
must be handed n a smar manner, and ta pad on the body and chasss at
the rates of 7 per cent and 5 per cent, respectvey.
Par. 20. There s nserted mmedatey precedng secton 316.5 the
foowng:
Snc. 5 . utomobe. Truck, us, and Parts Ta . (Revenue ct of
19 1, Tte , Part I .)

(c) Credts on ccount of Tre and Tube Ta . Secton 3 03(e) of
the Interna Revenue Code s amended to read as foows:
(e) If tres or nner tubes on whc ta has been mposed under (hs
chapter are sod on or n connecton wth, or wth the sne of, a chasss,
body, or motorcyce, there sha (under reguatons prescrbed by the
Commssoner, wth the approva of the Secretary) be credted aganst
the ta under ths secton an amount equa to, n the case of an artce
ta abe under subsecton (a), 5 per centum, and n the case of au artce
ta abe under subsecton (b), 7 per centum
(1) of the purchase prce (ess, n the case of tres, the part of
such prce attrbutabe to the meta rm or rm base) f such tres
or nner tubes were ta abe under secton 3 00 (reatng to ta on
tres and nner tubes) ; or
(2) f such tres or nner tubes were ta abe under secton 3
(reatng to use by manufacturer, producer, or mporter) then of
the prce (ess, n the ease of tres, the part of such prce at-
trbutabe to the meta rm or rm base) at whch such or smar
tres or nner tubes are sod, n the ordnary course of trade, by
manufacturers, producers, or Importers thereof, us determned by
the Commssoner. In eu of the rates of credt of 5 per centum
and 7 per centum above provded, the rates, respectvey, for the
foowng perods, sha be as foows:
( ) Wth respect to the perod after une 30. 19 0, and
before the effectve date of the ncrease n ta on automobes
made by the Revenue ct of 19 1, I per centum and 8
per centum; and
( ) Wth respect to the perod before uy 1, 19 0, 2 per
centum and 3 per centum.

Sec. 553. dmnstratve Changes n Manufacturers cse Ta
Tte of Code. (Revenue ct of 19 1, Tte , Part .)

(d) Credts, and Ta Free Saes of utomobe Rados.
Secton 3 03(e) of the Interna Revenue Code, as amended by ths ct,
s further amended by strkng out tres and nner tubes where the
phrase appears the frst tme and nsertng tres, nner tubes, or auto-
mobe rados ; paragraph (1) of subsecton (e) of such secton Is
amended by nsertng before the semcoon or, n the case of automo-
be rados, f such rados were ta abe under secton 3 0 ; para-
graph (2) of subsecton (e) of such secton s amended by strkng out
tres or nner tubes wherever such phrase appears and nsertng
tres, Inner tubes, or automobe rados .
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Regs. 6 (19 0).
27
Par. 21. Secton 316.5 as amended by Treasury Decson 998, s
further amended to read as foows:
Sec. 316.5 . Credt for ta es on tres, nner tubes, or automobe rados.
Under the specfc provsons of the Code, tres, nner tubes, and automobe
rados may not be purchased ta free for use as matera In the manufacture
of, or as a component part of, other ta abe artces manufactured by tbe
purchaser.
Where a manufacturer ses ta -pad tros, nner tubes, and automobe rados
on, or n connecton wth, or wth the sae of automobe trucks, other auto-
mobes, ta abe tractors, or motorcyces, he may take credt aganst the ta
due on hs sae n an amount determned by appyng to the purchase prce of
the tres; nner tubes, automobe rados, the percentage rate of ta appcabe to
such automobe trucks, other automobes, ta abe tractors, or motorcyces, but
the part of the purchase prce of tres attrbutabe to any meta rms or rm
bases sha be e cuded. For e ampe, f the sae prce of an automobe s
1,000, the ta payabe thereon 70, and the cost to the automobe manufacturer
of the tres, nner tubes or automobe rados, sod on or n connecton there-
wth s 0, the manufacturer w be permtted to take a credt aganst the ta
payabe on the seng prce of tbe automobe n an amount equa to 7 per cent
of 0, or 2.80.
In the event that the manufacturer of an automobe aso manufactures or
mports tres and Inner tubes, and ses the automobe and the tres and tubes
n a snge transacton, he w be abe for ta on the sae prce of the auto-
mobe (ncudng the tres and tubes) at the rate of 7 per cent, and he w aso
be abe for ta on the tres and tubes at the rates of 5 cents and 9 cents per
pound, respectvey. e w, however, be permtted to take a credt aganst
the tu on the automobe on the same bass as f he had purchased the tres
and tubes so sod. The same rue appes In the case of motorcyces and, e cept
for the dfference n the rate of ta , n the case of automobe truck chasss
and ta abe tractors.
Saes of automobe trucks, ta abe tractors, other automobes and motor-
cyces, orgnay equpped wth ta -pad tres, nner tubes, or automobe rados,
to an e empt governmenta agency for ts e cusve use are not propery to be
regarded resaes of tres and nner tubes, as such, so as to entte the manu-
facturer of such tres and nner tubes to a credt or refund of the amount of
ta pad by hm thereon.
Par. 22. There s nserted mmedatey precedng secton 316.55 the
foowng:
Skc 5 . utomobe, Tur n, os, and Parts Ta . (Revenue ct of
19 1, Tte , Part I .)

(b) Increase n Rate on Parts and cuson of Rados From
utomobe Ta . The frst sentence of secton 3 03(c) of the Interna
Revenue Code s amended to read as foows: Parts or accessores
(other than tres and nner tubes and other than rados) for any of the
artces enumerated n subsecton (a) or (b), 5 per centum.

Par. 23. Secton 316.55 s amended by addng the foowng sen-
tence at the end of the frst paragraph:
owever, such term does not ncude tres, nner tubes, and automobe rados,
snce these artces are e pressy e cnded by the statute from the ta on parts
or accessores. Wth respect to fare regsters and fare bo es for use on busses
and automobes, see secton 816.1 0.
Par. 21. Secton 316.56 as amended by Treasury Decson 998, s
further amended to read as foows:
Sec. 316.56. Rate of ta . The ta s payabe by the manufacturer at the rate
of 5 per cent of the sae prce as determned under sectons 316.8 to 316.13,
ncusve.
Par. 25. There s nserted mmedatey after the ctaton of secton
3 03(f) the foowng:
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275
(Regs. 6 (19 0).
Sec. 5 . utomobe, Truck, us, and Parts Ta . (Revenue ct of
19 1, Tte , Part I .)

(d) Credts on Termnaton of Ta . Secton 3 03(f) of the In-
terna Revenue Code (reatng to credts and refunds on termnaton
of automobe ta ) s repeaed.
Par. 26. There s nserted mmedatey precedng secton 316.60 the
foowng:
Sec. 5 5. Rados, Phonographs, Records, and Musca Instruments.
(Revenue ct of 19 1, Tte , Part I .)
Secton 3 0 of the Interna Revenue Code s amended to read as
foows:
Sec. 3 0 . Ta on Rado Recevng Sets, Phonographs, Phonograph
Records, and Musca Instruments.
There sha be mposed upon the foowng artces (ncudng n
each case, e cept n the case of musca nstruments, parts or accessores
therefor sod on or n connecton wth the sae thereof) sod by the
manufacturer, producer, or mporter a ta equvaent to 10 per centum
of the prce for whch sod:
(a) Rado recevng sets, automobe rado recevng sets, com-
bnaton rado and phonograph sets, and phonographs.
(b) Chasss, cabnets, tubes, reproducng unts, power packs,
antennae of the but-n type, and phonograph mechansms, whch
are sutabe for use on or n connecton wth, or as component parts
of, any of the artces enumerated n subsecton (a), whether or
not prmary adapted for such use.
(c) Phonograph records.
(d) Musca nstruments.
Par. 27. Sectons 316.60 as amended by Treasury Decson 998,
316.61, and 316.62, as amended by Treasury Decson 998, are em-
nated and the foowng new sectons are nserted n eu thereof:
Sec. 316.60. Scope of Ta . The ta attaches to the sae by the manufacturer
of (1) rado recevng sets, automobe rado recevng sets, combnaton rado
and phonograph sets, and phonographs; (2) chasss, cabnets, tubes, reproduc-
ng unts, power packs, antennae of the but-n type, and phonograph mecha-
nsms, whch are sutabe for use on or n connecton wth, or as component
parts of, rado recevng sets, automobe rado recevng sets, combnaton rado
and phonograph sets, and phonographs, regardess of whether such components
are prmary adapted for such use; (3) phonograph records; and ( ) musca
nstruments. Parts and accessores for such artces (e cept musca nstru-
ments) are sub|ect to the ta when sod on or n connecton wth the sae thereof.
utomobe rado recevng sets may not be sod ta free to manufacturers
of automobes under the provsons of ether secton 3 2 or secton 3 03(c),
as amended.
utomatc devces for payng or repeatng records, phonograph pck-ups, home
recordng apparatus, and smar devces are sub|ect to the ta f sod on or
n connecton wth or wth the sae of rado recevng sets, combnaton rado
and phonograph sets, or phonographs.
Sec. 316.61. Rado , phonographs, etc., components. The term chasss
Incudes rado recevng apparatus of a types.
The term cabnets ncudes contaners sutabe for housng rado recevng
sets, automobe rado recevng sets, combnaton rado and phonograph sets,
and phonographs.
The term tubes ncudes vacuum tubes of a types sutabe for use n
connecton wth or as part of rado recevng sets, automobe rado recevng
sets, combnaton rndo and phonograph sets, or phonographs.
The term reproducng unts ncudes a apparatus for the ampfcaton
or reproducton of sound whch are sutabe for use In connecton wth or as
parts of rado recevng sets, automobe rado recevng sets, combnaton rado
and phonograph sets, or phonographs.
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Regs. 6 (19 0).
276
The term power packs ncudes a devces whch are sutabe for nse on
or n connecton wth or as part of rado recevng sets, automobe rado re-
cevng sets, combnaton rado and phonograph sets, or phonographs, whch
convert eectrc current of ordnary commerca or domestc votages nto eec-
trc current of votages sutabe for operatng such artces.
The term antennae of the but-n type ncudes a types of aeras of
the knd competey contaned n a rado recevng set, automobe rado recev-
ng set, or combnaton rudo and phonograph set.
The term phonograph mechansms ncudes devces whch are sutabe for
use n combnaton rado and phonograph sets, or phonographs for the purpose
of payng records.
The artces denned n ths secton are sub|ect to the ta regardess of whether
such artces are prmary adapted for use n connecton wth rado recevng sets,
automobe rado recevng sets, combnaton rado and phonograph sets, or phono-
graphs.
Sec. 316.62. Phonograph record . The term phonograph records means a
dsks, cynders, or other artces, regardess of the matera from whch they are
made, and upon whch are recorded or may be recorded human swech or other
sounds for reproducton by means of a phonograph or combnaton rado and
phonograph.
Sec. 316.63. Musca nstrument . The term musca nstruments ncudes
panos and organs of a types, trombones, sa ophones, vons, drums, yophones,
chmes, cymbas, etc., and a strng, wnd, reed, or percusson nstruments nsed
In producng musc, or n reproducng t, e cept rados and phonographs, for whch
see secton 316 61.
Sec. 316.6 . Rate of ta . The ta s payabe by the manufacturer at the rate of
10 per cent of the sae prce as determned by sectons 316.8 to 316.15, ncusve.
Par. 28. There s nserted mmedatey precedng secton 316.70 the
foowng:
Sec. 5 6. Mechanca Refrgerators. (Revenue ct of 10 1, Tte ,
Part I .)
Secton 3 05 of the Interna Revenue Code Is amended to read as
foows:
Skc. 3 05. Ta on Refrgerators, Refrgeratng pparatus, and r-
Condtonf-rs.
There sha be mposed on the foowng artces (Incudng n each
case parts or accessores therefor sod on or n connecton wth the sae
thereof) sod by the manufacturer, producer, or mporter a ta equva-
ent to 10 per centum of the prce for whch so sod:
(a) Refrgerators, etc. Refrgerators, beverage cooers, Ice
cream cabnets, water cooers, food and beverage dspay cases, food
and beverage storage cabnets, ce makng machnes, and mk cooer
cabnets, each such artce havng, or beng prmary desgned for
use wth, a mechanca refrgeratng unt operated by eectrcty,
gas, kerosene, or gasone.
(b) Refrgeratng appapatt-s. Compressors, condensers, evapo-
rators, e panson unts, absorbers, and contros, for, or sutabe for
use as part of, or wth, a refrgeratng pant, refrgeratng system,
refrgeratng equpment or unt, or any of the artces enumerated n
subsecton (a).
(c) R-coNnToN RS. Sef-contaned ar-condtonng unts.
(d) Components. Cabnets, compressors, condensers, fans, bow-
ers, heatng cos, coong cos, fters, humdfers, and contros, for,
or sutabe for use as part of, or wth, any of the artces enumerated
n subsecton (c).
Pah. 29. Sectons 316.70, 316.71, 316.72, and 316.73 as amended by
Treasury Decson 998, are emnated and the foowng new sectons
nserted n eu thereof:
Skc. 316.70. Refrgerators, etc. Subsecton (a) of secton 3 05. as amended by
secton 5 (5 of the Revenue ct of 19 1, mposes a ta on saes by the manufacturer
of refrgerators, beverage cooers, ce cream cabnets, water cooers, food and
beverage dspay cases, food and beverage storage cabnets, ce makng machnes,
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Regs. 6 (19 0)
and mk cooer cabnets, each such artce havng, or beng prmary desgned for
use wth, a mechanca refrgeratng unt operated by eectrcty, gas, kerosene,
or gasone, and ncudng n each case parts or accessores therefor sod on or n
connecton wth the sae of the artce.
The ta appes to a the above-enumerated artces wthout regard to ther
sze, whether snge or mutpe cabnet nstaaton, or whether desgned for
househod, commerca, or ndustra use.
The ta appes to a the above-enumerated artces, If prmary desgned for
use wth a mechanca refrgeratng unt operated by eectrcty, gas, kerosene,
or gasone; t s not necessary that such a mechanca refrgeratng unt be sod
on or n connecton wth the sae of the artce.
manufacturer of an artce ta abe under secton 3 05(a), as amended, may
purchase ta free for use as a component n the manufacture of such artce
any of the refrgeratng apparatus specfed n secton 3 05(a), as amended.
(See secton 31G.71.) owever, f any of the refrgeratng apparatus specfed
n secton 3 05(b), as amended, s purchased ta pad and used as a com-
ponent n the manufacture of an artce ta abe under secton 3 05(a), as
amended, the manufacturer of such artce may be aowed a credt to the
e tent of the ta pad on the refrgeratng appnratus so used as a component.
(See secton 310.20 .)
The ta does not appy to refrgerator cabnets whch are prmary desgned
for use wthout a mechanca refrgeratng unt
Sec. 316.71. Refrt|eratng apparatus. Subsecton (b) of secton 3105, as
amended by secton 5 0 of the Revenue ct of 19 1, mposes a ta on saes by
the manufacturer of compressors, condensers, evaporators, e panson unts,
absorbers, and contros, for, or sutabe for use as part of, or wth, a refrgerat-
ng pant, refrgeratng system, refrgeratng equpment or unt, or any of the
artces enumerated n secton 3 05(a), as amended, and Incudng n each
case parts or accessores therefor sod on or n connecton wth the sae of the
specfed refrgeratng apparatus.
Sec. 316.72. r-condtoners, and components. Subsectons (c) and (d) of
secton 3105, as added by secton 5 6 of the Revenue ct of 19 1, mpose ta es
on saes by the manufacturer of sef-contaned ar-condtonng unts, as we
as separate saes of cabnets, compressors, condensers, fans, bowers, heatng
cos, coong cos, fters, humdfers, and contros for, or sutabe for use as
part of, or wth, sef-contaned ar-condtonng unts, and ncudng n each
case parts or accessores therefor sod on or n connecton wth the sae of the
specfed artces.
Sec. 316.73. Rate of ta . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 316.8 to 316.15,
ncusve.
Par. 30. There s nserted mmedatey precedng secton 316.80, the
foowng:
Sec. 521. Dktcnbe cse Ta Rates Made Permanent Whch re
Not Increased by Ths ct. (Revenue ct of 19 1, Tte ,
Part II.)
(a) The foowng sectons of the Interna Revenue Code are amended
as foows:

(18) Freaams, etc. Secton 3 07 Is amended by strkng out
10 per centum and nsertng n eu thereof 11 per centum.

Pak. 31. The second paragraph of secton 316.81 s amended to read
as foows:
Saes of pstos and revovers are specfcay e empt from the ta mposed
under secton 3 07 of the Code, as amended, but are sub|ect to the ta mposed
under secton 2700(a), as amended, and (b) of the Code, whch remans n
effect. (See Reguatons 7, revsed October, 1928, as amended by T. D. 5083,
approved October 3, 19 1 rpage 293, ths uetn , reatng to e cse ta es on saes
by the manufacturer of pstos and revovers.)
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Regs. 6 (19 0).
278
Par. 32. Secton 316.82 as amended by Treasury Decson 998, s
further amended to read as foows:
Sec. 316.82. Rate of ta . The ta s payabe by the manufacturer at the rate
of 11 per cent of the sae prce as determned under sectons 316.8 to 316.15,
Incusve.
Par. 33. Subpart . Msceaneous Provsons s amended to
read Subpart U. Msceaneous Provsons, and the sectons now-
appearng under dmnstratve Provsons are renumbered as fo-
ows: 316.90 to 316.200; 316.91 to 316.201; 316.92 to 316.202; 316.93 to
316.203; 316.9 to 316.20 ; 316.95 to 316.205; and 316.96 to 316.206.
Par. 3 . There are nserted mmedatey after secton 316.82 new
Subparts to T, ncusve, as foows:
Subpart - Sportng Goods.
Sec. 551. New Manufacturers cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by Insertng after secton 3 05 the foowng new secton :
Sec. 3 06. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Imposton. There sha be Imposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent to the
rate, on the prce for whch sod, set forth In the foowng paragraphs
(ncudng n each case parts or accessores pf such artces sod on or n
connecton therewth, or wth the sae thereof) :
(1) Sportng goods. admnton nets; badmnton rackets (meas-
urng 22 nches over-a or more n ength) ; badmnton racket
frames (measurng 22 nches over-a or more n ength) ; badmnton
racket strng; badmnton shuttecocks, badmnton standards; base-
bas; baseba bats (measurng 26 nches or more n ength) ; base-
ba body protectors and shn guards; baseba goves and mtts;
baseba masks; basketbas; bard and poo tabes (measurng
5 nches over-a or more n ength) ; bard and poo bas and
cues for such tabes; bowng bas and pns; bo ng goves, masks,
head guards, and ear guards; cay pgeons; crcket bas; crcket
bats; croquet bas and maets; curng stones; deck tenns rngs,
nets, and posts; fencng equpment; fshng rods, crees, rees, and
artfca ures, bats, and fes; footbas; footba harness; footba
hemets; gof bags (measurng 26 nches or more n ength) ; gof
bas; gof cubs (measurng 30 nches or more n ength) ; gymna-
sum equpment and apparatus; hockey bas; hockey pucks; hockey
stcks (measurng 30 nches or more n ength) ; ndoor basebas;
Indoor baseba bats (measurng 26 nches or more n ength) ; ndoor
baseba goves and mtts; acrosse bas; acrosse stcks; mass bas;
poo bas; poo maets; push bas; skates; sks; sk poes; snow
shoes; snow toboggans and seds; soccer bas; Softba bas; soft-
ba bats (measurng 26 nches or more n ength) ; softba goves
and mtts; squash bas; 6quash rackets (measurng 22 Inches over-
a or more n ength) ; squash racket frames (measurng 22 nches
over-a or more n ength) ; squash racket strng; tenns bas; tabe
tenns tabes, bas, nets, and paddes; tenns nets; tenns rackets
(measurng 22 nches over-a or more n ength) ; tenns racket
frames (measurng 22 nches over-a or more n ength) ; tenns
racket strng; track hurdes; traps for throwng cay pgeons; vaut-
ng poes, cross bars, and standards; voey bas, nets, and stand-
ards ; water poo bas and goas; and wrestng head harness; 10
per centum.

sc. 816.90. Scope of ta . Subsecton (a)(1) of secton 3 06, as added by
secton 551 of the Revenue ct of 19 1, mposes a ta on saes by the manufac-
turer of the specfed artces, equpment, and apparatus, ncudng n each case
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279
Regs. 6 (19 0).
parts or accessores therefor sod on or In connecton therewth, or wth the sae
thereof.
The term fencng equpment ncudes fos, sabers, bades, dueng swords,
masks, guards, pastrons, and a other equpment used n the snort of fencng.
The term gymnasum equpment and apparatus Incudes a equpment or
apparatus of the type used n connecton wth any varety of ndoor e ercse for
deveopng or e hbtng the strength, actvty, or contro of the body. The fo-
owng s descrptve but not a-ncusve of the type of equpment or apparatus
ntended to be ncuded n the above-mentoned term: Indan cubs, dumbbes,
e ercsng rngs, sta bars, gymnasum adders, parae bars, vautng horses,
horzonta bars, strkng or punchng bags, puey weghts, rowng machnes, etc.
The ta does not attach (uness otherwse Indcated n subsecton 3 06(a) (1))
to artces whch, n vew of ther sze, quaty, or the substance of ther matera,
ore not capabe of beng used n the payng of any game, athetc event, sport,
or as gymnasum equpment.
Sec. 316.91. Rate of ta . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 316.8 to 316.15k
Incusve.
Subpart . Lugoage.
Sec. 551. New Manufacturkbs cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Sec. 3 06. cse Ta es Imposed by the Revenue ct op 19 1.
(a) Imposton. There sha be mposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent to the
rate, on the prce for whch sod, set forth n the foowng paragraphs
(ncudng n each case parts or accessores of such artces sod on or
In conuecton therewth, or wth the sae thereof) :

(2) Luggage. Trunks, vases, traveng bags, sutcases, hat
bo es for use by traveers, ftted toet cases (not ncudng contents),
and other traveer s uggage, and eather and Imtaton eather bref
cases, 10 per centum.

Seo. 316.100. Scope of ta . Subsecton (a)(2) of secton 3 06, as added by
secton 551 of the Revenue ct of 19 1, mposes a ta on the sae by the manu-
facturer of trunks, vases, traveng bags, sutcases, hat bo es for use by traveers,
ftted toet cases (not ncudng contents), other traveer s uggage, and eather
and mtaton eather bref cases, ncudng n each case (e cept contents of ftted
toet cases) parts or accessores therefor sod on or In connecton therewth, or
wth the sae thereof.
The term trunks Incudes a receptaces whch are commony or commer-
cay desgnated as trunks, and whch are desgned for the purpose of carryng
or conveyng the effects of a traveer.
The terms vases, traveng bags and sutcases. Incude a receptaces
whch are commony or commercay desgnated as vases, traveng hags, and
sutcases and whch are desgned to be used for the purpose of carryng or con-
veyng by hand the effects of a traveer.
The term other traveer s uggage ncudes a other receptaces commony
or commercay desgnated as uggage and whch are desgned for the purpose
of carryng or conveyng by hand or otherwse the effects of a traveer.
The term hat bo es for use by traveers ncudes a receptaces commony
or commercay desgnated as hat bo es and whch are desgned for the purpose
of conveyng or carryng hats by hand or otherwse n traveng.
The term eather or mtaton eather bref cases ncudes a receptaces
commony or commercay desgnated as bref cases whch are made of any
eather or Imtatons thereof, and whch are desgned for the purpose of carryng
or conveyng documents, etc., of any sze or shape.
The term ftted toet cases Incudes a receptaces of any form whatsoever
desgned or ftted to contan toet artces or other effects of a traveer, or both,
e cusve of the toet artce contents thereof.
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Regs. 6 (19 0).
280
rtces commony or commercay desgnated as saesmen s trunks, vases,
utty bags, etc., desgned for the purpose of carryng or conveyng sampes of
any knd are sub|ect to the ta even though not specfcay used to carry or convey
the usua effects of a traveer.
Sec. 316.101. ppcaton of the tar. In the case of artces ta abe under
secton 3 06(a)(2), whch contan f tures such as hangers, trays, drawers,
etc.. the ta attaches to the prce for whch the entre assemby s sod.
Fttngs such as bottes, phas, |ars, combs, brushes, mrrors, etc., contaned
In ftted toet cases, are not ta abe when sod as a part thereof and the
sae prce of such fttngs may be e cuded n determnng the sae prce of
the ta abe ftted toet case, provded the sae prce of such fttngs Is sepa-
ratey nvoced by the manufacturer or that such sae prce can be estabshed
by adequate records to the satsfacton of the Commssoner.
If an artce ta abe under secton 3 06(a)(2) s sod at reta by the
manufacturer, and such artce contans fttngs that are sub|ect to the re-
taers e cse ta mposed by secton 2 00 (reatng to |ewery, etc.) or secton
2 02 (reatng to toet preparatons), the manufacturer, n addton to the
manufacturers e cse ta , ncurs abty for the retaers e cse ta wth
respect to the sae whch must be returned and pad as requred by Regua-
tons 51 (19 1 edton). owever, where the fttngs are sub|ect to the tar
mposed by secton 2 00, the sae thereof by the manufacturer, whether at
whoesae or reta, does not sub|ect hm to a abty under secton 3 06(a) (2).
(See secton 316 29 .)
Sec. 316.102. Rate of ta . The ta s payabe by the manufacturer at the
rate of 10 per cent of the sae prce as determned by sectons 316.8 to 316.15,
ncusve.
Subpart L. ectrc, Gas, and O ppances.
Sec. 551. Nkw Manufacturers cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Subchapter - of Chapter 29 of the Interna Revenue Code s
amended by nsertng after secton 3 05 the foowng new secton:
Sec. 3 C6. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Imposton. There sha be mposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent
to the rate, on the prce for whch sod, set forth n the foowng
paragraphs (ncudng n each case parts or accessores of such ar-
tces sod on or n connecton therewth, or wth the sae thereof) :

(3) - Ctrc, oas, and o PPU NC S. ectrc drect motor-
drven fans and ar crcuators; eectrc, gas, or o water heaters;
eectrc fat rons; eectrc ar heaters (not ncudng furnaces);
eectrc mmerson heaters; eectrc heatng pads and bankets;
eectrc, gas, or o appances of the type used for cookng,
warmng, or keepng warm food or beverages for consumpton
on the premses; eectrc m ers, whppers, and ucers; and
househod type eectrc vacuum ceaners; 10 per centum.

Sec. 316.110. Scope of ta . Subsecton (a) (3) of secton 3 06, as added by sec-
ton 551 of the Revenue ct of 19 1, mposes a ta on saes by the manufacturer of
eectrc drect motor-drven fans and ar crcuators, eectrc, gas, or o water
heaters, eectrc fat rons, eectrc ar heaters (not Incudng furnaces), eectrc
mmerson heaters, eectrc heatng pads and bankets, eectrc, gas, or o ap-
pances of the type used for cookng, warmng, or keepng warm food or beverages
for consumpton on the premses, eectrc m ers, whppers, and |ucers, house-
hod type eectrc vacuum ceaners, and combnatons of two or more of such
appances, ncudng n each case parts and accessores therefor sod on or n
connecton therewth, or wth the sae thereof.
The term eectrc drect motor-drven fans and ar crcuators Incudes
appances of the type prmary desgned and adapted to be operated as ndepend-
ent unts. It Incudes so-caed e haust fans but does not ncude so-caed
bowers. Wth respect to fans and bowers for, or sutabe for use as part of,
or wth, sef-contaned ar-condtonng unts, see secton 316.72.
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281
Regs. 6 (19 0).
The phrase eectrc, gas, or o appances of the type used for cookng, warm-
ng, or keepng warm food or beverages for consumpton on the premses In-
cudes any type of appance operated by, or for whch the heat s generated by,
eectrcty, gas, or o. whch s used, commercay or domestcay, to cook, warm,
or keep warm food or beverages for consumpton on the premses. The foowng
are descrptve but not a ncusve of the types of artces sub|ect to ta under
ths cassfcaton: coffee makers, ranges, roasters, toasters, waffe rons, grddes,
hot pates, casseroes, steam tabes, etc.
Sec. 316.111. Rate of ta . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 310.8 to 316.15, n-
cusve.
SU P T M. rOTOGU P IO PP R TUS.
Sec. 551. New Manufacturers cse Ta es. (Revenue ct of 19 1,
Tte . Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Sec. 3 ;)6. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Imposton. There sha be mposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent to the
rae, on the prce for whch sod, set forth In the foowng paragraphs
(Incudng n each case parts or accessores of such artces sod on or n
connecton therewth, or wth the sae thereof) :

( ) Photographc apparatus. Cameras and enses; une posed
photographc ms (ncudng moton pcture ms but not ncudng
-ray fmt, photographc pates and senstzed paper; photographc
apparatus and equpment; and any apparatus or equpment desgned
especay for use In the takng of photographs or moton pctures
or n the deveopng, prntng, or enargng of photographs or moton
pcture fms; 10 per centum.

Sec. 553. dmnstratve Changes n Manutactvrers cse Ta
Tte of Code. (Revenue ct of 19 1, Tte , Part .)

(c) Une posed Moton Pcture Ftms. Secton 3 3(a)(3)( ) of
the Interna Revenue Code (reatng to credts or refunds of ta to
manufacturer) s amended by nsertng at the end thereof the foowng
new cause:
(v) n the case of une posed moton pcture fms, used or resod
for use n makng of news ree moton pcture fms.

Sec 316.120. copr of tar Subsecton (a)( ) of secton 3 06, as added by
secton 551 of the Revenue ct of 19 1, mposes a ta on saes by the manu-
facturer of cameras, enses for cameras, a une posed st or moton pcture
fms (e cept -ray fms), photographc pates, photographc senstzed paper,
photographc apparatus, photographc equpment, and any apparatus or equpment
desgned especay for use n the takng of photographs or moton pctures or n
the deveopng, prntng, or enargng of photographs or moton pcture fms,
ncudng n each case parts or accessores therefor sod on or n connecton there-
wth, or wth the sae thereof.
The term cameras ncudes the entre assemby, regardess of weght, whch
Is used for or capabe of use n the takng of st or moton pctures.
The term enses ncudes the gass and aso the frame or ce n whch such
gass s mounted. Where a ens s sod n combnaton wth a barre, shutter,
dffusng devce, etc., the ta attaches to the tota amount pad for the assemby.
The term une posed photographc fm ncudes a fms for use n any type
of st or moton pcture camera whether n ros, rees, or packs, but does not
ncude -ray fms.
The term photographc pates Incudes any pate used n any type camera
n the takng of a pcture.
1611 2 19
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Regs. 6 (19 0).
282
The term senstzed paper Incudes any type of paper, regardess of sze, used
n producng prnts or enargements from any type of photographc negatve.
The term photographc apparatus and equpment ncudes any artce used
on or n connecton wth a camera or ens n the takng of a st or moton
pcture. The foowng are descrptve but not a-ncusve of such artces:
range fnders, vew fnders, ens e tenson tubes, fters, dffusers, trpods, focus-
ng fnders, etc.
The phrase any apparatus or equpment desgned especay for use n the
takng of photographs or moton pctures or n the deveopng, prntng, or
enargng of photographs or moton pcture fms ncudes the foowng artces
whch are descrptve but not a-ncusve: e posure meters, enargers, enses
and other attachments for enargers, tanks or pans desgned for deveopng
fms, prntng frames, photofood amps and refectors, fash bubs, etc.
Skc. 316.121. Une posed moton pcture fms used n makng news ree moton
pcture fms. Under the provsons of the Code, where une posed moton pc-
ture fms are used or are resod for use n the makng of news ree moton
pcture fms the manufacturer of such une posed moton pcture fms s
entted to a refund or credt of the ta pad on the sae of such une posed
fms.
The term makng of news ree moton pcture fms means the producton
of news ree moton pctures coverng current news events for mmedate reease
for pubc e hbton.
The ta attaches to the manufacturer s sae of a une posed moton pcture
fms even though t s known at the tme of the sae that such une posed
fms w be used or resod for use n the makng of news ree moton pcture
fms.
In order to estabsh the rght to a credt or refund of the ta pad on the
sae of une posed moton pcture fms used or resod for use n the makng of
news ree moton pcture fms, t Is necessary that, (1) the manufacturer
have defnte knowedge that the fm In queston was used for such purposes,
and (2) he obtan from the purchaser and retan In hs possesson a propery
e ecuted certfcate n the form prescrbed by ths secton.
Where the certfcate s obtaned pror to the tme the manufacturer s
requred to fe a return coverng ta es due for the month n whch the sae
was made, he must ncude the ta on such sae In hs return for that month,
n the tem Tota ta due, but he may deduct an amount equvaent to the
ta appcabe to such sae and pay the net ta resutng, makng approprate
e panaton on a rder attached to the return. If the certfcate Is not so
obtaned, the manufacturer must ncude the ta on such sae n hs return
for the month n whch the sae was made, and when the certfcate s obtaned
ater he may fe a cam for refund on Form 8 3, or take a credt upon any
subsequent return, but such acton must be taken wthn the -year perod
of mtaton prescrbed by secton 3313.
For reguatons reatng to the camng of credts or refunds, see secton
316.2(1 .
The foowng s a form of e empton certfcate whch w be acceptabe for
the purpose of ths secton and must be adhered to n substance:
CR DIT OR R FUND C RTIFIC T .
(For use by purchasers of une posed moton pcture fms for use In the
makng of news ree moton pctures.)
, 19
The undersgned hereby certfes that the une posed moton pcture
fms covered by ths certfcate were used n the makng of news
ree moton pcture fms.
The undersgned understands that a frauduent use of ths cer-
tfcate to secure a credt or refund may sub|ect hm (1) to a penaty
equvaent to the amount of ta due on the sne of the une posed
moton pcture fm, and (2) to a fne of not more than 10,000, or
Imprsonment of not more than fve years, or both, together wth
costs of prosecuton.
(Name.)
( ddress.)
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283
Regs. 6 (19 0).
If t s mpractcabe to furnsh a separate certfcate for each order or con-
tract, a certfcate coverng a orders between gven dates (such perod not
to e ceed a month) w be acceptabe. Such certfcate and proper records of
nvoces, orders, etc., reatve to ta -free use sha be retaned as provded n
secton 310.202. If, upon nspecton, t s dscovered that a manufacturer s
records wth respect to any use camed to be ta free do not contan a proper
certfcate, as outned above, wth supportng nvoces and such other evdence
as may be necessary to estabsh the e empt character of the use, the ta sha
be payabe by the manufacturer on such sae.
The une posed moton pcture fms covered by the certfcate must be fuy
dentfed as to the nature of ts use, the quantty used, the date of sae, and the
amount of ta pad thereon.
Sec. 316.122. Rae of ta . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 316.8 to 316.15, ncusve.
Surpart N. ectrc Sgns.
Skc. 551. New Manufacturers cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Su)chapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Sec. MWt. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Impobton. There sha be Imposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent to the
rate, on the prce for whch sod, set forth n the foowng paragraphs
(ncudng n each case parts or accessores of such artces sod on or n
connecton therewfh. or wth the sae thereof) :

(5) ectrc sgns. Neon-ube sgns, eectrc sgns, and eectrc
advertsng devces, 10 per centum.
.
Sec. 316.130. Scope of ta Subsecton (a) (5) of secton 3 06, as added by
secton 551 of the Revenue ct of 1911, mposes a ta on the sae by the manu-
facturer of neon-tube sgns, eectrc sgns, and eectrc advertsng devces, ncud-
ng n each case parts or accessores therefor sod ou or n connecton therewth,
or wth the sae thereof.
Sec. 316.131. Ratr of tu . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 316.8 to 316.15, ncusve.
Subpart O. usness and Store Machnes.
Sec. 551. New Manufacturers cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Sec. 3 06. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Imposton. There sha be mposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent to the
rate, on the prce for whch sod, set forth n the foowng paragraphs
(ncudng n each case parts or accessores of such artces sod on or n
connecton therewth, or wth the sae thereof) :

(6) usness and store machnes. ddng machnes, address-
ng machnes, autographc regsters, bank proof machnes, bng
machnes, bookkeepng machnes, cacuatng machnes, card punch-
ng machnes, cash regsters, change makng machnes, check wrt-
ng machnes, check sgnng machnes, check canceng machnes,
check perforatng machnes, check cuttng machnes, check datng
machnes, other check protector machne devces, computng ma-
chnes, con counters, dctographs, dctatng machne record shavng
machnes, dctatng machnes, dupcatng machnes, embossng ma-
chnes, enveope openng machnes, erasng machnes, fodng ma-
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Regs. 6 (19 0).
28
chnes, fanfod machnes, fare regsters, fare bo es, stng ma-
chnes, ne-a-tne and smar machnes, mang machnes, mut-
graph machnes, nutgraph typesettng machnes, nutgraph type
|ustfyng machnes, numberng machnes, portabe paper fastenng
machnes, pay ro machnes, penc sharpeners, posta permt ma-
ng machnes, punch card machnes, sortng machnes, stenc cuttng
machnes, shorthand wrtng mnchnes, seang machnes, tabuatng
machnes, tcket countng machnes, tcket ssung machnes, type-
wrters, transcrbng machnes, tme recordng devces, and com-
bnatons of any of the foregong, 10 per centum.

Sec. 316.1 0. Scope of ta . Subsecton (a)(6) of secton 3 06, as added by
secton 551 of the Revenue ct of 19 1, mposes a ta on saes by the manufac-
turer of a busness and store machnes of the types enumerated n such sub-
secton, and to saes by the manufacturer of any combnaton of two or more of
such machnes, ncudng parts and accessores sod on or In connecton there-
wth, or wth the sae thereof.
Where any ta abe busness or store machne s eased (ncudng any renewa
or any e tenson of a ease or any subsequent ease of such artce) by the
manufacturer, such ease sha, for the purpose of ths secton, be consdered as
the sae thereof. For computaton of ta on eases or rentas see secton 316.9.
Fare regsters and fare bo es for use n streetcars, busses, and other vehces
are ta abe as busness machnes under secton 3 06(a) (6) and not as automobe
accessores under secton 3 03(c), as amended.
Sec. 316.1 1. Rate of ta . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 316.8 to 316.15, ncusve.
Subpart P. Rubber rtces.
Sec. 551. New Manufacturers cse Ta es. (Revenue ct of 19 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 0o the foowng new secton:
Sec. 3 06. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Imposton. There sha be mposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent to the
rate, on the prce for whch sod, set forth n the foowng paragraphs
(ncudng n each case parts or accessores of such artces sod on or n
connecton therewth, or wth the sae thereof) :

(7) Rubber artces. rtces of whch rubber s the component
matera of chef weght, 10 per centum. The ta mposed under
ths paragraph .sha not be appcabe to footwear, artces desgned
especay for hospta or surgca use, or artces ta abe under
any other provson of ths chapter.

Sec. 316.1.-.0. Scope of ta Subsecton (a) (7) of secton 3 06. as added by sec-
ton 551 of the Revenue ct of 19 1, mposes a ta on the sae by the manufac-
turer of any artce of whch rubber s the component matera of chef weght,
e cept artces of footwear such as shoes, rubbers, boots, hees, soes, etc.; artces
especay desgned for hospta or surgca use; and artces ta abe under any
other secton of Chapter 29 of the Code, as amended.
The component matera of chef weght of any artce, for the purposes of ths
secton, s that component matera whch s not e ceeded n weght by any other
snge component.
The foowng st s descrptve but not a-ncusve of the type of artces
sub|ect to ta f rubber s the eom| onent matera of chef weght: rancoats,
hose, foorng, mats and mattng, thread, cement, goves, statoners bands,
erasers, cameback, bathng caps and bets and betng, tape, sponge, fabrc, tubng,
packng, washers, vaves, battery |ars, mouth peces for ppes, cgar and cgarette
hoders, stoppers of a types, etc.
Where rubber s n component matera of an artce and e empton wth respect
to the sae of such artce s camed on the ground that rubber s not the
component matera of chef weght, the manufacturer must mantan adequate
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285
Regs. 6 (19 0).
records or have In hs possesson proper evdence to estabsh to the satsfacton
of the Commssoner that the rubber s not the component matera of chef weght.
In the absence of such records or evdence, the ta must be pad wth respect
to the sae of such artce.
Sec. 316.151. Rate of ta . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 316.8 to 316.15, ncusve.
Subpart . Commerca Washng Machnes.
Rfc. 551. New Manufacturebs cse Ta es. (Revenue ct of 19 1,
Tte . Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Sec. 3 06. cse Ta es Imposed by the Revenue ct or 19 1.
(n Imposton. There sha be mposed on the foowng artces,
sod by the manufacturer, producer, or m|orter, f ta equvaent to
the rate, on the prce for whch sod, set forth n the foowng para-
graphs (ncudng n each case parts or accessores of such artces
sod on or n connecton therewth, or wth the sae thereof) :

(8) Washng machnes Washng machnes of the knd used
In commerca aundres, ) per centum. No ta sha be mposed
under ths paragraph on washng machnes of the househod type.

Sec. 316.160. Scope of ta . Subsecton (a)(8) of secton 3 06, as added by
secton . 51 of the Revenue ct of 19 1, mposes a ta on the sae by the manu-
facturer of washng machnes of the type desgned and ntended to be used n
commerca aundres, ncudng parts and accessores for such machnes sod
on or n connecton therewth or wth the sae thereof.
Under the e press povsons of the Code, as amended, no ta attaches wth
respect to saes of washng machnes of the type desgned and ntended soey
for use n the home.
Sec. 316.161. Rate of taw. The ta s payabe by the manufacturer at the rate
of 10 per cent of the sa .- prce as determned by sectons 316 8 to 316.15, ncusve.
Subpart R. Otca qupment.
Skc. 551. New M vntacturehs cse Ta es. ( Revenue ct of 19 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by nsertng after secton 3 05 the foowng new secton:
Sec. 3 06. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Imposton. There sha be mposed on the foowng artces,
sod by the manufacturer, producer, or mporter, a ta equvaent to the
rate, on the prce for whch sod, set forth n the foowng paragraphs
(ncudng In each case parts or accessores of such artces sod on or n
connecton therewth, or wth the sae thereof) :

(9) Optca ko pment. Refractoneters; spectrometers; spec-
troscopes; coormeters; pohuscopes; optca measurng nstru-
ments; teescopc sghts; pro|ecton enses and prsms; optca
machnery ; mcroscopes ; teescopes ; photo-mcro and mcro-pro|ec-
ton apparatus: fre contro optca nstruments; and searchght
mrrors and refectors; 10 per centum.

Sc. 316.170. Scope of ta . Subsecton (a)(9) of secton 3 06, as added by
secton 551 of the Revenue ct of 19 1, mposes a ta on the sae by the manu-
facturer of ( ) refractometers, spectrometers, spectroscopes, coormeters, poar-
scopes, optca measurng nstruments, teescopc sghts, pro|ecton enses, pro|ec-
ton prsms, optca machnery, mcroscopes, teescopes, photo-mcro and mcro-
pro|ecton apparatus, fre contro optca nstruments, searchght mrrors and
refectors; (6) combnatons of two or more of such artces; and (c) parts or
accessores of such artces sod on or n connecton therewth, or wth the sae
thereof.
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Regs. 6 (19 0).
286
Sec. 316.171. Rate of ta . The ta s payabe by the manufacturer at the rate
of 10 per cent of the sae prce as determned by sectons 316.8 to 310.15, ncusve.
Subpart S. ectrc Lght ubs and Tubes.
Seo. 551. New Manufacturers cse Ta es. (Revenue ct of 10 1,
Tte , Part .)
Subchapter of Chapter 29 of the Interna Revenue Code s amended
by Insertng after secton 3 05 the foowng new secton :
Sec. 3 06. cse Ta es Imposed by the Revenue ct of 19 1.
(a) Imposton. There sha be mposed on the foowng artces, sod
by the manufacturer, producer, or mporter, a ta equvaent to the rate,
on the prce for whch sod, set forth n the foowng paragraphs (ncud-
ng In each case parts or accessores of such artces sod on or n con-
necton therewth, or wth the sae thereof) :

(10) ectrc ght bubs and tubes. ectrc ght bubs and
tubes, not ncudng artces ta abe under any other provson of ths
subchapter, 5 per centum.

Sec. 316.180. Scope of ta . Subsecton (a) (10) of secton 3 06, as added by
secton 551 of the Revenue ct of 19 1, Imposes a ta on the sae by the manu-
facturer of eectrc ght bubs and tubes.
n eectrc ght bub or tube s any devce desgned for the dffuson of
artfca ght for umnatve or decoratve purposes through the use of
eectrcty.
Sec. 316.181. Rate of ta . The ta s payabe by the manufacturer at the rate of
f per cent of the sae prce as determned by sectons 316.8 to 316.15, ncusve.
Subpart T. ectrca nergy.
Sec. 3 11 (as amended by Secton 521(a) (19) of the Revenue ct of
19 1). Ta on ectrca, nergy for Domesto or Commeroa.
Consumpton.
(a) There sha be mposed upon eectrca energy sod for domestc
or commerca consumpton and not for resae a ta equvaent to 3
per centum of the prce for whch so sod, to be pad by the vendor under
such rues and reguatons as the Commssoner, wth the approva of the
Secretary, sha prescrbe. The sae of eectrca energy to an owner or
essee of a budng, who purchases such eectrca energy for resae to
the tenants theren, sha for the purposes of ths secton be consdered as
a sae for consumpton and not for resae, but the resae to the tenant
sha not be consdered a sae for consumpton.

Seo. 316.190. Scope of ta . The ta mposed by secton 3 11(a) of the Interna
Revenue Code, as amended, appes, e cept as provded herenafter, to a eectr-
ca energy sod for domestc or commerca consumpton and not for resae.
The term eectrca energy sod for domestc or commerca consumpton
docs not ncude (1) eectrca energy sod for ndustra consumpton, e. g., for
use n manufacturng, mnng, refnng, shpbudng, budng constructon, rr-
gaton, etc., or (2) that sod for other uses whch kewse can not be cassed as
domestc or commerca, such as the eectrca energy used by eectrc and gas
companes, waterworks, teegraph, teephone, and rado communcaton compa-
nes, raroads, other smar common carrers, educatona nsttutons not oper-
ated for prvate proft, churches, and chartabe nsttutons n ther operatons
as such. owever, eectrca energy s sub|ect to ta f sod for consumpton n
commerca phases of ndustra or other busnesses, such as n offce budngs,
saes and dspay rooms, reta stores, etc., or n domestc phases, such as n dor-
mtores or vng quarters mantaned by educatona Insttutons, churches,
chartabe nsttutons, or others.
Where eectrca energy Is sod to a consumer for two or more purposes, through
separate meters, the specfc use for whch the energy s sod through each
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287
Regs. 6 (19 0).
meter, 1. e., whether for domestc or commerca consumpton, or for other use,
sha determne ts ta abe status. Where the consumer has a the eectrca
energy consumed at a gven ocaton furnshed through one meter, the predom-
nant character of the busness carred on at such ocaton sha determne the
cassfcaton of consumpton for the purposes of ths ta .
The ta attaches to eectrca energy sod for domestc or commerca con-
sumpton, rrespectve of whether any of the energy sod s actuay used or the
charges therefor actuay coected. The ta s due on a such saes whether the
charge therefor s bed as a mnmum charge, a fat charge, a servce charge, or
otherwse.
Where a dscount s aowabe from the gross charge for eectrca energy f
payment therefor s made by the consumer wthn a prescrbed perod, or where
an addtona amount s added for faure to make payment wthn a prescrbed
perod, the ta sha be based on the amount due.
Sec. 310.101. Saes for resae. The ta does not appy to saes of eectrca
energy for resae, e cept where the eectrca energy s sod to an owner or essee
of a budng for resae to the tenants theren. The statute provdes that saes
of eectrca energy to an owner or essee of a budng for resae to the
tenants theren sha be consdered a sae for consumpton ; accordngy, the
saes to such owner or essee are sub|ect to the ta . owever, n such case
the resae of the eectrca energy by the owner or essee of the budng to
the tenants s not ta abe. In determnng the ta payabe wth respect to the
eectrca energy sod to an owner or essee of a budng for resae to tenants
theren, such porton of the eectrca energy as can be shown to have been resod
to the tenants for other than domestc or commerca consumpton may be
e cuded.
very person who purchases eectrca energy for resae (e cept resae by
the owner or essee of a budng to the tenants theren) must regster wth the
coector for the dstrct n whch Is ocated the prncpa pace of busness of
such person (or, f he has no prncpa pace of busness n the Unted States,
wth the coector at atmore, Md.). The appcaton for regstry must show
the name and pace, or paces, of busness of the appcant. The coector w
ssue regstraton numbers n a separate seres, begnnng wth number 1, for
hs dstrct. ectrca energy so furnshed for resae sha be e empt from
ta ony when the vendee furnshes to the vendor a certfcate showng the
vendee s regstraton number and that the eectrca energy s to be resod
by hm.
Where eectrca energy Is sod to a person regstered under the provsons
of the precedng paragraph, a porton of whch Is for domestc or commerca
consumpton by the vendee and a orton of whch s for resae, the certfcate
furnshed by such vendee must show the amount of such eectrca energy pur-
chased for domestc or commerca consumpton by hm, and the amount pur-
chased by hm for resae. The vendor must pay ta on the porton of such
eectrca energy sod to the vendee for domestc or commerca consumpton
by such vendee. Such vendee must n turn pay ta on the porton of such
eectrca energy resod by hm for domestc or commerca consumpton. The
ta In each case s based on the prce for whch the eectrca energy s sod to
the consumer thereof.
Sec. 316.192. Rate of ta . The ta s payabe by the vendor at the rate of
3 per cent of the sae prce.
eectrca enerfy e emptons.
Sec. 3 11. Ta on ectrca nergy for Domestc or Commerca
Consumpton.

(c) No ta sha be mposed under ths secton upon eectrca energy
sod to the Unted States or to any State or Terrtory, or potca
subdvson thereof, or the Dstrct of Coumba. None of the pro-
vsons of ths secton sha appy to pubcy owned eectrc and
power pants, or to eectrc and power pants or systems owned and
operated by cooperatve or nonproft corporatons engaged n rura
eectrfcaton. The rght to e empton under ths subsecton sha be
evdenced n such manner as the Commssoner, wth the approva of
the Secretary, may, by reguaton, prescrbe.
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Regs. 6 (19 0).
288
Sec. 316.193. emptons. ectrca energy sod to the Unted States or to
any State or Terrtory, or potca subdvson thereof, or the Dstrct of Coumba,
Is e empt from the ta .
Saes of eectrca energy by eectrc and power pants owned by the Unted
Stutes, or any State or Terrtory, or potca subdvson thereof, or the Dstrct
of Coumba, are e empt from the ta .
Saes of eectrca energy by eectrc and power pants or systems owned and
operated by cooperatve or nonproft corporatons engaged In rura eectrfcaton
are e empt from the ta .
In every case, the e empton specfed n ths secton must be estabshed by
an offca rung. Where not so estabshed, any corporaton camng the rght
to such e empton must submt for rung by the Commssoner, ( ) a copy of
ts charter, ( ) a copy of ts by-aws, and (C) adequate and suffcenty detaed
evdence of the area served by ts operatons.
Sue. 3 11. Ta on ectrca nergy for Domestc or Commerca
Consumpton.

(b) The provsons of sectons 3 1, 3 , and 3 7 sha not be ap-
pcabe wth respect to the ta mposed by ths secton.

Sec. 316.19 . Inappcabe admnstratve provsons. The provsons of sectons
3 1, 3 , and 3 7 of the Interna Revenue Code reatng to sae prce, use by
manufacturers, and contracts pror to May 1, 1932, respectvey, do not appy to
the ta Imposed on saes of eectrca energy.
Par. 35. The frst sentence of paragraph 3 of renumbered secton
316.200 s amended to read as foows:
Returns coverng ta es coected from vendees under secton 3 7(b), or secton
3 53, as added by secton 5. 3(b) of the Revenue ct of 19 1, shoud be made as
prescrbed above on Form 728.
Par. 36. The ast sentence of renumbered secton 316.201 s amended
by changng secton 316.95 n hst sentence to secton 316.205 .
Par. 37. There s nserted mmedatey precedng renumbered secton
316.20 , the foowng:
Sec. 5. 3. dmnstratve Changes n Manufacturers cse Ta
Tte of Code. (Revenue ct of 19 1, Tte , Part .)

(c) Une posed Moton Puttee Fms. Secton 3 3(a) (3) ( ) of the
Interna Revenue Code (reatng to credts or refunds of ta to manufac-
turer) s amended by nsertng at the end thereof the foowng new
cause:
(v) n the case of une posed moton pcture fms, used or resod
for use n the makng of news ree moton pcture fms.
(d) Chkmts, and Ta Free Saes of utomobe Rados. Secton
3 2, secton 3 3(a) (1), and secton 3 (a) (1) and (2) of the Interna
Revenue Code (reatng to ta n case of sae of tres to manufacturers
of automobes, etc., and credt on sae) are amended by strkng out
tres or nner tubes wherever appearng theren and nsertng tres,
nner tubes, or automobe rados ta abe under secton 3 0 : and by
strkng out tre or nner tube wherever appearng theren and nsert-
ng tro, nner tube, or automobe rado ta abe under secton 3 0 .
Secton 3 03(e) of the Interna Revenue Code, as amended by ths ct,
s further amended by strkng out tres and nner tubes where the
phrase appears the frst tme and nsertng tres, nner tubes, or auto-
mobe rados ; paragraph (1) of subsecton (e) of such secton s
amended by nsertng before the semcoon or, n the case of automobe
rados, f such rados were ta abe under secton 3 0 ; paragraph (2)
of subsecton (e) of such secton s amended by strkng out tres or
nner tubes wherever such phrase appears and nsertng tres, nner
tubes, or automobe rados .
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289
Regs. 6 (1932), rt. 1.
Par. 38. Paragraph 1 of renumbered secton 316.20 s amended by
substtutng (other than a tre, nner tube, or automobe rado
ta abe under secton 3 0 ) for (other than a tre or nner tube) .
Par. 39. The amendments made by ths Treasury decson sha be
appcabe ony wth respect to the perod begnnng wth October 1,
19 1.
(Ths Treasury decson s ssued under the authorty contaned n
sectons 501. 521, 535, 586. 5 , 5 5, 5 6, 5 9, 550, 551, 552(b), 553, and
558 of the Revenue ct of 19 1 (Pubc aw 250, Seventy-seventh
Congress), and secton 3791 of the Interna Revenue Code (53 Stat.,
67; 26 U.S. C., Sup. , 3791).)
Gut T. everng,
Commssoner of Interna Revenue.
pproved November 28, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 28, 19 1, 2.r 8 p. m.)
TITL I . M NUF CTUR RS CIS T S. (1932)
S CTION 606 UTOMO IL S, TC.
Reguatons 6 (1932), rtce 1: Defnton 19 1-27-10767
of parts or accessores. Ct. D. 1521
M M F CT R RS CIS T R NU CT OF 1932 D CISION
OF COURT.
1. Manufacturer or Producer utomoh-b Parts or ccesso-
res Use of Dscarded rmatures n Producton of rma-
tures for Sae.
corporaton whch acqures burned and worn out armatures,
strps them to the core, and by varous machne and hand opera-
tons, through the use of the od core and new materas, turns
out for the genera market rebut armatures stamped wth the
corporaton s trade name and stock number and paced n stock
for future sae, Is a manufacturer or producer wthn the mean-
ng of secton 60b (c) of the Revenue ct of 1932, and the sae of
such artces s sub|ect to the ta mposed by that secton. The
dscarded armatures purchased by the ta payer, havng ost ther
functon as a usefu artce as we as ther commerca vaue as
such, when acqured for use n the manufacture and producton
of an artce of commerce bear the same reaton to the competed
armature as the purchase of unused materas woud bear to the
competed artce.
2. Cask Fot|.owed.
Carson d ate, Inc., v. arrson Ct. D. 1 2, C. P . 19 0-1, 2-19
(108 Fed. (2d), 991) foowed.
S. Decson Reversed.
Decson of the dstrct court (28 F. Supp., 10 (1939)), reversed.
. Certorar Dened.
Petton for certorar dened May 5, 19 1.
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Regs. 6 (1932), rt. 1.
290
Unted States Crcut Court ok ppeas for the Nnth Crcut.
Unted States of merca, appeant, v. rmature chanac. Incorporated, a
Corporaton, aso known us The rmature change, Incorporated, a Cor-
poraton, appeee.
11C Fed. (2d), 969.
Upon appea from the Dstrct Court of the Unted States for the Southern Dstrct of
Caforna, Centra Dvson.
anuary 17, 19 1.
OPINION.
Stephens, Crcut udge: Sut by appeee ta payer aganst the Unted
States for recovery of 1, 52.30 assessed and pad as manufacturers e cse
ta es on saes of armatures. From a udgment of the dstrct court n favor
of the ta payer 28 Fed. Supp., 10 the Unted States appeas. For carty n
ths opnon we sha refer to the appeant Unted States of merca as the
Government, and to the appeee as ta payer.
The ta es n queston were assessed aganst the ta payer by vrtue of
secton 606(c) of the Revenue ct of 1932 ( 26 U. S. C. ., end of chapter 20),
whch provdes, so far as here appcabe:
Sec. 606 Ta on utomobes. tc.
There Is hereby mposed upon the foowng artces sod by the manufac-
turer, producer, or mporter, a ta equvaent to the foowng percentages of
the prce for whch so sod:

(c) Parts or accessores (other than tres and nner tubes) for any of the
artces enumerated n subsecton (a) or (b), 2 per centum, .
Note. Subsectons (a) and (b) referred to enumerate automobes, auto-
mobe trucks and motorcyces.
It s not dened that the ta payer sod the armatures n queston, nor Is t
dened that the armatures consttute automobe parts or accessores. The soe
queston nvoved n ths appea s whether or not the saes are ta abe to ta -
payer as the manufacturer or producer thereof, wthn the meanng of the ct.
Ta payer was ncorporated under the aws of Caforna to carry on the
busness of manufacturng and assembng armatures, motors and eectrca
equpment of any and a knds. To desgn and prepare pans and specfca-
tons for the manufacture, constructon and assembng of eectrca appances
and equpment. To enter nto contracts and make the necessary agreements
for marketng and dsposng of the same.
Ta payer acqures burned and worn out armatures, strps them to the core,
and by varous machne and hand operatons, through the use of the od core
and new matera, turns.out for the genera market rebut armatures. The
method of ta payer s operatons s fuy descrbed n the opnon of the |udge who
tred the case, supra, and t need not be repeated here. ach artce s stan ed
wth the ta payer s trade name nne and s separatey bo ed and abeed
nne Rebut rmature. uaty Product. nne Code (gvng num-
ber). bout SO armatures are turned out, checked, bo ed and put on the ta -
payer s sheves day. It mantans a stock for sae of 600 dfferent types of
armatures, each wth ta payer s own stock number.
It s the contenton of the ta payer, and n ths t s supported by the con-
cuson of the tra court, that Its busness s smpy that of reconstructng and
restorng armatures, as contrasted to that of manufacturng or producng
armatures.
The tra court s concuson that the rebut armatures were not manufac-
tured or produced by the ta payer Is premsed upon the assumpton that there
must be a new and dfferent artce at the competon of the ta payer s
operatons. artranft v. Wepmann (121 U. S., 609) and nhcscr- usch sso-
caton v. Unted States (207 U. S., 556) are cted as authorty for ts proposton.
The artranft case arose under the provsons of sectons 250 and 2505 of
the Revsed Statutes. Ry secton 250 manufactures of shes were dutabe.
Under the provsons of secton 2505 shes of every descrpton, not manufac-
tured were e empt from duty. The ta payer there Invoved had mported
shes whch had been ceaned wth acd and ground on an emery whee. Some
of them were etched wth acd. were ntended to be sod for ornaments, as
shes. It was hed that the ceaned and poshed shes were not mannfac-
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291
Regs. 6 (1932), rt. 1.
tures of shes, as they had not been manufactured nto a new and dfferent
artce.
The nheuser- usch rewng ssocaton case arose under secton 25 of the Tarff
ct of October 1,1890 (26 Stat., .r t7, 617), whch provded for a rebate on e ported
manufactured artces. The ta payer e ported beer n corked bottes. The
corks had been brought from Span, and then treated to make them usabe. It
was hed by the Supreme Court that the corks had not been manufactured
here. The court cted the artranft case, supra, wth approva, and hed that n
order to consttute a manufacture there must be a transformaton; a new
artce must emerge havng a dstnctve name, character or use (page 562).
In our opnon nether of the cted cases s authorty for the poston of the
ta payer that t s not a manufacturer or producer of armatures. In both
cases the raw materas were not sub|ect to the terms of the statute nvoved,
the statutes reatng soey to manufactures. Certany n such statutes there
must be a transformaton.
De onge v. Magone (159 U. S., 562), cted hy the ta payer n ts bref, s n
the same category. It aso arose under the Tarff ct 22 Stat., S8, 510 , whch
Imposed a duty of 15 per cent on paper, manufactures of, or of whch paper
Is a component matera, and a duty of 25 per cent on a other pa) er not
specay enumerated or provded for. The queston was whether the ta payer
was sub|ect to 15 per cent or 25 per cent duty. The paper nvoved had been
treated to make a hgher and better grade of pa|er. There was no change of
form, and the court therefore hod that the 25 per cent duty apped.
Other cases reed on by the ta payer are those arsng under the patent
aws. mercan Frut (Irmrer , Inc.. v. rooder (283 U. S.. 1); Goodyear
Shoe Machnery Co. v. ack on (112 Fed., 1 6) (C. C. . 1, 1901) ; Foge ong
Mach. Co. v. ./. D. /anda Co. (239 Fed., 893) (C. C. . 6, 1917) ; y orra
Safe Co. v. Mo er Safe Co. (62 Fed. (2d), 52 ) (C. C. . 2, 1933) ; and e s-
rght Mfg. Co. v. earngs Co. (271 Fed., 350) (D. C. Pa., 1921).
The mercan Frut Growers case nvoved the queston of whether certan
cams of a patent descrbed an artce of manufacture wthn the meanng of
35 U. S. C. ., secton 31. The product attempted to be patented was orange rnd
treated to make t resstant to bue mod decay. There the Court propery
hed that the treated rnd was not a manufactured artce.
The other patent cases cted umve nvoved the queston of what repars
may be made by a purchaser of a patent artce wthout consttutng nfrnge-
ment. They a turn on the e tent of the cense granted to the purchaser
of a patented combnaton, and are not authorty n the nstant case. (See
Cotton Te Co. v. Smmon , 106 U. S., 89; Mer atchere , Inc., v. uckeye
Incubator Co.. 1 Fed. (2d), 619 (C. C. . 8, 1930).)
We can not nd any |ustfcaton for readng nto the statute nvoved here,
as ta payer woud have us do, the quafcaton that the artces manufactured
or produced must have been so manufactured or produced entrey from new
or vrgn raw materas. We recog z. the rue of constructon that the tera
meanng of words can be nssted on n resstance to a ta ng statute, but as
stated by the Supreme Court n Carbon Stee y. Leweyn (251 U. S., 501, 505),
It the rue of tera constructon can not be carred to reduce the
statute to empty decaratons.
The ( overnnent contends, and we thnk correcty, that the dscarded arma-
tures purchased by the ta payer, havng ost ther functon as a usefu artce
as we as ther commerca vaue as such, when acqured for use n the manu-
facturng and producton of an artce of commerce, bear the same reaton to
the competed armature as the purchase of unused materas woud bear to the
competed artce. (See Cadnuadcr v. .Ic up Moore Paper Co., 1 9 U. S.,
350.) The artce resutng from the use of the dscarded core wth new mate-
ras, and through the empoyment of sk, abor, and machnery, s, as t seems
to us, a manufactured and produced artce of commerce. Such an artce pro-
duced In quanttes under a trade name and paced In stock for future sae
must be cassfed as a manufactured or produced artce. It a our opnon
and we hod that these operatons consttuted manufacture or producton
wthn the meanng of the statute nvoved. See opnon In Carson t as,
Inc., v. arrson (108 Fed. (2d), 901 Ct. D. 1 2, C. . 19 0-1, 2 9 ).
In addton to the above, f more were needed, Treasury eguatons 6,
artce , approved une 18, 1932, reguatng ta aton of automobe accessores
under secton 000(e) of the Itevenue ct of 1932, provdes,
bt. . Who s a manufacturer or producer. s used In the ct. the term
producer ncudes a person who produces a ta abe artce by
combnng or assembng two or more artces.
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Regs. 6 (1932), rt. 55. 292
Ths provson has appeared n the Treasury reguatons snce 1920, durng
whch tme the statute ta ng manufacturers and producers of automobe
accessores tas been reenacted, wthout change matera to ths cause, severa
tmes. Under the estabshed rue Congress must be taken to have approved
the admnstratve constructon and thereby to have gven It the force of aw.
everng v. Reynods Tobacco Con 306 U. S., 110, 115 Ct. D. 1383, C. .
1939-1, 225 .)
It s certan that had the ta payer n ts operatons purchased new cores and
combned these cores wth the other materas needed, t woud have manu-
factured or produced armatures wthn the terms of the statute and reguatons.
(See eppcr v. Carter, 286 Fed., 370, 371 (C. C. . 9) T. D. 3 3, C. . II-,
281 (1923) .) There can be no possbe dfference where the ta payer utzes
used cores, whch have been dscarded and are out of crcuaton, to combne
wth new essenta materas consttutng a substanta and matera porton
of the competed product
Reversed.
Desman, Crcut udge, concurs n the resut.
S CTION 609. T ON SPORTING GOODS.
Reguaton s 6 (1932), rtce 55: Games. 19 1- 9-10922
Ct. D. 1530
M NUF CTUR RS CIS T S R NU CT OF 1032 D CISION OF
COURT.
1. Ta on Spobt.no Goods o-Saw ow a Machne Ta -
abe as a Game.
g-Saw ow a machne, manufactured and sod by the
pantff. a game wthn the meanng of secton 609 of the Revenue
ct of 1932, and s therefore sub|ect to the ta mposed by that
secton.
2. Certorar Dened.
Petton for certorar dened October 20, 19 1.
Coubt of Cams of the Unted States.
C. R. rk d Co. v. The Unted States.
37 Fed. Supp., 93 .
pr 7, 19 1.
opnon.
Whtakkb, udge, devered the opnon of the court.
The frst queston presented In ths case s whether or not the artce descrbed
n the frst fndng s a game n te sense that word s used n secton 609 of the
Revenue ct of 1982 ( 7 Stat.. 169, 26 ). Ths secton eves a ta on numerous
artces sod by the manufacturer, producer, or mporter, of whch the foowng
groups are typca: (1) tenns rackets, baseba bats, gof cubs, acrosse stcks,
basebas, footbas, tenns bas, and gof bas : (2) skates, snow shoes, toboggans,
canoe paddes, and fshng rods and rees; and (3) bard and poo bas, chess
and checker hoards, dce, and games. Then foows ths catch a phrase: and
a smar artces commony or commercay know as sportng goods.
It w e noted that (e artces sted ncude equpment for both ndoor and
outdoor sportng contests. mong the outdoor sports are tenns, baseba,
footba, gof, acrosse, and poo. mong the ndoor sports are bards, chess,
checkers, dce, and games. of these nvove contests; but, n addton, there Is
aso sub|ected to the ta equpment for sports whch do not often nvove contests,
such as snow shoes, canoe paddes, fshng rods and rees.
Many of the courts have sad that the word game necessary nvoves e
eement of contest (Stearne-s v. State, 21 Te ., 692, 6 M; Cheek v. Cotnmonreath,
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293
Regs. 7, rt. 1.
7P y.. 3T 9. 363; onver s Law Dctonary Games ) : but we doubt that Con-
gress meant to so mt t here. Snow shoes, toboggans, canoe paddes, fshng
rods and rees, whch Congress specfcay ta ed, may be used n contests, but
rarey are.
The Supreme Court, however, n Whte v. ronton ( 302 U. S.. 16 Ct. D. 1283,
C. . 1937-2, 507 ), gave somewhat quafed approva to the foowng statement
of the crcut court of appeas:
The words G:mes and parrs of games brng nto the st of ta abes ony
such other artces as are used n games of contest, the same as those partcuary
named are and wth whch they are cosey assocated.
In vew of ths, we sha assume that the eement of contest s necessary.
The proof shows, and we have so found, that whe there was some nducement
for a person to pay the machne n queston by hmsef, the greatest en|oyment
from ts use was n competton wth others, to see who coud get the hghest
score. cept for te fact that t was adaptabe to such contests, we doubt f
many of the machnes coud have been sod.
We have no doubt that, In so far as ts eement s concerned, t comes wthn
the defnton of the word game as mted by Whte v. ronson. supra.
The ony utty of the devce was recreaton or amusement. It served no other
usefu purpose. It mproved nether the mnd nor the body. It had no uttaran
use.
The fact that but one payer coud manpuate It at a tme Is mmatera.
Numerous artces sub|ected to the ta can be used by ony one person at a tme.
baseba bat, gof cubs, a tenns racket, a footba, a bard ba, dce, etc.,
can be used by ony one payer at a tme.
We have east about for some word to descrbe ths devce other than game.
We have been unabe to thnk of one. It was so descrbed by the pantff. The
pantff speaks of t as the fastest game you ve ev r seen.
We are of opnon that the devce comes wthn the defnton of the word
game as used n the ct.
Ths vew makes t unnecessary for us to consder the second queston presented,
whch s whether or not the pantff passed on the ta .
It resuts that pantff s petton must be dsmssed. It Is so ordered.
Madden, udge; ones, udge; LTT|rroN. udge; and Whaet, Chef ustce,
concur.
INT RN L R NU COD .
S CTION 2700, S M ND D. PISTOLS ND R OL RS.
Reguatons 7, rtce 1: Rate of ta . 19 1- 1-10858
T. D. 5083
TITL 2 INT RN L R NU . C PT R I. SU C PT R C, P RT 302. T
ON PISTOLS ND R OL RS.
Reguatons 7. as made appcabe to the Interna Revenue Code
by Treasury Decson 8.S5 C. . 1939-1 (Part 1), 396 , amended.
Tre vsuky Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 7 Part 302, Tte 26, Code of
Federa Reguatons , reatng to the ta on saes of pstos and re-
vovers by the manufacturer, to secton 210 of the Revenue ct of
19 0 (5 Stat. 516), and secton 521 (a)(9) and (b) of the Revenue
ct of 19 1 (Pubc Law 250, Seventy-seventh Congress), approved
September 20, 19 1, amendng secton 2700(a) of the Interna Revenue
Code, such reguatons, but ony as prescrbed and made appcabe to
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Regs. 7, rt. 1.
29
the Interna Revenue Code by Treasury Decson 885, approved
February 11, 1939 C. . 1939-1 (Part 1), 396 Chapter I, note, Tte
26, Code of Federa Reguatons, 1939 Sup. , are amended as foows:
There s nserted mmedatey precedmg artce 1 secton 302.1
the foowng:
Sec. 2700. Ta . (Interna Revenue Code.)
(a) Rate. There sha be eved, assessed, coected, and pad upon
pstos and revovers sod or eased by the manufacturer, producer, or
mporter, a ta equvaent to 109c of the prce for whch so sod or eased.

Sec. 210. Msceaneous cses. (Revenue ct of 19 0.)
The Interna Revenue Code s amended by nsertng nt the end of
chapter 9 the foowng new chapter:
Chapter 9 Defense Ta for Fve Tears.
Sec. 1650. Defense Ta for Fve Tears.
(a) In eu of the rates of ta specfed n such of the sectons of ths
tte as are set forth In the foowng tabe, the rates appcabe wth
respect to the perod after une 30,19 0, and before uy 1, 19 5, sha be
the rates set forth under the headng Defense-Ta Rate :
Secton.
2700(a)-
Descrpton of ta .
Pstos and revovers.
Od rate.
10 percent.
Defense-tat
rate.
11 percent.
Sec. 521. Defense cse Ta Rates Made Pehmanf.nt Whch are not
Increased by Ths ct. (Revenue ct of 19 1.)
(a) The foowng sectons of the Inferna Revenue Code are amended
as foows:

(9) Pstos and kevovebs. Secton 2700(a) s amended by strk-
ng out 10 per centum and nsertng n eu thereof 11 per
centum.
(b) The rates specfed n subsecton (a) sha be appcabe ony wth
respect to the perod after the date of the enactment of ths ct, and
the rntcs specfed n secton f50(a) of the Interna Revenue
Code sha not appy wth respect to such perod.
rtce 1 secton 302.1 s amended to read as foows:
rtce 1. Rate of ta . The ta s mposed at the rate of 10 per cent wth
respect to the perod pror to uy 1, 19 0. y reason of the modfcaton made
by secton 210 of the Revenue ct of 19 0 and the amendment made by secton
521 of the Revenue ct of 19 1, the ta s eved at the rate of 11 per cent wth
respect to the perod after une 30, 19 0.
(Ths Treasury decson s prescrbed pursuant to secton 210 of the
Revenue ct of 19 0 (5 Stat., 516), secton 521 of the Revenue ct
of 19 1, approved September 20, 19 1, and secton 3791 of the Interna
Revenue Code (53 Stat, 67; 26 U. S. C, Sup. , 3791).)
Gut T. evemno,
Commssoner of Interned Revenue.
pproved October 3, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 6,19 1, 3.31 p. m.)
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295 Regs. 51 (19 1), 320.30.
R T IL RS CIS T S.
INT RN L R NU COD .
S CTION 2 O0, S DD D Y S CTION 552 OF T R NU
CT OF 19 1.
Reguatons 51 (19 1), Sec ton 320.30: Scope 19 1 15-10892
of ta . S. T. 921
( so Sectons 2 01 and 2 02, as added by Secton 552
of the Revenue ct of 19 1. and Sectons 320. 0 and
320.50 of Reguatons 51 (19 1).)
Where the retaers e cse ta s coected ns a specfc tem, and
the addton of the ta to the reta sae prce resuts n a fractona
part of a cent beng coectbe from the customer, such fractona
part of a cent, f ess than one-haf cent, mny be dsregarded, but
f one-haf cent or more shoud be ncreased to 1 cent.
dvce s requested as to how fractona parts of a cent are to be
treated by retaers where the retaers e cse ta under sectons 2 00,
2 01. and 2 02 of the Interna Revenue Code, as added by secton 552
of I he Revenue ct of 19 1, s coected from customers as a specfc
tem.
Where the retaers e cse ta s coected from the customer as a
specfc tem, ndvdua transactons frequenty arse whch nvove
a fracton of a cent. For e ampe, n the case of an artce whch s
sod at reta for 25 cents the retaer now adds the 10 per cent re-
taers e cse ta , or 2y2 cents, so that 27y2 cents s the tota amount
due from the customer. Thus, the queston s presented whether a
ta of 2 cents or a ta of 3 cents shoud be coected from the cus-
tomer. (The fractona part of a cent ascrbabe to the ta w vary
accordng to the amount of the reta sae prce.)
ecause of the necessty for makng change n even cents, and n
order not to handcap the ordery transacton of reta busness where
a arge number of saes are nvoved, n determnng the ta to be
coected, a fractona part of a cent whch s ess than one-haf cent
may be dsregarded, but where such fractona part of a cent s one-
haf cent or more, such amount shoud be ncreased to 1 cent.
ccordngy, n the e ampe stated, a ta of 3 cents shoud be
coected.
The foregong practce s approved where t s adopted soey for
the bona fde purpose of makng change.
Reguatons 51 (19 1), Secton 320.30: Scope
of ta .
( so Secton 2 05, as added by Secton 552 of
the Revenue ct of 19 1, and Secton 320.10
of Reguatons 51 (19 1).)
Where a |eweer pays the fu amount of retaers e cse ta
on a sae of |ewery on the nstament pan at the tme the nsta-
ment sae contract s entered nto, and s unabe to coect one or
more of the nstament payments, the |eweer may take a credt
aganst ta due on a subsequent return, or may fe a cam for
refund for the amount of ta attrbutabe to the uncoectbe In-
stament or nstaments.
19 1- 8-10915
S. T.92
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Regs. 51 (19 1), 320.33.
296
dvce s requested whether a |eweer, who at the tme an nsta-
ment sae contract s entered nto pays the fu amount of retaers
e cse ta on the reta sae prce of an artce of |ewery, etc., sod
under such contract, s entted to a credt or refund of the propor-
tonate part of the ta n the event he s unabe to coect one or
more of the nstament payments due under the contract.
number of so-caed credt |eweers have e pressed the de-
sre to pay the fu amount of ta on reta saes of |ewery on the
nstament pan at the tme the contracts are entered nto n order
to avod the work ncdent to accountng for a porton of the ta as
each payment s receved, provded a credt or refund s aowabe
for that porton of the ta appcabe to uncoectbe nstaments.
Secton 2 00 of the Interna Revenue Code, as added by secton
552 of the Revenue ct of 19 1, mposes a ta of 10 per cent of the
prce for whch |ewery and other enumerated artces are sod at
reta.
Secton 2 05 provdes n part that n the case of a contract of sae
of an artce wheren t s provded that the prce sha be pad by
nstaments and tte to the artce sod does not pass unt a future
date, there sha be pad upon each payment wth respect to the
artce that porton of the tota ta whch s proportonate to the
porton of the tota amount to be pad represented by such payment.
The effect of ths secton s that a porton of the ta s ncurred
upon the payment of each nstament of the purchase prce of the
artce sod. There s nothng n the statute to suggest that such pay-
ments of the ta are predcated upon, or are affected n any way b v,
the utmate passng of tte to the artce purchased. The ta s
mposed upon each pad nstament. Under secton 2 05. no ta s
mposed upon uncoectbe nstaments. Thus, t s beeved that
secton 2 00 and secton 2 05 must be read together and treated as
the mposng sectons n cases of eases, nstament saes, and con-
dtona saes where the passng of tte s postponed.
In vew of the foregong, t s hed that where a reta |eweer
pays the fu amount of ta at the tme the nstament sae contract
s entered nto and t ater deveops that he s unabe to coect one
or more of the nstament payments due under such contract, there
s, n effect, an overpayment of the ta to the e tent of the amount of
ta attrbutabe to the uncoectbe nstaments. In such a case,
the ta payer may take a credt for such overpayment aganst the ta
due on a subsequent return, or may fe a cam for the refund thereof,
upon compance wth the requrements of secton 320.6(5 of Regua-
tons 51 (19 1).
Reguatons 51 (19 1), Secton 320.33: rtces 19 1- 5-10893
made of, or ornamented, mounted or ftted wt h, S. T. 923
precous metas or mtatons thereof.
The pen pont, ever, cp, and te narrow meta band or bands
paced on the cap for the e press purpose of preventng the spttng
or e panson of the cap are hed to be essenta parts of a fountan
pen not used for ornamenta purposes, wthn the meanng of the
e empton provsons contaned n secton 2 00 of the Interna
Revenue Code, reatng to fountan pens. other parts made of
precous metas or mtatons thereof are hed to be ornamentatons
uness t s concusvey estabshed that a partcuar part Is an
essenta part and not for ornamenta purposes.
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297 Regs. 51 (19 1), 320.30, etc.
dvce s requested as to whch parts of a fountan pen are con-
sdered essenta parts not used for ornamenta purposes, wthn
the meanng of the e empton provsons contaned n secton 2 00 of
the Interna Revenue Code, as added by secton 552 of the Revenue
ct of 19 1.
Secton 2 00 of the Code provdes as foows:
There s hereby mposed upon the foowng artces sod at reta a tat
equvaent to 10 per eentun of the prce for whch so sod: artces
made of, or ornamented, mounted or ftted wth, precous metas or mtatons
thereof . The ta mposed by ths secton sha not appy to
a fountan pen f the ony parts of the pen whch consst of precous metas are
essenta parts not used for ornamenta purposes.
The pen pont, ever, cp, and the narrow meta band or bands
paced on the cap for the e press purpose of preventng the cap from
spttng or e pandng are hed to be the parts of a fountan pen
whch are u essenta parts not used for ornamenta purposes, wun
the meanng of the e empton provsons contaned n secton 2 00 of
the Interna Revenue Code. other parts consstng of precous
metas or mtatons thereof are hed to be ornamentatons uness t s
concusvey estabshed that a partcuar part s an essenta part and
not for ornamenta purposes. ccordngy, fountan pens whch
have parts (other than the essenta parts enumerated above) con-
sstng of precous metas or mtatons thereof are sub|ect to the ta
mposed by secton 2 00 of the Interna Revenue Code.
Reguatons 51 (19 1), Sectons 320.30, 320.31, 19 1-50-10929
320.32, 320.37, and 320.6 . T. D. 5102
TITL 26 INT RN L R NU . C IT I I. SU C PT R C, P RT 320.
Reguatons 51, reatng to e cse ta es on saes by the retaer,
amended.
Treasury Department,
Offce of Commssonkr of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 51, approved September 29, 19 1 Part 320, Tte 20,
Code of Federa Reguatons, 19 1 Sup. , are amended as foows:
Paragraph 1. Subparagraph (1) of secton 320.30 s amended to
read as foows:
(1) artces commony or conmercny known as |ewery, whether rea
or mtaton, regardess of the substance of whch made, ncudng artces to be
carred n the hand, or hung on the arm, or carred or worn on the person, whch
are made of, ornamented, mounted or ftted wth, pears, precous or sem-
precous stones, or mtatons thereof. ,
Par. 2. Secton 320.31 s amended to read as foows:
Sec. 320.31. ercrp. ewery n genera ncudes artces desgned to be worn
on the person or appare for the purpose of adornment and whch n accordance
wth custom or ordnary usage are worn so as to be dspayed, such as rngs,
chans, brooches, braceets, cuff buttons, neckaces, eurrngs, beads, etc. The ta s
mposed on the sae of any of such artces at reta, regardess of the substance
of whch made and wthout reference to ther uttaran vaue or purpose, uness
for a purpose specfcay e empted by aw.
1611 2 20
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Regs. 51 (19 1), 320.30, etc. 298
ewery aso ncudes artces to be carred In the hand, or hung on the arm, or
curred or worn on the person, whether n pocket or bag or under the outer
garment, such as cgarette cases, eyegass cases, pencs, powder bo es, garter
buckes, canes, purses or handbags, f made of, or ornamented, mounted or ftted
wth, pears, precous or sem-precous stones, or mtatons thereof. Such
artces are kewse sub|ect to ta wthout regard to ther uttaran vaue or
purpose. ( ut see secton 320.33 for the ta abty of such artces where made of,
or ornamented, mounted or ftted wth, precous metas, or Imtatons thereof.)
For purposes of the ta , t s Immatera whether |ewery s rea or mtaton.
Par. 3. Secton 320.32 s amended by addng the foowng at the end
thereof:
( ut see secton 320.31 for the ta abty of certan artces where made of, or
ornamented, mounted or ftted wth, pears, precous or sem-precous stones, or
mtatons thereof.)
Par. . The thrd paragraph of secton 320.37 s amended to read
as foows:
Where an artce otherwse ta abe s sod for regous purposes and the
artce s of such nature as to be usabe for uonregous as we as regous
purposes, for e ampe, crosses, candestcks, vases, etc.. the retaer must have In
hs possesson a statement from the consumer certfyng that the artce was
purchased soey for regous purposes n order to estabsh hs rght to e emp-
ton from the ta on the sae. owever. If the artce Is of such nature as
tt be usabe ony for regous pun oses. for e ampe, a crucf , rosary, chace,
etc.. a statement from the purchaser or consumer w not be requred to estabsh
the ta e empton.
Par. 5. Secton 320.6 s amended by emnatng a but the frst
paragraph and substtutng the foowng n eu thereof:
Where an artce s sod and before use, the sae s rescnded by a return of
the artce to the retaer and by a refund or credt of the fu amount of the
purchase prce, ncudng ta , to the purchaser, no ta s payabe wth respect
to the transacton. In such case, f a ta was pad by the retaer, the amount
thereof may be apped as a credt upon a subsequent monthy return, or may
be made the sub|ect of a cam for refund.
Where an artce Is sod and before use. the sae s rescnded by a return of
the artce to the retaer, and the purchaser receves credt for the fu amount
of the purchase prce, ncudng ta , n an e change of the artce for another
artce, wth approprate ad|ustment for the dfference, f any, n the vaues
of both artces, the ta appes to the second artce, f ta abe, wthout regard
to the tme when the sae of the frst artce occurred, whether before, on, or
after October 1. 19 1. If a ta was pad by the retaer wth respect to the
frst artce, the amount thereof may be apped as a credt upon a subsequent
monthy return or may be made the sub|ect of a cam for refund.
Where an artce sod under a guaranty contract s returned to the retaer
from whom purchased, whether before or after use, by reason of a defect or a
faure under the warranty, and a new artce of the same knd s gven wthout
charge n e change therefor, no ta s payabe wth respect to the transacton.
In such case, there s no ad|ustment wthn the meanng of secton 2 07(a) of
the prce at whch the frst artce was sod; accordngy, no credt or refund of
the ta , f any, pad wth respect to the returned artce Is aowabe. Where
the purchaser receves an artce, whether of the same knd or of a dfferent knd,
and s requred to make some payment for the second artce n addton to
whatever amount s aowed as an ad|ustment for the returned defectve artce,
the ta s payab|e wth respect to the second artce, f ta abe, on the bass of
the amount pad therefor, pus the amount aowed for the returned artce. In
that case, the amount aowed for the returned artce s an ad|ustment wthn
the meanng of secton 2 07(a) of the prce at whch such artce was sod, and
the retaer may be aowed a refund or credt of that part of the ta , f any, pad
wth respect to such artce whch s proportonate to the part of the saes prce
aowed as an ad|ustment.
credt or refund of ta s not aowabe wth respect to an artce returned
as a trade-n n the purchase of another artce. In such case, there Is no
ad|ustment wthn the meanng of secton 2 07(a) of the prce at whch the frst
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299 Regs. 51 (19 1), 320. 0.
artce was sod. Instead, the sae of the second artce Is a separate and dstnct
transacton n whch the frst artce s merey apped n part payment of the
purchase prce. ccordngy, the fu amount of the tn due upon the sae of
the second artce s payuhe wthout any aowance or offset for the ta pad on
the sae of the frst artce. (See secton 320.5.)
(Ths Treasury decson s ssued pursuant to the authorty con-
taned n secton 2 10 of the Interna Revenue Code, added by secton
552 of the Revenue ct of 19 1 (Pubc aw 250, Seventy-seventh
Congress).)
Gut T. everno,
Commssoner of Interna Revenue.
pproved December 9, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster December 10, 19 1, 11.23 a. m.)
FURS.
S CTION 2 01, S DD D Y S CTION 552 OF T R NU CT
OF 19 1.
Reguatons 51 (19 1), Secton 320. 0: Scope 19 1- 2-10872
of ta . S.T.920
( so Secton 2 05, as added by Secton 552 of
the Revenue ct of 19 1, and Secton 320.10
of Reguatons 51 (19 1).)
Ta abty under secton 2 01 of the Interna Revenue Code, as
added by secton 552 of the Revenue ct of 19 1, of reta saes of
furs and fur-trmmed armeuts under nstament sae and ay-
away contracts made pror to October 1, 19 1, nnd reta saes of
such artces for cash or on open account.
dvce s requested as to the appcaton of secton 2 01 of the
Interna Revenue Code, as added by secton 552 of the Revenue ct
of 19 1, to reta saes of fur, or fur-trmmed garments of whch the
fur trmmng s the component matera of chef vaue, under nsta-
ment sae or ayaway contracts made pror to October 1, 19 1, and
to cash saes or saes on open account made pror to that date.
Secton 2 01 of the Interna Revenue Code, as added by secton 552
of the Revenue ct of 19 1, mposes a ta of 10 per cent of the prce
for whch artces made of fur on the hde or pet, and artces of whch
such fur s the component matera of chef vaue, are sod at reta.
Secton 2 05 of the Interna Revenue Code, as added by secton 552
of the Revenue ct of 19 1, provdes as foows:
In the case of (a) a ease, (6) a contract for the sae of an artce wheren
It s provded that the prce sha be pad by Instaments and tte to the artce
sod does not pass unt a future date notwthstandng parta payments by
Instaments, or (c) a condtona sae, there sha be pad upon each payment
wth respect to the artce that porton of the tota ta whch s proportonate
to the porton of the tota amount to be pad represented by such payment No
ta sha be mposed under ths chapter on the sae of any artce ta abe under
secton 2 00 or secton 2 01 f wth respect to such artce the ease, contract
for sae, or condtona sae was made, devery thereunder was made, and a
part of the consderaton was pad, before October 1,19 1.
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Regs. 51 (10 1), 320. 0. 300
In the case of a reta sae of a fur, or fur-trmmed garment of
whch the fur trmmng s the component matera of chef vaue, t s
hed that, under secton 2 05 of the Interna Revenue Code, the ta
mposed by secton 2 01 w attach to any payment made on or after
October 1, 10 1, pursuant to an nstament sae contract entered nto
pror to that date, uness before October 1. 19 1, part payment of the
purchase prce was made and there was actua devery of such artce
to the customer, or the artce was so dentfed as the customer s prop-
erty as to entte the enstomer to receve devery pror to October 1.
19 1.
In the case of a so-caed ayaway sae of such fur or garment
efore October 1, 19 1, where part payment to the retaer was made
but the purchaser can not obtan devery of such artce unt the
ente purchase prce has been pad, payments made on and after
October 1,19 1, are sub|ect to ta .
In the case of a reta sae of such fur or garment for cash or on open
account pror to October 1. 19 1, the ta does not attach to such sae
where tte to the artce passed to the customer pror to that date.
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301 Regs. 8 (193 ), rt. 1.
PROC SSING T S.
INT RN L R NU COD .
COCONUT ND OT G T L OILS.
S CTION 2 77 FIRST DOM STIC PROC SSING D FIN D.
Reguatons 8 (193 ), rtce 1: Defntons. 19 1-38-10880
S.T.919
The e empton provded n secton 2 77 of the Interna Revenue
Code, reatng to the use of pam o n the manufacture of tn pate
or terue pate, does not appy to the use of pam o by the M Com-
pany n the manufacture of cod-roed stee sheets whch are not
manufactured nto tn pate or terne pate.
dvce s requested whether the e empton provded n secton
2 77 of the Interna Revenue Code, wth respect to the use of pam
o n the manufacture of tn pate or terne pate, appes to the use
by the M Company of pam o n the manufacture of cod-roed stee
sheets whch are not eventuay manufactured nto tn pate or terne
pate.
Secton 2 70 of the Interna Revenue Code mposes a ta upon the
frst domestc processng n the Unted States of pam o and certan
other vegetabe os. Secton 2 77 of the Code provdes as foows:
For the pnrposes of ths chapter the term frst domestc processng means
the frst use In the Unted States, n the manufacture or producton of an artce
ntended for sae, of the artce wth respect to whch the ta s mposed, but
does not Incude the use of pam o n the manufacture of tn pate or terne
pate, or any subsequent use of pam o resdue resutng from the manufacture
of tn pate or terne pate.
In the nstant case the pam o s heated unt t reaches the
consstency of water. It s then run on the fet roers through whch
the stee sheets are passed. The stee sheets become coated on both
sdes wth a ght appcaton of pam o. The M Company aso uses
pam o by drect appcaton on the cod m ros. Under both
processes, the pam o s used to prevent the stee from beng scratched
and to ad n the reducton of ght gauges. The M Company produces
nether terne pate nor tn pate. ther of such products can e
manufactured from the M Company s product, and some of the M
Company s product s manufactured nto terne pate by the purchasers.
The e empton provded n secton 2 77 e pressy appes to the
use of pam o n the manufacture of tn pate or terne pate. Such
e empton aso appes to the use of pam o n the nta stages of
the manufacture of tn pate or terne pate, athough the fna stages
of such manufacture may be performed by some person or company
other than the person or company whch performed the nta stages
of such manufacture. owever, many of the cod-roed sheets pro-
duced by the M Company are not manufactured nto tn pate or
terne pate. The queston s presented whether the e empton prov-
sons of secton 2 77, supra, appty to the use of pam o n the manu-
facture of such sheets.
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Regs. 8. rt. 8.
302
In Farrngton v. Tennessee (95 U. S., 679, 686) the Supreme Court
of the Unted States made the foowng observatons concernng e -
emptons from ta aton:
When e empton s camed, t must he shown Indubtaby to e st.
t the outset, every presumpton s aganst t. we-founded doubt s fata to
the cam. It s ony when the terms of the concesson are too e pct to admt
fary of any other constructon that the proposton can be supported. (WY f
Wsconsn Raway Co. v. oard of Supervsors, 93 U. S., 595; Tucker v. Ferguzon,
22 Wa., 527.)
In Phpps v. Commssoner (91 Fed. (2d), 627, 629, certorar dened
(1937), 302,U. S., 7 2) the Court ponted out that when a ta ng statute
s beng construed the usua rue that such a statute s beray construed
n favor of the ta payer does not appy when the queston of e empton
from ta aton s concerned, but on the contrary the provson grantng
e emptons s construed aganst the ta payer wth respect to a am-
bgutes. (See aso cases cted n Phpps v. Commssoner, supra.)
It s hed that the e empton provded n secton 2 77 of the In-
terna Revenue Code does not appy to the use of pam o by the M
Company n the manufacture of cod-roed stee sheets whch are not
manufactured nto tn pate or terne pate.
S CTION 2 83, S DD D Y S CTION 561 OF T R NU CT
OF 19 1.
Reguatons 8, rtce 8: Records. 19 1-50-10928
T. D.5101
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 806
PROC SSING T O C RT IN OILS.
Reguatons 8, as made appcabe to the Interna Revenue Code
by Treasury Decson 885 C. . 1939-1 (Part 1), 398 , amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton. D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 8 Part 306, Tte 26. Code of
Federa Reguatons , reatng to the processng ta on certan os,
to secton 561 of the Revenue ct of 19 1 (Pubc aw 250, Seventy-
seventh Congress), approved September 20, 19 1, amendng Chapter
21 of the Interna Revenue Code, such reguatons, but ony as pre-
scrbed and made appcabe to the Interna Revenue Code by
Treasury Decson 885, approved February 11. 1939 C. . 1939-1
(Part 1), 396 Chapter 1, note, Tte 26, Code of Federa Regua-
tons, 1939 Sup. , are amended as foows:
Paragraph 1. There s nserted mmedatey precedng artce 2
secton 306.2, Tte 26, Code of Federa Reguatons , as amended
by Treasury Decson (395 C. . -2, 32 (1936) , the foowng:
Sec. 561. Payment of Proceeds of Processtn-u Ta to Gcam and
mercan Samoa. (Revenue ct of 19 1.)
(a) Payment to Possessons. Chapter 21 of the Interna Revenue
Code (reatng to processng ta on os) s amended by addng at
the end thereof the foowng new secton:
Sec. 2 S3. ta es coected under ths chapter wth respect to
coconut o whoy of the producton of Guam or mercan Samoa or
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303 Regs. 96 (1936), rt. 20 .
produced from materas whoy of the growth or producton of Gunm
or mercan Samoa, sha be hed as separate funds and pad to the
Treasury of Guam or mercan Samoa, respectvey. No part of the
money from such funds sha be used, drecty or ndrecty, to pay a
subsdy to the producers or processors of copra, coconut o, or aed
products, e cept that ths sentence sha not be construed as prohbtng
the use of such money, n accordance wth reguatons prescrbed by
the Commssoner wth the approva of the Secretary, for the acqus-
ton or constructon of factes for the better curng of copra or for
bona fde oans to copra producers of Guam or mercan Samoa.
(b) ffectve Date of mendment. The amendment made by ths
secton sha be appcabe ony wth respect to ta es coected after
the date of enactment of ths ct.
Par. 2. Subdvson (c) of artce 8 secton 306.8, Tte 26, Code
of Federa Reguatons , s amended to read as foows:
(c) Records reatve to coconut o or to any combnaton or m ture con-
tanng a substanta quantty of coconut o, wth respect to whch o no ta
has been pad, must be mantaned n such a manner as to show:
(1) Separatey, the quantty of coconut o or combnaton or m ture con-
tanng a substanta quantty of coconut o, whch s whoy the producton
of () the Phppne Isands, () Guam, () mercan Samoa, and (v) a
other possessons of the Unted States; and
(2) Separatey, the quantty of coconut o, or combnaton or m ture con-
tanng a substanta quantty of coconut o, produced whoy from materas
whch are the growth or producton of () the Phppne Isands, () Guam,
() mercan Samoa, and (v) n other possessons of the Unted States.
The records sha aso show the country or possesson n whch the raw
materas or os were produced, when such artces were brought nto the
Unted States, and the name and address of the mporter.
Such records sha be retaned for a perod of at east four years from the
date the ta became due. The books of every person abe for the ta sha
at a tmes be open for nspecton by nterna revenue offcers.
For provsons reatng to the mposton of penates for faure to keep
proper records, see artce 21.
Ths Treasury decson sha be effectve as of September 21, 19 1.
(Ths Treasury decson s prescrbed pursuant to secton 3791 of
the Interna Revenue Code (53 Stat., 67; 26 U. S. C, Sup. , 3791).)
Gut T. everng,
Commssoner of Interna Revenue.
pproved December 5, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster December 8, 19 1, 11.12 a. m.)
TITL II. R FUNDS OF MOUNTS COLL CT D UND R T
GRICULTUR L D USTM NT CT. (1936)
Reguatons 96 (1936), rtce 20 : Condtons 19 1- 1-10856
as to ta burden wth respect to amount of re- Ct. D. 1526
fund aowabe.
PROC SSING T GRICULTUR L D USTM NT CT R NU CT OF 1036
decson of court.
1. Cam fob Refund Power of Congress to Lmt Refttnd to mount
of Ta urden orne y Ta payer.
Congress has the power to mt refunds of ta es egay coected
to the amount of the ta burden borne by the ta payer.
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Regs. 96 (1936), rt. 20 . 30
2. Processng Ta oard of Revew Fndngs of Fact uthobtt
of Crcut Court of ppeas to Revew.
The queston of whether the ta payer bore the burden of the ta
mposed upon the frst domestc processng of cotton wthn the mean-
ng of the statute s n queston of fact to be determned, frst, by
the Commssoner, and, second, by the Processng Ta oard oT
Revew. . fndng by such oard that the ta payer had pot borne
the burden of the ta , f supported by substanta evdence, s bndng:
Upon the crcut court of appeas, whose authorty to revew decsons
of the Processng Ta oard of Revew s substantay smar to that
granted to t by secton 11 1 of the Interna Revenue Code to revew
decsons of the Cnted States oard of Ta ppeas.
3. vdence Suffcency Increase n Prce of Product Motve.
The oard of Revew had before t substanta evdence on whch
to base ts decson that the ta payer had not borne the burden of the
processng ta , where the record showed that the ta payer ncreased
the prce of ts artce concurrenty wth the mposton of the ta n
an amount more than suffcent to take care of the ta and there was no
evdence that such ncrease was due to any ncrease n the cost of
raw materas, of abor, or of manufacture generay. though the
presdent of the company testfed that the prce was ncreased because
ts compettor rased the prce of ts product and that the processng
ta es were not taken nto consderaton n f ng the prce, the motve
for such Increase s mmatera.
Unted States Crcut Court of ppeas tor the Thrd Crcut.
onorbt Products, Inc., pettoner, v. Commssoner of Interna Revenue,
respondent.
119 Fed. (2d), 797.
On petton to revew the decson of the Unted States Processng Ta oard of Revew.
efore ggs, Mars, and Cark, Crcut udges.
pr 30,19 1.
opnon.
ggs, Crcut udge: The pettoner seeks to recover the sum of 1,05 . 7 pa d
under the grcutura d|ustment ct (eh. 25, 8 Stat., 31), upon the frst
domestc processng of cotton and brought a proceedng to the Unted States
Processng Ta oard of Revew upon the Commssoner s dsaowance of the
cam for refund. Secton 901 of the Revenue ct of 1936 (ch. 90, 9 Stat.,
16 8) repeaed those portons of the grcutura d|ustment ct reatng to
the processng ta es, foowng the decson of the Supreme Court n Unted
State v. uter (2 )7 U. S., 1 ret. D. 1070, C. . -1, 21 (1936) ). Secton
902(a) provdes that, No refund sha be made or aowed, of any
amount pad by or coected from any camant as ta under the grcutura
ct, uness the camant estabshes to the satsfacton of the Commssoner
or to the satsfacton of the tra court, or the oard of
Revew (a) That he bore the burden of such amount and has not
been reeved thereof nor rembursed therefor nor shfted such burden, drecty
or ndrecty, . The Commssoner re|ected the cam, fndng that the
pettoner had not proved (hat t had borne the burden of the pro -essng ta es
covered by ts cam. The oard of Revew affrmed the Commssoner and a
petton for revew was fed n ths court pursuant to the provsons of secton
906(g) of the pertnent Revenue ct. The testmony before the oard of
Revew was not ncuded n the orgna record fed n ths court. It has now
been certfed, however, and s part of the record before us.
The facts are as foows. The pettoner, onorbt, manufactures a mattress
advertsed and sod under the trade name of Perfect Seeper. The ony raw
(ta abe) cotton used by onorbt n the year 1933, wth neggbe e ceptons,
was used n these mattresses n fng a Government contract whch specfed
the use of 25 per cent raw cotton. ppro matey 16 pounds of raw cotton went
nto the manufacture of each Perfect Seeper mattress and ths cotton repre-
sented appro matey 10 per cent of the tota cost of the raw materas enterng
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305
Regs. 90 (1936), rt. 20 .
nto the manufacture of each mattress. The rate of ta per pound of cotton
Drocessed, n the perod ugust to December, 1933, ncusve, was .2 cents. onor-
bt began manufacturng the Perfect Seeper mattress n the atter part of
1929 or the eary part of 1930. t ths tme the whoesae prce was twenty to
twenty-one doars for each mattress. In 1932 the pettoner owered the whoe-
sae prce of the Perfect Seeper to 18 and n une or uy, 1933, rased t
agan to 20 per mattress. The presdent of onorbt testfed that the prce
of the Perfect Seeper mattress was controed hy the prce of the eauty
Rest mattress whch was manufactured by the Smmons Mattress Co. and
was sod n the same prce range as the Perfect Seeper In competton wth
t. The wtness aso testfed that the ony other factor taken nto consderaton
n puttng a prce upon the Perfect Seeper was the manufacturng cost,
ncudng the market prce of the materas. e stated specfcay that the proc-
essng ta was not consdered and was not a factor n f ng the amount of hs
company s bd to the Unted States.
There can be no queston of the power of Congress to mt refunds of ta es
egay coected to the amount of the ta burden borne by the ta payer.
nnUton Mannfaeturno Co. v. Dav , 301 U. 8., 337 Ct. P. 123 , C. . 1937-1,
85 ; Unted State v. efferson eetrc Co., 291 U. S., 386 Ct. D. 8(8. C. .
III-1, 393 (193 ) .) We aso entertan no doubt that the queston of whether
a ta payer bore the burden of the ta wthn the terms of the statute s prmary
a queston of fact to be determned, frst, by the Commssoner, and second, by
the oard of Revew. Secton 106(g) whch grants authorty to ths court to
revew the decsons of the oard of Revew, states that the crcut courts of
appeas sha have e cusve |ursdcton to affrm the decson of
the oard, or to modfy or reverse such decson, f t s not n accordance wth
aw, wth or wthout remandng the cause for a rehearng, as |ustce my re-
qure. The power of ts court to revew the decsons of the oard of Revew
s substantay smar to the authorty granted to us to revew decsons of
the Unted States oard of Ta ppeas bv secton 11 1 of the Interna Revenue
Code (26 U. S. C. ., 11 1). (Cf. Od Coony Trv t Co. v. Comm rmer, 279
U. S., 716 Ct. D. 80, C. . III-2, 222 (1929) ; evernq v. ehoe, 309 U. S.,
277 Ct. D. 11 7. C. R. 19 0-1. 187 .) If foows therefore that a. concuson by
the oard of Revew whch s supported by substanta evdence s bndng upon
us and hat we may not substtute our |udgment upon the facts for the decson
of the oard.
In our opnon the oard of Revew had before t substanta evdence on whch
to base ts decson that the ta payer had not borne the burden of the ta . The
pettoner s ncrease of prce of the Perfect Seeper mattress from eghteen
to twenty doars went nto effect concurrenty wth the mposton of the proc-
essng ta . The ta amounted to about 67.2 cents for each mattress or about one-
thrd of the prce ncrease of 2. The ncrease was more than suffcent to take
care of the ta and there s nothng In the record to show that the ncrease n
prce was due to any ncrease n the cost of raw materas, of abor or of manu-
facture generay. The testmony of the pettoner s presdent s smpy that
the prce was ncreased ocase the Smmons Mattress Co. rased the prce of
ts competng mattress. Whether the pettoner ntended t or not, the burden
of the ta was not borne by t, but was borne by the purchaser of ts matresses
who pad the ncreased prce. In our opnon the motve for the ncrease n
prce s mmatera and t makes no dfference that onorbt s presdent testfed
that processng ta es were not taken nto consderaton n f ng the prce per
mattress.
The case at bar s cosey anaogous to Lnzer , Inc., v. ee (106 Fed. (2d),
130, 135, certorar dened 309 U. S.. 660). In that case manufacturers e cse
ta es mposed under the Revenue ct of 1932 (eh. 209, 7 Stat., 169) (whch
contaned a mtaton 1 upon refund of ta es erroneousy or egay coected
thereunder smar to secton 902 of the Revenue ct of 1936) were under con-
sderaton. When the ta was mposed the Lnzer s, Inc., added to reta prces
of a orders a fat charge of 10 per cent ntended to cover tems of addtona
cost and e penses n addton to the ta . The 10 per cent charge whch the
ta payer had thus coected was suffcent to cover the amount of the addtona
ta but was nsuffcent to cover the ta and the tems of ncreased cost. The
Crcut Court of ppeas of the ghth Crcut hed that the motve for the
ncrease was Immatera and snce the amount coected was suffcent to re-
1 See subdvson (d), secton 62t of the Revenue ct of tn2.
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Regs. 96 rt. 20 .
306
mburse the company for ta es, t coud not recover the amount of the ta es
egay assessed. The case at bar s more strongy n favor of the Commssoner
than the ease cted, for n the nstant case there s no showng whatsoever that
the ncrease n prce was for any purpose than to take advantage of a more
favorabe market.
ccordngy the decson of the Unted States Processng Ta oard of Revew-
s affrmed.
Reguatons 96. rtce 20 : Condtons as to 19 1- 7-109O5
ta burden wth respect to amount of refund Ct. D. 1528
aowabe.
PROC SSING T GRICULTUR L D USTM NT CT R NU CT O
1930 D CISION OF COURT.
PROC SSING T ON RC CL IM FO R FUND Ta -PaYM NT W R-
R NTS Ta payer Not ntted to Refund.
The use of ta -payment warrants by a processor of rce and the
acceptance thereof by the coector of nterna revenue at ther face
vaue n payment of the processng ta dd not consttute such a pay-
ment or coecton of the ta under the grcutura d|ustment ct
as to entte the ta payer to a refund under the provsons of Tte
II of the Revenue ct of 1936 The ta payer was n fact seekng
ony recovery of an e port ad|ustment baance. Dsappontment
as to ths can not be remeded under the provsons for refundng
processng ta es unawfuy coected.
Unted States Crcut Court of ppeas for the Ffth Crcut.
C anpo Ree Mng Co., Inc., pettoner, v. Commssoner of Interna
Revenue, respondent.
121 Fed. (2d), 3aS.
Petton for revew of decson of Unted States Processng Ta oard of Revew, sttng
at Washngton, D. C. .
efore Sbey, omes, and McCord, Crcut udges.
une 25, 19 1.
opnon.
Sbey, Crcut udge: Campo Rce Mng Co., under marketng agree-
ments made wth the Secretary of grcuture by vrtue of secton 8(2) of
the orgna grcutura d|ustment ct ( 8 Stats., 31) bought rough rce
from producers at prces above the market and had on hand on March 31,
193.r , over 8,000,000 pounds unprocessed. y the amendment of March 18,
1935, secton 9(b)3 ( 9 Stats., 5), a ta of 1 cent a pound was eved for
processng, begnnng pr 1, 1935. ecause rce on hand produced n 1933
and 193 had been purchased at an advanced prce of whch the producer had
the beneft, and because t was deemed un|ust to mpose the processng ta on
such rce, secton 15(b) of the orgna ct was amended by addng provsons
for ssung ta -payment warrants on such rce suffcent to cover the ta
wth respect to the processng thereof, and these sha be accepted by the
coector of nterna revenue at the face vaue thereof u payment of any
processng ta on rce. Caupo receved such warrants for ts rce on hand
In au amount of 88, 77. Durng pr, May, une. uy, and ugust, 1935,
t processed ts rce and pad the processng ta wth the warrants, to an amount
of 81, 56. Of the rce thus processed and ta ed t e ported durng the fa
a part, and under secton 17(a), as amended, of the grcutura d|ustment
ct, becnme entted to a refund of processng ta es on t n a sum of over 59,897.
Of ths 7,838 was refunded n cash, and a cam for the baance of 12,059 was
pendng at the tme the ta ng provsons of the grcutura ct were decared
unconsttutona. (Unted States v. uter, 297 U. S., 1 Ct. D. 1070, C. . -1,
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307
Regs. 96, rt. 20 .
21 (1930) ; Rckert Rce )f v. Fontenot, 297 U. S., 110 Ct. D. 1080, C. .
-1, 36 (1938) .) Ths cam f r refund was dsaowed.
The Revenue ct of 1936 ( ) Stats.. 1( 7). took cognzance of the duty of
the Unted Sates to refund ta es unconsttutonay coected under the gr-
cutura d|ustment ct, and made mted provson for ther return. y
secton 1)06 no sut or proceedng In court coud be mantaned for the refund
of n processng ta , e cept through the oard of Revew whch was set up.
Oampo thereupon fed wth the coector of Interna revenue cam for
refund of 12,059. as a processng ta pad, and on ts dsaowance brought
the matter before the oard of Revew, whch hed that the use of the ta -
payment warrants at face vaue to dscharge the processng ta dd not
consttute such payment as entted Campo to a money refund from the
Treasury. petton to revew ths decson s before us, under Revenue ct
1936 (secton 906(g). 9 Stats., 17 S).
The oard decded rghty. Secton 902 ( 9 Stats., 17 7) speaks of refund-
ng amounts pad by or coected from any camant as ta . If the
Treasury has receved money as ta whch It ought not to retan a refund
s provded under strct mtatons. If the Treasury has receved no money
from the camant, no obgaton s mposed to pay back money. What
Campo pad ns ta to the coector was not money, but certan warrants or
certfcates whose purpose and functon was to dscharge the ta cam wthout
payng t n money. Campo pad nothng to the Unted States for the
warrants. The Unted States ssued them to offset the ta about to be mposed
because It seemed unfar to burden the rce owner wth the ta after e had
pad an e aggerated prce to the producer at the Instance of the Secretary of
grcuture. It s true ths e aggerated prce operated In the case of rce
to ad the producer n |ust the way processng ta es on other commodtes were
used, and as the newy mposed processng ta on rce was ntended to be u ed
n the future, and n ths way tended to reeve the Treasury. ut t remans
true that Campo pad a the money t ever pad to the producers, and
none to the Unted States. It certany pad no money as ta , because there
was no ta whe t was buyng ts rce. t ever pad as ta was the
warrants whch had been gven to t by the Unted States. If anythng ought
to he refunded n respect of payng the ta , t s the warrants, and I Campo
does not wsh them. It n fact s askng ony for the 12,059 e port ad|ustment
baance. Dsappontment ns to ths (see W on Co. v. Unted States, 311
U. S., 10 ; Standard Rce Co. v. Sehofcd, 27 Fed. Sup., 85 Ct. D. 1 2, C. .
1939-2, 3881) can not e remeded under the provsons for refundng processng
ta es unawfuy coected. The |udgment of the oard of Revew Is affrmed.
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Regs. 71 (1932), rt. 79. 308
ST MP T S.
INT RN L R NU COD .
S CTION 3 82, S M ND D Y S CTION 1 OF T R NU CT OF
1939. S CTIONS 209 ND 210 OF T R NU CT OF 19 0, ND S C-
TIONS 505 ND 521(a)2 OF T R NU CT OF 19 1. CON Y-
NC S.
Reguatons 71 (1932), rtce 79: Sod defned. 19 1-50-10927
( so rtce 89.) G. C. M. 22955
The transfer of rea estate n a statutory merger or consodaton
from a consttuent corporaton to the contnung or new corporaton,
as the case may he, consttutes a transfer of reaty sod wthn
the meanng of secton 3 82 of the Interna Revenue Code, as
amended, and s sub|ect to stamp ta under that secton.
n opnon s requested whether the transfer of reaty n a statutory
merger or consodaton of two or more corporatons consttutes a
transfer of reaty sod sub|ect to stamp ta under secton 3 82 of
the Interna Revenue Code, as amended by secton 1 of the Revenue.
ct of 1939, sectons 209 and 210 of the Revenue ct of 19 0, and sec-
tons 505 and 521(a)2 of the R-venue ct of 19 1.
Secton 3 82 of the Interna Revenue Code, as amended, mposes a
stamp ta on any Deed, nstrument, or wrtng whereby
any ands, tenements, or other reaty sod sha be granted, assgned,
transferred, or otherwse conveyed to, or vested n, the purchaser or
purchasers, when the consderaton or vaue of the nterest
or property conveyed, e cusve of the vaue of any en or encumbrance
remanng thereon at the tme of sae, e ceeds 100 v .
The term sod mports the transfer of the absoute or genera
tte for a vauabe consderaton or prce. ( rtce 79, Reguatons
71 (1932).) Stock n a corporaton s a vauabe consderaton for
the transfer of rea property. ( rtce 89. Reguatons 71 (1932).)
In a generc sense, statutory mergers and consodatons are to be
dstngushed from mere saes. n ustraton of such dstncton
may be found, for e ampe, n Pnea Ice d- Cod Storage Co. v. Com-
mssoner (287 IT. S., 62 Ct. I). 630, C. . II-1. 161 (192 ) ) and
Mercante ome ank cf- Trust Co. v. Unted States (96 Fed. (2d).
655). The Pneas case nvoved a sae by one corporaton to another
of a of ts assets for a money consderaton, part n cash and the re-
mander n promssory notes of the vendee. It was hed that such sae
was not an e change of property for cash and securtes by a
party to a reorganzaton wthn the meanng of secton 203(6)3(h)
of the Revenue ct of 192G. The Court stated n part as foows:
ut the mere purchase for money of the assets of one company by another s
beyond the evdent purpose of the provson, and has no rea sembance to a
merger or consodaton.
gan, n Cortand Specaty Co. et a. v. Commssoner (60 Fed.
(2d), 937. C. . II-1. 16 (1933)). nvovng substantay the same
queston as that n the Pneas case, t was stated that
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309
Regs. 71 (1932), rt. 79.
Reorganzaton, merger and consodaton are words ndcatng corporate read-
|ustments of e stng nterests. They a dffer fundamentay from a sae where
the vendor corporaton parts wth ts nterest for cash and receves nothng more.
Reorganzaton In the most ordnary sense suggests the formaton of a new
corporaton that s In fnanca dffcutes, for the purpose of purchasng the
company s works and other property, after the forecosure of a mortgage or
|udca sae.
Thus, t may be seen that the courts have recognzed a dstncton
between mere saes on the one hand and mergers and consodatons on
the other. Ths offce s of the opnon, however, that these cases must
be dstngushed from the present consderaton for they do not touch
upon the queston whether mergers and consodatons nvove saes of
assets of the consttuent corporatons.
Ordnary, form rather than substance s the test of abty n
stamp ta cases. Under secton 3 82 of the Interna Revenue Code,
as amended, however, the ta s mposed upon the transfer of reaty
sod. Whether or not reaty s sod s a queston of substance rather
than of form, for artce 79 of Reguatons 71 provdes that sod
mports the transfer of reaty for a vauabe consderaton. If con-
sderaton passes to the consttuent corporatons for reaty transferred
to the contnung or new corporaton n a statutory merger or con-
sodaton, then such a transfer s ta abe as one of reaty sod.
Lookng therefore to substance, statutory mergers and consoda-
tons are not dstngushabe, for present purposes from cases n
whch the consttuent corporatons make an outrght sae of ther
assets to a contnung corporaton or to a newy created corporaton
n consderaton for the assumpton of ther abtes and the ssu-
ance to them of stocks of the transferee corporaton. In the atter
case, the consttuent corporat ons make a qudatng dvdend of the
stock so receved to ther stockhoders, and subsequenty go through
the formaty of dssouton as provded by statute. The net resut
n ether ty S of case s the same. The ony dstncton, so far as
the nstant queston s concerned, s one of ega form. The rea
purpose of statutes e tendng to corporatons the prvege of merg-
ng or consodatng n the technca sense s to provde a smpe
and convenent method of corporate reorganzaton, thus emnatng
the necessty of severa forma steps. ence, such statutes shoud not
be treated as affectng the queston of substance or, more specf-
cay, the queston whether consderaton passes to the consttuent
corporatons.
There can be no doubt that a ta abe transfer of reaty sod s
nvoved n the stuaton above mentoned where consttuent corpo-
ratons n a nontechnca merger or consodaton make an outrght
sae of ther assets to a contnung or newy created corporaton n
consderaton for the assumpton by t of ther abtes and for the
new stock of such corporaton. It s therefore beeved that a ta abe
conveyance of reaty sod s n substance aso nvoved n a stat-
utory merger or consodaton. Support for ths concuson s found
n rgenbrght et a. v. Phoen Fnance Co. of Iowa et a. (De.,
193G, 187 t, 12 , 12(5), wheren t s stated that Whe n every
merger a sae of assets s nvoved , yet the converse s not
true, vz, that n every sae of assets a merger or consodaton s
nvoved. To the same effect s Coe et a. v. Natona
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Regs. 71 (1932). rt. 79. 310
Ca h Credt ssocaton (De., 1931, 156 t., 183), whch nvo
a sut by certan stockhoders to en|on ther corporaton from |
ceedng wth a merger agreement. The court sad:
The ease therefore s one that rests on the soe fact of aeged mterv
ton and overvauaton of the assets of two of the mergng companes.
Where that s the case the rue adopted by ths court and appcabe to
sae of corporate assets woud seem by anaogy to suppy a sound bass
gudance. Whe a consodaton s qute dstnct from a sae, yet from
vewpont of the consttuent companes, n sae of assets s n substance nvo
The argument has sometmes been made that snce the new st
passes drecty to the stockhoders of the consttuent corporatons,
corporatons themseves can not be sad to have acqured a rght
such new stock. That such s not the case was ponted out n R
estos-Manhattan, Inc., v. Unted States (296 U. S., 60, C. . I
00 (1935)), nvovng a nontechnca consodaton wth an aer
ment whch provded that the new stock shoud be ssued drecty
the stockhoders of the consttuent corporatons. The queston n t
case was whether there occurred a ta abe transfer of a rght to
ceve the new stock from the consttuent corporatons to ther sto
hoders. The Court, hodng that there was such a transfer, sad
In the present case the generatng source of the rght to receve the ne
ssued shares of pettoner new corporaton was the conveyance to t of
property of each of the corporatons to be consodated. The new shares co
not awfuy be ssued to any other than the grantor cor| nton wthout
authorty, . The consodaton agreement thus Imposed the duty
pettoner to ssue the new shares upon recept of the property, and at 1
same tme made dsposton to (he stockhoders of the two corporatons of I
correatve rght to receve the stock.
We thnk that ths effectve dsposton of the rght to receve the st
nvoved a ta abe transfer qute as much as f the severa ega reatonsh
of the partes had been estabshed at dfferent tmes and by separate documen
It Is not doubted that there woud have been a ta abe transfer f each c
poraton had conveyed ts property to pettoner n e change for ts shares
stock to be ssued as the grantor mght drect, and had ater ordered the eertfea
ssued to ts stockhoders. The reach of a ta ng ct whose purpose s
obvous as the present Is not to be restrcted by technca refnements.
Marcon Wreess Teegraph Co. of merca v. Duffy (D., Ne
ersey, 1921, 273 Fed., 197 T. D. 3219, ST. 9-21-313, 55 (1921) ) s
the same effect. In that case one corporaton sod a part of ts asse
to another corporaton n consderaton of a certan number of snr
of the purchasng corporaton. The stock was to be ssued drect
to the stockhoders of the seng corporaton. The queston w
whether the seng corporaton had a rght to eceve the stock. T
Court stated n part as foows:
In consderng the queston at ssue we must not Ignore the substant
dfference between a corporaton and ts stockhoders. The propcr
sod to Rado was the pantff s seng corporaton property, and coud I
sod ony by t. To effect the sae the consent of the stockhoders w:
necessary; but t, and not the stockhoders, hed the ega tte, and t ao
coud vest such tte n the purchaser. The stockhoders eventuay wou
share n the consderaton of the sae, hut ths coud be brought about on
by means of dvdends or smar methods of dstrbuton. The stock ssue
by Rado to the pantff s stockhoders was the consderaton for the propert
sod to t by the pantff.
ttenton as been caed to the case of Rochee Investment Co
poraton v. Fontenot (D. C. La., 19 0. 3 Fed. Supp., 118), where;
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311
Regs. 71 (1932), rt. 79.
t was hed that a transfer of rea estate by vrtue of a statutory
merger dd not consttute a sae of rea estate and accordngy was
not sub|ect to stamp ta . The Court stated n part as foows:
Consstent wth the rung of the Commssoner the defendant contends that
Schedue -8 of the above mentoned t o and ct mposes a ta on any
deed, nstrument, or wrtng whereby the absoute or genera tte to rea property
sod s conveyed to the grantee or to any other person at hs drecton. It
s urged that the term sod mports the transfer of such tte for a vauabe
consderaton or prce and that stock n a corporaton s deemed a vauabe
consderaton for the transfer of rea property. That snce the assets of the
mergng corporatons were conveyed to the Itochee Investment Corporaton
n consderaton for the ssuance of capta stock there was a vauabe
consderaton for the transfer of the rea property.
Pantff on the other hand contends that the ct does not appy to a transfers
of rea estate, but that t appes ony to deeds e ecuted to transfer property sod
to a purchaser or a nomnee. That the property heren nvoved was not sod
to a purchaser, but was transferred by vrtue of the merger agreement through
operaton of aw, the operatng aws beng the corporaton aws of Deaware and
Lousana.
In my udgment pantff s rght. transfer of rea estate by vrtue of merger
Is not a sae of rea estate. In merger the mergng corporatons, e cept the one
whch survves cease to e st. Consequenty the mergng corporatons n the
nstant case dd not and coud not receve any consderaton for the transfer,
because they were e tngushed and dssoved by the acts of ther stockhoders
n assentng to the proposed agreement of merger.
It s to be noted that the Court rested ts concuson many on the
ground that no consderaton coud pass to the mergng corporatons
because they ceased to e st at the moment of merger. The Court
thus assumed that consderaton for a sae must pass subsequent to the
transfer of the thng purchased. owever, t s the ntenton of the
partes as e pressed n the saes agreement whch must contro, and
pursuant to such ntenton the consderaton may pass pror to, sub-
sequent to, or at the same nstant as the passng of tte of the thng
purchased. (Wston on Saes, Second dton, secton 52.)
In cases nvovng statutory mergers or consodatons the ntentons
of the consttuent corporatons are to be found n the agreements to
merge or consodate. Under State aw, such agreements are requred
to foow certan we defned patterns and must contan, ether e -
pressy or by mpcaton, certan specfc provsons. Thus, under
such aws the contnung or new corporaton acqures the assets of
the consttuent corporatons. It ssues ts stocks to the stockhoders
of the consttuent corporatons, and t s requred to assume the
abtes of such corporatons. Furthermore, the consttuent cor-
poratons cease to e st wthout the necessty of forma dssouton.
It foows that when corporatons e ercse the prvege of mergng
or consodatng under such statutes they do so wth the knowedge
and ntenton that the above-mentoned characterstc provsons are
requred to be an nherent part of the merger or consodaton agree-
ment. ewed n ths ght, such agreement must be nterpreted as
refectng an ntenton on the part of the consttuent corporatons
that the transfer of ther assets, the assumpton of ther abtes
by the contnung or new corporaton, and the creaton of the rghts
to receve the new stock shoud a occur at the same nstant. It fo-
ows that snce the consttuent corporatons are n e stence at the
moment ther assets are transferred they must aso be n e stence at
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Regs. 66, rts. 8, 19.
312
the same moment for canceaton of ther abtes, and for the
recept of any other consderaton due them. Such concuson s not
n accord wth the hodng n the Rochee case that the consttuent
corporatons coud not receve consderaton because they ceased to
e st.
It s the opnon of ths offce that n the case of a statutory merger
or consodaton of two or more corporatons the assets of the con-
sttuent corporatons are transferred to the contnung or new cor-
poraton, as the case may be, n consderaton for the ssuance of the
stock of the contnung or new corporaton and the assumpton of the
abtes of the consttuent corporatons by the contnung or new
corporaton, and that the transfer of rea estate from one or more
of the consttuent corporatons to the contnung or new corpora-
ton pursuant to such a statutory merger or consodaton consttutes
a transfer of reaty sod wthn the meanng of secton 3 82 of
the Interna Revenue Code, as amended. ccordngy, such a transfer
s sub|ect to the stamp ta mposed by that secton.
. P. Wenche,
Chef Counse, ureau of Interna Revenue.
PL YING C RDS.
S CTION 1807, S M ND D,
Reguatons 66, htce 8: Ta on payng 19 1- 1-10859
cards. T. D. 5080
rtce 19: Imported payng cards.
TITL 2 INT RN L R NU . C PT R I. SI C PT R C, I RT 305. T
ON PL YING C IU1S
Increase of rate of ta wder secton 1807 of the Interna Revenue
Code, as amended, and as further amended by secton f)31 of the
Revenue ct of 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 66 Part 305, Tte 26, Code of
Federa Reguatons , as amended by Treasury Decson 987, ap-
proved uy 18,19 0 C. . 19 0-2, 3 0 , reatng to the ta on payng
cards under the Interna Revenue Code, to sectons 531 and 536 of the
Revenue ct of 19 1 (Pubc aw 250, Seventy-seventh Congress),
approved September 20, 19 1, amendng secton 1807(a) of the In-
terna Revenue Code, such reguatons, but ony as prescrbed and
made appcabe to the Interna Revenue Code by Treasury Decson
885. approved February 11, 1939 C. . 1939-1 (Part 1), 396 Chap-
ter I, note, Tte 26, Code of Federa Reguatons, 1939 Sup. , are
f rther amended as foows:
There s nserted mmedatey precedng artce 8 secton 305.8 ,
the foowng:
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313
Regs. 66, rte. 8, 10.
Tte of the Revenue ct of 19 1.
part ncreases n bates of e stng e cse ta es.
Sec. 531. Payng Cards.
Secton 1807(a) of the Interna Revenue Co p s amended by strkng
out 10 cents and nsertng n eu thereof 13 cents .
Sec. 536. ffectve Date of Part III.
The amendments made by ths Part sha be appcabe ony wth
respect to the perod begnnng wth October 1, 1011, and the rates
specfed n secton 1807(b) of the Interna Reve-
nue Code sha not appy wth respect to such perod. Ths Part sha
take effect on October 1, 19 1.
The frst paragraph of artce 8 secton 305.8 , as amended by Treas-
ury Decson 987, s amended to read as foows:
rt. 8. Ta on payng cards. On and after October 1, 19 1, the rate of ta
on p ayng cards s 13 cents per pack contanng not more than 5 cards. ach
addtona 5 cards or fracton thereof n a pack consttutes a new pack on whch
ta must be pad. For e ampe, f a pack contans 1-0 cards t must be consd-
ered as consttutng three packs, two packs of 5 cards and one pack of 12 cards,
and each such pack s sub|ect to ta at the rate n effect when abty s ncurred.
There s nserted mmedatey precedng artce 19 secton 305.19 ,
the foowng:
Tte of the Revenue ct of 19 1.
P RT h ncreases n rates of e stng e cse T S.
Sec. 531. Fayng Cards.
Secton 1807(a) of the Interna Revenue Code s amended by strkng
out 10 cents and nsertng n eu thereof 13 cents .
Sec. 536. ffectve Date of Part III.
The amendments made by ths Part sha be appcabe ony wth
respect to the perod begnnng wth October 1, 19 1, and the rates spec-
fed n secton 1807(b) of the Interna Revenue Code
sha not appy wth respect to such perod. Ths Part sha take effect
on October 1, 19 1.
The frst paragraph of artce 19 secton 305.19 , as amended by
Treasury Decson 987, s amended to read as foows:
kt. 1 . Imported payng card . (a) Labty to ta . On and after October
1, 19 1. payng cards mported from foregn countres must be ta -pad at the
rate of 13 cents per pack of not more than 5 cards. Such ta s n addton
to any mport duty and must be pad by ;M ng the requred stamps pror to
reease of the cards from customs custody.
(Ths Treasury decson s prescrbed pursuant to sectons 531 and
536 of the Revenue ct of 19 1, approved September 20, 19 1, and
sectons 1835 and 3791 of the Interna Revenue Code (53 Stat., 20 ,
67; 26 U. S. C, Sup. , 1835, 3791).)
Gt|y T. everng,
Commssoner of Interna Revenue.
pproved October 3, 19 1.
errert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 6, 19 1, 3.32 p. m.)
1(511 2 21
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Regs. 66, rts. 8, 19.
81
INT RN L R NU COD .
FIR RMS.
S CTION 2733. D FINITIONS.
Reguatons 88 (19 1), Secton 319.1: Meanng 19 1- 8-1091
of terms. S. T. 923
Lusrer or Mauser semautomatc psto equpped merey wth
a ug, spur, sot, or other devce for the attachment of a shouder
stock s not a frearm wthn the meanng of secton 2733(a)
of the Interna Revenue Code.
S. T. 008 (C. . 19 0-2, 3 2) revoked.
It was hed n S. T. 908 (C. . 19 0-2, 3 2) that a Luger or Mauser
psto equpped wth a ug, spur, sot, or other devce for the attach-
ment of a shouder stock s a frearm wthn the meanng of
secton 2733(a) of the Interna Revenue Code.
Upon reconsderaton of the matter, t s now hed that a Luger
or Mauser semautomatc psto whch s equpped merey wth a
ug, spur, sot, or other devce for the attachment of a shouder
stock s not a frearm wthn the meanng of secton 2733(a) of
the Interna Revenue Code. In order for such a psto to consttute
a frearm, as defned n that secton, there must be an accom-
panyng shouder stock wth whch the psto may be used.
S. T. 908 (C. . 19 0-2, 3 2) s revoked.
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315 Regs. 9 (1936), rt. 28.
OL OM RG RIN .
S CTION 2302(b).
Reguatons 9 (1036), rtce 28: Packnges. 19 1-38-10831
T. D.5068
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 310.
Reguatons 9, as amended, reatng to ta es on oeomargarne,
aduterated butter, and process or renovated butter, as made ap-
pcabe to the Interna Revenue Code by Treasury Decson 886
C. . 1930-1 (Part 1), 3 S , amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 9 (revsed pr, 1936) part 310, Tte 26, Code of Fed-
era Reguatons , but ony as prescrbed and made appcabe to the
Interna Revenue Code by Treasury Decson 886, approved February
11, 1939 C. . 1939-1 (Part 1), 396 Chapter I, note, Tte 26, Code
of Federa Reguatons, 1939 Sup. , are amended as foows:
rtce 28 secton 310.28, Tte 26, Code of Federa Reguatons s
amended by changng paragraph ( ) thereof to read as foows:
(o) Genera, No ma mum package s prescrbed by aw. owever, manu-
facturers are requred to put up ther product n statutory packages. statutory
package s one desgned to contan ony that quantty and cass of oeomargarne
ns ndcated by the stamp to be aff ed thereto. statutory package may ncude
sma advertsng cards, coupons, certfcates, crcuars, and other ke advertsng
matter ntended as an advertsement of the oeomargarne busness of the manu-
facturer. It sha not contan any artce whch woud materay ncrease the
weght or sze of the package.
Contaners of oeomargarne must be of a durabe and substanta character and
must competey cover the contents. s to penaty for refng contaners from
whch oeomargarne has been removed, see secton 13, ct of ugust 2, 1886.
(Ths Treasury decson s ssued under the authorty contaned n
sectons 30 and 3791 of the Interna Revenue Code (53 Stat., 2
and 67).
Got T. everno,
Commssoner of Interna Revenue.
pproved September 11, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wt the Dvson of the Federa Regster September 13, 19 1, 12.31 p. m.)
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Re.gs. 8 (193 ), rt. 72. 316
CIG R TT S.
INT RN L R NU COD .
S CTION 2000(c)2, S M ND D Y S CTION 212 OF T R NU
CT OF 19 0 ND S CTION 521(a)8 OF T R NU CT OF 19 1.
Reguatons 8 (193 ), rtce 72: Rates of ta 19 1- 7-10906
on cgars and cgarettes, etc. T. D. 5097
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 1 0.
T ON CIG R TT S.
Reguatons 8 as made appcabe to the Interna Revenue Code
by Treasury Decson 885 C. . 1939-1 (Part 1), 396 , amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 8 (revsed November, 193 ) Part
1 0, Tte 26, Code of Federa Reguatons , reatng to the ta es on
tobacco, snuff, cgars, and cgarettes, aso on cgarette papers and tubes
and purchase and sae of eaf tobacco, to secton 212 of the Revenue
ct of 19 0 (5 Stat., 516) and secton 521 (a)8 of the Revenue ct
of 19 1 (Pubc aw 250, Seventy-seventh Congress), amendng sec-
ton 2000(c) 2 of the Interna Revenue Code, such reguatons, but ony
as prescrbed and made appcabe to the Interna Revenue Code by
Treasury Decson 885, approved February 11, 1939 C. . 1939-1
(Part 1), 396 Chapter I, note. Tte 26, Code of Federa Reguatons,
1939 Sup. , are amended as foows:
Paragraph 1. There s nserted mmedatey precedng artce 72
secton 1 0.72 the foowng:
Sec. 2( 0. Ratk or Ta . (Interna Revenue Code.)

(c) Cgaks and Cgarettes. Upon cgars and cgarettes manufactured
n or mported nto the Unted States, whch are sod by the manu-
facturer or mporter, or removed for consumpton or sae, there sha
be eved, coected, and pad the foowng ta es:
(1) Couts. On cgars of a descrptons made of tobacco, or any
substtute therefor, and weghng not more than three pounds per
thousand, 75 cents per thousand;
On cgars made of tobacco, or any substtute therefor, and wegh-
ng more than three pounds per thousand, f manufactured or
Imported to reta at not more than 5 cents each, 2 per thousand;
If manufactured or mported to reta at more than 5 cents each
and not more than 8 cents each, 3 per thousand;
If manufactured or mported to reta at more than 8 cents each
and not more than 15 cents each, 5 per thousand;
If manufactured or mported to reta at more than 15 cents each
and not more than 20 cents each, 10.50 per thousand;
If manufactured or mported to reta at more than 20 cents
each, 13.50 per thousand;
Whenever n ths paragraph reference s made to cgars manu-
factured or mported to reta at not over a certan prce each, then
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317
Regs. 8 (192 ), rt. 72.
In determnng the ta to bp pad regard sha be bnd to the ordnary
reta prce of a snge cgar n ts prncpa market.
12) Coarkttes. On cgarettes made of tobacco, or any subst-
tute therefor, and weghng not more than three pounds per thou-
sand. . per thousand;
Weghng more than three pounds per thousand, 7.20 per thou-
sand: e cept that If more than d nches n ength they sha be
ta abe at the rate provded n the precedng paragraph, countng
each 2t - Inches (or fracton thereof) of the ength of each as one
cgn nte.
The ta Imposed by ths subsecton sha be n addton to any
mport dutes mposed upon mported cgars and cgarettes.

Sec. 212. Coarett 9. (Revenue ct of 19 0.)
Subchapter of Chapter 15 of the Interna Revenue Code s amended
by nsertng at the end thereof the foowng new sectons:
Pec. 200 . Defense Ta fob Fve Tears.
In eu of the rates of ta specfed n secton 2000(c) (2), the rates
of ta for the perod after une 30, 19 0, and before uy 1, 19 5,
sha 1m 3.25 and 7.80, respectvey.

Sec. 521. Defense cse Ta Rates Made Permanent Whch re
Not Increased bt Ths ct. (Revenue ct of 19 1.)
(a) The foowng sectons of the Interna Revenue Code are amended
as foows:

(8) Cgarettes. Secton 2000(c) (21 s amended by strkng out
and nsertng n eu thereof 3.26 and by strkng out
7.20 and nsertng n eu thereof 7.80 .

(b) The rates specfed n subsecton (a) sha be appcabe ony
wth respect to the perod after the date of the enactment of ths ct,
and the rates specfed n secton 200 of the In-
terna Revenue Code sha not appy wth respect to such perod.
Par. 2. rtce 72(a) secton 1 0.72 as amended by Treasury
Decson 985, approved uy 18. 1010 C. . 19 0-2, 3 9 , s further
amended to read as foows:
(a) The rates of ta on cgars as shown beow became effectve on March
2 t, 1926. The rates of ta on cgarettes as shown beow became effectve on
uy 1, 19 0.
Cass.
Cgars weghnc more than 3 pounds per 1,000.
Rate per
1,000.
It manufactured or mported to reu at

2.00
3.00
5.00
10.50
13.50
n
r
)
More than 8 cents each and not more than 15 cents each
More than 15 tvnts each and not more than 2U cents eueh

ate.
Cgars weghng not more than 3 pounds per 1,000 per 1,000 0. 75
Cgarettes weghng not more than 3 pounds per 1,000 per 1,000 3. 25
Cgarettes weghng more than 3 pounds per 1,0: .0 and measurng not more
than 6 /| nches n ength per 1,00 ) 7. SO
Cgarettes weghng more than 3 muds per 1.0 0 and measurng more than
6 ,( nches n ength; each 2 nches (or fracton thereof) of the ength
of each to be counted as one cgarette per 1,000 8. 25
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Regs. 8 (193 ). rt. 72.
318
(Ths Treasury decson s prescrbed pursuant to secton 212 of the
Revenue ct of 19 0 (5 Stat., 516), secton 521 of the Revenue ct of
19 1, approved September 20, 19 1, and secton 3791 of the Interna
Revenue Code (53 Stat., 67; 26 U. S. C, Sup. , 3791).)
Gur T. everng,
Commssoner of Interna Revenue.
pproved November 13, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 1 , 19 1. 2.59 p. m.)
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319
Msc.
FLOOR STOC S T S.
INT RN L R NU COD .
TIR S, INN TU S, ND TC S.
S CTION 3 00(b), S DD D Y S CTION 535(c) OF T R NU CT
OF 19 1; S CTION 3 09(b), S DD D Y S CTION 5 7 OF T R -
NU CT OF 19 1.
19 1-39-10837
Mm. 52 7
Premnary Instructons n regard to the procedure respectng the
fng of returns and payment of the foor stocks ta es on tres, nner
tubes, and matches mposed by sectons 3 00(b) and 3 09(b) of the
Interna Revenue Code.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, September 19,19 1.
Coectors of Interna Revenue and Others Concerned:
Secton 3 00(b) of the Interna Revenue Code (as added by secton
635(c) of the Revenue ct of 19 1) mposes a foor stocks ta on
certan tres and nner tubes whch on October 1, 19 1, are hed for
sae.
Secton 3 09(b) of the Interna Revenue Code (as added by sec-
ton 5 7 of the Revenue ct of 19 1) mposes a foor stocks ta on
certan matches whch on October 1, 19 1, are hed and ntended for
sae or for dsposton n connecton wth the sae of another artce.
The premnary nstructons as contaned heren are ssued for the
convenence of coectors and ta payers.
TIR S ND TID S.
1. Law. Secton 535 of the Revenue ct of 19 1 reads as foows:
Sec. 535. Tnts and Tubes.
(a) Rate on Trks. Secton 3 00(1) of the Interna Revenue Code
Is amended by strkng out 2 cents and Insertng In eu thereof
5 cents .
(b) Rate on Tubes. Secton 3 00(2) of the Interna Revenue Code
Is amended by strkng out cents and nsertng n eu thereof
9 cents .
(c) Foor Stocks Ta on Trks and Inneb Tubes. Secton 3 00 of
the Interna Revenue Code s amended by Insertng (a) Ta . before
the begnnng thereof and by Insertng at the end thereof the foowng:
(b) F-oor Stocks Ta . Upon tres und nner tubes sub|ect to ta
under subsecton (a) of the type used on vehces sub|ect to ta under
secton 3 03 (a) or (1 ) whch on October 1, 19 1, are hed for sue by
any person there sha be eved, assessed, coected, and pad a foor
stocks ta at the rate of 2 / cents per pound n the case of tres and
cents per pound n the case of nner rubes. The ta sha appy to
tres and nner tubes hed for sae on, or n connecton wth, or hed for
use n the manufacture or producton of, artces the sae of whch w
be sub|ect to ta under secton 3 03 (a) or (b). The ta sha not
appy to tres and Inner tubes hed for sae by the manufacturer,
producer, or mporter thereof, and to tres and nner tubes the sae of
whch w be sub|ect under the provsons of sectons 3 (a) (2) and
8 5 to the manufacturers ta on tres nnd nner tubes.
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Msc.
320
M TC S.
2. Law. Secton 5 7 of the Revenue ct of 19 1 reads as foows:
Sec. 5 7. Matches.
Secton 3 09 of the Interna Revenue Code Is amended to read aa
foows:
Sec. 3 09. Ta ow Matches.
(a) Manufactubebs Ta . There sha be mposed upon matches
sod by the manufacturer, producer, or mporter, a ta of 2 cents per
1,000 matches, e cept that n the case of fancy wooden matches and
wooden matches havng a staned, dyed, or coored stck or stem, packed
In bo es or In buk, the ta sha be 5 cents per 1,000 matches.
(b) Foor Stocks Ta . On matches sub|ect to ta under subsecton
(a) whch, on October 1, 19 1, are hed and ntended for sae, or for ds-
poston n connecton wth the sae of other artces, there sha be
eved, assessed, coected, and pad a foor stocks ta at the rate of 2
cents per thousand matches. The ta sha not appy to matches n
reta stocks hed at the pace where ntended to be sod or dsposed of.
The ta sha not appy to matches hed for sae by the manufacturer,
producer, or mporter thereof, nor to fancy wooden matches or wooden
mutches havng a staned, dyed, or coored stck or stem.
G N R L.
8. Law. Secton 3 9 of the Interna Revenue Code reads as fo-
ows:
Sec. 3 9. ppucabty or dmnstbatve Provsons.
provsons of aw (ncudng penates) appcabe n respect of the
ta es mposed by secton 2700 sha, n so far as appcabe and not
Inconsstent wth ths chapter, be appcabe n respect of the ta es
mposed by ths chapter.
INSTRUCTIONS.
. Scope of ta . In genera the foor stocks ta es are mposed upon
tres, nner tubes, and matches (wth the e ceptons heren set forth)
whch at the frst moment of October 1,19 1, are hed for sae by any
person oer than the manufacturer, producer, or mporter thereof.
The ta s on the hodng thereof for sae and not on the sae.
(a) Tres and nner tubes. The foor stocks ta es appy to
(1) Tres and nner tubes of the type used on automobes, trucks,
busses, hghway tractors, traers, semtraers, and motorcyces, f
such tres and nner tubes are hed for sae at the frst moment of
October 1, 19 1, by whoesaers, |obbers, dstrbutors, retaers, or any
person other than the manufacturer, producer, or mporter, of such
tres and nner tubes;
(2) Tres and nner tubes whch at the frst moment of October
1, 19 1, are mounted on automobes, trucks, busses, hghway tractors,
traers, semtraers, and motorcyces hed by the manufacturers,
producers, or mporters of such vehces;
(3) Tres and nner tubes whch at the frst moment of October 1,
19 1, are hed by manufacturers of automobes, trucks, busses, hgh-
way tractors, traers, semtraers, and motorcyces for use n the
manufacture of such vehces.
The foor stocks ta es do not appy to tres and nner tubes hed
for sae by the manufacturer, producer, or mporter thereof. The
foor stocks ta es kewse are not appcabe to tres and nner tubes
actuay mounted on automobes, trucks, etc., whch are hed for sae
by persons who are not the manufacturers of such vehces.
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(b) Matches. The foor stocks ta appes to matches whch at the
frst moment of October 1. 19 1, are hed and ntended for sae, or for
dsposton n connecton wth the sae of other artces, by whoe-
saed, |obbers, dstrbutors, and retaers. In respect to matches hed
by retaers, the foor stocks ta s appcabe ony to matches hed n
a warehouse or pace other than the separate reta estabshment
where matches are sod or dsposed of to consumers. The phrase for
dsposton n connecton wth the sae of another artce ncudes
matches hed for devery to a customer purchasng another artce.
For e ampe, matches used as advertsng matera by manufacturers
of varous other artces and devered to purchasers n connecton
wth the sae of such artces are sub|ect to the foor stocks ta .
The foor stocks ta does not appy to matches hed on October 1,
19 1, n separate reta estabshments or departments where such
matches are to be sod or dsposed of e cusvey at reta drecty to
consumers. The foor stocks a kewse does not appy to matches
hed for sae on October 1, by the manufacturer, producer, or
mporter thereof, or to fancy vooden matches, or wooden matches
havng a staned, dyed, or coored stck or stem.
(c) Tres, nner tubes, and matches w be regarded as hed for
sae or dsposton by the owner thereof on October 1, 19 1, athough
on that date the artces may be n transt to the owner, or n a ware-
house, storeroom, or dstrbutng depot of the owner.
5. Rate of ta . The rates of ta are:
Tres 2 cents per pound on the tota weght (e cusve of
meta rms or rm bases).
Inner tubes y2 cents per pound on the tota weght.
Matches 2 cents per thousand matches.
6. Inventory. very person abe to pay the foor stocks ta es on
tres, nner tubes, or matches sha prompty make an temzed nven-
tory of such artces sub|ect to the foor stocks ta hed for sae at the
frst moment of October 1 19 1. T-es and nner tubes sha be segre-
gated and nventored separatey accordng to trade name, sze, and
weght. Matches sha be nventored as to number.
Persons hodng tres, nner tubes, or matches at more than one
ocaton sha prepare a separate nventory n dupcate for each such
ocaton. One copy of the separate nventory sha be retaned at
such ocaton and one copy sha be forwarded to the ta payer s
prncpa pace of busness. ach nventory sha show the name of
the ta payer, the ocaton of the partcuar premses for whch the
nventory s made, and the name and address of the prncpa offce
from whch the foor stocks return w be fed.
Separate nventores forwarded to the ta payer s prncpa pace
of busness sha be consodated nto a snge nventory for the pur-
pose of computng the ta and makng return.
Tres, nner tubes, and matches n transt on October 1, 19 1, sha
be ncuded n the nventory of the person havng tte thereto on the
date mentoned. Where tte does not pass to the consgnee unt the
artces are devered, such artces n transt on October 1, 19 1, sha
be ncuded n the nventory of the consgnor.
Inventores shoud NOT be fed wth the return but must be
retaned by the ta payer at hs prncpa pace of busness.
7. Return and payment of ta . Form 887, revsed 19 1, s pre-
scrbed as the form on whch persons abe to the foor stocks ta es
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322
on tres, nner tubes, and matches sha make return and pay such
ta . The return sha be prepared and fed n dupcate on or before
October 31, 19 1, wth the coector of the dstrct n whch s ocated
the ta payer s prncpa pace of busness, accompaned by remttance
of the ta due.
The coector w retan the copy of the return for the fes of hs
offce and forward the orgna return to the Commssoner.
8. Records. Records showng payment of foor stocks ta on tres,
nner tubes, and matches, together wth the consodated and nd-
vdua nventores and other reevant papers and matera, must be
kept by the ta payer for a perod of four years from the date the
ta s due.
9. Penates and nterest. ny person abe to the foor stocks ta
who fas to make return and pay such ta on or before October 31,
19 1, w ncur abty to a penaty of 5 per cent of the ta f the
faure s for not more than 30 days, wth addtona penaty of 5
er cent for each addtona 30 days, or fracton thereof, durng whch
enquency contnues, not to e ceed 25 per cent of the aggregate ta
and nterest at the rate of 6 per cent per annum. Severe penates
are aso mposed by the Interna Revenue Code for wfu faure to
pay ta , keep records, fe returns, suppy nformaton for purposes
of ta computaton, and for fng fase or frauduent returns.
Correspondence n .regard to the procedure descrbed heren sha
refer to the number of ths mmeograph and to the symbos MT:T.
Gur T. everng,
Commssoner.
19 1- -10886
T. D. 509
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 321.
Reguatons reatng to the foor stocks ta es on tres, nner tubes,
and matches.1
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton., D. C.
To Coectors of Interna Revenue and Others Concerned:
Iabb of Contents.
Secton.
321.0. Scope of reguatons.
821.1. Scope of tu .
321.2. ates of ta .
321.3. Payment of ta .
321. . Inventory.
321.5. Return.
321.6. Records.
321.7. Penates and nterest
321.8. Refunds.
Secton 321.0. Scope of reguatons. These reguatons dea wth
the foor stocks ta es mposed by sectons 3 00(b) and 3 09(b) of
the Interna Revenue Code, as added by sectons 535(c) and 5 7 of
the Revenue ct of 19 1 (Pubc aw 250, Seventy-seventh Con-
1 Sectons 321.0 to 321.8 are ssued under authorty of sectons 3 8 and 3791 of the
Interna Revenue Code (53 Stat., 19, 07 ; 26 U. S. C, Sup. , 3 8, 3791).
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gress), approved September 20, 19 1. Secton 3 00(b) mposes ta es
wth respect to tres and nner tubes, and 3 09(b) wth respect to
matches.
Sec. 535. Tres and Tubks. (Revenue ct of 10 1.)
(a) Rate on Tres. Secton 3 00(1) of the Interna Revenue Code
Is amended by strkng out 2 cents and Insertng In eu thereof
5 cents .
(b) Ratk on Tubes Secton 3 00(2) of the Interna Revenue Code
Is amended by strkng out cents and Insertng In eu thereof
9 cents .
(c) Foor Stocks Ta on Tres and Inner Tubes. Secton 3 00 of
the Interna Revenue Code s amended by nsertng (a) Ta .
before the begnnng thereof and by nsertng at the end thereof the
foowng:
(b) Foor Stocks Ta . Upon tres and nner tubes sub|ect to
ta under subsecton (a) of the type used on vehces sub|ect to ta
under secton 3 03 (a) or (b) whch on October 1, 19 1, are hed
for sae by any person there sha be eved, assessed, coected, and
pad a foor stocks ta at the rate of 2 cents per pound n the case
of tres and cents per pound n the case of nner tubes. The ta
sha appy to tres and nner tubes hed for sae on, or n connec-
ton wth, or hed for use n the manufacture or producton of, artces
the sae of whch w be sub|ect to ta under secton 3 03 (a) or (b).
The ta sha not appy to tres and nner tubes hed for sae by the
manufacturer, producer, or mporter thereof, and to tres and nner
tubes the sae of whch w be sub|ect under the provsons of sectons
3 (a) (2) and 3 5 to the manufacturers ta on tres and nner tubes.
Sec. 5 7. Matches. (Revenue ct of 19 1.)
Secton 3 09 of the Interna Revenue Code Is amended to read as
foows:
Sec 3 09. Ta on Matches.
(a) Manufacturkrs Ta . There sha be Imposed upon matches
sod by the manufacturer, producer, or mporter, a ta of 2 cents per
1,0(10 matches, e cept that n the case of fancy wooden matches and
wooden matches havng a staned, dyed, or coored stck or stem, packed
In bo es or n buk, the ta sha be 5 cents per 1,000 matches.
(b) Foor Stocks Ta . On matches sub|ect to ta under subsecton
(a) whch, on October 1, 19 1, are hed and ntended for sae, or for ds-
poston n connecton wth the sae of other artces, there sha be
eved, assessed, coected, and pad a foor stocks ta at the rate of 2
cents per thousand matches. The ta sha not appy to matches n
reta stocks hed at the pace where ntended to be sod or dsposed of.
The ta sha not appy to matches hed for sae by the manufacturer,
producer, or mporter thereof, nor to fancy wooden matches or wooden
matches havng a staned, dyed, or coored stck or stem.
Skc. 3 9. ppcabty of dmnstratve Provsons. (Interna Reve-
nue Code.)
provsons of aw (ncudng penates) appcabe n respect of the
ta es mposed by secton 2700 sha, n so far as appcabe and not Incon-
sstent wth ths chapter, be appcabe n respect of the ta es mposed
by ths chapter.
Sec. 321.1. Scope of tar. (a) Genera. Foor stocks ta es are mposed on
tres, nner tubes, and matches (wth the e ceptons set forth n these regua-
tons) hed for sae or specfed dsposton at the frst moment of October 1,
19 1, by any person other than the manufacturer, producer, or mporter of the
artces. The foor stocks ta es are on the hodng for sae, etc., and not on the
sae of the artces.
Tres, Inner tubes, and matches are regarded as hed by the owner thereof at
the frst moment of October 1, 19 1, athough at that tme the artces are In
transt to the owner, or n a warehouse, storeroom, or dstrbutng depot.
Where tte does not pass to the consgnee unt devery, artces n transt at the
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32
frst moment of October 1, 19 1, are regarded as hed by the consgnor at that
tme.
b) Tres and nner tubes. (1) The foor stocks ta es appy to
() Tres and nner tubes of the type used on automobes, trucks, busses,
hghway tractors, traers, sem-traers, and motorcyces, hed for sae at the
frst moment of October 1, 19 1, by whoesaers, |obbers, dstrbutors, and re-
taers, or any person other than the manufacturer, producer, or mporter, of
such tros and nner tubes;
() Tres and nner tubes whch at the frst moment of October 1, 19 1,
are mounted on, or hed for sae on or n connecton wth, automobes,
trucks, busses, hghway tractors, traers, sem-traers, and motorcyces
hed by the manufacturers, producers, or mporters, of such vehces and the
sae of whch w be ta abe;
() Tres and nner tubes whch at the frst moment of October 1, 19 1,
are hed by manufacturers of automobes, trucks, busses, hghway tractors,
traers, sem-traers, and motorcyces for use n the manufacture of such
vehces.
(2) The foor stocks ta es do not appy to tres and nner tubes hed for sae
by the manufacturer, producer, or mporter thereof. The foor stocks ta es ke-
wse are not appcabe to tres and nner tubes actuay mounted on automo-
bes, trucks, etc., whch are hed for sae by persons who are not the manufac-
turers of such vehces.
(3) The term tres ncudes rubber casngs, rubber hoops, and rubber
strps or bands, of a knds, desgned and shaped or but to form the tread of
or to ft a whee of a vehce capabe of use as a means of transportng a person
or burden. The term ncudes aso tres of ether the pneumatc or sod type.
( ) The term nner tubes ncudes tubes or ar contaners of a types
made whoy or n part of rubber and desgned and manufactured for use n
pneumatc tres.
(c) Matches. (1) The foor stocks ta appes to matches whch at the frst
moment of October 1, 19 1, are hed and ntended for sae, or for dsposton n
connecton wth the sae of other artces, by whoesaers, |obbers, dstrbutors,
and retaers. In respect of matches hed by retaers the foor stocks ta s
appcabe ony to mutches hed n a warehouse or pace other than the separate
reta estabshment where matches are sod or dsposed of to consumers. The
phrase for dsposton n connecton wth the sae of another artce ncudes
matches hed for devery to a customer purchasng another artce. For e -
ampe, matches used as advertsng matera by manufacturers of varous other
artces and devered to purchasers n connecton wth the sae of such other
artces, arc sub|ect to the foor stocks ta .
(2) The foor stocks ta does not appy to matches hed on October 1, 19 1,
n seperate reta estabshments or departments where such matches are to be
sod or dsposed of e cusvey at reta drecty to consumers. The foor stocks
ta kewse does not appy to matches hed for sae on October 1, 19 1, by the
manufacturer, producer, or Importer thereof, or to fancy wooden matches, or
wooden matches havng a staned, dyed, or coored sck or stem.
(3) The term fancy wooden matches means matches havng a wooden
stem, and whch n addton to servng the purpose of the ordnary match, are
coored or decorated or manufactured n such a manner as to be more ornamenta
or attractve than the ordnary match.
Sec. 321.2. ates of ta . The rates of the foor stocks ta es are:
Tres 2 cents per pound on the tota weght (e cusve of meta rms
or rm bases).
Inner tubes 1 cents per pound on the tota weght.
Matches 2 cents per thousand matches.
Sec. 321.3. Payment of ta . very person abe to foor stocks ta on tres,
nner tubes, or matches s requred to make return and pay such ta on or
before November 30, 19 1. Ta sha be pad at the tme of fng return.
Skc. 321. . Inventory. very person abe o pay foor stocks ta on tres,
nner tubes, or matches, sha prompty make an temzed nventory of such
artces sub|ect to the foor stocks ta hed at the frst moment of October
1, 19 1. Tres and nner tubes sha be segregated and nventored separatey
accordng to trade name, sze, and weght. Matches sha be Inventored as to
number.
Persons hodng tres, nner tubes, or matches at more than one ocaton
sha prepare a separate Inventory n dupcate for each such ocaton. One copy
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of the separate Inventory sha be retaned nt such ocaton and one copy sha
be forwarded to and kept at the ta payer s prncpa pace of busness. ach
nventory sha show the name of the ta payer, the ocaton of the partcuar
premses for whch the nventory s made, and the name and address of the
prncpa offce from whch the foor stocks return w he fed.
Separate nventores forwarded to the ta payer s prncpa pace of busness
sha be consodated nto a snge nventory for the purpose of computng the
ta and makng return.
Inventores shoud OT be fed cth the return but must be retaned by
the ta payer at hs prncpa pace of busness.
Sec. 3-1.5. Return. Form 887, revsed 19 1, s prescrbed as the form on
whch persons abe to foor stocks ta on tres, nner tubes, .or matches sha
make return and pay ta . The return sha be prepared and fed n dupcate
on or before November 30, 19 1, wth the coector of the dstrct n whch s
ocated the ta payer s prncpa pace of busness.
The coector w retan the copy of the return for the fes of hs offce and
forward the orgna return to the Commssoner.
Sec. 321.6 Records. Records showng payment of foor stocks ta on tres,
nner tubes, or matches, together wth the consodated and separate nventores
and other reevant papers and matera, must be kept by the ta payer for a
perod of four years from the date the ta s due.
Set. 321.7. Penates and nterest. In the case of faure to pay the ta
due on or before November 30, 19 1, there sha be added as part of the ta ,
nterest at the rate of 6 per cent per annum for the perod begnnng December
1, 19 1, to the date of payment of the ta . Where an assesssment of the foor
stocks ta s certfed by the Commssoner to the coector of the dstrct and
payment of such ta s not made wthn 10 days after ssuance by the coector
of the frst notce and demand on Form 17 for payment, there w accrue under
secton 3(555 of the Interna Revenue Code a 5 per cent penaty and nterest
at the rate of 6 per cent per annum from the date of ssuance of the frst notce
and demand on Form 17 unt date of payment of the ta .
The penaty under secton 3612(d)(1) of the Interna Revenue Code for
denquency n fng the return s 5 per cent of the amount of the ta f the
faure s not for more than 30 days, wth an addtona 5 per cent for each
addtona 30 days or fracton thereof durng whch faure contnues, but not
to e ceed 25 per cent n the aggregate. The penaty does not appy where
the return s ater fed and faure to fe the return wthn the prescrbed tme
s shown to the satsfacton of the Commssoner to be due to reasonabe cause
and not to wfu negect.
In case a fase or frauduent return s wfuy made the penaty under
secton 3612(d)(2) of the Interna Revenue Code s 50 per cent of the tota
ta due.
Under secton 3612(e) of the Interna Revenue Code the pennty added to any
ta sha be coected at the same tme and n the same manner and as a part of the
ta uness the ta has been pad before dscovery of the negect, fasty, or fraud,
n whch case the amount so added sha be coected n the same manner as the
ta .
Other penntes are aso mposed by the Interna Revenue Code for wfu
faure to pay ta , keep records, fe returns, or suppy nformaton for purposes
of ta computaton, and for fng fase or frauduent returns.
Sec. 321.8. Refunds. cam for refund may be fed by any person who has
overpad a foor stocks ta on tres, nner tubes, or matches. The cam must
be made under oath on Form 8 3 and fed wth the coector of Interna revenue
to whom the ta was pad. The cam must contan the nformaton requred
by the form and be supported by a statement of the facts and evdence upon
whch the cam s based.
Norman D. Cann,
ctng Commssoner of Interna Revenue.
pproved October 25,19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 28, 111 1, 9.5 a. m.)
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19 1-39-108 1
T. D. 5070
TITL 26 INT RN L R NU . C PT R I. SU C PT R C, P RT 171.
Foor stocks ta es on dsted sprts and wnes.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue, Dstrct Supervsors, and Others
Concerned:
Sectons 533 and 53 of the Revenue ct of 19 1, approved Septem-
ber 20, 19 1 (Pubc Law 250, Seventy-seventh Congress), read as
foows:
Sec. 533. Dsted Spkts.

(d) Foob Stocks Ta . Secton 2800 of the Interna Revenue Code
s amended by nsertng at the end thereof the foowng new sub-
secton :
() Foob stocks ta .
(1) Upon a dsted sprts upon whch the nterna-revenue
ta mposed by aw has been pad, and whch on October 1, 19 1,
are hed and ntended for sae or for use In the manufacture or
producton of any artce ntended for sae, there sha be eved,
assessed, coected, and pad a foor stocks ta of 1 (e cept that n
the case of brandy, the rate sha be 1.25) on each proof-gaon,
and a proportonate ta at a ke rate on a fractona parts of such
proof-gaon.
(2) very person requred by ths subsecton to pay any foor
stocks ta sha, on or before anuary 1, 19 2, under such regua-
tons as the Commssoner, wth the approva of the Secretary, sha
prescrbe, make a return and pay such ta . Payment of the ta
shown to be due may be e tended to a date not ater than ugust
1, 19 2, upon the fng of a bond for payment thereof n such form
and amount and wth such surety or suretes as the Commssoner,
wth the approva of the Secretary, may prescrbe.
(3) provsons of aw, ncudng penates, appcabe n re-
spect of nterna-revenue ta es on dsted sprts sha, nsofar as
appcabe and not nconsstent wth ths subsecton, be appcabe
n respect of the foor stocks ta mposed hereunder. For the pur-
poses of ths subsecton on the term dsted sprts sha ncude
products produced n such manner that the person producng them
s a rectfer wthn the meanng of secton 325 (g).
Sec. 53 . Wnes.

(c) Subchapter F of Chapter 26 of the Interna Revenue Code s
amended by nsertng at the end thereof the foowng new secton:
Sec. 3192. Foor Stocks Ta on Wnes.
(a) Foor Stocks Ta . Upon a wnes upon whch the nterna-
revenue ta Imposed by aw has been pad, and whch on October 1,
19 1, are hed and ntended for sae or for use In the manufacture or
producton of an artce ntended for sae, there sha be eved, as-
sessed, coected, and pad a foor stocks ta at rates equa to the In-
creases n rates of ta (over the defense ta rates) made appcabe to
such artces by secton 53 of the Revenue ct of 19 1.
(b) Rkturns. very person requred by subsecton (a) to pay any
foor stocks ta sha, on or before anuary 1, 19 2, under such regua-
tons as the Commssoner, wth the approva of the Secretary, sha
prescrbe, make a return and pay such ta . Payment of the ta shown
to be due may be e tended to a date not ater than ugust 1, 19 2,
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327
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upon the fng of a bond for payment thereof In such form and amount
and wth such surety or suretes as the Commssoner, wth the approva
of the Secretary, may prescrbe.
(c) Laws ppcab|-:. provsons of aw, ncudng penates,
appcabe In respect of the u es mposed by secton 3030(a) sha.
Insofar as appcabe and not Inconsstent wth ths subsecton, be
appcabe wth respect to the foor stocks ta mposed by subsecton
(a).
Pursuant to the above sectons of aw, the foowng reguatons are
prescrbed:
DISTILL D SPIRITS.
1. ach dster, propretor of an ndustra acoho pant, nterna
revenue bonded warehouse, acoho bonded warehouse, or ta -pad
bottng house, and eac rectfer, whoesae deaer n quors, reta
deaer n quors, manufacturer, or any other person, corporaton,
partnershp or assocaton hodng on October 1, 19 1, ta -pad ds-
ted sprts, ncudng acoho and brandy, ntended for sae or
for use m the manufacture or producton of any artce ntended for
sae, sha before begnnng busness on that date prepare an nventory
of a such ta -pad dsted sprts.
2. The foowng knds of dsted sprts, among others, are sub-
|ect to the foor stocks ta of 1 a proof gaon f ta -pad pror to
October 1. 19 1, and whch on that date are hed and ntended for
sae or for use n the manufacture or producton of any artce n-
tended for sae:
(a) coho.
(b) Sprts gran, sprts cane, and sprts frut.
(c) Whsky, rum. and gn.
(d) ermouth contanng dsted sprts of any knd.
(e) Cocktas contanng dsted sprts of any knd.
(/) Lqueurs, cordas, and smar compounds contanng ds-
ted sprts of any knd.
(r/) Tequa, okoehao, etc.
(h) Dsted sprts of anv knd, e cept brandy, hed by any
person for use n the manufacture of any artce ntended for
sae, regardess of whether the artce to be produced s n tsef
unft for beverage purposes.
3. randy s sub|ect to a foor stocks ta of 1.25 a proof gaon
f ta -pad pror to October 1. 19 1, and whch on that date s hed
and ntended for sae or for use n the manufacture or producton
of any artce ntended for sae. The term brandy ncudes the
foowng:
) randy.
b) ends of brandes.
(c) cohoc products abeed and ntended for sae as
brandy.
(d) randy hed by any person for use n the manufacture of
any artce ntended for sae, regardess of whether the artce
to be produced s n tsef unft for beverage purposes.
. (a) The nventory of dsted sprts sha be prepared n dup-
cate on sheets of paper not arger than 10y2 by 1G nches to be
furnshed by the ta payer. The dsted sprts sha be sted
separatey by knds, that s, there w be a separate stng of acoho,
whsky, gn, rum, cordas, queurs, cocktas, etc.
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328
(b) The nventory of brandy w be prepared, n dupcate, on a
separate sheet or sheets of paper not arger than 10y2 by 16 nches,
and dentfed as the nventory of brandy.
(c) ach nventory w consst of two sectons. The frst sec-
ton w cover botted dsted sprts and w be dvded nto
seven vertca coumns whch w be desgnated:
(1) nd.
(2) Number of cases.
h) Sze of botte.
( ) Number of bottes.
(5) Wne gaons.
(6) Proof of sprts.
(7) Proof gaons.
Where dsted sprts n cases are n transt on October 1, 19 1,
the ta payer w show, n addton to the foregong, the sera
numbers of the cases and the name of the botter, pus the data re-
qured by paragraph 9.
(d) The second secton w cover dsted sprts n packages
(barres or drums), tank cars, and n tanks. The sera number and
knd of contaner, the name of the dster, wne gaons, proof of
the sprts, and proof gaons must be shown. Where such sprts
are n transt on October 1, 19 1, the ta payer must aso show the
data requred by paragraph 9.
Sprts n process of rectfcaton, or n bottng or storage tanks,
w be measured and proofed and the wne gaons, proof, and
proof-gaon content of each tank reported separatey on the nven-
tory. The number and knd of receptace contanng the sprts
w aso be shown.
WIN S.
5. ach propretor of a bonded wnery, bonded storeroom, or ta -
pad bottng house, and each rectfer, vhoesae or reta deaer n
quors (ncudng whoesae or reta deaer n wnes and whoe-
sae or reta deaer n wnes and mat quors), manufacturer, or
any other person, corporaton, partnershp or assocaton hodng
on October 1, 19 1, ta -pad wnes ntended for sae or for use n
the manufacture or producton of any artce ntended for sae, sha
aso before begnnng busness on that date prepare an nventory
of a such ta -pad wnes.
6. The term wnes sha ncude, among others, the foowng,
whch are sub|ect to the foor stocks ta es ndcated beow f ta -
pad pror to October 1, 19 1, and whch on that date are hed and
ntended for sae or for use n the manufacture or producton of
any artce ntended for sae:
nd.
Foor stocks ta .
(o) St wnes, ncudng vermouth, and a artfca or mtaton wnes, or
compounds sod as st wne, contanng:
(1) Not more than 1 per cent of acoho by voume _
2 cents a gaon.
12 cents a gaon.
(2) More than 1 per cent and not e ceedng 21 per cent of acoho by
voume.
(3) More than 21 per cent and not e ceedng 2 per cent of acoho by
35 cents a gaon.
voume.
(6) Champagne and sparkng wnes, that s, effervescent wne charged wth
carbon do de resutng from secondary fermentaton of the wno n buk
or n the botte.
cents per each one-haf
pnt or fract on thereof.
(e) rtfcay carbonated wne, that s, effervescent wne artfcay charged
wth carbon do de.
2 cents per each one-haf
pnt or fracton thereof.
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7. The nventory of wnes sha be prepared, n dupcate, on sheets
of paper not arger than O1 by 16 nches to be furnshed by the
ta payer. The nventory w be dvded nto fve parts for the
separate stng of the fve dfferent ta casses as foows:
Part 1 St wnes contanng not more than 1 per ent of acoho.
Part 2 St wnes contanng more than 1 per cent but not
e ceedng 21 per cent of acoho.
Part 3 St wnes contanng more than 21 per cent but not e -
ceedng 2 per cent of acoho.
Part Champagne and other sparkng wnes.
Part 5 rtfcay carbonated wnes.
ach part w be dvded nto s vertca sectons whch w he
desgnated:
(a) nd of wne.
(b) Number of packages.
(c) Number of cases.
d) Sze of bottes.
e) Number of bottes.
/) Tota gaons.
Where wnes are n transt on October 1, 10 1, the ta payer w
show, n addton to the foregong, the sera numbers of the cases,
packages, or tank car. the name of the producer or botter, pus the
data requred by paragraph 9.
Wnes n process of rectfcaton, or n bottng or storage tanks,
sha be measured and the wne gaons and acohoc content of the
contents of each tank reported separatey on the nventory The
number and knd of receptace contanng the wne sha aso be
shown.
8. The nventory of wnes may be attached to and made a part of
the nventory of dsted sprts f the person preparng the nventory
of wnes aso hods dsted sprts sub|ect to foor stocks ta .
DISTILL D SPIRITS OR WIN S O OT R PR MIS S OR IN TR NSIT.
9. The ta payer sha show separatey and ceary n the nventory:
(a) ta -pad dsted sprts of any knd and wnes not on the
premses of the ta payer on October 1, 19 1, but owned by hm and
stored esewhere, gvng the address of the pace or paces of storage;
(b) ta -pad dsted sprts of any knd and wnes not on the
premses of the ta payer, but owned by hm and n transt from hm
to other persons or to hmsef on October 1, 10 1, gvng the means of
transportaton and the name and address of the consgnee ; and
(c) ta -pad dsted sprts of any knd and wnes owned by
hm and n transt to hm on October 1, 19 1, gvng the means of
transportaton and the name and address of the consgnor.
FILING OF R TURN ND P YM NT OF T .
10. ach ta payer desgnated n paragraphs 1 and 5 sha make a
return on Form 758 (revsed 10 1), n trpcate, for each pace where
dsted sprts or wnes are hed, n accordance wth the nstructons
thereon. The orgna and dupcate copes must be fed not ater
than anuary 1, 10 2, wth the coector of nterna revenue of the
dstrct n whch the dsted sprts or wnes are hed. The orgna
of the nventory must be attached to the dupcate copy of Form 758.
1611 2 22
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The trpcate copy of the return and the dupcate copy of the n-
ventory w be retaned by the ta payer at the ocaton covered by
the return. The fng of a banket return wth one coector to cover
a number of paces n dfferent coecton dstrcts w not be accept-
abe.
11. The foor stocks ta shown by the return to be due sha be
pad to the coector of nterna revenue at the tme the return s fed,
uness the date of payment of the ta s e tended to a date not ater
than ugust 1, 19 2, upon the fng, n accordance wth the nstruc-
tons thereon, of a bond on Form 723- , n dupcate, n a pena
sum of not ess than the amount of the ta (ncudng the den-
quency penaty, f any), pus an amount equvaent to and not more
than 10 per cent of the ta (ncudng the denquency penaty,
f any).
Guy T. evernq,
Comms oner of Interna Revenue.
pproved September 25, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster September 26, 19 1, 11.27 a. m.)
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MISC LL N OUS RULINGS.
LCO OL T S.
DISTILL D SPIRITS.
Reguatons , Sectons 183. 7, 183.155, 19 1- 2-10869
183.21 , 183.302,183.376,183.377,183.378, T. D. 5085
183.381,183.383.
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 183.
PRODUCTION OF DISTILL D SPIRITS.
mendng Reguatons (19 0).
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
y vrtue of and pursuant to secton 3176 of the Interna Revenue
Code, Reguatons , Producton of Dsted Sprts (19 0), s
hereby amended by nsertng a new secton n rtces III and ,
desgnated secton 183. 7a and secton 183.377a, respectvey, and
amendng sectons 183.155(a)( ), 183.21 , 183.362, 183.376, 183.378,
183.381, and 183.383 to read as foows:
rtce III. qupment.

Sec. 183. 7a. Unfnshed sprts tanks. Whenever a dstery estabshed or
operated under these reguatons s to be operated aternatey as such and as an
Industra acoho pant or frut dstery n accordance wth rtce , and
the dster desres to retan unfnshed sprts where the change n type of pant
s to be temporary ony, he must provde for the purpose one or more tanks, each
of whch must be constructed and equpped n accordance wth the provsons
of secton 183. 6 and have panted thereon the words Unfnshed Sprts Tank,
foowed by ts sera number and capacty n wne gaons. The tanks must be
so arranged that the unfnshed sprts to be coected theren w pass from the
st nto the tank through contnuous and securey cosed, f ed ppes and vesses.
The ppe nes connectng the tanks wth sts or other apparatus must be con-
structed n accordance wth secton 183.5 . aves must be provded n the ppe
nes and so arranged as to contro competey the fow of unfnshed sprts both
Into and out of each tank. The constructon of the vaves must be such that
they can be secured wth Government ocks. (Sees. 2823, 2829, 3170, I. . G.)
rtce . Requrements Governng ternate Operatons as Frut
Dstery or Industra coho Pant.

Sec. 183.155(0).

( ) Materas, heads and tas, and unfnshed sprts. If dstng materas
are transferred to the successor or f heads and tas or unfnshed sprts are to
(331)
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Regs. , 183. 7, etc.
332
be retaned on the premses pendng the resumpton of operatons as a regstered
dstery, compy wth the requrements of rtce .

rtce . Manufacture of Dst kd Sprts.

Sec. 18. ..21 . Gaugng of unfnshed sprts. t dsteres where sprts, n the
course of dstaton, are run from the beer st nto tanks n the dstery
budng for temporary depost preparatory to competng the dstaton thereof,
storekeeper-gangers sha prompty gauge (measure and proof) the unfnshed
sprts n such tanks and make proper entry on Form 1592. cept as provded
n rtce , unfnshed sprts may not be stored n such tanks but may be
deposted theren ony temporary n the course of dstaton. Dstates
contanng one-haf of 1 per cent or more of adehydes or 1 per cent or more
of fuse o, coected n ocked tanks for remova for denaturaton or destructon,
as provded n rtce I, w be carred on Form 1592 as unfnshed sprts
unt gauged and destroyed or removed for denaturaton. (Sec. 3176, I. . C.)
rtce II. Suspenson and Resumpton op Operatons.

Sec. 183.362. Date of suspenson. The dster w f n the notce the tme
when a the beer on the dstery premses w be dsted and a sprts n
the dstery run nto the recevng csterns n the cstern room, e cept unfnshed
sprts or dstates contanng one-haf of 1 per cent or more of adehydes or
1 per cent or more of fuse o whch are to be retaned on the premses durng
a temporary change In the type of dstery, as provded n rtce . (Sees.
2850, 3176, I. R. C.)
btc|; . ternate Operaton as Industra coho Pant or Frut
Dstery.

Sec. 183.376. Competon of operaton requred. When a regstered dstery
s to be operated as an ndustra acoho pant or as a frut dstery, the bus-
ness of producng sprts, e cept as herenafter provded, must be competey
fnshed by the person or persons frst carryng on the busness, and the dstery
duy suspended before t can be operated as an ndustra acoho pant or a
frut dstery. cept as provded n sectons 183.377 and 183.377a, a un-
fnshed sprts, ncudng hgh wnes and ow wnes, and dstates contanng
one-haf of 1 per cent or more of adehydes or 1 per cent or more of fuse o co-
ected n accordance wth the provsons of rtce I, must be redsted and
run nto the cstern room and warehoused by the outgong dster. cept as
provded n the foowng sectons, a such dstates or unfnshed sprts must
be dsposed of before the dstery can be operated as an ndustra acoho
pant or frut dstery. (Sees. 2850, 3176, I. R. C.)
Sec. 183.377a. Retenton of unfnshed sprts. Where the change n type
of pant s to be temporary ony, the outgong dster may retan unfnshed
sprts under Government ock n unfnshed sprts tanks provded n accordance
wth secton 183. 7a n the dstery unt the pant Is agan operated by hm
as a regstered dstery under these reguatons: Provded. That such dster
furnshes a duy e ecuted consent of surety, Form 1533, n trpcate, contnung
abty on the dster s bond, Form 30, for the ta on such unfnshed sprts
retaned on the premses, notwthstandng the change n the type of pant.
(Sec. 3176. I. It. C.)
Sec. 183.378. Transfer of materas, etc. The outgong dster may transfer
to s successor materas on hand, ncudng mash and beer n process, at
the me the change n type of pant takes pace, but no sprts may be so
transferred, e cept the resdue of sprts n the sts whch It s not practcabe
to competey bo out: Provded, That materas not usabe and resdue of
sprts n ss not producbe under the aw at the succeedng type of pant
may not be transferred to the successor. Where such materas and resdue
of sprts are not transferabe, a mash and beer must be dsted, a basc
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333
Regs. , 183. 7, etc.
materas must be removed from the premses, and the sts and other vesses
must be competey ceared of sprts, and such sprts, f other than dstates
or unfnshed sprts ntended for retenton n accordance wth the provsons of
sectons 183.377 and 183.377a, removed to the recevng csterns n accordance
wth aw before the change n type of pant becomes effectve. When t s agan
desred to resume operatons as a dster under these reguatons the busness
of producng acoho or brandy, as the case may be, must be smary fnshed
and the ndustra acoho pant or frut dstery suspended n accordance wth
governng reguatons. (Sec. 3176. I. R. C.)
Sec. 183.381. Competon of records. The outgong dster w compete
hs record, Form 1508, and the storekeeper-ganger hs record, Form 1592, as
to the remova of basc materas from the premses, or the transfer of basc
materas and mash and beer n process to the successor, as the case may be,
and as to producton and remova from the cstern room of a sprts produced
by the outgong dster. The actua date of the entry of the depost of the
fnshed sprts n the cstern room and the actua date the sprts are removed
from the cstern room w be gven n the respectve coumns of both forms.
If dstates coected n accordance wth rtce I, or unfnshed sprts
are retaned on the premses n ocked tanks as provded n sectons 183.377 and
183.377a, a notaton w e made on Form 1508 under Speca Operatons or
Condtons, showng that such dstates or unfnshed sprts are temporary
retaned on the premses pendng resumpton of operatons as a regstered
dstery. The storekeeper-ganger w make a smar notaton on hs Form
1592 for such dster. The dster and storekeeper-ganger w contnue to
fe monthy reports on Forms 1508 and 1592, respectvey, durng the perod
such dstates or unfnshed sprts are retaned on the dstery premses.
Where the pant Is operated as a regstered dstery n two or more perods
durng the same month by the same propretor, the operatons of such propretor
w be recorded on the same Form 1598 and the same Form 1502, but appro-
prate notatons w be made on the separatng nes on each form to show the
dates the dstery was operated as a frut dstery or an ndustra acoho
pant and the names under whch It was so operated. (Sees. 28 1(a), 3176,
I. R. C.)
Sec. 183.383. Dsposton of sprts. Where a change n the type of pant
takes pace, the storekeeper-ganger In charge of the dstery w see that a
dstates coected n accordance wth rtce I are dsposed of, and that
a other unfnshed sprts, e cept the resdue of sprts n sts where the
same Is to be transferred to the successor as provded n secton 183.378, are
dsted and transferred to the cstern room, uness retaned n ocked tanks
In accordance wth sectons 183.377 and 183.3770, res ectvoy. before the pant
s operated as another type of dstery. Upon dsposton or retenton n
ocked tanks of such dstates or unfnshed sprts, and transfer of a other
sprts to the cstern room, the dstery may be operated as another type of
pant, but a sprts transferred to the cstern room must be branded and
removed In accordance wth aw by the outgong dster n the name under
whch they were produced, before any sprts are deposted n the cstern room
or wthdrawn from the dstery by the successor, and n any event wthn
three days of ther depost In the cstern room. (Sec. 3176, I. R. C.)
Norman D. Cann,
ctng Commssoner of Interna Revenue.
pproved October 9, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 10, 19 1, 1.57 p. m.)
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Regs. , rts. 183. 37-183. 7.
33
Reguatons , rtces 183. 37-183. 7. 19 1 1-10860
T. D. 5077
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 183.
PRODUCTION OF DISTILL D SPIRITS.1
mendng Reguatons .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervses, Coectors of Interna Revenue, and Others
Concerned:
Pursuant to the provsons of sectons 2883 and 3176 of the Interna
Revenue Code, Reguatons are hereby amended by addng the fo-
owng new artce and sectons:
rtce LI Transfer of Ta -Pad Dsted Sprts by Ppe Lne to
Rectfyng Pants.
Sec. 183. 37. Commssoner may authorze. The Commssoner may, In hs
dscreton, authorze the nstaaton of a ppe ne for the transfer of dstUed
sprts produced under secton 2883, Interna Revenue Code, at a proof n
e cess of 159 degrees and reduced n the recevng cstern to not more than
159 and not ess than 100 degrees proof, from the weghng tank n the cstern
room of a regstered dstery, after ta -payment, to storage tanks n a rectfyng
pant for use n rectfcaton and bottng, when such rectfyng pant s contguous
to, or s n the mmedate vcnty of the dstery. The Commssoner w
determne from a the crcumstances n each case whether the rectfyng pant
s n the mmedate vcnty of the dstery. ( ; Sec. 2883, I. R. C.)
Sec. 183. 38. ppcaton. dster who desres to nsta a ppe ne for the
transfer of such sprts to a contguous rectfyng pant or rectfyng pant n the
Immedate vcnty of the dstery, must fe appcaton n trpcate wth the
dstrct supervsor showng the reatve postons of the pants and the propretor-
shp thereof, and gvng a fu descrpton of the proposed ppe ne. ( ; Sec.
2883, I. R. C.)
Seo. 183. 39. cton on appcaton. Upon recept of the appcaton, the dstrct
supervsor w make such nqury as he may deem necessary to determne the
proprety of grantng the permsson sought and w then forward a copes of
the appcaton to the Commssoner wth hs recommendaton thereon. The
Commssoner w ndcate hs approva or dsapprova on a copes of the
appcaton and w return two copes to the dstrct supervsor, who w forward
one copy to the appcant. Where the appcaton s approved, the dster
w, upon nstaaton of the ppe ne, fe amended dster s notce, Form
27- , and pans, as provded In secton 183.1 9 n the case of ma|or changes n
equpment, and an amended pat. ( ; Sec. 2883, I. R. C.)
Seo. 183. 0. Ppe-ne constructon. The ppe ne sha be constructed and
the outet of the weghng tank secured, n the manner provded by secton
183.5 , respectng ppe nes from the cstern room to storage tanks n an nterna
revenue bonded warehouse on the dstery premses. ( ; Sec. 288. I. R. C.)
Sec. 183. 1. ppcaton, Form 179. Where a ppe ne has been nstaed
for the transfer of dsted sprts drect from the weghng tank n the ds-
tery to a contguous rectfyng pant or rectfyng pant n the mmedate
vcnty under the provsons of ths artce, and the dster desres to transfer
such sprts, he sha e ecute appcaton for the ta -payment of such sprts on
Form 179, n quadrupcate. The dster and the storekeeper-gauger sha
then proceed n accordance wth the provsons of sectons 183.281, 183.282, and
183.297, respectng the gaugng and wthdrawa of sprts for ta -payment n
raroad tank cars, n so far as the provsons thereof are appcabe. ( ; Sec.
2883, I. R. C.)
Sec. 183. 2. ppcaton for certfcate of ta -payment, Form ,r 9 . The
dster w forward a copes of Form 179 and Form 1520, prepared In accord-
Thc astersk at the end of sectons refers to secton 3170 of the Interna Revenue Code.
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335 Regs. , rts. 183. 37-183. 7.
ance wth secton 183.297, wth Form 159 , ppcaton for Coector s Certf-
cate of Ta -Payment of Dsted Sprts for Shpment n Tank Cars, n
dupcate, appropratey modfed to cover the transfer by ppe ne, accompaned
by proper remttance for the ta to the coector of nterna revenue. ( ; Sec. .
2883, I. R. C).
Skc. 183. 3. Certfcate of ta -payment, Form .r )5. The coector w note
the ta -payment (ncudng the sera number of the certfcate. Form 1595) n
the coumn on a copes of Form 179 and Form 1520, provded for enterng the
sera numbers of ta -pad stamps, e ecute a certfcate of ta -payment on
Form 179 and ssue Form 1595, Coector s Certfcate of Ta -Payment of
Dsted Sprts for Shpment n Tank Cars, whch certfcate sha be appro-
pratey modfed to cover te transfer of sprts by ppe ne. The coector
sha f n a requred data n the bank spaces on the certfcate, e cept those
provded n the ower eft corner for the verfcaton of the storekeeper-ganger,
and sha date and sgn the certfcate n the manner requred by secton 183.299.
The certfcate s not negotabe and sha not be used for any sprts other than
those descrbed theren. The coector w enter on the orgna and the copy
or copes of Form 159 In the space provded, the sera number, date, and amount
of the certfcate ssued. The coector w retan one copy each of Form 179
and Form 1520, and the orgna copy of Form 159 . e w ma or dever
the certfcate. Form 1595, and the orgna and remanng copes of Form 179
and Form 1520 to the dster or hs desgnated agent, n accordance wth
the dster s request In Form 159 . The coector w send one copy of the
appcaton. Form 159 , to the dstrct supervsor. ( ; Sec. 2883, I. R. C).
Sko. 183. . Storekeeper-ganger s verfcaton. The dster shn dever
the certfcate of ta -payment, Form 1595, and a copes of Form 179 and
Form 1520 to the storekeeer-gauger at the dstery. The storekeeper-gauger
w verfy the contents of the weghng tank and date and sgn the certfcate,
Form 1595, n the space provded therefor. The certfcate must be attached to
a board on the weghng tank by means of a tack In each corner, after whch
It w he canceed n the same manner as a ta -pad stamp attached to a
package, and covered wth a coatng of transparent varnsh, sheac, or acquer to
prevent any ateraton thereof. ( ; Sec. 2883, I. R. C).
Skc. 183. 5. Reease of sprts (or transfer. When the certfcate of ta -
payment has been aff ed to the weghng tank and canceed, the storekeeper-
gauger w unock the outet vave and permt the dster to transfer the
sprts by ppe ne to the rectfyng pant named n the certfcate. The sprts
sha be transferred ony under the mmedate supervson of the storekeeper-
gauger. fter the sprts have been transferred, the storekeeper-gauger w
forward one copy of Form 179 and Form 1520 and the canceed Form 1595 to
the dstrct su|ervsor, retan one copy of Form 179 and Form 1520, and dever
one copy of Form 179 and two copes of Form 1520 to the dster, who w
Immedatey dever one copy of Form 1520 to the rectfer. ( ; Sec. 2883,
I. R. C).
Sbo. 183. 6. Rectfer s use of Form 1520. The report of gauge, Form 1520,
devered to the rectfer by the dster, sha be attached to the storage tank
n the rectfyng pant. The rectfer sha enter the date and quantty of
removas from the tank n the bank space on such Form 1520. The report of
gauge sha be kept on the tank unt such tme as the quantty covered by
such report as been wthdrawn from the tank. The report sha then be
fed by the rectfer, avaabe for nspecton by Government offcers. The
sprts transferred by ppe ne may not be used by the rectfer pror to attach-
ment of Form 1520 to the storage tank.
Sec. 183. 7. Comparson of canceed, certfcate wth appcaton. The dstrct
supervsor w compare the canceed certfcate wth the copy of the appca-
ton and the report of gauge as to the number of gaons of dsted sprts,
the amount of ta , etc., and Investgate any dscrepancy. e w then send
the copy of the appcaton to the Commssoner and where there Is a dscrepancy,
a report of hs fndngs reatve thereto.
Gut T. everng,
Commssoner of Inferna Revenue.
pproved October 2, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October , 19 1, 10.31 a. m.)
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Regs. 10, 185.382. 185.395. 336
Reguatons 10, Secton 185.382: Inspecton of 19 1- 0-108 8
botted sprts. T. D. 5072
Secton 185.395: Losses n transt.
TITL 26 INT RN L R NU C PT R I, SU C PT R C, T T 1S5.
mendng Reguatons 10.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors, Coectors of nterna Revenue, and Others
Concerned:
1. Secton 3 of the ct of uy 22, 19 1 (Pubc Law 187, Seventy-
seventh Congress), reads n part as foows:
That secton 300(a) of the Tarff ct of 1930, as amended, be further
amended by nsertng after the words nterna revenue ta a comma
and the words or from any nterna revenue bonded warehouse, from
any brewery, or from any wnery premses or bonded premses for the
storage of wne, free of nterna revenue ta .
That secton 2907 of the Interna Revenue Code be repeaed.
2. Pursuant to the foregong provsons of aw, and sectons 2905,
3170, and 3176 of the Interna Revenue Code, Reguatons 10 are hereby
amended n these respects:
3. Sectons 185.395(6) and 185. 01 are revoked.
. Sectons 185.382 and 185.395(a) are amended to read as foows:
Sec. 185.382. Inspecton of botted sprts. The nspector at the port of e port
w n every nstance carefuy nspect cases contanng sprts for the purpose of
ascertanng whether the cases bear evdence of tamperng or have sustaned osses
In transt due to breakage. The Inspector w report on Form 691 any cases as to
whch a dscrepancy s found, gvng the sera numbers of the cases, ther orgna
contents n proof gaons, and the nature of the dscrepancy as to each case. When
the nspector has competed hs nspecton and report as prescrbed, the entre
shpment may be aden wthout detenton of the defcent cases, uness the crcum-
stances ndcate fraud, n whch event such cases w be detaned pendng nves-
tgaton by the dstrct supervsor, to whom the detenton shoud be mmedatey
reported. ( ; Sec. 2905, I. R. C.)
Sec. 185.395. Los cs n transt. (a) Leakage or unavodabe accdent. Under
the provsons of sectons 2889 and 2890, I. R. 0., aowance may be made for ds-
ted sprts ost by eakage or by any unavodabe accdent, and wthout any
fraud or neggence of the dster, owner, e porter, carrer, or ther agents or
empoyees, occurrng durng transportaton from a bonded warehouse to the port
of e port, e cept that where the sprts are covered by a vad cam of nsurance
In e cess of the market vaue thereof, e cusve of the ta , the ta sha not be
remtted to the e tent of such e cessve nsurance.
5. The foowng new artce and sectons are added:
rtce L, II. Suppes for Certan essks and rcraft.
Sec. 185. 99. Genera. Dsted sprts n packages and In cases whch have
been botted n bond for e port may be wthdrawn from nterna revenue bonded
warehouses free of ta for use as suppes on the foowng vesses and arcraft:
(1) esses of war, n ports of the Unted States, of any naton whch may
recprocate such prvege toward the vesses of war of the Unted States In ts
ports;
The astersk at the end of sectons refers to secton 317C of the Interna Revenue Code.
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337 Regs. 10, 185.382, 185.395.
(2) esses empoyed n the fsheres or n the whang busness, or actuay
engaged n foregn trade or trade between the tantc and Pacfc ports of the
Unted States or between the Unted States and any of ts possessons;
(3) rcraft regstered n the Unted States and actuay engaged n foregn
trade or trade between the Unted States and any of ts possessons; and
( ) rcraft regstered In any foregn country and actuay engaged n foregn
trade or trade between the Unted States and any of ts possessons, where such
trade by foregn arcraft Is permtted, and where the Secretary of the Treasury
sha have been advsed by the Secretary of Commerce that he has found that
such foregn country aows, or w aow, substantay recproca prveges In
respect of arcraft regstered n the Unted States. (Sec. 30 )(a) of the Tarff
ct of 1930, as amended by the ct of uy 22, 19 1 (Pubc Law 187, Seveuty-
seventh Congress).)
Sec. 185.500. Procedure. ppcaton to remove dsted sprts n packnges
and n cases botted n bond for e port from nterna revenue bonded warehouses
or use as suppes on vesses or arcraft w be made on Form 20(5, propery
modfed. The procedure prescrbed n rtce III of these reguatons, as t
reates to the wthdrawa of packages from nterna revenue bonded warehouses
for e portaton, s hereby made appcabe to the wthdrawa of packages for use
as suppes on vesses or arcraft. The procedure prescrbed n sectons 185.360,
185.307, and 185.308, reatng to the transfer and wthdrawa of sprts botted
n bond for e port, s hereby made appcabe to the transfer and wthdrawa of
botted sprts free of a for use as suppes on vesses or arcraft. (Sec. 300(a)
of the Tarff ct of 1930, as amended by the ct of uy 22, 19 1 (Pubc Law
187, Seventy-seventh Congress).)
Seo. 185.501. ond. Dsted sprts whch are to be wthdrawn from Interna
revenue bonded warehouses free of ta for use as suppes on vesses or arcraft
must be covered by a bond on Form 5 7 or Form 057. Such bonds w be
e ecuted n the same manner as bonds for dsted sprts wthdrawn free of
ta for e portaton, but must be accompaned by consent of surety, Form 1533,
specfcay stpuatng that the terms thereof w cover dsted sprts wth-
drawn for use ns suppes on vesses or arcraft. porters who have on re
bonds on Form 057, coverng the e portaton of dsted sprts, and who desre to
wthdraw sprts free of ta from an nterna revenue bonded warehouse for use
ns suppes on vesses or arcraft, may fe a consent of surety contanng a smar
stpuaton, provded that such bonds are of suffcent pena sum. (Sec. 309(a)
of the Tarff ct of 1930, as amended by the ct of uy 22, 19 1 (Pubc Law
187, Seventy-seventh Congress).)
Sec. 185.502. port entry. efore the sprts may be aden on the vesse or
arcraft, the owner must fe Form 691, propery modfed, wth the coector of
customs. The provsons of sectons 185.379, 185.380, 185.382, as amended heren,
185.383, and 185.38 w be observed n so far as appcabe. (Sec. 309(a) of the
Tarff ct of 1930, as amended by the ct of uy 22, 19 1 (Pubc Law 187,
Seventy-seventh Congress).)
Seo. 185.503. vdence of use an suppes on vesses and arcraft. If the ds-
ted sprts were aden on board a vesse or arcraft for use as shp s suppes
or -suppes for arcraft, there must be submtted to the dstrct supervsor,
wthn s months (or such addtona e tensons of tme as may be granted by the
dstrct supervsor or the Commssoner), an affdavt of the master or other
offcer of the vesse or arcraft on whch the sprts were aden, havng knowedge
of the facts, showng that the sprts have been used on board the vesse or
arcraft, and that no porton thereof has been unaden n the Unted States or
any of ts possessons : Provded. That n the case of any shpment, the amount of
ta thereon does not e ceed 25, such affdavt w not be requred. In the case
of vesses of war, such affdavt w not be requred. (Sec. 309(a) of the
Tarff ct of 19 0, as amended by the ct of uy 22, 19 1 (Pubc Law 187,
Seventy-seventh Congress).)
Sec. 185.50 . ccount wth bond. Form 657. The dstrct supervsor w keep
an account wth each bond, Form 057, smar to that kept for dsted sprts
e ported free of ta . In cases where e portatons free of ta and wth-
drawas free of ta for use as suppes on vesses or arcraft are made under
the same bond, ony one account coverng both transactons need he kept.
Upon recept of satsfactory evdence of the use of the sprts as suppes, the
bond w be credted wth the quantty so reported. (Sec. 309(a) of the
Tarff ct of 1930, as amended by the ct of uy 22, 19 1 (Pubc Law 187,
Seventy-seventh Congress).)
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Regs. 13, 175.3, 175.9.
338
Sew. 185.505. Records. When sprts are wthdrawn for use as suppes on
vesses or arcraft, the quantty so removed w be reported on Forms 1513 and
151 or Forms 1516 and 1517, as the case may be, as Wthdrawn as suppes
for vesses and arcraft (Sec. 309(a) of the Tarff ct of 1930, as amended
by the ct of uy 22, 19 1 (Pubc Law 187, Seventy-seventh Congress).)
Gut T. everng,
Commssoner of Interna Revenue.
pproved October 2, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 3, 19 1, 10.2 a. m.)
Reguatons 13, Secton 175.3: Defntons. 19 1-30-10796
Secton 175.9: Labes. T. D. 5063
(TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 17 .
TR FFIC IN CONT IN RS OF DISTILL D SPIRITS.
mendng Reguatons 13.
Treasury Department,
Offce of the Secretary,
Washngton, D. C, uy 23, 19 1.
To Dstrct Supervsors and Others Concerned:
Pursuant to secton 2871 of the Interna Revenue Code, Reguatons
13 are amended n these respects:
(1) Secton 175.3 s amended by substtutng n paragraphs (m)
and (n) thereof the words n effect as of uy 1,19 1, for the words
n effect as of uy 1, 1938, wherever such words appear n sad
paragraphs.
(2) Paragraph (c) of secton 175.9 s amended, effectve 60 days
after the date of fng hereof wth the Dvson of the Federa Regster,
to read as foows:
(c) Name and address of the botter, e cept that In the case of dsted sprts
botted for the actua dster or rectfer thereof, the name and address of such
dster or rectfer may be stated n eu of the name and address of the botter.
In addton, on abes of dsted sprts botted for a retaer or other person who
s not the actua dster or rectfer of such dsted sprts, there may be stated
the name and address of such retaer or other person, mmedatey preceded by
the words otted for or Dstrbuted by or other smar statement.
(3) Secton 175.9 s further amended by addng thereto a new
paragraph as foows:
(y) If brandy, aged for a perod of ess than two years, the age thereof.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 2 . 19 1, 11. a. m.)
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339
Regs. 13, 175.3, 175.9.
19 1-28-10779
T. D.5060
mendng the Gangng Manua.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
y vrtue of and pursuant to the provsons of sectons 2808 and
3176, Interna Revenue Code, subparagraphs (a), (/), and (|), para-
frraph 60, of the Gaugng Manua, approved November 21, 1938, are
ereby amended to read as foows:
Pab. 60. (a) The proof at whch the sprts other than sprts derved from
frut were dsted sha be shown by the egend Dsted 190 Proof or over,
Dsted between 100 and 100 Proof, or Dsted not over 160 Proof, as
the case may be, n etters and fgures not ess than one-haf nch n heght.
The foowng symbos may be used as the equvaent of the specfed mark-
ngs D 190 P for Dsted 190 Proof or over, D 160-190 P for Ds-
ted between 160 and 190 Proof, and D 160 P for Dsted not over 160
Proof.
The proof at whch sprts derved from frut were dsted sha be shown
by the egend Dsted 190 Proof or over, Dsted between 170 and 190
Proof, or Dsted not over 170 Proof, as the case may be, In etters and
fgures not ess than one-haf nch n heght. The foowng symbos may be
used as the equvaent of the specfed markngs: D 190 P for Dsted
190 Proof or over, D 170-190 P for Dsted between 170 and 190 Proof,
and D 170 P for Dsted not over 170 Proof.
Par. CO. (/) Sprts obtaned soey from the fermented |uce or
mash of frut dsted at ess than 190 degrees of proof n such man-
ner that the sprts possess the taste, aroma, and ctaracerstcs gen-
eray attrbuted to brandy sha be branded as foows:
(1) randy dsted on or after uy 1, 19 1, at more than 170
proof and ess than 190 proof, sha be branded n the same manner
as f dsted at a ower proof, e cept that the desgnaton sha be
quafed by the word neutra, e. g., neutra brandy, neutra
grape ees brandy, or neutra grape pomace brandy, neutra
peach brandy, neutra peach pomace brandy, etc.
(2) randy conformng to the standard for frut brandy, as de-
fned n Reguatons 5, Reatng to Labeng and dvertsng of Ds-
ted Sprts, as amended, derved e cusvey from grapes, sha be
branded grape brandy or brandy ; and frut brandy, other than
grape brandy, derved e cusvey from one varety of frut, sha be
desgnated by the word brandy, quafed by the name of such
frut (e. g., peach brandy, appe brandy, orange brandy ),
e cept that appe brandy may be desgnated appe|ack. Frut
brandy dsted from more than one varety of frut sha be branded
frut brandy, quafed by a statement of composton (e. g., frut
brandy per cent grapes and per cent backberres ).
(3) randy that conforms to the standard for frut brandy e cept
that t has been derved from sound dred frut, or from the standard
wne of such frut, sha be branded dred frut brandy. randy
derved from rasns, or from rasn wne, sha be branded rasn
brandy. Other brandes defned n ths subparagraph sha be desg-
nated n the same manner as frut brandy from the correspondng
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varety or varetes of frut e cept that the name of the frut sha
be quafed by the word dred.
( ) randy dsted from the ees of standard grape, ctrus, or
other frut wne, sha be branded ees brandy, quafed by the
name of the frut from whch such ees are derved (e. g., grape
ees brandy ).
(5) randy dsted from the skn and pup of sound, rpe grapes,
ctrus or other frut, after the wthdrawa of the |uce or wne there-
from, sha be branded pomace brandy, or marc brandy, quafed
by the name of the frut from whch derved (e. g., grape pomace
brandy ). Grape pomace brandy may be desgnated as grappa
or grappa brandy.
(6) Substandard brandy, as defned n Reguatons No. 5, Re-
atng to Labeng and dvertsng of Dsted Sprts, as amended,
sha bear as a part of ts desgnaton the word substandard.
Par. 60. (|) Whsky, rye whsky, wheat whsky, mat whsky, rye
mat whsky, bourbon whsky, or corn whsky, as defned n subpara-
graphs (c) and (r/) of ths paragraph, produced on or after March
1, 1938, or brandy as defned n subparagraph (/) of ths paragraph,
produced on or after uy 1, 19 1, whch n whoe or n part s treated
wth wood chps through percoaton or otherwse, durng dstaton
or storage, sha be further marked, ether by brandng or stencng,
wth the words Treated wth oak chps.
Gut T. eveknq,
Commssoner of Interna Revenue.
pproved uy 8, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 11, 19 1, 9.10 a. m.)
LCO OL DMINISTR TION CT.
19 1- 3-10881
T. D.5093
Standards of f for wne under the Federa coho dmns-
traton ct.
Treasury Department.
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
1. y vrtue of and pursuant to secton 5(e) of the Federa -
coho dmnstraton ct, as amended (U. S. C. Sup., Tte 27),
secton 3170 of the Interna Revenue Code (53 Stat., part 1), and
secton 161 of the Revsed Statutes (U. S. C, Tte 5, secton 22),
subsectons (a) and (h) of secton 37 of Reguatons No. , Reatng
to Labeng and dvertsng of Wne (27 C. F. R.. .37 (a) and ( )),
are amended, effectve two years after the date of fng hereof wth
the Dvson of the Federa Regster, to read as foows:
Sec. 37. Net content . (a) The net contents of wne for whch a standard
of f s prescrbed n rtce II of these reguatons sha be stated In the
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3 1
same manner and form n whch such standard of f Is set forth In sad
artce.
(6) The net contents of wne for whch no standard of f s prescrbed n
rtce II of these reguatons sha be stated as foows, e cept that net con-
tents may be e pressed n the metrc system of measure for contaners of
ter, 1 ter, and 1 ter:
(1) If 1 pnt, 1 quart, or 1 gaon, the net contents sha be so stated.
(2) If ess than a pnt, the net contents sha be stated n fractons of
a pnt, or n fud ounces.
(3) If more than a pnt, but ess than a quart, the net contents sha be
stated In fractons of a quart, or n pnts and fud ounces.
( ) If more than a quart, but ess than a gaon, the net contents sha
be stated n fractons of a gaon, or n quarts, pnts, and fud ounces.
(5) If more than a gaon, the net contents sha be stated n gaons and
fractons thereof.
2. y vrtue of and pursuant to secton 5(e) of the Federa coho
dmnstraton ct, as amended (U. S. C. Sup., Tte 27), secton
3170 of the Interna Revenue Code (53 Stat., part 1), and secton 161
of the Revsed Statutes (U. S. C, Tte 5, secton 22), Reguatons
No. , Reatng to Labeng and dvertsng of Wne (27 C. F. R.,
part ) are amended, effectve two years after the date of fng hereof
wth the Dvson of the Federa Regster, by strkng out rtce
II thereof and substtutng therefor the foowng:
rtce II. Standards op F for Wne.
Sec. 70. ppcaton of artce. (a) cept as provded n subsecton (6),
no erson engaged n busness as a producer, rectfer, bender, mporter, or
whoesaer of wne, drecty or ndrecty or through an affate, sha se or
shp or dever for sae or shpment, or otherwse ntroduce n Interstate or
foregn commerce, or receve theren, or remove from customs custody, any
wne uness such wne s botted or packed n the standard wne contaners
heren prescrbed.
(6) Ths artce sha not appy (1) to sake, or () to wne packed n con-
taners of 5 gaons or more, or () to mported wne n the orgna contaners
n whch entered n customs custody, or (v) to wne domestcay botted or
packed, ether n or out of customs custody, pror to the effectve date of ths
artce, f the contaner, or the abe on the contaner, bears a conspcuous
statement of the net contents thereof, and f the actua capacty of the contaner
s not substantay ess than the apparent capacty upon vsua e amnaton
under ordnary condtons of purchase or use.
Sec. 71. Standard cne. contaners. (a) standard wne contaner sha be
made, formed, and fed to meet the foowng specfcatons:
(1) Desgn. It sha be so made and formed as not to msead the pur-
chaser. Wne contaners sha be hed (rrespectve of the correctness of
the net contents specfed on the abe) to be so made and formed as to
msead the purchaser f the actua capacty s substantay ess than the
apparent capacty upon vsua e amnaton under ordnary condtons of
purchase or use ; and
(2) F. It sha be so fed as to contan the quantty of wne specfed
n one of.the standards of f prescrbed n secton 72; and
(3) eadspace. It sha be so made and fed as to have a headspace
not In e cess of 6 per cent of ts tota capacty after cosure If the net
contents of the contaner s pnt or more, and a headspace not n e cess
of 10 per cent of such capacty n the case of a other contaners.
Sec. 72. Standards of f. (o) The standards of f for wne sha be the
foowng, sub|ect to the toerances herenafter aowed:
.9 gaons. pnt.
3 gaons. pnt
1 gaon. ounces.
gaon. 3 ounces.
1 quart. 2 ounces.
quart
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Regs. , .32. 3 2
(6) The toerances n f sha be the same as are aowed by secton 37 of
these reguatons n respect to statement of net contents upon abes.
rtce III. Genera provsons.
Sec. 80. ports. These reguatons sha not appy to wne e ported n
bond.
Stewart erkshre,
Deputy Commssoner of Interna Revenue.
pproved October , 19 1.
Norman D. Cann,
ctng Commssoner of Interna Revenue.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 2 ,19 1, 11. 0 a. m.)
INT RN L R NU COD .
Reguatons ( coho), Secton .32: Manda- 19 1- 7-10907
tory abe nformaton. T. D. 5098
TITL 27 INTO IC TING LI UORS. C PT R I, P RT L LING ND
D RTISING OF WIN .
Mandatory nformaton on wne abes under the Federa coho
dmnstraton ct.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
Secton 1. y vrtue of and pursuant to secton 5 (e) of the Federa
coho dmnstraton ct, as amended (U. S. C. Sup., Tte 27),
secton 3170 of the Interna Revenue Code (53 Stat., Part 1), and
secton 161 of the Revsed Statutes (U. S. C, Tte 5, secton 22),
secton .32, Part , Chapter 1, Tte 27 of the Code of Federa Regu-
atons (secton 32 of Reguatons No. , Reatng to Labeng and
dvertsng of Wne), s amended to read as foows :
Sec. .32. Mandatory abe nformaton. (a) cept as otherwse provded n
subsecton (c), there sha be stated on the brand abe
(1) rand name, n accordance wth secton .33.
(2) Cass, type, or other desgnaton, n accordance wth secton .3 .
(3) Name and address, n accordance wth secton .35.
( ) On bends consstng of foregn and domestc wnes, f any reference
to the presence of foregn wne s made, the e act percentage by voume
of foregn wne.
(6) There sha be stated on the brand abe, or on a separate abe aff ed
In Immedate pro mty thereto on the same sde of the contaner
(5) cohoc content, n accordance wth secton .36.
(6) Net contents, n accordance wth secton .37.
(c) In the case of Imported wne, the name and address of the mporter need
not be stated upon the brand abe f t s stated upon any other abe aff ed
to the contaner. In the case of domestc wne, botted or packed for a retaer
or other person under hs prvate brand, the name and address of the botter
or packer need not be stated upon the brand abe f the name and address of
the person for whom botted or packed appears upon the brand abe, and the
name and address of the botter or packer s stated upon any other abe aff ed
to the contaner.
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3 3
Regs. 7, rt. II.
Sec. 2. These reguatons sha take effect upon the date of fng
wth the Dvson of the Federa Regster.
Stewart erkshre,
Deputy Commssoner of Interna Revenue.
pproved November 13, 19 1.
Gut T. everng,
Commssoner of Interna Revenue.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 1 , 19 1, 2.59 p. n.)
Reguatons 7, rtce II: portaton 19 1- 0-108 9
of wnes free of ta . T. D. 5073
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 178.
Wfthdrnwa of wnes, free of ta , for suppes of certan vesses
and arcraft (amendng Reguatons No. 7).
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
Secton 3 of the ct of uy 22, 19 1 (Pubc Law 187, Seventy-
seventh Congress), provdes n part as foows:
That secton 309(a) of the Tarff ct of 1930, as amended, be further
amended by Insertng after the words nterna revenue ta a comma
and the words or from any nterna revenue bonded warehouse, from
any brewery, or from any wnery premses or bonded premses for the
storage of wne, free of nterna revenue ta .
Pursuant to the above provsons of aw and sectons 3170 and
3176, Interna Revenue Code, paragraph 1 3, Reguatons No. 7, a9
amended (Part 178, Tte 26, Code of Federa Reguatons) s hereby
amended to read as foows:
Par. 1 3. Remova free of ta to mercan possesson and for suppes of ves-
ses and arcraft. (a) Shpments to mercan possessons. The provsons of
these reguatons, and the forms prescrbed, n respect to the remova of wnes, free
of ta for e portaton to foregn countres, appy to ke removas and shpments
to the Phppne Isands, Puerto Pco, Guam, mercan Samoa, the rgn
Isands, and the Panama Cana Zone. awa and aska are Terrtores of
the Unted States, and a shpments of domestc wnes thereto must be ta -
pad before wthdrawa from bonded wneres or other bonded premses, uness
transferred In bond to a bonded wnery or storeroom ocated n one of those
Terrtores.
(6) Wthdrawas for suppes of certan vesses and arcraft. The provsons
of these reguatons, n respect to the remova of wnes, free of ta for e porta-
ton to foregn countres, are e tended to wthdrawas of wnes for adng as
suppes upon the foowng vesses or arcraft:
(1) esses of war, n ports of the Unted States, of any naton whch
may recprocate such prvege toward the vesses of war of the Unted States
n ts ports;
(2) esses empoyed In the fsheres or n the whang busness, or actuay
engaged n foregn trade or trade between the tantc and Pacfc ports
of the Unted States or between the Unted States and any of ts possessons;
(3) rcraft regstered n the Unted States and actuay engaged n
foregn trade or trade between the Unted States and any of ts possessons;
and
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Regs. 15. 190.33, etc.
3
( ) rcraft regstered n any foregn country and actuay engaged n
foregn trade or trade between the Unted States and any of ts possessons,
where such trade by foregn arcraft s permtted, and where the Secretary
of the Treasury sha have been advsed by the Secretary of Commerce that
he has found that such foregn country aows, or w aow, substantay
recproca prveges n respect of arcraft regstered n the Unted States.
ppcaton to wthdraw wne free of ta for suppes of vesses and arcraft
must be made on Form 711, modfed appropratey. Wne whch s to be wth-
drawn from bonded wneres or bonded storerooms free of ta for use as sup-
pes on vesses and arcraft must be covered by a bond, Form 186. Such bond w
be e ecuted n the same manner as bonds for wne wthdrawn free of ta for
e portaton, but must be accompaned by consent of surety, Form 1533, specfcay
stpuatng that the terms thereof w cover wne wthdrawn for use as suppes
on vesses and arcraft. porters who have on te bonds on Form 186, coverng
the e portaton of wne, and who desre to wthdraw wne free of ta from a
bonded wnery or bonded storeroom for use as suppes on vesses and arcraft,
may fe a consent of surety contanng a smar stpuaton, provded that such
bonds are of a suffcent pena sum. Wne so wthdrawn sha not be unaden at
any port or pace n the Unted States or n any of ts possessons.
Guy T. eyehng,
Commssoner of Interna Revenue.
pproved October 2,19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 3, 19 1, 10.2 a. m.)
Reguatons 15, Sectons 190.33, 190. 5, 19 1- 1-10861
190.170, 190.173, 190.17 . T. D. 5078
TITL 26 INT RN L R NU . C PT R I, SU C PT R C. P RT 190.
R CTIFIC TION OF SPIRITS ND WIN S.1
mendng Reguatons 15.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. Pursuant to the provsons of sectons 2801(e)(1) and 3176 of
the Interna Revenue Code, Reguatons 15 are amended as heren-
after set forth.
2. Secton 190. 5 s amended by addng a new paragraph thereto,
as foows:
Skcton 190. 5. f) Ppe ne from contguous dstery or dstery n mme-
date vcnty. The ppe ne used for the conveyance of ta -pad sprts from
the cstern room of a contguous dstery or dstery n the mmedate
vcnty of the rectfyng pant, as provded n Reguatons , as amended, and
the ppe ne used for the conveyance of ta -pad acoho from a contguous
bonded warehouse or bonded warehouse n the mmedate vcnty of the
rectfyng pant, as provded n Reguatons 3, as amended, sha be of a f ed
and permanent character, constructed of meta and so arranged as to be
e posed to vew throughout ts entre ength, and a connectons, vaves,
fanges, unons, etc., sha be brazed, weded, or otherwse secured. The ppe
ne sha be connected drecty to the storage tank n the recevng room of
the rectfyng pant, and must be equpped wth a vave, at or near the pont
of entrance to the storage tank, capabe of beng ocked wth a Government
The astersk at the end of sectons refers to sectons 2801(e)(1) and 3176 of the
Interna Revenue Code.
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3 5
Regs. 15, 100.33, tc.
ook. When the storage tank Is mounted on scaps the ppe ne may be con-
nected therewth by means of short, demchahe hose connectons f the end of
the ppe ne s equpped wth a vave whch may be ooked wth a Government
ook. Where sprts are to be conveyed to two or more storage tanks n the
rectfyng pant, the ppe ne may be connected wth the storage tanks by
manfod connectons so arranged as to contro the fow of sprts nto each
tank. There sha be panted on each p e ne e tendng from the manfod
to the storage tanks a number correspondng wth the sera number of the
storage tank wth whch the ppe ne Is connected, uness the arrangement of
the ppe ne s such that the dentfy of the tank wth whch t s connected
s apparent. ( ; Sec. 2820. I. R. C.)
8. Sectons 190.33, 190.170, 190.178, and 190.17 are amended to
read as foows:
Se-. 1 )0.:;3. ttorape tanks. It sprts are receved n tank cars, or by
ppe ne from the cstern room of a contguous dstery or dstery n the
mmedate vcnty of the rectfyng pant, or by ppe ne from a contguous
bonded warehouse or bonded warehouse n the mmedate vcnty of the rect-
fyng pan , sutabe storage tanks must be provded n the recevng room
wthn whch to store such sprts, e cept that such storage tanks w not be
requred n the case of sprts receved n tank cars whch are transferred
drecty to processng and bottng tanks n accordance wth secton 100.170(a).
ach storage tank sha be constructed of meta and be of unform dmensons
from top to bottom. ach such tank sha be equpped wth a sutabe meas-
urng devce, or mounted on scaes, whereby the actua contents w be correcty
ndcated. There sha be panted on eao tank the words, Storage Tank,
foowed by ts sera number and (rapacty n wne gaons. sutabe board
sha be provded on each storage tank for the attachment of Forms 1520 and
1-1 0, as herenafter provded. Manhoads, nets, and outets of the tanks must
be provded wth factes for ookng wth Government ooks. Stopcocks must
be provded and so arranged as to contro competey the fow of sprts, both
nto and out of the ank. The constructon of the vaves must be such that
they can be scoured wth Government ooks. The ppe connectons contanng
such stopcocks or vaves must be brazed, weded, or otherwse secured, to the
tanks n such a manner that they can not be detached or atered wthout
showng evdence of tamperng. Storage tanks must not be permanenty
connected wt ppe nes used for the conveyance of ar, dsted water, or
other substances than sprts. ( : Sec. 2820. I. . O.)
Sec. 190.170. (k) Recept n tank rars. Where dsted sprts are receved
In tank cars or wnes are receved n tank cars, tanks, or tank trucks, they
may be transferred drecty from such contaners nto processng or bottng
tanks f permsson s frst obtaned from the dstrct supervsor and the sprts
or wnes are frst nspected by a Government offcer. When quors are so
transferred the rectfer must submt Form 12:2 or Form 230 to the Government
offcer assgned to the pant, or o the dstrct supervsor or desgnated offcer
for approva as provded n rtces I and I , mmedatey the tank
oars, tanks, or tank trucks are empted. Dsted sprts may be receved n
tank cars ony f the premses of the rectfer are equpped wth sutabe raroad
sdng factes. efore permttng sprts to be transferred from a tank car
nto a storage tank or a processng or bottng tank, the Government offcer w
see that the raroad, oar seas are ntact on the tnnk car and that the car bears
the coector s certfcate of ta -payment, Form 1595. When sprts are trans-
ferred nto or out of storage tanks the Government offcer sha open and cose
the Government ocks, but t sha be the duty of the propretor to manpuate
the stopcocks or vaves controng the fow of the sprts. The offcer w keep
a memorandum record of the quanttes of sprts entered nto and wthdrawn
from each storage tank by dates, n order that he may determne that ony
awfu, ta -pad sprts are wthdrawn from such tanks for rectfcaton.
(6) Recept by ppe tne. Where sprts are receved by ppe ne from the
cstern room of a contguous dstery or dstery n the mmedate vcnty
of the rectfyng pant, as provded by Reguatons , as amended, or acoho s
receved by ppe ne from a contguous bonded warehouse or bonded warehouse
n the mmedate vcnty of the rectfyng pant, as provded n Reguatons 3,
as amended, they sha be conveyed drecty nto the storage tank or tanks n
1611 2 23
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Regs. 28, 176.3, etc.
3 G
the recevng room. When sprts are transferred nto or out of such tanks, the
Government offcer sha foow the procedure specfed n the foregoug
paragraph, n so far as t s appcabe.
Skc. 190.173. Dsposton of gauge report. (a) Recept n tank cars.
When dsted sprts receved n a tank car are run nto a storage tank, the
report of gauge, Form 1520 n the case of sprts other than acoho, and Form
1 0 n the case of acoho, sent to the rectfer by the vendor, sha be attached
to such storage tank. The rectfer sha enter the date and quantty of
removas from the storage tank n a bank space on the report of gauge.
The report of gauge sha be kept on the tank unt such tme as the quantty
covered by such report has been wthdrawn from the tank. The report sha
then be ted by the rectfer, avaabe for nspecton by Government offcers.
If the sprts are transferred drecty from the tank car nto a processng or
bottng tank, the rectfer sha make a notaton to that effect on the report of
gauge and fe t. The requrements of ths secton sha not precude use of
the sprts pror to recept of Form 1520 or 1 0.
(6) Recept by ppe ne. When sprts receved by ppe ne are run nfo
the storage tank, the report of gauge, Form 1520 or Form 1 0, devered to
the rectfer by the vendor sha be attached to the storage tank. The rectfer
sha enter the date and quantty of removas from the tank n the bank
space on such Form 1520 or Form 1 0. The report of gauge sha be kept on
the tank unt such tme as the quantty covered by such report has been wth-
drawn from the tank. The report sha then be fed by the rectfer, avaabe
for nspecton by Government offcers. The sprts transferred by ppe ne may
not be used by the rectfer pror to attachment of Form 1520 or Form 1 0 to
the storage tank.
Skc. 190.17 . M ng of dfferent sprts prohbted. Sprts receved n tank
cars or by ppe ne whch were produced from dfferent materas, or by two
or more dsters or from dfferent combnatons of the same materas at ess
than 190 degrees of proof, or whch dffer n knd accordng to the standards
of dentty estabshed under the Federa coho dmnstraton ct, or
whch dffer more than 10 degrees n proof, or whch are otherwse hetero-
geneous, may nbt be ndnged n a storage tank, nor may sprts receved n
tank cars be mnged n a storage tank wth sprts receved by ppe ne.
( ; Sec. 325 (g), I. II. C.)
Guy T. everng,
Commssoner of Interna Revenue.
pproved October 3, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October , 19 1, 10.32 a. m.)
Reguatons 28, Sectons 170.3. 176.5. 17(5.12, 19 1 1-10802
170.16-176.2 , 170.27, 176.3 , 176.35, 170.39- T.D.5081
170 1,176. 9,176.50. 170.55,176.57,176.09,105.0 .
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 176. DR W-
C ON DISTILL D SPIRITS ND WIN S.1
mendng Reguatons 23.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. O.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. Tho ct approved uy 22, 19 1 (Pubc Law 187, Seventy-
seventh Congress), provdes, n part, as foows:
The astersk at. end of sectons refers to secton 3179(b). Interna Revenue Code, and
secton 309 (a), (b), (c), (d) of the Tarff ct of 19.S0, as amended (19 U. S. C, Sup. ,
1309 (a), (b), (c), (d)).
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3 7
Regs. 28, 176.3, etc.
That subsecton (c) of secton 33 1, Interna Revenue Code, be
amended to read as foows:
(c) Draw-b.uk of Ta Pad n the Unted States. provsons
of aw for the aowance of draw-back of nterna revenue ta on artces
e ported from the Unted .States are, so far as appcabe, e tended to
ke artces upon whch an nterna revenue ta has been pad when
shpped from the Unted States to the Phppne Isands.
Sec. 2. That secton 3351, Interna Revenue Code, be amended by
addng at the end thereof a new subsecton to read as foows:
(c) Draw-back of Ta Pad n the Unted States. provsons
of aw for the aowance of draw-back of nterna revenue ta on
artces e ported from the Unted States are, so far as appcabe,
e tended to ke artces upon whch an nterna revenue ta has been
pad when shpped from the Unted States to the rgn Isands.
Sec. 3. That subsecton (c) of secton 3361, Interna Revenue Code,
be amended to read as foows:
(c) Draw- ack of Ta Pad n the Unted States. provsons
of aw for the aowance of draw-hack of nterna revenue ta on artces
e ported from the Unted States are, so far as appcabe, e tended to
ke artces upon whch an nterna revenue ta has been pad when
shpped from the Unted States to Puerto Rco, Guam, or mercan
Samoa.

2. Pursuant to the foregong provsons of aw and sectons 2887,
as amended, 3176, and 3179, Interna Revenue Code, and sectons
309 (a), (b), (c), (d), and 313 (d), () of the Tarff ct of 1930, as
amended (19 U. S. C, Sup. , 1309 (a), (b), (c), (d), and 1313 (d),
()), Reguatons 28 are amended as herenafter set forth:
3. Sectons 176.16,176.17, 176.23, and 176.2 are amended by addng
new paragraphs thereto, as foows:
Skc. 176.16. (e) Ta -pad certfcate. Upon recept of the Form 230, the
dstrct supervsor w prepare Form 1000, Certfcate of Dstrct Supervsor
of coho Ta Unt of Ta -Pad Sprts or Wnes otted specay for port,
usng as a bass therefor the (umpng and bottng record Form 230. e w then
forward the Form 1600 to the Commssoner wth a copy of the Form 230. The
Forms 1600 and 230 w be retaned by the Commssoner for use n connecton
wth the e amnaton and certfcaton of the cam for drawback on such sprts
or wnes.
(f) Transfer and storage pendng e portaton. Sprts or wnes botted espe-
cay for e port under ths secton may be transferred from the e port storage
room of the botter, pursuant to Form 1656, ppcaton tor Transfer of Dsted
Sprts or Wnes otted specay for port, to another e port storage room
at the port of e portaton, for storage pendng reease for drect e portaton
or use as suppes on vesses or arcraft. Such e port storage room at the port
of e portaton may be estabshed by the propretor of a ta -pad bottng house
or rectfer, under the provsons of Reguatons 11 or 15, whether or not the
propretor of the ta -pad bottng house or rectfer ntends to botte dsted
sprts or wnes especay for e port. Form 1656 w be e ecuted, n quadrup-
cate (or quntupcate, f the sprts are to be transferred to another supervsory
dstrct), by the botter or e porter, after approprate arrangements have been
made by hm wth the propretor of the e port storage room at the port of
e portaton for such storage. copes of the form w then be submtted to
the dstrct supervsor, or desgnated offcer, for approva. Upon approva
thereof, the sprts or wnes may he reeased by the Government offcer for trans-
fer. The offcer w retan one copy for hs fes, furnsh one copy to the botter,
forward one copy to the dstrct supervsor, and forward one copy to the con-
sgnee. If the sprts or wnes are transferred to another dstrct, he w
forward one copy to the dstrct supervsor of such dstrct. The sprts or wnes
so transferred and stored w be entered for drawback and marked and reeased
for e portaton, etc., n accordance wth the procedure prescrbed by sectons
178.35 to 176.38, ncusve.
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Regs. 28, 176.3, etc.
3 8
Sec. 176.17. (e) Ta -pad certfcate Upon recept of the Form 230, the
dstrct supervsor w prepare and forward to the Commssoner Form 1600,
and a copy of the Form 230, n accordance wth the procedure prescrbed by
secton 176.16(e).
Sec. 176.17. (f) Transfer and storage pendng e portaton. Wnes botted
especay for e port under ths secton may be transferred pursuant to Form
1056 from the e port storage room of the botter, to another e port storage
room at the port of e portaton, for storage pendng reease for drect e porta-
ton or use as suppes on vesses or arcraft, n accordance wth the procedure
set forth n secton 176.16(f). Such e port storage room at the port of e porta-
ton may be estabshed by a wnemaker or the propretor of a bonded store-
room under secton 176.15 of these reguatons, or by the propretor of a ta -
pad bottng house, or rectfer, under the provsons of Reguatons 11 or 15,
whether or not the wnemaker or the propretor of a bonded storeroom ntends
to botte wnes especay for e port, or the propretor of the ta -pad bottng
house or rectfer ntends to botte sprts or wnes especay for e port.
Sec. 176.23. (e) cton by dstrct supervsor. Upon recept of Form 230
from the botter n such cases, the dstrct supervsor w forward a copy of
such form to the Commssoner.
(f Transfer and storage pendng e portaton. Sprts and wnes botted
especay for e port under ths secton may be transferred pursuant to Form
1656 from the e port storage room of the botter to another e port storage room
at the port of e portaton, for storage pendng reease for drect e portaton or
use as suppes on vesses or arcraft, n accordance wth the procedure pre-
scrbed by secton 176.16(f). Such e port storage room at the port of e porta-
ton may be estabshed by the propretor of a ta -pad bottng house or rec-
tfer, under the provsons of Reguatons 11 or 15, whether or not the propretor
of the ta -pad bottng house or rectfer ntends to botte dsted sprts or
wnes especay for e port.
Sec. 176.2 . (a) Cam requred on Form 5S2. Where dsted sprts and
wnes are m ed n the process of rectfcaton, for bottng especay for e port
wth beneft of drawback, cam for drawback of the dsted sprts ta . the
rectfcaton ta and the ta under secton 3030(a), Interna Revenue Code, as
amended, sha be made on Form 1582. Separate cam on Form 1582- w
not be requred n such cases.
. Sectons 176.3(e), 176.5, 176.12, 176.18, 176.19(a), 176.20, 176.21,
176.22, 176.23(a), 176.27(a)(1), 176.3 . 176.35(a), 176.39, 176. 0,
176. 1, 176. 9, 176.50, 176.55, 176.57, and 176.69 are amended to read
as foows:
Sec. 176.3. (e) Defntons. Dsted sprts or sprts sha mean a
the substances produced by the dstaton of fermented gran, moasses, frut or
other matera commony known as sprts, whsky, rum, gn, brandy, acoho,
etc., and sha ncude rectfed sprts, cordas, queurs, and smar compounds
and other rectfed products prepared wth dsted sprts and wnes, e cept
where otherwse ndcated.
Sec. 176.5. portaton. n e portaton s an act defned by secton 176.3((7).
Shpments of favorng e tracts and medcna or toet preparatons (ncudng
perfumery) manufactured or produced n part wth domestc acoho to the
Phppne Isands, Puerto Rco, the rgn Isands, mercan Samoa, Guam,
and Panama Cana Zone sha be treated as e portatons. There s no authorty
of aw for the aowance of drawback on acoho contaned n such products
whch are shpped to aska, awa, ngman s Reef, the Mdway Isands, or
Wake Isand. (Sees. 33 1(c), as amended, 3351(c), and 3361(c), as amended,
I. R. C, and Sec. 313 of the Tarff ct of 1930, as amended (19 U. S. C, Sup.
, 1313(d), ()).)
Sec. 176.12. portaton. n e portaton Is an act defned by secton 176.3(g).
The provsons of ths secton, reatng to the bottng of dsted sprts and
wnes especay for e port and the e portaton thereof wth beneft of draw-
back, and the forms prescrbed for use In connecton therewth, sha appy
to ke bottng, remova, and shpment to mercan Samoa, Guam, Puerto Rco,
the Phppne Isands, the rgn Isands, and the Panama Cana Zone. There
s no authorty of aw for the bottng of dsted sprts and wnes especay
for e port, wth beneft of drawback, for shpment to aska, awa, ngman s
Reef, the Mdway Isands, or Wake Isand. ( ; Sees. 83 1(c), as amended,
3351(c), and 3361(c), as amended, I. R. C.)
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3 9
egs. 28, 5 176.3, etc.
Sec. 176.18. ppcaton, Form 122. Rectfers sha prepare a separate app-
caton on Form 122, Rectfer s Descrpton of Sprts, Wnes, or Other Lquors
to be Dumped for Rectfcaton, and Return of Gauge, n trpcate, for each
ot of dsted sprts or wnes to be rectfed before beng botted for e porta-
ton wth beneft of drawback. The rectfer sha nsert n each copy of the
form, after the descrpton of the packages to be dumped for rectfcaton, a
notce of ntenton as foows:
The above descrbed sprts or wnes w, after rectfcaton, be
botted pursuant to approva of Form 237 especay for e port wth
beneft of drawback.
Sec. 176.19. pprova of Form 122. (o) y storekeeper-ganger. cept as
provded by the foowng paragraph, a copes of Form 122 w be submtted for
approva to the storekeeper-ganger assgned to supervse rectfyng operatons.
The storekeeper-gauger w e amne the packages descrbed In the appcaton
am the scaped portons of tn -pad stamps or the affdavt or statements n eu
thereof, attached to the orgna of the form, and f he fnds that the sprts or
wnes to be dumped for rectfcaton and bottng especay for e port are as
descrbed, and have been awfuy ta -pad, and the forms are propery prepared,
he w e ecute hs certfcate and authorze the rectfer to dump the packages
descrbed n the appcaton and return a copes of the form to the propretor.
Immedatey after dumpng the sprts or wnes, the rectfer sha forward two
copes of the Form 122 (one. the orgna, wth the cut-out portons of the ta -
pad stamps, or other prescrbed evdence of ta -payment attached) to the dstrct
supervsor, and retan the remanng copy of such form on fe at the rectfyng
pant.
Sec. 176.20. M ng of dsted sprts or wnes ta -pad at dfferent rates.
When a rectfer manufactures dsted sprts to be botted especay for e port
wth beneft of drawback by a process of rectfcaton nvovng the m ng of
dsted sprts or dsted sprts and wnes upon whch basc ta es were pad
at dfferent rates (. e., acoho and wne, acoho, brandy, and wne, or brandy
and rum. etc.), he sha note on Form 122 the number of proof gaons of each
knd of sprts and the number of wne gaons and percentage of acoho of the
wne m ed together n the processng receptace, and no further m ng of such
sprts or wnes wth sprts or wnes contaned n any other receptace sha be
made, uness a smar notaton Is made on Form 122.
Sec. 176.21. ppcaton. Form 2S7, etc. a) Procedure. The rectfer sha
make appcaton on Form 237, Notce of Competon of Rectfcaton and Return
of Rectfed Sprts, Wnes or Other Lquors Gauged, Marked and Stamped, In
quadrupcate (or n quntupcate, f the sprts or wnes are to be transferred
by ppe ne to a contguous ta -pad bottng house), to the storekeeper-gnuger,
or to an offcer desgnated by the dstrct supervsor, f no storekeeper-gauger
s avaabe, for permsson to botte the sprts or wnes. notce of Intenton
sha be nserted by the rectfer In each copy of Form 237 after the descrpton
of the sprts or wnes as foows:
The above descrbed sprts (or wnes), rectfed pursuant to Form
122. Sera No dated , 19 , are to be botted
especay for e port wth beneft of drawback.
When the process of manufacturng sprts or wnes, In accordance wth secton
176.20. has been competed, the rectfer sha note on Form 237 the quantty of
each knd of dsted sprts or wnes, or both (cacuated on a proof gaon bass
as to sprts and a wne gaon bass as to wnes), used n manufacturng the
sprts or wnes. The storekeeper-ganger or desgnated offcer w, after approva,
return a copes of Form 237 to the rectfer, who sha, f the sprts are sub|ect
to the rectfcaton ta , forward a copes of the form to the coector of Interna
revenue, w-th remttance of the ta . n accordance wth the procedure prescrbed
by Reguatons 15. Upon recept of the copes of Form 237 from the coector,
or, n the case of sprts or wnes e empted from the rectfcaton ta , upon
ecept of the copes of such form from the storekeeper-gauger or desgnated
offcer, the rectfer sha proceed to botte the sprts or wnes, or, If the sprts
or wnes are to be packaged, to f, mark, and stamp the packages. Upon com-
peton of the bottng and casng or packagng of the sprts or wnes, and the
e ecuton of Form 237, the rectfer sha retan one copy of the form and forward
the orgna and one copy to the dstrct supervsor. The storekeeper-gauger or
desgnated offcer w, upon competon of the bottng or packagng operatons,
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Regs. 28, 176.3, etc.
350
supervse the depost of the sprts or wnes n the e port storage room, e cept
as, provded by secton 176.22.
(6) Ta -pad certfcate. Upon recept of the Form 122, as provded n sec-
ton 176.19 and the Form 237, as heren provded, the dstrct supervsor w
prepare Form 1600, usng as a bass therefor the dumpng and bottng records
Forms 122 and 237. e w then forward Form 1600 to the Commssoner wth
a copy each of Forms 122 and 237, and Form 1583, f any. Forms 1533, ).
122, and 237 w be retaned by the Commssoner for use u connecton wth
the e amnaton and certfcaton of the cam for drawback on such sprts
or wnes.
(c) Transfer and storage pendng e portaton. Sprts and wnes botted
especay for e port under ths secton may be transferred from the e port
storage room of the botter, pursuant to Form 1656, to another e port storage
room at the port of e portaton for storage pendng reease for drect e porta-
ton or use as suppes on vesses or arcraft, n accordance wth the pro-
cedure prescrbed by secton 176.16(/). Such e port storage room at the port
of e portaton may be estabshed by the propretor of a ta -pad bottng
house or rectfer, under the provsons of Reguatons 11 or 15, whether or
not the propretor of the ta -pad bottng house or rectfer ntends to botte
dsted sprts or wnes especay for e port.
Sec. 176.22 Rectfcaton by person other than the botter. Where dsted
sprts or wnes ntended to be botted especay for e port wth beneft of
drawback are to be rectfed by a person other than the botter, the rectfer
sha Insert n each copy of Form 122, after the descrpton of the packages
to be dumped, a notce of ntenton as foows:
The above descrbed sprts (or wnes) w, after rectfcaton, be
packaged and shpped to ,
(Name and address of botter.)
for bottng especay for e port.
When the sprts have been rectfed and packaged, the rectfer sha nsert
n each copy of Form 237, before forwardng the same to the dstrct super-
vsor, a notce of ntenton as foows:
The above descrbed sprts (or wnes), rectfed pursuant to Form
122, Sera No. , dated , 19 , are to be shpped
to
(Name and address of botter.)
for bottng especay for e port.
fter the packages have been propery stamped, the rectfer sha stenc or
mark thereon, n addton to the other requred marks or brands, the words
for bottng especay for e port. Such packages sha then be deposted
n the e port storage room pendng reease by the Government offcer for
shpment to tho bottng pant, uness they are to be shpped mmedatey.
The rectfer and the storekeeper-gauger, or desgnated offcer, w proceed
otherwse n accordance wth the provsons of sectons 176.18 to 176.21, n-
cusve, and n addton the rectfer w furnsh the botter wth a copy of
the Form 237. Upon recept of the Forms 122 and 237, the dstrct super-
vsor w prepare and forward to the Commssoner Form 1600 and a copy
each of Forms 122, 237, and Form 15S3, f any, n accordance wth the pro-
cedure ndcated by secton 176.21(6). If the sprts or wnes so rectfed
are to be transferred by ppe ne to a contguous ta -pad bottng house,
the rectfer sha proceed n accordance wth the provsons of ths secton,
e cept that he sha nsert n each copy of Form 237, before forwardng one
copy to the botter and two copes to the dstrct supervsor, n eu of the
notce of ntenton above requred, a notce of ntenton as foows:
The above descrbed sprts (or wnes), rectfed pursuant to Form
122, Sera No. , dated , 19 , are to be trans-
ferred by ppe ne to
(Name and address of botter.)
for bottng especay for e port.
Seo. 176.23. ottng by person other than rectfer. (a) ppcaton, Form
230. Where packages of dsted sprts or wnes rectfed by a person other
than the botter, especay for e port wth beneft of drawback, are receved
for bottng, the botter sha, uness such sprts or wnes are to be botted
mmedatey, pace them In the e port storage room pendng remova for
bottng. Such sprts or wnes w be reported on Form 5 or 52-D, as the
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351
Regs. 28, 176.3, etc.
case may be, as havng been deposted In the e port storage room pror to
bottng. The botter (rectfer or propretor of a ta -pad bottng house) sha
prepare a separate appcaton on Form 230, n trpcate, for each ot of such
sprts or wnes to be dumped and botted. The botter sha nsert n each
copy of Form 230, after the descrpton of the packages, or of sprts or wues
transferred by ppe ne, a notce of ntenton as foows:
The above descrbed sprts (or wnes) are to be botted especay
for e port wth beneft of drawback.
Sprts or wues whch have been stored n the e port storage room n packages
may be reeased by the storekeeper-gauger for bottng, pursuant to request for
that purpose by the botter.
Sec. 176.27. Fberboard cases. (a)(1). Outer contaner. In addton to
meetng such requrements, the outer contaner of the cases sha be doube-faced,
and sha not be ess than 0.0808 of an nch thck for sod fberboard, and three-
s teenths of an nch thck for snge and doube wa corrugated tberboard,
and sha have a burstng strength of not ess than 200 pounds per square nch,
Muen or Cady test, and be faced on the outsde wth tough smooth matera.
The outer py sha be wuter-proofed, as requred by the above-mentoned rues,
and the nner pes may be water-proofed where desred. The outer faps of
both the top and bottom sha meet at the center of the case.
Sc. 176.3 . Record of sprts and wnes botted especay for e port. (a) y
rectfers and propretors of ta -pad bottng houses. The recept, rectfcaton,
f any, bottng, and dsposton of dsted sprts and wues botted especay
for e port, wth beneft of drawback, sha be entered by the rectfer on Form 5,
Rectfer s Monthy Record and Report. appcabe nformaton ndcated
by the headngs of the coumns and nes and the nstructons prnted on the
form w be entered thereon. The recept, bottng, and dsposton of dsted
sprts or wnes botted especay for e port wth beneft of drawback, by pro-
pretors of ta -pad bottng houses sha be entered on Form 52-D, Monthy
Record and Report of Ta -Pad ottng ouse Operatons. appcabe
nformaton ndcated by the headngs of the coumns and nes, and the
nstructons prnted on the form, w be entered thereon.
(6) y tcnemakers and propretors of bonded storerooms. The recept, bot-
tng, and dsposton of wnes botted especay for e port wth beneft of draw-
back sha be entered by wnemakers and propretors of bonded storerooms, ou
Form 52-D, Monthy Record and Report of Ta -I ad ottng ouse Opera-
tons. appcabe nformaton ndcated by the headngs of the coumns and
nes, and the nstructons prnted on the form, w be entered thereon. Form
52-D w he kept, and transcrpt thereof w be forwarded to the dstrct super-
vsor on or before the 10th day of the succeedng month.
Sec. 170.35. Cam and entry. (a) Form 1582 or Form 1582- . Cam for
aowance of drawback of nterna revenue ta es on dsted sprts or wnes
manufactured or produced n the Unted States and botted especay for e port,
and entry for the e portaton of such sprts or wnes wth beneft of drawback,
sha be prepared by the e porter on Form 15N2, Cam for Interna Revenue
Drawback on otted Dsted Sprts ported, and ntry for portaton
Thereof, In quadrupcate, for dsted sprts, and Form 1582- , Cam for
Interna Revenue Drawback on otted Wnes ported, and ntry for porta-
ton Thereof, n quadrupcate, for wnes. copes of Form 1582 or Form
1582- , wth Part 1 and Part 2 e ecuted, sha be fed by the e porter wth
the dstrct supervsor of the dstrct wheren s ocated the e port storage room
n whch the botted sprts or wnes are stored at the tme of e portaton.
of the nformaton caed for, as ndcated by the headngs of the coumns, and
the nes of the form, and the Instructons prnted on the form, sha be furnshed.
Sec. 176.39. Certfcate. Form 1583. Where sprts or wnes manufactured
(rectfed) In the Unted States from Imported sprts or wnes are botted
especay for e port wth beneft of drawback, the coector of customs at the
port where the entry or wthdrawa for consumpton was made w, upon
appcaton n wrtng by the rectfer, e ecute a certfcate on Form 1583, n
trpcate, showng that Interna revenue ta has been coected on the mported
sprts or wnes descrbed n the appcaton. Two copes of the certfcate
w be forwarded by the coector of customs to the dstrct supervsor of the
coho Ta Unt dstrct n whch the sprts were rectfed. The remanng
copy w be retaned by the coector of customs. Such certfcates sha be
seray numbered, begnnng wth number 1 for each customs dstrct
Sec. 176. 0. ppcaton for certfcate. The rectfer must set forth n hs
appcaton for the ssuance of the certfcate suffcent nformaton to enabe the
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Regs. 28, 176.3, etc
352
coector of customs to Identfy the Importaton, such as the port of entry, th
entry number, name of mportng vesse or other carrer, date of mportaton,
name of mporter, marks and numbers of packages, and a descrpton of the
sprts or wnes.
8 c. 176. 1. Certfcate requred before approva of cam. The Commssoner
w not approve a cam for drawback on sprts or wnes manufactured from
Imported sprts or wnes and botted especay for e port pror to the recept
of the certfcate, Form 1583, from the coector of customs, showng that
nterna revenue ta has been coected on such Imported sprts or wnes.
Skc. 176. 9. Drect devery for customs nspecton. (o) If the e port storage
room where the botted sprts or wnes are stored s ocated at the port of
e portaton, the e porter sha dever the shpment drecty for customs n-
specton and supervson of adng. The drawback entry must be fed wth the
coector of customs at east s hours pror to the adng of the sprts n order
to aow opportunty for customs nspecton. The e porter must re one copy of
the e port b of adng wth the coector of customs and one copy wth the
dstrct supervsor. The b of adng must show the e porter as the shpper,
the sera numbers of the cases, and the quantty shpped In wne gaons.
Skc. 176.50. Shpment to port of e port. In the event the e port storage
room where the sprts or wnes are stored s ocated esewhere than at the
port of e portaton, the e porter sha dever the shpment ether drecty for
customs nspecton and supervson of adng, as n the case where sprts or
wnes are stored at the port of e portaton, or to a common carrer for trans-
portaton to the port of e portaton. If the sprts or wnes are devered to a
common carrer for transportaton, the e porter sha procure two copes of
the b of adng coverng such transportaton. In case of e portaton through
a border port to contguous foregn terrtory, the b of adng sha cover
transportaton to destnaton and must show the routng, partcuary the car-
rer whch w dever the shpment for customs nspecton at the border. The
b of adng sha aso show that the shpment was sent n care of the co-
ector or deputy coector of customs at the border port. The e porter sha
Immedatey forward one copy of the b of adng drect to the coector of
customs at the port of e port, and transmt the other copy to the dstrct
supervsor of the dstrct from whch the sprts or wnes wore reeased for
e portaton. The dstrct supervsor w attach hs copy of the b of adng
to the copy of the cam and entry, Form 1582 or Form 1582- , returned by
the Government offcer at the e port storage room.
Sec. 176.55. Dstrct supervsor s approva. The dstrct supervsor w e -
amne the two copes of drawback cam. Form 1582 or 1582- , receved from
the coector of customs, and compare them wth the copy receved from the
storekeeper-gauger or desgnated offcer who supervsed the reease of the
quor from the e port storage room. If the dstrct supervsor s satsfed that
the camant has comped n every respect wth the aw and reguatons, and
the cam s vad, and f a good and suffcent bond has been furnshed, he
w e ecute hs certfcate of approva on each copy of the cam and forward
the orgna to the Commssoner, e cept as provded by secton 176. 5.
Sec. 176.57. cton on cam. The Commssoner w, upon recept of the cam
from the dstrct supervsor, e amne the cam and the records of hs offce,
Forms 230, 122, 237, 1583, and 1600, prevousy furnshed hm, as provded by
sectons 176.16 to 176.23, ncusve, to determne whether the sprts or wnes
descrbed n the cam have been ta -pad. If the Commssoner fnds that such
sprts or wnes have been ta -pad, he w e ecute a certfcate to that effect
on Form 6 6- , Certfcate of Commssoner of Interna Revenue of Ta -Pad
Sprts, or Form 6 6- , Certfcate of Commssoner of Interna Revenue of
Ta -pad Wnes. If the cam s aowed n whoe, or n part, the Commssoner
w forward t, together wth hs certfcate, Form 6 6- or Form 6 6- ,
schedued on Form 1550- , Schedue of Cams for owance of Drawback on
Dsted Sprts or Wnes otted specay for port and ported, to the
Comptroer Genera of the Unted States for certfcaton of the amount aowed.
If the cam s dsaowed, the Commssoner w so notfy the camant and
state the reasons therefor.
Sec. 176.69. portaton. n e portaton Is an act defned by secton 176.3(a),
e cept that shpments of ta -pnd dsted sprts n dsters orgna packages
to mercan Samoa, Guam, Puerto Rco, the Phppne Isands, the rgn Isands,
and the Panama Cana Zone sha be treated as e portatons. There Is no
authorty of aw for the shpment of dsted sprts n dsters orgna packages,
wth beneft of drawback, to aska, awa, ngman s Reef, the Mdway Isands,
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353 Regs. 5, (1910), rts. I , etc.
or Wake Isand. (Sees. 2RS7. as amended, 3176, 33 1(c), as amended, 3351(c),
and 3301(c), as amended, L R. .)
5. Page 36 of Reguatons 28 s modfed by strkng out Seo.
16- .6t and substtutng therefor Sec. 176.C .
6. These reguatons sha take effect on and after the s teth day
foowng the. date of approva, e cept sectons 176.5,176.12, and 176.69,
whch sha take effect mmedatey.
Guy T. everno,
Commssoner of Interna Revenue.
pproved October 3, 19 1.
erbert . Gaston,
ctng Secretan/ of the Treasury.
(Fed wth the Dvson of the Federa Regster October 6, 19 1, 3.29 p. m.)
Reguatons 5 (19 0), rtces I , I, 19 1 8-10916
I , and II. T. D. 5100
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT . PRO-
DUCTION OF R NDY.
mendng Reguatons 5 (19 0).
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. G.
To Dstrct Supervsors and Others Concerned:
y vrtue of and pursuant to sectons 2825 and 3176 of the Interna
Revenue ( ode, Reguatons 5, Producton of randy (19 0), s
he-eby amended by nsertng a new secton n rtces I and II,
desgnated secton 18 . 7a and secton 18 .399a, respectvey, and
amendng sectons 18 .138(a)( ), 18 .383, 18 .398, 18 . 00, 18 . 03,
and 18 . 05, to read as foows:
rtce I . qupment.

Sec. 18 . a. Unfnshed sprts tanks. Whenever a frut dstery estabshed
or operated under these reguatons s to be operated aternatey as such and
as an ndustra acoho pant or as a regstered dstery n accordance wth
rtce I, and the frut dster desres to retan unfnshed sprts where the
change n ty e of pant s to be temporary ony, he must provde for the purpose
one or more tanks, each of whch must be constructed and equpped n accord-
ance wth the provsons of secton 18 . 2 and have panted thereon the words
Unfnshed Sprts Tank. foowed by ts sera number and capacty n wne
gaons. The tanks must be so arranged that the unfnshed sprts to be co-
ected theren w pass from the st nto the tank through contnuous and
securey cosed, f ed ppes and vesses. The ppe nes connectng the tanks
wth sts or other apparatus must be constructed n accordance wth secton
18 .52. aves must be provded n the ppe nes and so arranged as to contro
competey the fow of unfnshed sprts both nto and out of each tank. The
constructon of the vaves must be such that they can be secured wth Government
ocks. (Sees. 2823, 2829, 3170, I. R. C.)

rtce I. Requrements Governng ternate Operatons as Industra
coho Pant or Regstered Dst ehy.
.
Seo. 18 .13S. (a)

( ) Materas, heads and tas, and unfnshed sprts. If dstng materas
are transferred to the successor or f heads and tas or unfnshed sprts are
s
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Regs. 5 (19 0), rts. I , etc. 35
to be retaned on the premses pendng te resumpton of operatons as a frut
dstery, compy wth the requrements of rtce II.

btce I . Suspenson and Resumpton of Operatons.

Sko. 18 .3 3. Date of suspenson. The dster w f n the notce the tme
when a dstng matera on the dstery premses w he dsted and a
sprts n the dstery run nto the recevng tanks, e cept unfnshed sprts or
dstates contanng one-haf of 1 per cent or more of adehydes or 1 per cent or
more of fuse o whch are to be retaned on the premses durng a temporary
change n the type of dstery, as provded n rtce II. Where no
storekee er-gauger s assgned to the dstery the dster w forward the
notce to the dstrct supervsor n suffcent tme to reach hm at east 8 hours
before the date the dster ntends to suspend operatons, n order that the
dstrct supervsor may deta an offcer to ock the furnace door of each st
or the contro vave n the ppe ne conveyng steam or fue to each st, as the
ease may be, at the tme operatons are suspended. (Sees. 2825, 2850. 3176,
I. R. C.)

rtce II. ternate Operaton- as Industra coho Pant ob
Regstered Dstery.

Sec. 18 .308. Competon of operaton requred. When a frut dstery s
to be oented as an ndustra acoho pant or as a regstered dstery, the
busness of producng brandy, e cept as herenafter provded, must be competey
fnshed by the person or persons frst carryng on the busness, and the dstery
duy suspended before t can be operated as an ndustra acoho pant or a
regstered dstery. cept as provded n sectons 18 .399 and 18 .399a, a
unfnshed sprts, ncudng sngugs and ow wnes, and dstates contanng
one-haf of 1 per cent or more of adehydes or 1 per cent or more of fuse o
coected n accordance wth the provsons of rtce I, must be redsted
and run nto recevng tanks, drawn off, gauged, and removed by the outgong
dster. cept as provded n sectons 18 .399 and 18 .399a, a such unfnshed
sprts or dstates must be dsposed of before the dstery can be operated
as an ndustra acoho pant or regstered dstery. (Sees. 2825, 2850, 3178,
I. R. C.)
Sec. 18 .: ,90a. Retenton, of unfnshed sprts. Where the change n type of
pant s to be temporary ony, the outgong dster may retan unfnshed sprts
under Government ock n unfnshed sprts tanks, provded n accordance wth
secton 18 . a n the frut dstery, unt the pant s agan operated by hm
as a frut dstery under these reguatons: Provded, That such dster fur-
nshes a duy e ecuted consent of surety, Form 1533, In trpcate, contnung
abty on the frut dster s bond, Form 30 , for the ta on such unfnshed
sprts retaned on the premses, notwthstandng the change n the type of pant.
(Sees. 2825. 3176. I. R. O.)
Sec. 18 . 00. Transfer of materas, etc. The outgong dster may transfer
to hs successor materas on hand, ncudng those n process, at the tme the
change n type of pant takes pace, but no sprts may be so transferred, e cept
the resdue of sprts n the sts whch t s not practcabe to competey bo
out: Provded, That materas not usabe and resdue of sprts n sts not
producbe under the aw at the succeedng type of pant may not be transferred
to the successor. Where such materas and resdue of sprts are not trans-
ferabe, a materas n process must be dsted, a basc materas must be
removed from the premses, and the sts and other vesses must be competey
ceared of sprts, and such sprts, f other than unfnshed sprts or dstates
ntended for retenton n accordance wth the provsons of sectons 18 .399 and
18 .399a, removed from the dstery In accordance wth aw before the change
In type of pant becomes effectve. When t s agan desred to resume opera-
tons as a dster under these reguatons, the busness of producng acoho or
whsky, rum, etc., as the case may be, must be smary fnshed and the ndustra
acoho pant or regstered dstery suspended n accordance wth governng
reguatons. (Sees. 2825, 3176, I. R. O.)
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355
eo. 18 . 03. Competon of record . The outgong dster w compete hs
record, Form 15, as to the remova of basc materas from the premses, or the
transfer of basc materas and materas n process to the successor, as the case
may be, and as to producton and remova from the dstery of a brandy
produced by hm. If dstates coected n accordance wth rtce I are
retaned on the premses under ock n tanks or n the brandy depost room,
as provded n secton 18 .399, or unfnshed sprts are retaned on the.premses
In ocked tanks, as provded In secton 18 .399a, a notaton w be made on
Form 15 showng that such unfnshed sprts or dstates are temporary
retaned on the premses pendng resumpton of operatons as a frut dstery.
The dster w contnue to fe monthy reports on Form 15 durng the perod
-uch unfnshed sprts or dstates are retaned on the dstery premses.
Where the pant s operated as a frut dstery n two or more perods durng
the same month by the same propretor, the operatons of such propretor w
be recorded on the same Form 15, but approprate notatons w be made on the
separatng nes to show the dates the dstery was operated as a regstered
dstery or an Industra acoho pant and the names under whch t was so
operated. (Sees. 2825, 28 1(a), 3176, I. R. C.)
Sec. 18 . 05. Dsposton of sprts. Where a change n the type of pant
takes pace, the storekeeper-ganger assgned or detaed to the dstery w see.
that a dstates coected n accordance wth rtce I are dsposed of, and
that a other unfnshed sprts, e cept the resdue of sprts n sts where the
same s to be transferred to the successor as provded n secton 18 . 00, are
dsted and run nto recevng tanks, drawn off, gauged, and removed by the
outgong dster n the name under whch they were produced, uness retaned
In the dstery n accordance wth sectons 18 .399 and 18 .399a, respectvey,
before the pant s operated as another type of dstery. Upon dsposton or
retenton n the dstery of such unfnshed sprts or dstates, and transfer
of a other sprts to the recevng tanks, the dstery may be operated as
another type of pant, but a sprts transferred to the recevng tanks must be
branded and removed n accordance wth aw by the outgong dster n the
nne under whch they were produced, before any sprts are deposted n
the recevng tanks or wthdrawn from the dstery by the successor. (Sees.
2825, 3170, 1. R. C.)

Guy T. everng,
Commssoner of Interna Revenue.
pproved November 27, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 29, 19 1, 11.21 a. m.)
INDUSTRI L LCO OL.
19 1- 5-1089
T. D.5095
mendment of ppend to Reguatons No. 3, revsed 1938.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. O.
To Dstrct Supervsors and Others concerned:
Pursuant to authorty n sectons 3070(a), 3105(a), 312 (a)(6).
and 317G(a), Interna Revenue Code, competey denatured acoho
formuae Nos. 12, 13, and 1 . as set forth n ppend to Reguatons
No. 3, approved December 2 ), 1938, are amended to read as foows:
Formua No. 12.
To every 100 gaons of ethy acoho of not ess than 160 proof add I
gaons of Deno or a compound smar thereto.
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Regs. 3, rts. I, 1 6.
356
1.5 gaons of methy sobuty ketone, or 2.5 gaons of methy propy ketone,
or 1 gaon of acetado (hydro y-buyradehyde).
1 gaon of gasone.
1 gaon of gdte or a compound smar thereto, or 2 gaons of ydro-
no or a compound smar thereto.
Formua No. 13.

To every 100 gaons of ethy acoho of not ess than 160 proof add:
gaons of ST-115 or a compound smar thereto.
1.5 gaons of methy sobuty ketone, or 2.5 gaons of methy propy ketone,
or 1 gaon of acetado (hydro y butyradehyde).
1 gaon of gasone.
0.5 gaon of gdte or a compound smar thereto or 1 gaon of ydro-
no or a compound smar thereto.
Formua No. 1 .
To every ICO gaons of ethy acoho of not ess than 160 proof add:
5 gaons of FD-13 or a product smar thereto.
1.75 gaons of methy sobuty ketone, or 2.5 gaons of methy propy ketone,
or 1 gaon of acetado (hydro y-butyradehyde).
SP CIFIC TIONS FOR C T LDOL.
cetado: 90 per cent to 100 per cent.
Specfc gravty: 1.098 to 1.105 at 20 C.
Purty: It sha ttrate not ess than 90 per cent or more than 110 per cent
by the foowng method:
Dssove 15 grams of the acetado n dsted water and dute to 1 ter n
a voumetrc fask. Transfer 5 m. of ths souton to a 250 m. gass stoppered
fask contanng 25 m. dsted water. dd 25 m. of a freshy prepared 1 per
cent sodum bsuphte souton. Prepare a bank omttng the acetado sou-
ton. Pace fasks n a dark pace away from e cessve heat or cod and aow
to stand s hours. Remove and ttrate free bsuphte wth tenth-norma odne
souton usng starch ndcator.
Lggt) 200 0. per Mnt cetaWo
weght of sampe
On account of the presence of acetadehyde, ttratons n e cess of 100 per
cent w sometmes be obtaned.
Norman D. Cann,
. ctng Commssoyer of Interna Revenue.
pproved October 30, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 31, 10 1, 11. 2 a m.)
Reguatons 3, rtce 111: Markng packages. 1911-36-10819
rtce 1 6: Genera provsons governng T. D. 5065
use.
mendment of Reguatons No. 3.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
Pursuant to the authorty n secton 3105(a), Interna Revenue
Code, Reguatons No. 3 s amended as herenafter set forth.
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357
Reg8. 3, rts. I, 1 6.
rtce 111. as amended, s further amended by addng thereto the
foowng paragraph:
ffectve mmedatey and unt further notce, propretors of denaturng pants
and ther bona fde agents may reuse embossed st e drums bearng the dentfyng
symbo of the denaturer for packagng competey denatured acoho and ant-
freeze manufactured wth competey denatured acoho, provded that drums
bearng the embossed symbo of one denaturer may not 1 reused by another
denaturer or hs agents. New and reused drums, when fed, sha have the date
of fng stenced thereon n addton to a the marks now requred by these
reguatons.
rtce 1 G, as amended, s further amended by addng thereto the
foowng paragraph:
ffectve mmedatey and unt further notce, producers of propretary sovents
and ther bona fde agents may reuse embossed stee drums bearng the dentfyng
symbo of the producer for packagng propretary sovent, provded that drums
bearng the embossed symbo of one producer may not be reused by another pro-
ducer or hs agents. New and reused drums, when fed, sha have the date of
fng stenced thereon n addton to a the marks requred by these regua-
tons.
Gt|y T. IIeverng,
Commssoner of Interna Revenue.
pproved ugust 20,10 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster September 2,19 1, 3.22 p. m.)
Reguatons 3, rtce 111: Markng packages. 19 1- 1-10863
rtce 1 6: Genera provsons governng T. D. 5075
use.
mendment of Reguatons No. 3.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
Pursuant to the authorty n sectons 3105(a), 312 (a)(6), and
3176(a), Interna Revenue Code, Reguatons No. 3 s amended as
herenafter set forth.
rtce 111, as amended, s further amended as foows:
ffectve mmedatey and unt further notce, the producer s dentfyng
symbo and the sera number on packages of competey denatured acoho, n
eu of beng embossed as heretofore prescrbed, may be cut, sand-basted, or
otherwse permanenty ndented thereon. Packages marked n ths manner may
be reused by producers and ther agents n accordance wth the procedure
outned n ths artce as amended by Treasury Decson 50C5 page 356, ths
uetn , provded such dentfyng symbos and sera numbers are dstnct and
egbe when the reused packages are fed and shpped.
rtce 1 6, as amended, s further amended as foows:
ffectve mmedatey and unt further notce, the producer s dentfyng sym-
bo and the sera number on packages of propretary sovent, n eu of beng
embossed as heretofore prescrbed, may be cut, sand-basted, or otherwse per-
manenty Indented thereon. Packages marked In ths manner may be reused by
producers and ther agents In accordance wth the procedure outned n ths
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Regs. 3, rte. 171-180
358
artce as amended by Treasury Decson 5065 page 356, ths uetn , provded
such dentfyng symbos and sera numbers are dstnct und egbe when the
the reused packages are fed and shpped.
Gut T. everng,
Commssoner.
pproved October 3, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October , 19 1, 10.31 a. n.)
Reguatons 3, rtces 171-180. 19 1- 1-1086
T. D.5076
mendment of Reguatons No. 3.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
Pursuant to the authorty n sectons 3105, 312 (a) (6), and 3176 of
the Interna Revenue Code, Reguatons No. 3 s amended by addng
thereto the foowng new artces:
TR NSF R OF T -P ID LCO OL Y PIP LIN TO R CTIFYING PL NTS.
ut. 171. The Commssoner may, n hs dscreton, authorze the nstaaton
of a ppe ne for the transfer of acoho produced In accordance wth these
reguatons from the weghng tank n an ndustra acoho bonded warehouse,
after ta -payment, to storage tanks n a rectfyng pant for use n rectfcaton
and bottng, when such rectfyng pant s contguous to, or s n the mmedate
vcnty of the bonded warehouse. The Commssoner w determne from a
the crcumstances In each case whether the rectfyng pant s n the mmedate
vcnty of the bonded warehouse.
rt. 172. The propretor of a bonded warehouse who desres to nsta a ppe
ne for the transfer of ta -pad acoho to a contguous rectfyng pant, or
rectfyng pant n the mmedate vcnty of the bonded warehouse, must fe
appcaton n trpcate wth the dstrct supervsor showng the reatve poston
of the bonded warehouse and the rectfyng pant, the propretorshp thereof, and
a fu descrpton of the proposed ppe ne.
rt. 173. Upon recept of the appcaton, the dstrct supervsor w make
such nqury as he may deem necessary to determne the proprety of grantng
the permsson sought and w then forward a copes of the appcaton to
the Commssoner wth hs recommendaton thereon. The Commssoner w
ndcate hs approva or dsapprova on a copes of the appcaton and return
two copes to the dstrct supervsor, who w forward one copy to the appcant.
Where the appcaton Is approved, the propretor of the warehouse w, upon
nstaaton of the ppe ne, fe amended appcaton, Form 1 31, and pans and
pat coverng such changes n equpment n accordance wth these reguatons.
rt. 171. The ppe ne sha be constructed and the outet of the weghng
tank secured n the manner provded by secton 183.5 of Reguatons , respect-
ng ppe nes from the cstern room to storage tanks In an nterna revenue
bonded warehouse on the dstery premses.
rt 175. Where a ppe ne has been nstaed for the transfer of acoho
drect from the weghng tank n the bonded warehouse to a contguous rectfy-
ng pant or rectfyng pant n the mmedate vcnty, as provded heren, and
the propretor of the warehouse desres to transfer such acoho, he sha
e ecute appcaton for the ta -payment of such acoho on Form 159 , pp-
caton for Coector s Certfcate of Ta -Payment of Dsted Sprts for Shp-
ment n Tank Cars, n dupcate, appropratey modfed to cover the transfer
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359
Regs. 3, rts. 171-180.
by ppe ne. The propretor and the storekeeper-ganger sha then proceed In
accordance wth the provsons of these reguatons, as amended, respectng the
gaugng and wthdrawa of sprts for ta -payment n raroad tank cars. The
propretor w forward a copes of Form 1 0, prepared n accordance wth
artce 63, wth Form 15) , n dupcate, accompaned by proper remttance
for the ta , to the coector of nterna revenue.
rt. 17t. The coector w note on a copes of Form 1 0, the ta -payment
(ncudng the sera number of the certfcate, Form 1595), n the coumn pro-
vded for enterng the sera numbers of ta -pad stamps, e ecute the certfcate
of ta -payment on Form 1 0, and ssue Form 1595, Coector s Certfcate
of Ta -Payment of Dsted Sprts for Shpment n Tank Cars, whch cer-
tfcate sha be appropratey modfed to cover the transfer of acoho by
ppe ne. The coector w f n a the requred data n the bank spaces
on the certfcate, e cept those provded n the ower eft corner for the ver-
fcaton of the storekeeper-ganger, and sha date and sgn the certfcate n
the manner requred by secton 1 3.299 of Reguatons . The certfcate s
not negotabe and sha not be used for any sprts other than those descrbed
theren. The coector w enter on the orgna and copy of Form 150 , n
the space provded, the sera number, date, and amount of the certfcate
ssued. The coector w retan one copy of Form 1 0 and the orgna copy
of Form 150 . e w ma or dever the certfcate, Form 1505, and the
orgna and remanng copes of Form 1 0 to the propretor of the warehouse
or hs desgnated agent, n accordance wth the propretor s request n Form
150 . The coector w send one copy of the appcaton, Form 150 , to the
dstrct supervsor.
rt. 177. The propretor sha dever the certfcate of ta -payment. Form
1505, and a copes of Form 1 0 to the storekeeper-ganger at the bonded
warehouse. The storekeeper-ganger w verfy the contents of the weghng
tank and date and sgn the certfcate, Form 1505, n the space provded therefor.
The certfcate must be attached to a board on the weghng tank by means of
a tack n each corner, after whch t w be canceed n the same manner as
a ta -pad stamp attached to a package and covered wth a coatng of trans-
parent varnsh, sheac, or acquer to prevent any ateraton thereof.
kt. 178. When the certfcate of ta -payment has been aff ed to the wegh-
ng tank and canceed, the storekeeper-ganger w unock the outet vave and
permt the propretor to transfer the acoho by ppe ne to the rectfyng pant
named n the certfcate. The acoho sha be transferred ony under the mme-
date supervson of the storekeeper-ganger. fter the acoho has been trans-
ferred, the storekeeper-ganger w forward one copy of Form 1 0 and the
canceed Form 1505 to the dstrct supervsor, and dever two copes of Form
1 0 to the propretor, who w dever one copy of such form to the rectfer.
rt. 170. The report of gauge, Form 1 0, devered to the rectfer by the
propretor, sha be attached to the storage tank n the rectfyng pant. The
rectfer sha enter the date and quantty of removas from the tank n the
bank spaces of such Form 1 0. The report of gauge sha be kept on the tank
unt such tme as the quantty covered thereby has been wthdrawn from the
tank. The report sha then be fed by the rectfer avaabe for nspecton by
Government offcers. The acoho transferred by ppe ne may not be used
by the rectfer pror to attachment of Form 1 0 to the storage tank.
rt. 180. The dstrct supervsor w compare the canceed certfcate wth
the copy of the appcaton and the report of gauge as to the number of gaons
of acoho, the amount of ta . etc., and nvestgate any dscrepancy. e w
then scud a copy of the appcaton to the Commssoner and where there s
a dscrepancy, a report of hs fndngs reatve thereto.
Gut T. everng,
Commssoner of Interna Revenue.
pproved October 3, 19 1.
erbert . Gaston,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October , 19 1, 10.31 a. m.)
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Regs. 18, 192.197, etc.
360
Reguatons 18, Sectons 192.197, 192.280, 19 1- 0-10850
192.261, 192.262, 192.263, 192.26 , 192.265, T. D. 507
and 192.266.
TITL 26 INT RN L R NU . C PT R L SU C PT R C, P RT 192.
mendng Reguatons No. 18.1
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned;
Pursuant to the provsons of sectons 3153 (b) and 3176 of the Inter-
na Revenue Code, and secton 3 of the ct of uy 22, 19 1 (Pubc
Law 187, Seventy-seventh Congress), sectons 192.97 and 192.230 of
Reguatons No. 18 (Tte 26, Part 192, Code of Federa Reguatons)
are hereby amended, and new sectons 192.261 to 192.266 are added, to
read as foows:
Sec. 192.197. ond. rewers who desre to e port fermented mat quors
wthout the payment of ta sha be requred to furnsh the dstrct super-
vsor of the dstrct n whch the brewery s ocated, a bond, n dupcate, on
Form 263, wth acceptabe corporate surety, ndvdua suretes, or by the
depost of proper coatera. ond Form 203 must be fed wth the dstrct
supervsor pror to the fng of the frst appcaton for wthdrawa and entry
for e portaton on Form 550 f e portaton s made n barres, or pror to the
fng of the frst notce on Form 127 f beer s botted for e port. Separate
bonds are not requred for the e portaton of beer In barres and bottes.
( ; Sec. 3153(b), I. R. C.)
Sec. 192.230. Proof of andng not furnshed. In case the brewer, from causes
beyond hs contro, Is unabe to furnsh the requred proof of andng or oss on
and or at sea wthn the tme prescrbed, he may make appcaton to the
supervsor for an e tenson of tme for producton of the evdence. Such
appcaton must state specfcay the cause of faure to produce the evdence
and be verfed under oath. One e tenson of three months may be granted by
the supervsor and, f necessary, upon a second appcaton, an addtona e ten-
son of three months may be granted by hm. ( ; Sec. 3153(b), I. R. C.)
rtce III. Suppes fob esses and bcbaft.
Sec. 192.261. Suppes for vesses and arcraft. Fermented mat quor may
be removed from breweres and brewery bottng houses free of ta for use as
suppes on the foowng vesses and arcraft:
(1) esses of war, In ports of the Unted States, of any naton whch
may recprocate such prvege toward the vesses of war of the Unted
States n ts ports;
(2) esses empoyed n the fsheres or n the whang busness, or actu-
ay engaged n foregn trade or trade between the tantc and Pacfc
ports of the Unted States or between the Unted States and any of ts
possessons;
(3) rcraft regstered n the Unted States and actuay engaged n
foregn trade or trade between the Unted States and any of ts possessons;
and
( ) rcraft regstered n any foregn country and actuay engaged n
foregn trade or trade between the Unted States and any of ts possessons,
where such trade by foregn arcraft s permtted, and where the Secretary
of the Treasury sha have been advsed by the Secretary of Commerce that
he has found that such foregn country aows, or w aow, substantay
recproca prveges n respect of arcraft regstered n the Unted States.
( ; Sec. 3183(h), I. R. C.; Secton 3 of the ct of uy 22, 10 1 (Pubc Law
187, Seventy-seventh Congress).)
1 The astersk at the end of sectons refers to secton 3178 of the Interna Revenue Code.
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3G1
Regs. 18, 192.197, etc.
Sec. 192.262. Procedure appcabe. The remova, shpment, e amnaton by
customs offcers, and evdence of adng on vesses and arcraft, of fermented
mat quor from a brewery or brewery bottng house for use as suppes w,
so far as appcabe, foow the procedure of sectons 192.1C2 to 102.239 of these
reguatons, concernng the e portaton, free of ta , of fermented mat quor.
( ; Secton 3 of the ct of uy 22, 10 1 (Pubc Law 187, Seventy-seventh
Congress).)
Skc. 192.263. Form 550. ppcaton w be made on Form 550, propery
modfed, for the remova of fermented mat quor from a brewery or from the
bottng house of a brewery for use as suppes on vesses and arcraft. ( ;
Secton 3 of the ct of uy 22, 19 1 ( ubc Law 187, Seventy-seventh
C( ngress).)
Sec. 192.20 . ford. efore any beer Is removed from the bottng house for
use as suppes on vesses or arcraft, consent of surety on bond Form 263 must be
obtaned n accordance wth secton 192.05 of these reguatons. If no bond Form
203 s on fe wth the supervsor, the brewer, pror to bottng beer for use on
vesses or arcraft, w be requred to obtan and fe such bond propery
modfed. ( ; Secton 3 of the ct of uy 22, 19 1 ( ubc Law 187, Seventy-
seventh Congress).)
Skc. 192.265. eer botted for e port. eer whch has been botted for e port
and s stored n the bottng house of the brewery, may be removed for use as
suppes on vesses and arcraft. ( ; Secton 3 of the ct of uy 22, 19 1 (Pubc
Law 187, Seventy-seventh Congress).)
Sec. 192.266. vdence of u e. When fermented quor has been aden on board
a vesse or arcraft for use as shp s suppes or suppes for arcraft, there must
be submtted to the dstrct supervsor wthn s months (or such addtona
e tensons of tme as may be granted by the dstrct supervsor or the Comms-
soner), an affdavt of the master or other offcer of the vesse or arcraft on
whch the artces were aden, havng knowedge of the facts, showng that the
fermented mat quor has been used on board the vesse or arcraft, and that no
porton thereof ha-s been unaden n the Unted States or any of ts possessons:
Provded. That n the case of any shpment the ta on whch does not e ceed 25,
such affdavt w not be requred. In the case of vesses of war, such affdavt
w not be requred. ( ; Secton 3 of the ct of uy 22, 19 1 (Pubc Law 187,
Seventy-seventh Congress).)
Guy T. everng,
Commssoner o| Inte-na evenue.
pproved October 2, 19 1.
erbert . Gaston,
ctng Secretary o| the Treasury.
(Fed wth the Dvson of the Federa Regster October 3, 19 1, 10.2 a. m.)
1611 2 2
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Msc.
302
FIR RMS.
19 1-36-10820 T.D.5066
TITL 26 INT RN L R NU C PT R I, P RT 68.1
mendng Treasury Decson 901 C. . 19 0-1, 282 .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. 0.
To Dstrct Supervsors and Others Concerned:
y vrtue of and pursuant to the provsons of the ct of ugust
9, 1939 (U. S. C, Sup., tte 9, chapter 11), and Subchapter of
Chapter 25 of the Interna Revenue Code, the ast paragraph of
secton 68.0, and sectons 68.1 to 68.1 , ncusve, and secton 68.16
of Treasury Decson 961, approved anuary 5, 19 0 C. . 19 0-1,
282 , are amended to read as foows:
Secton 08.0. Introductory.
The foowng reguatons are hereby prescrbed under the ct
of ugust 9, 1939, and Subchapter of Chapter 25 of the Interna
Revenue Code, reatve to the sezure and dsposton of vesses,
vehces, and arcraft when engaged n the transportaton, etc., of
contraband frearms, and to the sezure and dsposton of the contra-
band frearms nvoved:
sc. 68.1. Defntons. s used n these reguatons, e cept as otherwse
ndcated by the conte t:
(a) The term conveyance means a vesse, vehce, or arcraft wthn the
scope of the ct of ugust 9, 1930. and these reguatons.
(6) The terms sezng offcer, offcer sezng, etc., mean the Deputy
Commssoner of Interna Revenue n charge of the coho Ta Unt, the
dstrct supervsor, nvestgator n charge, nvestgator, or nspector of the
proper dstrct, or such other offcer of nterna revenue as may be specay
authorzed by the Commssoner pursuant to secton 3720 of the Interna
Revenue Code to seze property egay sub|ect to sezure and who as made
or adopted a sezure wthn the scope of these reguatons.
(c) The term Secretary means te Secretary of the Treasury.
( f) The term Commssoner means the Commssoner of Interna Revenue.
(e) The term Deputy Commssoner means the Deputy Commssoner of
Interna Revenue n charge of the coho Ta Unt.
(f) The term dstrct supervsor means the person havng charge of a
supervsory dstrct of tfe coho Ta Unt of the ureau of Interna Revenue.
(g) The term nvestgator n charge means the person havng charge of a
subdvson of a supervsory dstrct of the coho Ta Unt of the ureau of
Interna Revenue.
(h) The term coector means the coector of nterna revenue.
( ) The terms defned n the ct of ugust 9, 1939, sha have the mean-
ngs thereby ascrbed to them.
Sec. 08.2. Reports of sezure. n offcer sezng or adoptng the sezure of a
conveyance or contraband frearm sha prompty make a compete wrtten
report to the dstrct supervsor for the dstrct n whch the sezure was made.
The report sha be n such form and submtted n such manner as the Deputy
Commssoner may requre.
Sue. 68.3. Custody and storage. ny conveyance or contraband frearm
sezed under the aw and these reguatons sha be n the custody of the ds-
trct suervsor or nvestgator n charge for the dstrct n whch the sezure
The astersk at pnd of sectons 6R.1 to 08.12, ncusve, and secton 68.16 refers to
ct of ugust 9, 1939 (53 Stat.. 1291 ; 9 . S. C, Sup., chapter 11), ana the Interna
Revenue Code, Chapter 25, Subchapter .
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s made. The sezng offcer sha store the conveyance or contraband frearm n a
pace desgnated, ether generay or n the partcuar case, by the dstrct super-
vsor or Investgator n charge. The pace of storage sha be n the |udca ds-
trct n whch the sezure oc-urred. Government storage factes sha be utzed
f practcabe. If the conveyance s stored on prvate premses there sha be
secured from the propretor thereof and forwarded wth the report to the ds-
trct supervsor a recept for the conveyance concdng wth tho descrpton
n the report to the dstrct supervsor. Conveyances or contraband frearms
may not be used pror to forfeture and award for offca use.
Sec. 68. . pprasement. The dstrct supervsor or nvestgator n charge
sha apprase the conveyance or frearm to determne the vaue at the tme
and pace of apprasement, or f there s no market for the conveyance or fre-
arm at the pace of apprasement, the vaue n the prncpa market nearest
the pace of apprasement. The apprasa may be based upon the report of the
sezng offcer and nny other nformaton whch may be acqured.
Skc. 68.5. dvertsement. If the apprased vaue does not e ceed 1,000, the
dstrct supervsor sha cause a notce of the sezure and of the Intenton to
forfet and se or otherwse dspose of the property to Ik pubshed once a week
for at east three successve weeks In a newspaper of genera crcuaton In the
|udca dstrct n whch the sezure occurred. The notce sha not e n-
serted oftener than three tmes, uness the dstrct supervsor s of the opnon
that, because of crcumstances pecuar to the partcuar case, a grenter num-
ber of nsertons w be to the advantage of the Government. The notce
shn
(1) descrbe the conveyance or frearm sezed, and show the regstra-
ton, motor and sera numbers of the conveyance and the number or other
dentfyng mark of the frearm, f any;
(2) show the reason for, and tme and pace of, sezure; and
(3) state that any person desrng to cam the conveyance or frearm
may, wthn 20 days from the date of frst pubcaton of the notce n the
case of a conveyance and wthn 30 days from the date of frst pubcaton
of the notce n the case of a frearm, fe wt the nvestgator n charge
a cam for the conveyance or frearm and a bond for costs of |udca
condemnaton wth satsfactory suretes n the sum of 250; and that
uness such cam and bond are ted wthn the stated tme the con-
veyance or frearm w e dsposed of n accordance wth aw. The form
of notce used n sezures under other aws by the coho Ta Unt w,
as far as appcabe, be foowed.
Sec. 68.6. Requrements as to cam and bona . The bond and cam sha
be n trpcate. The bond sha suffcenty dentfy the conveyance or frearm,
sha run to the Unted States of merca, have suretes approved by the ds-
trct supervsor, and be condtoned that n case of condemnaton of the con-
veyance or frearm the obgor sha pay a the costs and e penses of the pro-
ceedng to obtan the condemnaton. ond, Form 175, may be adapted for
the purposes of these reguatons. When a cam and bond are receved n
proper form and the suretes are satsfactory, the dstrct supervsor and the
nvestgator n charge sha proceed n accordance wth secton S8.8. If the
documents are not n satsfactory form when frst receved by the dstrct super-
vsor or Investgator n charge, a reasonabe tme for correcton may be
aowed. If correcton Is not made wthn a reasonabe tme the documents
may be treated as nugatory, and the case may proceed as though they had not
been tendered. The tng n proper form of the cam and bond does not entte
the camant to possesson of the conveyance or frearm but stops the summary
proceedngs.
Sec. 68.7. Summary forfeture. If the apprased vaue does not e ceed
1,000, and the cam and bond mentoned n secton 68.6 are not fed wthn
the tme requred, the nvestgator n charge sha e ecute, n quadrupcate, a
decaraton of forfeture, one copy of whch w be retaned and the orgna
and two copes forwarded to the dstrct supervsor. The decaraton shoud
state that t s made In accordance wth secton 609 of the Tarff ct of 1030
n the case of a conveyance and wth secton 372 of the Interna Revenue
Code In the case of a frearm, and shoud foow, wth necessary modfcatons.
Form 1570. Thereafter the conveyance sha be dsposed of n accordance
wth offca nstructons duy receved by the dstrct supervsor. No notce
of pubc sae of any such forfeted frearm sha be gven and no such frearm
gha be sod at pubc sae. ny such frearm forfeted as provded heren
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sha be devered by the dstrct supervsor to the Drector of Procurement
for approprate dsposton.
Sec. 68.8. Presentaton for |udea acton.- If the apprased vaue s greater
than 1,( 0 ), or f the apprased vaue s not more than 1,000 but a cam and
satsfactory bond have been receved (see secton 63.6), the nvestgator n
charge sha transmt a copy of the report of the sezng offcer, and a suppe-
menta report of any pertnent facts and crcumstances addtona to those
dscosed by the sezng offcer s report (see secton 08.2), to the Unted
Sates attorney for the |udca dstrct n whch the sezure was made for
nsttuton of condemnaton proceedngs. If the sezure has been advertsed
the report sha ncude copes of the newspapers contanng the advertsements.
Immedatey upon reference of a case to the Unted States attorney, the ds-
trct supervsor sha notfy the Deputy Commssoner. If deemed approprate,
the Commssoner w, n the case of a conveyance, request I e Drector of
Procurement to petton the court for devery of the same for offca use.
See Treasury Decson 625 (secton 3), Cumuatve uetn -1 (1930.1,
page S2.
b C. 63.9. Pettons for remsson or mtgaton of forfeture. ny person
Interested n any conveyance or frearm wthn the scope of these reguatons
whch has been forfeted by summary or admnstratve proceedngs, or whch
Is hed for summary or admnstratve forfeture, may wthn the tme pre-
scrbed (see secton 08.10) petton the Secretary for remsson or mtgaton
of the forfeture, and, f the conveyance or frearm has been sod, or de-
vered to a governmenta agency for offca use, for restoraton of the prt -
ceeds of sae or such part thereof as may be camed by the pettoner. The
petton sha be ted n trpcate wth the dstrct supervsor or the nvest-
gator n charge.
The petton sha be addressed to the Secretary and sha be e ecuted and
sworn to by the pettoner. The petton sha state n cear and concse terms
the foowng:
(1) compete descrpton of the conveyance or frearm, ncudng regstra-
ton number and motor and sera numbers of the conveyance and the number
or other dentfyng mark of the frearm, f any, the name of the owner, and
of the person from whom sezed, as we as the date and pace of sezure.
(2) The nterest of the pettoner n the conveyance or frearm, whch sha
be estabshed by bs of sae, contracts, mortgages, or other satsfactory
documentary evdence fed wth the petton.
(3) The crcumstances, to be estabshed by satsfactory proof, reed upon
by the pettoner to |ustfy remsson or mtgaton.
Where the forfeture and sae have aready occurred (see secton 68.10),
t must he estabshed by satsfactory proof that the pettoner dd not know
of the sezure pror to the forfeture, and was n such crcumstances as pre-
vented hm from knowng thereof.
Where the pettoner s not the one who n person commtted the act whch
caused the forfeture, the petton shoud show how the property came nto the
possesson of such other person, and what nvestgaton, f any, was made of
such person pror to partng wth the conveyance or frearm. If such nvest-
gaton was not made, the reason for not makng t shoud be stated.
Sec. 68.10. Tme for fng petton. petton for remsson or mtgaton
of a forfeture must be seasonaby fed. Where the petton s for restoraton
of the proceeds of sae, t must be ted wthn three months after the date of
sae. In the case of a conveyance or frearm whch s retaned or awarded for
offca use, the retenton or devery sha be regarded as a sae for the pur-
poses of these reguatons.
Sec. 08.11 andng of petton. Where the petton s n proper form, the
dstrct supervsor sha, upon competon of any nvestgaton necessary to
determne the merts of the petton, forward to the Deputy Commssoner the
orgna of the petton (ncudng a supportng documents), together wth
the orgna of the nvestgaton report, a copy of the case report, a copy of the
apprasement st, and the dstrct supervsor s recommendaton. One copy of
the petton w be retaned by the dstrct supervsor and one copy by the
nvestgator n charge.
Sec. 68.12. penses: Dsposton of proceeds. penses n connecton wth
a sezure and forfeture wthn the scope of these reguatons sha be pad
from the nterna revenue appropraton. Where a conveyance s forfeted and
sod through summary or admnstratve proceedngs, the nvestgator n charge
sha transmt to the coector wth the gross proceeds of the sae a statement
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of a e penses Incurred n counecton wth the sezure and forfeture. The
coector sha, after rembursng the nterna revenue appropraton for a
such e penses, depost the net proceeds as other nterna revenue recepts.
Where a forfeted conveyance s transferred to another Federa agency, such
agency sha remburse the nterna revenue appropraton for the costs of
haung, transportng, towng, and storage from the date of sezure to the date
of devery.
If the forfeture and sae be by court proceedngs, the sum recovered after
deductng a approprate charges for marsha s fees, court costs (where no bond
was gven therefor), etc., s payabe to the coector. When such sum s receved,
the coector sha, after rembursng the nterna revenue appropraton for a
e penses ncurred n connecton wth the sezure before devery of the conveyance
to the marsha, depost the net proceeds ns other nterna revenue recepts. The
Investgator n charge sha transmt to the coector mmedatey the conveyance
Is devered to the marsha a statement of such e )en.scs.
S . 68.13. Reease on payment of apprased vaue. If any person camng
an nterest n any conveyance wthn the scope of these reguatons offers to pay
the apprased vaue thereof (see secton 08. ), and t. appears that the camant
has n fact a substanta nterest n the conveyance, the Commssoner may,
sub|ect to the approva of the Secretary, accept the offer and reease the convey-
ance upon payment of the money, whch sha be dstrbuted n accordance wth
secton 68.12.
The offer must he n wrtng, addressed to the Secretary, sgned by the
camant, and submtted n trpcate to the dstrct supervsor or nvestgator
n charge. It must e press assent to forfeture of the conveyance and wave
further proceedngs. The offer sha be supported by such proof of ownershp as
In the opnon of the dstrct supervsor s necessary. The dstrct supervsor
sha forward the offer to the Deputy Commssoner and retan custody of the
conveyance, pendng octon on the otter and payment of the amount of the offer
f t s approved. (53 Stat, 1291; 9 T . S. C. Sup., chapter 11.)
Skc. 68.1 . trardn. ny po son not an offcer of the Unted States who takes
and sezes any conveyance wthn te scope of these reguatons, and reports the
matter to an offcer of nterna revenue or who furnshes nformaton eadng to
the forfeture of such a conveyance, may be awarded compensaton of 25 per
centum of the net amount reazed, but not e ceedng 50,000 n any case whch
sha be pad out of the nterna revenue appropraton. If a forfeted conveyance
s destroyed n eu of sae, or devoted to offca use, compensaton of 25 per
centum of the apprased vaue, not to e ceed 50,000 n any case, may be awarded
and pad. wards may uot be pad out of the proceeds of sae.
When nformaton of the e stence of ega bass for sezure s furnshed to
an nterna revenue offcer n wrtng, the orgna w he forwarded mmed-
atey to the Commssoner. The offcer sha retan a copy. If the nformaton
s furnshed oray, a memorandum thereof w be made and kewse for-
warded. owever, approprate acton sha be taken n the case wthout awat-
ng nstructons from the Commssoner.
The cam of an Informer, or of a detector and sezor, sha be e ecuted n
trpcate on Form No. 211, appropratey amended. The orgna of the cam
for compensaton sha contan the sgnatures of the respectve partes to the
cam. ny number of addtona copes necessary to compete the dstrct
supervsor s fes may be requred. The cam must show the date when, nnd
the crcumstances under whch, the nformaton was furnshed or the convey-
ance was detected and sezed, and fary state a the pertnent facts of the
case.
The dstrct supervsor of the dstrct n whch the cam orgnated w
attach a statement showng the foowng facts:
(1) The pace of sezure; (2) the date of sezure; (3) the statutes on the
voaton of whch the sezure was based; ( ) a fu descrpton of the con-
veyance and any other property sezed; (5) the names of the persons nvoved
n the voaton; (6) the net amount reazed from the forfetures; (7) the
date when the amount reazed was deposted, and the amount of the certfcate
of depost; (8) the amount pad n compromse, If any, and the date of pay-
ment; (9) the amount of e penses payabe from the nterna revenue appro-
praton ; and (10) If the conveyance was reeased upon payment of the apprased
vane, or the conveyance was devoted to offca use, the apprased vaue, as
we as costs and e penses ncurred, or that woud propery have been ncurred
had the ordnary procedure been foowed.
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The dstrct supervsor sha ndcate hs approva or dsapprova of the
cam and sha certfy whether or not the camant was an offcer of the Unted
States, and f an nformer, whether he furnshed the orgna nformaton n
the case, and f a detector and sezor, whether the camant actuay detected
and sezed the conveyance, and n ether case whether any person other than
the camant gave orgna nformaton n the case.
Cams w be transmtted by the dstrct supervsor to the Commssoner n
dupcate. Where there s a decree or order of court desgnatng the nformer,
a copy thereof sha aso be forwarded. In a contested case the dstrct super-
vsor sha forward the appcatons of a camants and furnsh a statement
of the facts bearng on the merts of the severa cams together wth hs
recommendaton. (53 Stat., 1291; 9 U. S. G, Sup., chapter 11.)
Sec. 68.16. Procedura detas. Wth respect to procedura detas not e -
pressy covered by these reguatons, dstrct supervsors and other offcers w
foow the procedure governng the forfeture and dsposton of persona
property sezed under other aws admnstered by the coho Ta Unt, n
so far as appcabe and not nconsstent wth these or any other reguatons
or any statutory provson, wth such varatons as may be approprate n the
crcumstances.
Guy T. everng,
Commssoner of Interna Revenue.
pproved ugust 29,19 1.
ohn L. Suvan,
ctng Secretary of the Treaswy.
(Fed wth the Dvson of the Federa Regster September 2,19 1, 3.22 p. m.)
19 1-36-10821
T. D. 5067
nforcement of aws reatng to certan frearms.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue, Dstrct Supervsors, and Others
Concerned:
Secton 1. y vrtue of and pursuant to the provsons of the ct
of une 30, 1938 (U. S. C, Sup., tte 15, chapter 18), the ct of
ugust 9, 1939 (U. S. C, Sup., tte 9, chapter 11), secton 2732
of the Interna Revenue Code, and secton 161 of the Revsed Statutes
(U. S. C, tte 5, secton 22). Part 171 of Tte 26, Code of Federa
Reguatons, s hereby amended by nsertng a new subpart desgnated
(D) to read as foows:
SU P RT (D). S IZUR S IN CONN CTION WIT CONTR ND FIR RMS.
Sec. 171. e. Deegaton of fmnctons. The coho Ta Unt n the ureau of
Interna Revenue s charged wth the duty and responsbty, under the drec-
ton of the Commssoner of Interna Revenue, of (1) nvestgatng, preventng
and detectng voatons of Subchapter of Chapter 25 and Fart III of Sub-
chapter of Chapter 27 of the Interna Revenue Code, e cept that coectors
of nterna revenue, sub|ect to the drecton of the Commssoner of Interna
Revenue, sha make a nqures and nvestgatons reatng to the fng of
speca ta returns and sha receve and account for a moneys; (2) nvest-
gatng, preventng, and detectng voatons of the Federa Frearms ct of une
30, 1938 (U. S. C, Sup., tte 15, chapter 18), and the reguatons thereunder,
e cept that coectors of nterna revenue, sub|ect to the drecton of the Com-
mssoner of Interna Revenue, sha make a nqures and nvestgatons
reatng to the ssuance of censes and sha receve and account for a moneys;
(8) detanng and sezng frearms for voaton of Subchapter of Chapter 25
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367
Msc.
and Part III of Subchapter of Chapter 27 of the Interna Revenue Code, and
the custody and dsposton, ncudng remsson or mtgaton of the forfeture,
of frearms so sezed, and ( ) admnsterng and enforcng the ct of ugust
9, 1939 (U. S. C, Sup., tte 9, chapter 11), and the reguatons thereunder,
n so far as such ct and reguatons reate to the sezure and forfeture of ves-
ses, vehces, and arcraft used for, or to factate, the transportaton, carrage,
conveyance, conceament, recept, possesson, etc., of any frearm defned by
secton 1(b)(2) of such ct to be a contraband artce; the remsson or mtga-
ton of the forfeture of such vesses, vehces, arcraft, and the equpment
thereof; the custody and dsposton of such conveyances; and awards for n-
formaton eadng to the forfeture of such conveyances: Provded, That the
remsson or mtgaton of the forfeture of any such conveyance, or the reease
of any such conveyance to a camant upon payment of the apprased vaue
thereof, sha be sub|ect to the approva of the Secretary of the Treasury: nd
provded further, That the awardng of compensaton for nformaton eadng
to the forfeture of any such conveyance sha be determned by the Comms-
soner of Interna Revenue, sub|ect to the approva of the Secretary of the
Treasury.
Seo. 171. f. Deegaton of authorty. The powers necessary for the dscharge
of the functons deegated to the coho Ta Unt by secton 171. e are hereby
conferred and mposed upon the Deputy Commssoner n charge of that Unt
to be e ercsed by hm under the drecton and supervson of the Commssoner
of Interna Revenue, and to dstrct supervsors and other offcers and empoyees
of such Unt to be e ercsed by them under the supervson and drecton of the
sad Deputy Commssoner.
Seo. 2. Treasury Decson 961, approved anuary 5, 19 0 C. .
19 0-1, 282 , s revoked to the e tent that t s nconsstent herewth.
Gut T. everng,
C ommssoner of Interna Revenue.
pproved ugust 29, 19 1.
ohn L. Suvan,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster September 2,19 1, 3.22 p. m.)
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Msc. 368
PROPOS D DMINISTR TI COD .
19 1-3 -10S.:D
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, September 23, 1911.
Government Offcas, ttorneys and ccountants Interested n Ta
Mutters, Professors of Ta Lar, and Other Interested Persons:
nnouncement s made of the pubcaton of a tentatve draft of
an admnstratve code based on the admnstratve provsons con-
taned n the Interna Revenue Code and a amendments thereto
made pror to anuary 1, 19 1. The purpose of the proposed code
s to suggest the nes aong whch the admnstratve provsons of
the nterna revenue aws may be smpfed, condensed, and modern-
zed. The proposed code has no force or effect as aw, and t shoud
not be construed to have such force or effect or quoted or cted as the
aw.
Copes of the proposed code w, upon request, be forwarded free
of charge to Government offcas, attorneys and accountants nter-
ested n ta matters, professors of ta aw, and other nterested per-
sons, for e amnaton, comment, and suggestons as to changes. The
requests shoud be addressed to Guy T. everng, Commssoner of
Interna Revenue, Washngton, D. C, for the attenton of ohn P.
Wenche, Chef Counse.
The comments and suggestons wth respect to the proposed code
w receve thorough consderaton and. together wth admnstratve
provsons enacted snce December 31, 19 0, w determne the nature
and e tent of the work remanng to be done on the proposed code.
ventuay the proposed code w be submtted to the Congress for
ts consderaton.
Guy T. everng.
Com mssoncr.
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369
Msc.
OL OM RG RIN .
19 1-30-10797 MS. 2 1
Schedue of oeomargarne produced and materas used durng Ihc month of une,
, as compared wth une, 19. 0.
Tota producton of uncoored oeomargarne.
Tota wthdrawn ta -pad
t schedue of uncoored oeomargarne:
. su o _
Coconut o
Corn o
Cottonseed o -
Dervatve of gycerne
I) (acety _
Lecthn
Mk...
Monostearn
Neutra ard.
OIcp :
Oeo stearne _.
Oeo stock
Pam o
Peanut o
at
Soda fbcnoete of)
Soya beau o
Soya bean stearne. __
tamn concentrate...
Tota .
Tota producton of coored oeomargarne
Tota wthdrawn ta -pad _
o coored oeomargarne:
Ingredent
T)aba u
utter favor --
Coconut o
Coor
Corn o
Cottonseed o
Cottonseed stearne
Dervatve of gycerne
Lecthn
Mk..
Monosenrne
Neutra ard
Oeo n
Oeo stearne
Oeo stock
Pam o
Peanut o
Sat ---
oda (I moate of)
Soya bean o
tamn concentrate
Tota.
une, 19 1.
une. 19 0.
Pounttt.
2 .7 2,558
Pound .
19.587.SS1
25. 5 1. 76
19. 96.627
681. an
L 371,003
35.7 3
10,750.382
58,109
2
1, 16.518
9.751
7, 377. 850
5 ,27
13. 928
, 575.335
8,662
93. 078
1,118.78
230,637
102.808
226.768
150.173
839, 552
12.030
8,119
3, 757. 98
M a
18,567
885.3.55
313. s 1
68.825
2,916
136.755
1.513
8 3
25. 88. 978
20. 288. S01
300,116
282,108

1.010
21,838
2
873
6 . 17
s
367
55
65.505
1 ,568
1. 70
580
378
68
53.8.51
mm
51.568
375
,650
20. 759
200
Z307
19,816
82
10, 787
160
55,500
2
S. 788
1 ,9 0
2.22(1
1,250
39
12,302
28
31,978
2
303.380
296.651
1 Of the amount produced, 2.1,7 7 pounds were reworked.
Of the amount produced, 23,232 pounds were reworked.
1 Of the amount produced, 32 pounds were reworked.
Of the amount produced, 5C8 pounds were reworked.
Note. Fgures are sub|ect to revson unt pubshed n the Commssoner s annua report.
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Msc.
370
19 1-35-10815
MS. 2 2
Schedue of oeomargarne produced and materas used durng the month of
uy, 19 1, o compared wth uy, 19 0.
Tota producton of uncoored oeomargarne -
Tota wthdrawn ta -pad
Ingredent schedue of uncoored oeomargarne:
ahassu o
utyrc acd..
Coconut o
Corn o
Cottonseed o
Dervatve of gycerne 1...
Daecty
LertMn
Mk
Monostearne
Neutra ard
Oro o
Oeo stearne
Oeo stock
Pam o
Pam stearne
Peanut o _
Sat
Soda (benroate of) _
Soya bran o
Soya an stearne- .
egetabe gum
tamn concentrate
Tota.
Tota producton of coored oeomargarne.
Tota wthdrawn ta -pad
Ingredent schedue of coored oeomargarne:
ahassu o.
utter favor -
Coconut o
Coor -
Corn o
Cottonseed n
Cottonseed stearne
Dervatve of gycerne
Lecthn
Mk
Monostearne. -
Neutra ard ..
Oeo o . -
Oeo stearne -- -
Oeo stock
Pam stearne-
Peanut o -
Sat..
Soda (benoate of)
oy a tean o
Soya bean stearne --
tamn concentrate
Tota.
uy, 19 1.
Pounds.
1 27,08 ,597
25,862, :t
2,373. 766
65,016
11, : . 593
59, 199
15
15,372
,821. 51
12, 138
6 5. 361
1,270,659
216,661
135. 20
667. 182
22,237
221.20
926,0 7
1 .263
,852, 709
618
1, 751
27, 725, 6 6
6, 19S
1
100.381
211
31
18,622
301
36
97. 5
308
5.131
3 ,5 0
.819
6,005
6
8, 709
75
68,931
335, 711
uy, 10 0.
Pounds.
21,812.:
22,0 . :
1,158,6 5
8,515. 202
70,6 1
6. 7 3
,225,0(3
812. 3 1
L 109. TSU
280, St7
as, sa
, 9
875,639
8,820
6,376,339
8
07
22, 686.126
208, 17
21,170
725
3
102,616
1 9
11,025
630
66
125
86,251
6,333
13,2
1,288
17
9,220
65
26,91
1 Of the amount produced, 20,68 pounds were reworked.
1 Of the amount produoed, 59,091 pounds were reworked.
Of the amount produced, 8 pounds were reworked.
Of the amount produced, 5, 58 pounds were reworked.
Note. Sub|ect to revson unt pubshed n the Commssoner s annua report.
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371
Msc.
19 1- 0-108 7
MS. 2 3
Schedue of oeomargarne produced and materas used durng the month of ugust,
19/,, as compared wth ugust, 19 0.
ugust, 19 1.
ugust, 1M ,
Tota producton of unoonred oeomargarne.
Tota wthdrawn ta -|md.
Ingredent schedue of uncoorcd
ahassu o.
Coconut o _
Corn o
Cottonseed o
Dervatve of gycerne.
Dacety
muso
Mk
Monestearne..
Neutrn ard...
Oeo o
Oeos
Oeo I
Pam o .
Pam kerne o
peanut o
Sat
Sofa (hemoatc of) ..
Soya hean o
Soya bean stcarne ...
tamn concentrate
Tota .
Tota producton of coored oeomargarne.
Tota wthdrawn ta -pad
Ingredent schedue of coored oeomargarne:
ahassu o .
utter favor
Coconut o
Coor
Corn o -
Cottonseed o
Cottonseed stearne
Dervatve of gycerne
Lecthn
Mk
Monnstearne -
Neutra ard
Oeo o
Oeo stcarne
Oeo stock
Pam o -
Peanut o
Sat
Soda (hemoae of)
Soya bean o
tamn conoentrato
Tota
Pounds.
2 ,551,3 0
25, 128, 325
2,35 , 112
2. 926
10,11 ,808
52. 638
15
157
1 , 11
,539. 82
10,077
530, 619
1, 197,802
161,010
120,387
8 3.717
2 . 969
183, 128
8 0. 0 5
10,881
3, 937.937
115
3,329
25. 2 9, 705
251. 685
7. 92
2
07, 195
337
1
16, 071
10
29
2, 32
309
7. 605
2,833
189
6,775
3,537
2
8,8 3
113
63, 938
2
Pmcnd .
21. 81,135
22, 70, 917
5, 659
1,109, 071
8, 259, 796
62,588
,1 1,356
309, 039
1, 102, 2 7
281.803
95, 68
139. 278
8 9, 991
8,72
6, 67,838
901
22, 272. 331
IS . . rt.11
21,202
1 0
3
80,360
16, 82
8 0
58
77
37, 758
. 611
I . 107
95
2, 099
35
7,9 2
63
29,117
2
199, 191
1 Of the amount produced, 22,76 pounds were reworked.
Of the amount produced, 25.256 pounds were reworked.
1 Of the amount produced, 17 pounds were reworked.
Of the amount produced, 52 pounds were reworked.
Notb. Sub|ect to revson unt pubshed In the Commssoner s annua report.
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Msc.
372
19 1- -10885
MS. 2
Schedue of oeomargarne produced and materas used durng the month of
September, 19 1, as compared wth September, 19)0.
September,
19 1.
September,
19 0.
Pound).
Pound .
32, 867. 535
26,327,721
Tota wthdrawn ta -pad
33.0 0. 1 7
25.693,306
Ingredent schedue of uncoored oeomargarne:
289. 702
200
3, 92. 755
2,760
12, 507, 893
72, 595
30
978
16, 7
331,20
L 067.159
M
Daccty
8,9 0,576
61,268
Lecthn - -
81303
593
Mk
6,000, 190
1 . 52
5 1. 583
1,762. 161
355,783
131.295
215. 8
885,028
99.392
181. 337
1, 12 , S75
1 .579
5,797. 112
595
6. 85
5,077,7St
18,077
23.286
L 225. 590
281,880
Oeo stock
92,6
Pam o
Pam kerne o
153,366
L 020. 803
9.85
7,8 8,595
Sat
Soya bean o
1. 091
Tota
33,953.8 3
27,262.963
Tota producton of coored oeomargarne . .
256,82
213,959
Ingredent schedue of coored oeomargarne
55. 13
25, 32
abassu o . _
10

utter favor -
1
Coconut o _
81.050
7 ,6 7
1 0
Coor
22
16, 670
Corn o
16,08
60
19
71
89,906
252
8,732
1 , 1.56
33
2,109
Cottonseed tcarne
Dervatve of gycerne
3 1
Lecthn
39
, 276
298
2.276
33,557
Mk
Monostearne
Neutra ard _
Oeo o
Oeo stock .
, 21
19, 787
73
8, 7
118
9. 509
12
Pam o
Peanut o _
31
9,2 6
57
56,975
2
at...
Soda (benzoate of)
Soya bean o .
tamn concentrate
Tota
2111. 596
216, 156
1 Of the amount produced. 30,1 0 pounds were reworked
Of the amount produced. 16.307 pounds were reworked
Noth Sub|ect to revson unt pubshed n the Comm-ssoner s annua report.
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#
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373
Msc.
19 1- 8-10017
MS. 2 5
Schedue of oeomargarne produced and materas used durng the month of
October, 19 1, as compared wth October, 19 0.
Tota producton of uncoored oeomargarne.
Tota wthdrawn ta -pad
Ingredent schedue of uncoored oeomargarne:
ahassu o. _
Ctrc aed
Cocouut o
Corn o
Cottonseed of
Dervatve of
Dacctyt..
Mk
Monostcarne.
Neutra ard
Oeo o-
Oeo stearno
Oeo stock
Pam fakes
Pam o
Pam kerne o
Peanut o
Sat
Soda (benzoate of)
Soya bean o
Soya bean stearne
tamn concentrate
Tota.
Tota producton of coored oeomargarne.
Tota wthdrawn tapad
Ingredent sob
abassu o:
utter fa
Coconut o
Coor
Corn o
Cottonseed o
Cottonseed stearne. - -
Dervatve of gycerne
Lecthn
Mk
Monostearne
Neutra ard. .-
Oeo o
Oeo stearne
Oeo stock
Pam fakes
Pam o
Peanut o
Sat --
Soda (benzoat of)
Soya bean of
Soya ean stearn
tamn concentrate....
of coored oeomargarne:
Tota.
October. 1911
Pound .
I 33,853, 180
33,871). 068
273, 53
186
637,3 0
82.289
000,711
70, 152
81
1.259
20.771
012.000
15.7 0
67 . 15
725.85
277. 171
1 7.7 7
15.681
121.819
36.256
237, 397
II . 709
1 . 29
6 3,8 6
1 6
6.573
3 .852.066
206. 20
62,372
989
2.820
3 5
0
16,859
310
79
37.022
371
7.5 7
39,9 6
85
6,375
696
3,503
127
8,056
58
9,909
12
21 ,978
t Of the amount produced, 27,256 pounds were reworked.
Of the amount produced, 36, 52 pounds were reworked.
Of the amount produced, 1,66 pounds were reworked.
Notb. Sub|ect to revson, tn t pubshed n the Commssoner s annua report.
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Msc.
37
19 1-52-109 1
MS. 2 6
Schedue of oeomargarne produced and matera used durng the month of
November, 19 1, an compared wth November, 19 0.
November,
1911.
mo.
Tota producton of uncoorcd oeomargarne.
Tota wthdrawn ta -pad
Ingredent schedue of uncoorcd oeomargarne.:
ahnssu o
Ctrc acd..
Coconut o -
Corn o..:
Cottonseed o.
Dervatve of gycerne.
Dacety -
muso
Lecthn
Mk
Monostearne
Neutra ard
Oeo o -
Oeo stearne
Oeo stock
Pam fakes
Pam o
Peanut o-
Sat - -
Soda (benzoate of)
8oya bean o
Soya bean stearne
tamn concentrate -
Tota
Tota producton of coored oeomargarne.
Tota wthdrawn ta -pad
Ingredent schedue of coored oeomargarne:
utter favor...
Coconut o -
Coor . --- -
Com o _ --
Cottonseed o ._
Cottonseed stearne
Dervatve of gycerne
Dacety _
Lecthn
Mk
Monostearne .
Neutra urd -
Oeo o
Oeo s
Oeo s
Pam fakes.
Pam o
Peanut o
Sat
Soda (bennmte of)
Soya bean o
Soya bean stearne
tamn concentrate.
srne.
ck_.__
Tota.
Pounds.
32, 270, 02
29. 72 . (GS
32.091.682
30.820. 6 3
2,350
10
1 0. 93
10 , 376
621,7 1
70,08
129
1.
21.382
726, 725
5.537
68 . 881
6 1.6 1
178. 97
233. 73
28.510
629. 278
Is. f- S
075.035
1 ,926
72 .582
55,;
10. S. .. 1 ) a
10. 13
6, 9 .772
18,529
00. 6Sf
1,321.896
262.757
102, 899
8,731
33, 135,53
232. 15
55.378
235. 156
157,051
1,101. 177
10. . I.
0,186.556
1,08
3
99,8 6
81
9.828
397
6. 126
23. 22
575
3,800
67
18,2 8
98
70,638
80
2
1 Of the amount produced, 22,007 pounds were reworked.
Of the amount produced, 16,5 6 pounds were reworked.
Of the amount produced, 2,528 pounds were reworked.
Note. Sub|ect to revson unt pubshed In the Commssoner s annua report.
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375
IMsc.
TO CCO.
19 1-27-10768
T. 8
Statement of manufactured tobacco produced, by dases, durng the month of
pr, 19 1, a compared wth pr. 19 0.
pr, 19 1.
pr, 19 0.
Pounds.
. f . 30
3. 1
2. 16
3. 7 5, 91
17, 2IW, .577
Pon v ds.
, 277. 76
5S. 002
3f. ) 0
3. 507. 122
16.9 9. 251
PU --
Twst
26, 2 f. 06
25, 55 . 079
19 1-31-10799
T. 85
Statement of manufactured tobacco produced, by casses, durng the month of
May, 19 1, an compared wth May, U ,0.
May, 19 1.
May, 19 .
Pug
Twst
Fne-cut chewng.
Scrap chewng
Smo ng-
Tota
Pounds.
. 288. 00
375.68(1
27. 1.50
3, 523. 563
16,8 7, 88
Pounds.
, 331.0IS
502.688
511.56
3. 539. 123
18.00 . 13
25. 2. 3 7
26,888.827
19 1-35-10 16
T. 86
Statement of manufactured tobacco produced, by casses, durng the month of
une, 19 1, as compared wth une, 19 0.
Pug
Twst
Fne-cut chewng
Scrap chowug...
Smokng.
Tota
Pounds.
, 228, 77.5
77, 5 5
0, 677
3. 910. 12
16, 2SS. 00
uno. 19 0.
Pounds.
, 11 , 862
. M
25, 3 5, 869
7. 323
31. .503
2-1. 166, 750
Nora. Fgures are sub|ect to revson unt pubshed In the Commssoner s annua
report.
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Msc.
376
19 1-39-10838
T. 87
Statement of manufactured tobacco produced, by casses, durng the month of uy,
19 1, as compared wth uy, 19 0.
uy, 19 1.
uy, 19 0.
Pounds.
, 559. 600
82.655
57.691
8, 88.1. 773
16. 3 .280
Povnd.
Pug
,521. 0
88.586
31.679
Twst
Scrap chewng . _
3.98 .
17, 60. 95
Tota
25. 732,199
28, SS7, 215
19 1- -10SS
T. 88
Statement of manufactured tobacco produced, by casses, durng the month of ugust,
19 1, as compared wth ugust, 19 0.
ugust, 19 1.
ugust. I 0.
Pounds.
Pound .
, 22 . 716
96. 657
56. 16
3,806, 751
10 9 8. 679
Pug
. 26 , 156
501. 99
50 ,759
Twst
Fne-cut chewng .
Scrap chewng ..
,06 . 1 9
15.200. 11
Tota
2 , 53 , 677
25,933,219
19 1- 8-10918
T. 89
Statement of manufactured tobacco produced, by casses, durng the month of
September, 19 1, as compared tcth September, 19 0.
September,
19 1.
September,
19 0.
Pug,
Pound .
, 75, 7 1
503. 96
67. 359
3,961.8 2
17, 7.57, 782
Pounds.
,1 5,011
69.889
398. 1
3. 52 . 595
17.762, 17
Tota
27, 166, 220
26,300,325
Note. Fgures are sub|ect to revson unt pubshed n the Commssoner s annua
report.
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377
Msc.
L GISL TION.
R NU CT OF 19 1. 19 1- 0-108 6
. R. r W. PU LIC L W 250. S NTY-S NT CONGR SS
C PT R 12 FIRST S SSION .
n ct To provde revenue, and for other purposes.
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That ths ct, dvded nto ttes and
sectons accordng to the foowng Tabe of Contents, may be cted us the
Revenue ct of 19 1 :
T L OF CONT NTS.
Tte I Indvdua and Corporaton Income Ta es.
Sec. 101. Surta on ndvduas.
See. 102. Optona ta on ndvduas wth certan gross ncome of :,000 or ess.
Sec. 103. Corporaton defense ta rates ncorporated n rate schedues.
Sec. 10 . Surta on corporatons and termnaton of defense ta .
Sec. 105. Ta on nonresdent aen ndvduas.
Sec. 106. Ta on foregn corporatons.
Sec. 107. Wthhodng of ta at source.
Sec. 108. Treaty obgatons.
Sec. 100. Reducton n pursuance of treates of rates of ta and wthhodng on
nonresdent aen ndvduas resdent n, and corporatons organzed
under aws of. Western emsphere countres.
Sec. 110. Defense ta rates on persona hodng companes and transfers to
avod Income ta ncorporated n rate schedues.
Sec. 111. Persona e empton.
Sec. 112. Returns of ncome ta .
Sec. 113. Credt for dependents.
Sec. 11 . Nonnterest-bearng obgatons ssued at dscount.
Sec. 115. Short-term obgatons ssued on a dscount bass.
Sec. 116. Informaton returns wth resp: ct to Federa obgatons.
Sec. 117. tenson of tme of orders of Securtes and change Commsson.
Sec. 118. Ta abe years to whch amendments appcabe.
Tte II cess Promts Ta .
Sec. 201. cess profts ta rates and credts.
Sec. 202. Deducton of e cess-profts ta .
Sec. 203. New capta.
Sec. 20 . Corporatons engaged n mnng strategc metas.
Sec. 205. Ta abe years to whch amendments appcabe.
Tte III Capta Stock Ta and Decared aue cess-Profts Ta .
Sec. 301. Capta sock ta .
Sec. 302. Decared vaue e cess-profts ta Defense ta rates ncorporated n
rate schedue.
Tte I state and Gft Ta es.
Sec. 01. state ta rates.
Sec. 02. Gft ta rates.
Tte cse Ta es.
P RT I 1932 CIS T F.S M D P RM N NT.
Sec. 501. 1032 e cse ta es made permanent.
Sec. 502. Ppe ne ta .
Sec. 503. Technca amendment.
Sec. 50 . ond ta .
Sec. 505. Conveyance ta .
1611 2 25
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878
P RT II D F NS T T S M D P RM N NT (NO INCR S I T ND NO
C NG IN SIS OF T ).
Sec. 521. Defense e cse ta rates made permanent whch are not ncreased by
ths ct.
P RT III INCR S S IN R T S OF ISTING CIS T S.
Sec. 531. Payng cards.
See. I 32. Safe depost bo es.
Sec. 533. Dsted sprts.
Sec. 58 . Wnes.
Sec. 535. Tres and tubes.
Sec. 536. ffectve date of Part III.
P RT I C NG S IN SIS OF COMPUTING T (R T S INCR S D IN C RT IN C S S).
Sec. 5 1. dmssons ta .
Sec. 5 2. Cabaret, roof garden, etc., ta .
Sec. 5 .3. Cub dues.
Sec. 5 . utomobe, truck, bus, and parts ta .
Sec. 5 5. ados, phonographs, records, and musca Instruments.
Sec. 5 0. Mechanca refrgerators.
Sec. 5 7. Matches.
Sec. 5 8. Teephone, teegraph, etc.
Sec. 5 9. Instament, etc., payments.
Sec. 550. ffectve dute of Part I .
P RT N W CIS T S.
Sec. 551. New manufacturers e cse ta es.
Sec. 552. New retaers e cse ta es.
Sec. 553. dmnstratve changes n manufacturers e cse ta tte of Code.
Sec. - SI. Transportaton of persons, etc.
Sec. 555. Con-operated amusement and gamng devces.
Sec. 550. owng aeys, etc.
Sec. 557. Use of motor vehces and boats.
Sec. 558. ffectve date of Part .
P RT I PROC SSING T ON C RT IN OILS.
Sec. 561. Payment of proceeds of processng ta to Guam and mercan Samoa.
Tte I Nonessenta Federa pendtures.
Sec. 601. Nonessenta Federa e pendtures.
Tte II Credt ganst Federa Unempoyment Ta es.
Sec. 701. Credt aganst Federa unempoyment ta es.
TITL I INDI IDU L ND CORPOR TION INCOM T S.
Sec. 101. Surta on Indvduas.
Secton 12(b) of the Interna Revenue Code s amended to read as foows:
(b) Rates of Surta . There sha be eved, coected, and pad for each
ta abe year upon the surta net ncome of every ndvdua the surta shown
n the foowng tabe:
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379 Msc.
If the surta net Income s: The surta sha he:
Not over 2,000 6 of the surta net Income.
Over 2,000 but not over ,000._ 120, pus 0 of e cess over 2,000.
Over ,000 but not over 6,000__ 300, pus 13 of e cess over 1,000.
Over o,000 but not over S,000_ 360, pus W/o of e cess over
0,000.
Over 8,000 but not over 10,000. 000, pus 21 of e cess over
8,000.
Over 10,000 hut not over 12,000_ 1,320, pus 25 of e cess over
10,000.
Over 12,000 but not over 1 ,000. 1,820, pus 20 of e cess over
12,000.
Over 1 ,000 but not over 16,000. 2, 00, pus 32 of e cess over
1 ,000.
Over 16,000 but not over 18,000. 3,0 0, pus 35 of e cess over
10,000.
Over 18,000 but not over 20,000. 3,7 0, pus 38 of e cess over
18,000.
Over 20,000 but not over 22,000. ,500, pus 1 of e cess over
20,000.
Over 22,000 but not over 26,000. 5,320, pus of e cess over
22,000.
Over 2(5,000 but not over 32,000. 7,080, pus 7 of e cess over
26,000.
Over 32,000 but not over 38,000. 0,900. pus 50 of e cess over
152 000
Over 3S,o;)0 but not over ,000. 12,000. pus 53 of e cess over
38,000.
Over ,000 but not over 50,000. 10,080, pus 55 of e cess over
,000.
Over 50,000 but not over 00,000. 10,380, pus 57 of e cess over
50,000.
Over (50,000 but not over 70,000. 25,080, pus 50 of e cess over
00,000.
Over 70,000 but not over 80,000. 30,080, pus 01 ) of e cess over
70,000.
Over 80,000 but not over 00,000. 37,080, pus 63 of e cess over
80,000.
Over 00,000 but not over 100,- 3,380. pus 6 of e cess over
0:10 00.0(o.
Over 100,000 but not over 0,780, pus 65 of e cess over
150,000 100,000.
Over 150,000 but not ovt-r 82,280. pus 66 of e cess over
2 10,000 150,000.
Over 2 )0,0C0 but not over 115,280, pus G7 of e cess over
250.000 , 200,000.
Over 250,000 but not over 1 8,780, pus 60 of e cess over
300,000 250,000.
Over 300,000 but not over 183,280, pus 71 of e cess over
11)0.000 300,000.
Over 00,000 but not over 25 ,280, pus 72 of e cess over
500,000 00,000.
Over 500,000 but not over 326,280, pus 73 of e cess over
750,000 500,000.
Over 750,000 but not over 508,780, pus 7 of e cess over
1.0(10,000 750,000.
Over 1,000,000 but not over (503,780, pus 757c of e cess over
2,000,000. 1,000,000.
Over 2,000,000 but not over 1, 3,780. pus 76 of e cess over
5,000,000. 2,000,000.
Over 5,000,000 3,723,780, pus 77 of e cess over
5,000,000.
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380
Sec. 102. Optona Ta on Indvduas Wth Certan Gross Income of 3,000
or Less.
(a) Optona Ta . The Interna Revenue Code s amended by nsertng
after secton 306 the foowng new Suppement:
suppement t ndvduas wth dross ncome from certan SOURC S OF f3,000
OR L SS.
Sec. 00. Imposton of Ta .
In eu of the ta mposed under sectons 11 and 12, nn ndvdua may-eect,
for each ta abe year, to pay the ta shown n the foowng tabe f hs gross
ncome for such ta abe year s 3,000 or ess and conssts whoy of one or
more of the foowng: Saary, wages, compensaton for persona servces, dv-
dends, nterest, rent, annutes, or royates:
If the pross Income Is over
1
750...
775...
800...
825...
850...
875...
900...
925...
950...
S975 ..
1,000.
s
s
s
SI
s
SI
1
SI
1
s
1
SI
SI
SI
1
1
SI
s
1
SI
s
1
1
SI
s
s
1
1
SI
SI
1
SI
,025.
050.
075.
100.
I 25
150.
175.
200.
225.
250.
275.
300.
325.
350.
375.
00.
25.
50.
, 75.
,500.
,525
50.
575.
.GOO.
,025 _
,050.
,675.
00.
25 _
50.
775 _
sno.
ut not
over
750
775
800
825
850
875
900
925
950
975
000
025
050
075
100
125
150
175
200
225
250
275
300
325
350
375
00
25
50
75
500
525
550
575
600
625
650
075
700
725
750
775
soo
825
The ta sha be
Snge per-
son (not
hc d of
u famy)
0
1
2
3
5
7
9
11
1
16
18
20
22
2
26
29
31
33
35
37
39
2

6
8
50
52
55
57
59
61
63
65
. 68
70
72
7
70
78
80
83
85
87
89
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381
Msc.
If the gross ncome Is over
1,825.
1,850.
1,875.
1,900.
1,925.
1,950.
1,975.
2,000
2,025.
2,050.
2,075
2,100.
2,125
2,150
2,175
2,200
2,225
2,250
2,275
2,300
2,325
2,350
2,375
2, 00
2, 25
2, 50
2, 75
2,500
2,525
2,550
2,575
2,600
2,025
2,650
2,675
2,700
2,725
2,750
2,775
2,800
2,825
2,850
2,875
2,900
2,925
2,950
2,975
The ta sha be
ut not
over-
Snce per-
ead of
son (not
famy or
head of
marred
a famy)
ptrson
S, 850
91
2
1, 875
93
26
1, 900
96
28
1, 925
98
30
1, 950
100
32
1, 975
102
;r
2. 000
10
37
2, 025
106
39
2, 050
109
1
2, 075
111
3
2, 100
113
5
2, 125
115
S
2, 150
117
50
2, 175
119
52
2, 200
122
5
2, 225
12
56
2, 250
126
5S
2, 275
128
t)
2. 300
130
63
2, 325
132
65
2, 350
13
67
2, 375
137
69
2. 00
139
71
2, 25
1 1
73
2, 50
1 3
76
2, 75
1 5
78
2, 500
1 7
80
2, 525
150
82
2, 550
152
8
2, 575
15
86
2, 600
156
89
2, 625
158
91
2, 650
160
93
2, 675
163
95
2, 700
165
97
2, 725
167
99
2, 750
169
102
2, 775
172
10
2, 800
17
106
2, 825
177
108
2, 850
180
110
2, 875
183
112
2, 900
186
11
2, 925
189
117
2, 950
191
119
2, 975
19
121
3, 000
197
123
In appyng te above schedue to determne the ta of a ta payer wth one
or more dependents there sha be subtracted from hs gross ucone 00 for
each such dependent.
Sec. 01. Rn. 8 fob ppcaton of Secton 00.
For the purposes of ths Suppement
(a) Defntons
(1) Marred person means a marred person vng wth husband or
wfe.
(2) Dependent means a person (other than husband or wfe) depend-
ent upon and recevng hs chef support from the ta payer If such
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382
dependent person s under eghteen years of age or s ncapabe of sef-
support because mentay or physcay defectve, e cudng as a dependent.
In the case of a head of a famy, one who woud be e cuded under
secton 25(b) (2) ).
(b) Dktkbmnaton of Status. The determnaton of whether a person s
vng wth husband or wfe, s a head of a famy, or s a dependent, sha be
made as of the ast day of the ta payer s ta abe year.
(c) Separate Return of usband and Wfe. If a husband and wfe vng
together te separate returns, each sha be treated as a snge person.
(d) Marred Persons Not Lvng Wth usband or Wfe. marred
person not a head of a famy and not vng wth husband or wfe sha be
treated as a snge person.
Sf . 02. Manner of ecton.
The eecton referred to n secton 00 sha be consdered to have been
made f the ta payer fes the return proscrbed for ths Suppement and such
eecton sha be rrevocabe. If the ta payer for any ta abe year has fed a.
return computng hs ta wthout regard to ths Suppement, he may not
thereafter eect for such year to compute hs ta under ths Suppement.
Sec. 03. f redts ganst Ta Not owed. _
Secton 31 (reatng to foregn ta credt) and secton 32 (reatng to
credt for ta es wthhed at source) sha not appy wth respect to the ta
mposed by ths Suppement.
Sec. 0 . Certan Ta payers Not gbe.
Ths Suppement sha not appy to a nonresdent aen ndvdua, or an
estate or trust.
(b) Cross-references.
(1) Secton 11 of the Interna Revenue Code s amended by nsertng at the
end thereof the foowng: (For aternatve ta f gross ncome from certan
sources s . 3,000 or ess, see secton 00) .
(2) Secton 12 of the Interna Revenue Code s amended by nsertng at the
end thereof the foowng:
(g) For aternatve ta f gross ncome from certan sources s 3,000 or
ess, see secton 00.
(c) mendment to Secton . Secton of the Interna Revenue Code s
amended by nsertng at the end thereof the foowng:
(k) Sharehoders of Persona Servce Corporatons, Suppement S.
(1) Indvduas wth gross ncome from certan sources of 3,000 or ess,
Suppement T.
Sec. 103. Corporaton Defense Ta Rates Incorporated n Rate Schedues.
(a) Ta on Corporatons n Genera. Secton 13(b) (1) and (2) of the
Interna Revenue Code are amended to read as foows:
(1) Genera rue. ta of 2 per centum of the norma-ta net
ncome; or
(2) ternatve ta (corporatons wth norma-ta net ncome
sghty more than 25,ooo). ta of ,250, pus 37 per centum of the
amount of the norma-ta net ncome n e cess of 25,000.
(b) Ta on Speca Casses of Corporatons. Secton 1 (b) of the Interna
Revenue Code s amended to read as foows:
(b) Corporatons Wth Norma-Ta Net Incomes of Not More Than
25.0; ). If the norma-ta net ncome of the corporaton s not more than
25,000, and f the corporaton does not come wthn one of the casses specfed
n subsecton (c), (d), or (e) of ths secton, the ta sha be as foows:
Upon norma-ta net ncomes not n e cess of 5,000, 15 per centum.
750 upon norma-ta net ncomes of 5,000, and upon norma-ta net
ncomes n e cess of 5,000 and not n e cess of 20,000, 17 per centum n
addton of such e cess.
3,300 upon norma-ta net ncomes of 20,000, and upon norma-ta net
ncomes n e cess of . 20,000, 19 per centum n addton of such e cess.
(c) Foregn Corporatons. Secton 1 (c) of the Interna Revenue Code (re-
atng to ta on resdent foregn corporatons) s amended by strkng out
22 o per centum cad nsertng 2 per centum .
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383 Mso.
.
(d) Surta on Corporatons Impropery ccumuatng Surpus. The rate
schedue of secton 102 of the Interna .Revenue Code s amended to read as
foows:
27 er centum of the amount of the undstrbuted secton 102 net
ncome not n e ces of 100,000, pus
38 / per centum of the undstrbuted secton 102 net ncome n e cess
of 100,000.
(e) Mutua Investment Companes. Secton 302(b) of the Interna Revenue
Code (reatng to ta on mutua nvestment companes) s amended by strkng
out 22fc per centum and nsertng 2 per centum .
Sec. 101. Surta on Corporatons and Termnaton of Defense Ta .
(a) Genera Rue. Secton 15 of the Interna Revenue Code (reatng to
defense ta ) s amended to read as foows:
Sec. 15. Surta on Corporatons.
(a) Corporaton Surta Net Income. For the purposes of ths chapter the
term corporaton surta net ncome means the net ncome mnus the credt
for dvdends receved provded n secton 26(b), computed by mtng such
credt to 85 | er centum of the net ncome n eu of 85, per centum of the
ad|usted net ncome.
(b) Imposton of Ta . There sha he eved, coected, and pad for each
ta abe year upon the corporaton surta net ncome of every corporaton (e -
cept a corporaton sub|ect to the ta mposed by secton 231(a) or Suppement
) a surta as foows:
Upon corporaton surta net ncomes not n e cess of 5,090, 6 per
centum of the amount thereof:
Upon corporaton surta net ncomes n e cess of 25,000, 1,500, pus
7 per centum of the e cess over 25,000.
(b) Surta on Mutua Investment Companes. Suppement of the In-
terna Revenue Cede (reatng to mutua nvestment companes) s amended by
nsertng at te end thereof a new secton to read as foows:
Sec. 3(. . Surta on Mutua Investment Companes.
(a) Suppement Surta Net Income. For the purposes of ths chapter
the term Suppement surta net ncome means the net ncome, computed
wthout te net operatng oss deducton provded n secton 23(s), mnus the
dvdends pad durng the ta abe year ncreased by the consent dvdends credt
provded n secton 28. For the purposes of ths subsecton the amount of dv-
dends pad sha be computed In the same manner as provded n subsectons (d),
(e), (f), (g), (h), and () of secton 27 for the purpose of the basc surta
credt provded n secton 27.
(b) Imposton of Ta . There sha be eved, coected, and pad for each
ta abe year upon the Suppement surta net ncome of every mutua nvest-
ment company a surta as foows:
Upon Suppement surta net ncomes not n e cess of 25,000, 6 per
centum of the am unt thereof;
Upon Suppement surta net ncomes n e cess of 25,000, 1,500, pus
7 per centum of the e cess over 25,000.
(c) Surta on anks. Secton 10 (b) of the Interna Revenue Code (reatng
to certan banks and trust companes) s amended to read as foows:
. (b) Rate of Ta . Ranks sha be sub|ect to ta under secton 13 or secton
1 (1)), and under secton 15.
(d) Surta on Resdent Foregn Corcoratons. Secton 231(b) of the In-
terna Revenue Code (reatng to certan foregn corporatons) s amended to
read as foows:
(I)) Resdent Corporatons. foregn corporaton enpaged n trade or bus-
ness wthn the Unted States or havng an offce or pace of busness theren
sha be ta abe as provded n secton 1 (c) (1) and secton 15.
(e) Surta on Corporatons ntted to the enefts of Secton 251.
Secton 251(c) (1) of the Interna Revenue Code (reatng to the ta on corpora-
tons entted to the benefts of secton 251) s amended to read as foows:
(1) Corporaton ta . domestc corporaton entted to the benefts
of ths secton sha be sub|ect to ta under secton 13 or secton 1 (b), and
under secton 15.
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38
(f) RmT on Chna Trade ct Corporatons.
(1) Surta . Secton 261(a) of the Interna Revenne Code (reatng to the
ta on Chna Trade ct corporatons) s amended to read as foows:
(a) Corporaton Ta . corporaton organzed under the Chna Trade ct,
1922 ( 2 Stat. 8 ; U. S. C, 193 ed., tte 15, ch. ), sha be sub|ect to ta
under secton 13 or secton 1 (b), nnd under secton 15.
(2) Crkdt of Chna Trade ct Corporatons. Secton 202(a) of the Interna
Revenue Code (reatng to credt aganst net ncome of Chna Trade ct cor-
poratons) s amended by strkng out sectons 13, 1 , and 600 and nsertng
n eu thereof sectons 13, 1 , 15, and 600 ; and by strkng out secton
13 or 1 wherever occurrng theren and nsertng n eu thereof secton 13,
1 , or 15 .
Sec. 105. Ta on Nonresdent en Indvduas.
(a) Ta n Genera. Secton 211(a)(1)( ) of the Interna Revenue Code
(reatng to ta on nonresdent aen ndvduas not engaged n trade or bus-
ness wthn the Unted States and not havng an offce or pace of busness
theren) s amended by strkng out 15 per centum and nsertng n eu
thereof 27 per centum .
(b) ggregate Recepts More Ttan 23,000. Secton 211(a)(2) of the
Interna Revenue Code s amended to read.as foows:
(2) ggregate mokk than 23,ooo. The ta mposed by paragraph (1)
sha not appy to any ndvdua f the aggregate amount receved durng
the ta abe year from the sources theren specfed s more than 23,000.
(c) Ta Where Gross Income of More Than 23,000. Secton 211(c) of
the Interna Revenue Code (rentng to ta on certan nonresdent aen Ind-
vduas) s amended by strkng out 2 ,000 wherever occurrng theren and
Insertng n eu thereof 23,000 ; and by strkng out 15 per centum and
nsertng n eu thereof 27 per centum .
Sec. 106. Ta on Foregn Corporatons.
Secton 231(a) of the Interna Revenue Code (reatng to ta on nonresdent
foregn corporatons) s amended by strkng out 15 per centum and n-
sertng n eu thereof 27 per centum .
Sec. 107. Wthhodng of Ta at Source.
(a) Sectons 1 3 (a) and (b) and 1 of the Interna Revenue Code are
amended by strkng out 15 per centum wherever occurrng theren and
nsertng n eu thereof 27 per centum .
(b) Secton 1 3(h) of the Interna Revenue Code s repeaed.
(c) Subsectons (a) and (b) of ths secton sha appy ony wth respect to
the perod begunng wth the tenth day after the date of the enactment of ths
ct.
Sec. 10S. Treaty Obgatons.
No amendment made by ths tte sha appy n any case where ts appcaton
woud be contrary to any treaty obgaton of the Unted States.
Sec. 109. Reducton n Pursuance of Treates of Rates of Ta and Wth-
hodng on Nonresdent en Indvduas Resdent n, and Corporatons
Organzed Under Laws of, Western emsphere Countres.
(a) Secton 1 3(a)(1) (reatng to wthhodng of ta on ta -free covenant
bonds) ; secton 1 3(b) (reatng to wthhodng of ta on dvdends, rents,
etc.) ; secton 1 (reatng to payment of corporaton ncome ta at source) ;
secton 211(a)(1) (reatng to ta on nonresdent aen ndvduas); and sec-
ton 231(a)(1) (reatng to ta on nonresdent foregn corporatons) of the
Interna Revenue Code are amended by strkng out a contguous country
and nsertng n eu thereof any country n North, Centra, or South merca,
or n the West Indes, or of Newfoundand .
(b) Secton 211(a)(3) of the Interna Revenue Code Is amended to read as
foows:
(3) Resdents of certan countres. The provsons of paragraph (2)
sha not appy to a resdent of any country n North, Centra, or South
merca, or In the West Indes, or of Newfoundand, so ong as thero
s n effect wth such country a treaty whch provdes otherwse.
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385
Msc.
To) Secton 211(c)( ) of the Interna Revenue Code Is amended to read as
foows:
( ) Ts subsecton su not appy to a resdent of any country n
North, Centra, or South merca, or n the West Indes, or of Newfoundand,
so ong as there s n effect wth such country a treaty whch provdes
otherwse.
Sec. 110. Defense Ta Ratks on Persona odng Companes and Transfers
To vod Income Ta Incorporated n ate Schedues.
(a) I eksona odng Companes. Secton . DO of the Interna Revenue
Code (reatng to ta on persona hodng companes) s amended as foows:
(1) Iy strkng out the headng (a) Genera Rue. ;
(2) I5y uneudg the rate schedue to read as foows:
(1) 71 , per centum of the amount thereof not In e cess of 2,000; pus
(2) S2 (. per centum of the amount thereof n e cess of 2,1 00. ; and
(3) y repeang subsecton (b) (reatng to defense ta for fve years).
(b) Transfers To vod Income Ta . Secton 1250 of the Interna Revenue
Code (reatng to ta on transfers to avod Income ta ), s amended as foows:
(1) y strkng out the headng (a) Genera r. . ;
(2) y strkng out 25 per centum and Insertng 271/..per centum ; and
(3) y repeang subsecton (b) (reatng to defense ta for ve years).
Sec. 111. Persona empton.
(n) Secton 25(b)(1) of the Interna Revenue Code s amended to read as
foows:
(1) Persona e empton. In the case of a snge person or a marred
person not vng wth husband or Wfe, a persona e empton of 750;
or n the case of the head of a famy or a marred person vng wth
husband or wfe, a persona e empton of 1,500. husband and wfe
vng together sha receve but one persona e empton. The amount of
such persona e empton sha be 1,500. If such husband and wfe make
separate returns, the persona e empton may be taken by ether or
dvded between them, e cept thnt f one spouse makes a return under
Suppement T, the persona e empton of the other spoust1 sha be 750.
(b) Secton 21-1 of the Interna Revenue Code (reatng to persona e empton
of nonresdent aen ndvduas) s amended by strkng out 800 and n-
sertng n eu thereof 750 .
(c) Secton 251(f) of the Interna Revenue Code (reatng to persona e -
empton of ctzens entted to benefts of secton 251) s amended by strkng
out 800 and nsertng n eu thereof 750 .
Sec. 112. Returns of Income Ta .
(a) Indvdua Returns. Secton 51(a) of the Interna Revenue Code s
amended to read ns foows:
(a) Requrement. The foowng Indvduas sha each make under oath
a return statng specfcay the tems of hs gross ncome and the deductons
and credts aowed under ths chapter and such other nformaton for the
purpose of carryng out the provsons of ths chapter as the Commssoner
wth the approva of the Secretary may by reguatons prescrbe
(1) very Indvdua who s snge or who s marred but not vng
wth husband or wfe, If havng a gross ncome for the ta abe year of
750 or fver.
(2) very ndvdua who s marred and vng wth husband or
wfe, f no |ont return s made under subsecton ( ) and f
( ) Such ndvdua has for the ta abe year a gross ncome of
1,500 or over, and the other spouse has no gross ncome; or
( ) Such ndvdua and hs spouse each has for the ta abe year
a gross ncome and the aggregate gross ncome s 1,5 0 or over.
(b) Fducary Returns. Secton 1 2(a) of the Interna Revenue Code s
amended to read as foows:
(a) Requrement of Return. very fducary (e cept a recever apponted
by authorty of aw n possesson of part ony of the property of au nd-
vdua) sha make under oath a return for any of the foowng ndvd-
uas, estates, or trusts for whch he acts, statng specfcay the tems of
gross ncome thereof and the deductons and credts aowed under ths chapter
and such other nformaton for the purpose of carryng out the provsons of
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886
ths chapter as the Commssoner wth the approva of the Secretary may by
reguatons prescrbe
(1) very ndvdua havng a gross Income for the ta abe year of 750
or over, f snge, or If marred and not vng wth husband or wfe;
(2) very ndvdua havng a gross ncome for the ta abe year of
1,500 or over, f marred and vng wth husband or wfe;
(3) very estate the gross ncome of whch for the ta abe year s 750
or over;
( ) very trust the net ncome of whch for the ta abe year s 100
or over, or the gross ncome of whch for the ta abe year s 750 or over,
regardess of the amount of the net ncome; and
(5) very estate or trust of whch any benefcary s a nonresdent aen.
(c) Informaton Returns. Secton 1 7(a) of the Interna Revenue Code (re-
atng to nformaton at the source) s amended by strkng out 800 wherever
occurrng theren and nsertng n eu thereof 750 .
Sec. 113. Credt for Dependents.
Secton 20(b) (2) of the Interna Revenue Code (reatng to credt for depend-
ents) s amended to read as foows:
(2) Credt for dependents.
( ) owance n Genera. 00 for each person (other than hus-
band or wfe) dependent upon and recevng hs chef support from the
ta payer f such dependent person s under eghteen years of age or a
ncapabe of sef-support because mentay or physcay defectve.
( ) cepton for Certan eads of Fames. If the ta payer
woud not occupy the status of head of a famy e cept by reason of
there beng one or more dependents for whom he woud be entted to
credt under subparagraph ( ), the credt under such subparagraph
sha be dsaowed wth respect to one of such dependents.
Sec. 11 . Nonntkkest- eaung Obgatons Issued at Dscount.
Secton 2 of the Interna Revenue Code (reatng to perod n whch tems of
gross ncome are ncuded) s amended by nsertng before the frst sentence
thereof (a) Genera Rue. , and by nsertng at the end of such secton a
new subsecton to read as foows:
(b) Nonnterest-bearng Obgatons Issued at Dscount. If, n the case of
a ta payer ownng any nountercst-bearng obgaton ssued at a dscount and
redeemabe for f ed amounts ncreasng at stated ntervas, the ncrease n the
redempton prce of such obgaton occurrng n the ta abe year does not (under
the method of accountng used n computng hs net ncome) consttute ncome
to hm In such year, such ta payer may, at hs eecton made In hs return for
any ta abe year begnnng after December 31, 19 0, treat such ncrease as
ncome receved n such ta abe year. If any such eecton s made wth respect
to any such obgaton, t sha appy aso to a such obgatons owned by the
ta payer at the begnnng of the frst ta abe year to whch t appes and to
a such obgatons thereafter acqured by hm and sha be bndng for a sub-
sequent ta abe years, uness upon appcaton by the ta payer the Comms-
soner permts hm, sub|ect to such condtons as the Commssoner deems neces-
sary, to change to a dfferent method. In the case of any such obgatons owned
by the ta payer at the begnnng of the frst ta abe year to whch hs eecton
appes, the ncrease In the redempton prce of such obgatons occurrng
between the date of acquston and the frst day of such ta abe year sha aso
be treated as ncome receved In such ta abe year.
Sec. 115. Short-Term Obgatons Issued on a Dscount ass.
(a) Dscount ccrued at Maturty. Secton 2 of the Interna Revenue
Code (reatng to perod n whch tems of gross ncome are Incuded) s
amended by nsertng at the end thereof the foowng new subsecton:
(c) Short-Term Obgatons Issued on Dscount ass. In the case of any
obgaton of the Unted States or any of ts possessons, or of a State or
Terrtory, or any potca subdvson thereof, or of the Dstrct of Coumba,
ssued on or after March 1, 19 1, on a dscount bass and payabe wthout
nterest at a f ed maturty date not e ceedng one year from the date of ssue,
the amount of dscount at whch such obgaton s orgnay sod sha not be
consdered to accrue unt the date ou whch such obgaton s pad at maturty,
sod, or otherwse dsposed of.
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387
Msc.
(b) Capta Gan Rue Not ppcabe. Secton 117(a)(1) of the Interna
Revenue Code (reatng to defnton of capta assets) s amended by strkng
out the semcoon at the end thereof and Insertng n eu thereof the foowng:
, or an obgaton of the Unted States or any of ts possessons, or of a State
or Terrtory, or any potca subdvson thereof, or of the Dstrct of Coumba,
ssued on or after March 1, 10 1, on a dscount bass and payabe wthout
nterest at a f ed maturty date not e ceedng one year from the date of ssue; .
(c) ffectve Date of mendments. The amendments made by (hs secton
sha be appcabe wth respect to ta abe years endng after February 28, 10 1.
Sec. 110 . Informaton Returns Wth Respect to Federa Obgatons.
(a) Secton 1 7(d) of the Interna Revenue Code (e emptng nterest on
obgatons of the Unted States from nforma on requrement) s repeaed.
(b) Secton 1 7(b) of the Interna Revenue Code s amended by strkng out
and (2) and nsertng n eu thereof (2) n the case of payments of nterest
u n obgatons of the Unted States or any agency or nstrumentaty thereof,
and (3) .
( ) Subsectons (a) and (h) of ths secton sha take effect upon the day
nfter the date of the enactment of ths ct.
ue. 117. tenson of Tme of Orders of Securtes and change
Commsson.
(a) tenson. Secton 373(a) of the Interna Revenue Code (reatng to
the defnton of orders of the Securtes and change Commsson wth respect
to whch Suppement R appes) s amended to read as foows:
(a) The term order of the Securtes and change Commsson means an
order (1) ssued after May 28, 1038, and pror to anuary 1, 10 3, by the
Securtes and change Commsson to effectuate the provsons of secton
11(b) of the Pubc Uty odng Company ct of 1035 ( 0 Stat. S20; U. S. C,
Supp. , tte 15, secton 70k(b)), or (2) ssued by the Commsson subsequent
to December 31, 10 2, n whch t s e pressy stated that.an order of the
character specfed n cause (1) s amended or suppemented, and (3) whch
has become fna n accordance wth aw.
b) ffectve Date of mendment. The amendment made by ths secton sha
be appcabe ony wth respect to ta abe years begnnng after December 31, 1030.
Sec. 118. Ta abe Tears to Whch mendments ppcabe.
The amendments made by ths tte (e cept sectons 107. 115, 118, and 117)
sha be appcabe ony wth respect to ta abe years begnnng after December
31, 19 0.
TITL II C SS PROFITS T .
Skc. 201. cess Profts Ta Rates and Credts.
(a) Rates. Secton 710(a) of the Interna Revenue Code s amended to
read as foows:
(a) Imposton.
(1) Genera buk, There sha he eved, coected, and pad, for each
ta abe year, on the ad|usted e cess profts net ncome, as defned n sub-
secton (b), of every corporaton (e cept a corporaton e empt under secton
727) the ta shown n the foowng tabe:
If the ad|usted e cess profts net The ta sha be:
ncome s:
Not over 20,000 33 of the ad|usted e cess profts net
ncome.
Over 20,000, but not over f 0.000___ 7,1 10. pus 0 of e cess over 20,000.
Over 50,0W , but not over 100,000 _ 10,000, pus 5 of e cess over
. .0,000.
Over 100,000, but not over 250,000 11,500, pus 50 of e cess over
100,000.
Over 250,000. but not over . 500,000 110.5(0, pus 55 . , of e cess over
250,000.
Over 500,000 25 ,000, pus 60 of e cess over
500,000.
(2) ppcaton of baths n case of certan e changes. If the ta -
payer s hghest bracket amount for the ta abe year computed under secton
752 (reatng to certan e changes) s ess than 500,000, then n the appca-
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Msc.
388
ton of the tabe n paragraph (1) of ths subsecton to such ta payer. In
eu of each amount, other than the percentages, specfed n such tabe,
there sha be substtuted an amount whch bears the same rato to the
amount so specfed as the hghest bracket amount so computed bears to
500,000.
(b) cess Profts Ceedt ased on Invested Capta. Secton 71 of the
Interna Revenue Code, as amended, s amended to read as foows:
Sec. 71 . cess Profts Credt ased on Invested Capta.
The e cess profts credt, for any ta abe year, computed under ths secton,
sha be the amount shown n the foowng tabe:
If the nvested capta for the ta abe The credt sha be:
vear, determned under secton 715,
s:
Not over 5,000,000 8 of the nvested capta.
Over 5,000,000 00,000, pus 7 of the e cess over
5,000,000.
Sec. 202. Deducton of cess-Profts Ta .
(a) mendment of Secton 23(c). Secton 23(c) of the Interna Revenue
Code (reatng to the deducton of ta es n computng net ncome) Is amended
to read as foows:
(c) Ta es Generay.
(1) owance n genera. Ta es pad or accrued wthn the ta abe
year, e cept
( ) Federa Income ta es;
( ) war-profts and e cess-profts ta es mposed by Tte II of the
Revenue ct of 1917, Tte III of the Revenue ct of 1918, Tte III
of the Revenue ct of 1921, secton 216 of the Natona Industra Recovery
ct, or secton 702 of the Revenue ct of 193 , or by any such provsons
as amended or suppemented;
(C) ncome, war-prots, and e cess-profts ta es mposed by the
authorty of any foregn country or possesson of the Unted States; but
ths deducton sha be aowed n the case of a ta payer who does not
sgnfy n hs return hs desre to have to any e tent the benefts of
secton 131 (reatng to credt for ta es of foregn countres and posses-
sons of the Unted States) ;
(D) estate, nhertance, egacy, successon, and gft ta es: and
( ) ta es assessed aganst oca benefts of a knd tendng to ncrease
the vaue of the property assessed; but ths paragraph sha not e cude
the aowance as a deducton of so much of such ta es as s propery
aocabe to mantenance or nterest charges.
(2) cess-profts ta under chapter 2 speca rues. For the pur-
poses of ths subsecton, n the case of the e cess-profts ta mposed by
Subchapter of Chapter 2
( ) The deducton sha be mted to the ta mposed for the ta abe
year, but any porton of such ta pad after the ta abe year sha be
consdered as havng been pad wthn the ta abe year;
( ) No reducton n such ta sha be made by reason of the credt
for ncome, war-profts, or e cess-profts ta es pad to any foregn
country or possesson of the Unted States;
(C) Such ta sha be computed wthout regard to the ad|ustments
provded n secton 73 ; and
(D) Such ta , n the case of a consodated return under secton
730, sha be aocated to the members of the affated group under regu-
atons prescrbed by the Commssoner, wth the approva of the Secre-
tary.
(b) mkndme t of Secton 102(d) Secton 102(d)(1)( ) of the Interna
Revenue Code (reatng to the deducton of ta es n computng secton 102 net
ncome) s amended to read as foows:
( ) Ta es. Federa ncome, war-profts, and e cess-profts ta es
(other than the ta mposed by Subchapter of Chapter 2 for a ta -
abe year begnnng after December 31, 19 0) pad or accrued durng
the ta abe year, to the e tent not aowed as a deducton by secton 23,
but not ncudng the ta mposed by ths secton or a correspondng
secton of a pror ncome-ta aw.
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Mso
(c) Computaton or cess-Profts Net Income.
(1) Ta abe ykaks begnnng after December s, 19 0.
( ) Secton 711(a)(1)( ) (reatng to ad|ustment for ncome ta es
n computng e cess-profts net ncome under ncome credt) s amended
to read as foows :
( ) Income Tu es. In computng such norma-ta net ncome 1 e
deducton for the ta mposed by ths subschapter sha not be
aowed ; .
( ) Secton 711(h)(2)(C) (reatng to ad|ustment for ncome ta es
n computng e cess-profts net ncome under nvested capta credt)
s amended to read as foows:
(C) Income Ta es. In computng such norma-ta net ncome the
deducton for the ta mposed by ths subchapter sha not e aowed: .
(2) Ta abe; years n the ha.se perod. Secton 711(b)(1)( ) (reat-
ng to ad|ustment for ncome ta es for ta abe years n the base perod) s
repeaed.
(d) Computaton ok Chartabe, tc., Deductons.
(1) Secton 711(a)(1) of the Interna Revenue Code Is amended by n-
sertng at the end thereof the foowng new subparagraph :
(G) Computaton of Chartabe, tc., Deductons. In determnng
any deducton the amount of whch s mted to a percentage of the
ta payer s net ncome (or net ncome from the property), such net
ncome (or net ncome from the property) sha be computed wthout
regard to the deducton on account of the ta mposed by ths sub-
chapter.
(2) Secton 711(a)(2) of the Interna Revenue Code s amended by add-
ng at the end thereof the foowng new subparagraph :
(I) Compuaton of Chartabe, tc., Deductons. In determnng
any deducton the amount of whch s mted to a percentage of the
ta payer s net ncome (or net Income from the property), such net n-
come (or net ncome from the property) sha Itc computed wthout
regard to the deducton on account of the ta mposed by ths
subchapter.
(e) cess-Proets Credt Carry-Oveb. Secton 710(c)(1) (defnng the
unused e cess-profts credt) s amended by addng at the end thereof a new
sentence to read as foows: For such purpose the e cess-profts credt and
the e cess-profts net ncome for any ta abe year begnnng n 19 0 sha be
computed under the aw appcabe to ta abe years begnnng n 1M1. .
(f) quty Invested Capta. Secton 718(e)(3) (reatng to the compu-
taton of earnngs and profts for nvested capta purposes) s amended by
addng after the word subchapter the words or chapter 1 .
(g) d|ustment of bnorma ase Perod Net Income. Secton 722(c)
(pacng a mt on the amount of reef afforded under secton 722) s amended
by addng at the end thereof a new sentence to read as foows: For the pur-
poses of ths subsecton and subsecton (d) the ta payer s norma-ta net ncome
sha be computed wthout deducton of the ta mposed by ths subchapter .
(h) Nondeduotbuty of cess Profts Ta n Computaton of Decared
aue cess Profts Ta . Secton 602 of the Interna Revenue Code s amended
by strkng out computed wthout the deducton of the ta mposed by secton
600 and nsertng n eu thereof computed wthout the deducton of the tu
mposed by secton COO or the ta mposed by Subchapter of Chapter 2 .
() d|usted Dec-ased aue.
(1) Secton 1202(b)(1)(C) of the Interna Revenue Code s amended to
read as foows:
(C) ts net ncome, computed wthout the deducton of the ta
mposed by Subchapter of Chapter 2, .
(2) Secton 1202(b) (1) () s amended to read as foows:
() the e cess of the deductons aowabe for ncome ta purposes
(not ncudng the deducton for the ta mposed by Subchapter of
Chapter 2) over ts gross ncome.
Sec. 203. New Capta.
Secton 71S(a) of the Interna Revenue Code s amended by strkng out and
at the end of paragraph ( ) ; by strkng out the perod at the end of para-
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390
graph (5) and Insertng n eu thereof a semcoon and the word and , and
by nsertng at the end thereof the foowng:
(0) New capta. n amount equa to 2a per centum of the new capta
for such day. The term new capta for any day means so much of the
amounts of money or property ncudbe for such day under paragraphs
(1) and (2) as was prevousy pad n durng a ta abe year begnnng
after December 81, 1910, and so much of the dstrbutons n stock ncudbe
for .such day under paragraph (3) as was prevousy made durng a ta abe
year begnnng after December 31, 1C 0, sub|ect to the foowng mtatons:
( ) There sha not be ncuded money or property pad n by a
corporaton n an e change to whch secton 112(b) (3), ( ), or (5),
or so much of secton 112 (c), (d), or (e) as refers to secton 112(b)
(3), ( ), or (5) s appcabe (or woud be appcabe e cept for sec-
ton 371(g)), or woud have been appcabe f the term contro had
been defned n secton 112(h) to mean the ownershp of stock possessng
more than 50 per centum of the tota combned votng power of a casses
of stock entted to vote or more than 50 per centum of the tota vaue
of shares of a casses of stock.
( ) There sha not be ncuded money or property pad In to the
ta payer by a transferor corporaton f mmedatey after such transacton
the transferor and the ta payer are members of the same controed group.
s used u ths subparagraph and subparagraph (C), a controed group
means one or more chans of corporatons connected through stock own-
ershp wth a common parent corporaton If (1) more than 50 per centum
of the tota combned votng power of a casses of stock entted to vote,
or more than DO per centum of the tota vaue of shares of a casses of
stock, of each of the corporatons (e cept the common parent corpo-
raton) s owned drecty by one or more of the other corporatons, and
() the common parent corporaton owns drecty more than 50 per
centum of the tota combned votng power of a casses of stock entted
to vote, or more than 50 per centum of the tota vaue of shares of a
casses of stock, of at east one of the other corporatons.
(C) There sha not be ncuded a dstrbuton n stock descrbed In
paragraph (3) made to another corporaton, f mmedatey after the
dstrbuton the ta payer and the dstrbutee are members of the same
controed group.
(D) Increase n Inadmssbe ssets. The new capta for any
day of the ta abe year, computed wthout the appcaton of subpara-
graph ( ), sha be reduced by the e cess, f any, of the amount com-
puted under secton 720(b) wth respect to nadmssbe assets hed on
such day, over the amount computed under secton 720(b) wth respect
to nadmssbe assets hed on the frst day of the ta payer s frst ta -
abe year begnnng after December 31, 19 0. For the purposes of ths
subparagraph, n determnng whether obgatons whch are descrbed n
secton 22(b) ( ) any part of the nterest from whch s e cudbe from
gross ncome or aowabe as a credt aganst net ncome are to be
treated as admssbe or Inadmssbe assets, such obgatons sha
be treated n the same manner as they are treated for the ta abe year
for whch ta under ths subchapter Is beng computed.
( ) Ma mum New Capta owabe. The new capta for any
day of the ta abe year sha not be more than the amount, If any, by
whch
() the sum of the equty Invested capta (computed wthout
regard to ths paragraph) and the borrowed capta (as defned n
secton 719(a)) of the ta payer as of such day, reduced by the
amount of money or property pad n whch s e cuded by reason
of the mtaton of subparagraph ( ) or ( ) of ths paragraph,
e ceeds
() the sum of such equty Invested capta and borrowed capta
as of the begnnng of the frst day of such ta payer s frst ta abe
year begnnng after December 31, 19 0, reduced by the amount, 11
any, by whch the accumuated earnngs and profts as of such frst
day of such frst ta abe year e ceed the accumuated earnngs and
profts (computed wthout regard to dstrbutons made n ta abe
years begnnng after December 31, 19 0) as of the begnnng o
the frst day of the ta abe year for whch the ta under thtt
subchapter s beng computed.
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Mbc.
( ) Reducton on ccount of Dstrbutons Out of Pre-19 1 ccumu-
ated arnngs and Profts.- The now capta for any day of the ta abe
year, computed wthout the appcaton of subparagraph ( ). sha be
reduced by the amount whch, after the begnnng of the frst ta abe
year whch begns after December 31, 19- O, has been dstrbuted out of
earnngs and profts accumuated pror to the begnnng of such frst
ta abe year.
C. 20 . CORPOR TION S NG G D IN MINING STR T GIC M T LS.
Secton 731 of the Interna Revenue Code (e emptng from e cess-profts ta
ncome derved from mnng certan metas) sha not appy wth respect to any
t nbe year begnnng after December 31, 19 0.
Sko. 205. Ta abe Years to Whch mendments ppcabe.
The amendments made by ths tte sha be appcabe ony wth respect to
ta abe years begnnng after December 31, 19 0.
TITL III C PIT L STOC T ND D CL R D LU
C SS-PROFITS T .
Sec. 301. Capta Stock Ta .
(a) Incre bb n ate ok Ta . Secton 1200 (a) and (b) of the Interna
Revenue Code (reatng to rate of capta stock ta ) s amended by strkng out
1 and Insertng n eu thereof 1.25 .
(b) Defense Ta Rate. Secton 1200(c) of the Interna Revenue Code s
repeaed.
(c) kttrns kor 10 1. Secton 1203(b)(2) of the Internn Revenue Code
(reatng to e tensons of tme for fng capta-stock ta returns) s amended by
nsertng at the end thereof the foowng: Wth respect to the year endng une
SO, 10 1, the e tenson may be for not more than nnety days. .
(d) ffectve Date. Ths secton sha e effectve ony wth respect to the
year endng une 30, 10 1, and succeedng years.
Sec. 302. Decared aue cess Profts Ta Defense Ta Rates Incor-
porated n ate Schedue.
(a) Rates. Secton 600 of the Interna Revenue Code (reatng to rate of
decared vaue e cess profts ta ) s amended as foows:
(1) y strkng out the headng (a) Genera Rue. ;
(2) y amendng the rate schedue to read as foows:
O per centum of such porton of ts net ncome for such ncome-ta
ta abe year as s n e cess of 10 per centum and not n e cess of 13 per
centum of the ad|usted decared vaue;
13 per centum of such porton of ts net ncome for such ncome-ta
ta abe year as s n e cess of 15 per centum of the ad|usted decared
vaue. ; and
(31 y repeang subsecton (b) (reatng to defense ta for fve years).
(b) ffectve Date. Ths secton sha be effectve ony wth respect to
ncome-ta ta abe years endng after une 30, 19 1.
TITL I ST T ND GIFT T S.
Skc. 01. state Ta Rates.
(a) Rates. Secton 5);5(b) of the Interna Revenue Code s amended to
read as foows:
(b) The tentatve ta referred to In subsecton (a)(1) of ths secton sha
be the tentatve ta shown n the foowng tabe:
If the net estate s:
Not over 5,000
Over 5, )0 but not over 10.000
() er . 10,000 but not over 20,000
Over 20,000 but not over 30,000
Over 30,000 but not over 0,000
The tentatve ta sha be:
3 of the net estate.
. 150, us 7 / of e cess over 5,000.
500, pus 11 of e cess over
10,000.
1,600, pus 1 of e cess over
20,000.
3,000, pus 18 of e cess over
30,000.
-
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392
The tentatve ta sha be:
,800, pus 22 of e cess over
0,000.
7,000, pus 20 of e cess over
50,000.
9,500, pus 28 of e cess over
150,000.
20,700, pus 30 of e cess over
. 100,000.
65,700, pus 32 of e cess over
250,000.
1 5,700. pus 35 of e cess over
500,000.
233,200, pus 37 of e cess over
750,000.
325,700, pus 39 of e cess over
1,000,000.
23,200. pus 2 of e cess over
1,250,000.
528,200. pus 5 of e cess over
1,500,000.
753,200, pus 9 of e cess over
2,000,000.
998,200, pus 537c of e cess over
2,500,000.
1,203,200, pus 567c of e cess over
3,000,000.
1,5 3,200, phs 597c of e cess over
3,500,000.
1,838,200, pus 637o of e cess over
,000,000.
2, 6S,200, pus 677c of e cess over
5,000,000.
3,138,200. pus 707o of e cess over
6,000,000.
3, 38,200, pus 737o of e cess over
7 000,000.
,568,200, pus 7670 of e cess over
3,000,000.
6,088,200, pus 777o of e cess over
10,000,000.
() Defense Ta Repeaed Subchapter C of Chapter 3 of the Interna
Revenue Code s repeaed.
(c) ffectve Date. Subsectons fa) and (b) sha be effectve ony wth
respect to estates of decedents dyng after the date of the enactment of ths ct.
Sec. 02. Gut Ta Rates.
(a) Rates. The Rate Schedue of secton 1001 of the Interna Revenue Code
s amended to read as foows:
If the net gfts are: The ta sha be:
Not over 5,000 2 of the net gfts.
If the net estate s:
Over 0,000 but not over 50,000
Over 50,000 but not over 60,000___.
Over 1)0,000 but not over 100,000
Over 100,000 but not over 250,000
Over 250,000 but not over 500,000
Over 500,000 but not over 750,000
Over 750,000 but not over 1,000,000.
Over 1,000,000
1,250,000.
Over 1,250,000
1,500,000.
Over 1,500,000
2,000,000.
Over 2,000,000
2,500,000.
Over 2,500,000
3,000,000.
Over 3,000,000
3,500,000.
Over 3,500,000
,000,000.
Over ,000,000
5,000,000.
Over 5,003,000
6,000,000.
Over 0,000,000
7,000,000.
Over 7,000,000
8,000,000.
Over 8,000,000
10,000,00.
Over 10,000,000-.
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
but
not
over
Over 5,000 but not over 10,000
Over 10,000 but not over 20,000
Over 20,000 but not over 30,000
Over 30,1 10 but not over 0,000
Over 0,000 but not over 50,000
Over 50,000 but not over 60,000
Over 60,000 but not over 100,000
Over 100,000 but not over 250,000
Over 250,000 but not over 500,000
112.50, pus 51 of e cess over 5,000.
375, pus 8|7o of e cess over 10,003.
1,200. pus 10|7e of e cess over
20,000.
2,250, pus 13|7o of e cess over
30,000.
3,600, pus 16 7c of e cess over
0,000.
5,250, pus 18 7o of e cess over
50,000.
7,125, pus 21 of e cess over 60,000.
15,525, pus 22 of e cess over
100,000.
9,275, pus 2 of e cess over
250,000.
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Msc.
If the net gfts are:
Over 500,000 but not over 750,000. .
Over 750,00 but not over 1,000,000.
but not
Over 1,000,000
1,250,000.
Over 1.250,000
1,500,000.
Over 1,500,000
2,000,000.
Over 2,000,000
2,500,000.
Over 2,500,000
3,000,000.
Over 3,000,000
3,300,000.
Over 3,500,000
,000,000.
Over 1,000,000
5,000,000.
Over 5,000,000
0,000,000.
Over (1,000,000
7,000,000.
Over 7,000,000
8,000,000.
Over 8,000,000
10,000,000.
Over 10,000,000
but
but
but
but
but
but
but
but
but
but
but
not
not
not
not
not
not
not
not
not
not
not
over
over
over
The ta sha he:
100,275, pus 26 of e cess over
500,000.
17 ,900, pus 27 of e cess over
750,000.
211,275, pus 291 of e cess over
1,000,000.
317, 00, pus 3U of e cess over
1,250,000.
00,151), pus 33 of e cess over
1,500,000.
66 ,900, pus 36: of e cess over
2,000,000.
over 7 8,050, pus 393 of e cess over
2,500,000.
over 9 7, 00, pus 2 of e cess over
3,000,000.
over 1,157, 00. pus of e cess over
3.51)0,000.
over 1378,650, pus 71 of e cess over
,000,000.
over 1,851,180, phs 50 of e cess over
5.0O0,()00.
over 2,353,050, pus 52 of e cess over
;,ooo,ooo.
over 2,878,050, pat 5 3 of e cess over
7,000,000.
over 3, 20,150, pus 57 of e cess over
8,000,000.
,506,150, pus 573 of e cess over
10,000,000.
(h) Teaks to Wmcn mendments hp.cahe. The amendments made by
ths secton sha be apped n computng the ta for the cnendar year 19 2
and each caendar year thereafter (but not the ta for the caendar year
19 1 or a prevous caendar year), and such amendments sha he apped n
a computatons n respect of the caendar year 19 1 and prevous caendar
years for the purpose of computng the ta for the caendar year 19 2 and any
caendar year thereafter.
(c) Defense Ta Refkaed. Secton 1001(d) of the Interna Revenue Code
(reatng to defense ta for fve years on gfts) s repeaed.
TITL CIS T S.
Part I 1932 cse Ta es Made Permanent.
Sec. 501. 1932 cse Ta es Made Permanent.
Secton 3 52 of the Interna Revenue Code (reatng to e praton of 1932
e cse ta es) s repeaed.
Sec. 502. Ppe Lne Ta .
Secton 3 60(a) of the Interna Revenue Code (reatng to termnaton of
ta on transportaton by ppe ne) s amended by strkng out orgnatng
before uy 1, 19 5 .
Sec, 503. Technca mendment.
The headng of Subtte C of the Interna Revenue Code Is amended to
read as foows:
SU TITL C M NUF CTUR RS CIS ND IMPORT T S ND T MPOR RY
T S.
Sue. 50 . ond Ta .
Secton 3 81(b) of the Interna Revenue Code (reatng to e praton of ta
on transfer of bonds) s repeaed.
Sec. 505. Conveyance Ta .
Secton 3 82 of the Interna Revenue Code (reatng to ta on conveyances)
s amended by strkng out devered before uy 1, 19 5 .
1011 2 2tt
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39
Part II Defense Ta Rates Made Permanent (No Increase n Ta and
No Chance n ass of Ta ).
Sec. 521. Defense cse Ta Rates Made Permanent Whch re Not Increased
by ths ct.
(n) The foowng see ons of the Inferna Revenue Code are amended as
foows:
(1) o seats. Secton 17(0(b)() s amended by strkng out 10 per
centum and nsertng n eu thereof 11 per centum .
(2) Saes outsde bo offce. Secton 1700(c) (1) s amended by strkng
out 10 per centum and nsertng n en thereof 11 per centum .
(3) Corporate securtes. Secton 1801 s amended by strkng out 10
cents unt uy 1, 10 5, and 5 cents thereafter and nsertng n eu
thereof 11 cents .
( ) Capta stock ssues. Secton 1802(a) s amended by strkng out
10 cents unt uy 1, 10 5, and 5 cents thereafter and the comma
wherever foowng such e presson and nsertng n eu thereof 11
cents ; and by strkng out 2 cents unt uy 1, 19 5, and 1 cent there-
after, and nsertng n eu thereof 3 cents .
(5) Capta stock transfers. Secton 1802(b s amended by strkng
out cents unt uy 1, 10-15, and 2 cents thereafter, and nsertng n
eu thereof 5 cents ; and by strkng out 5 cents nstead of cents
unt uy 1, 10 5 and nsertng n eu thereof 0 cents .
( ) Insurance poces. Secton 1S0 s amended by strkng out 3
cents and nsertng n en thereof cents .
(7) Passage tckets. Secton 1806 s amended by strkng out 1
and nsertng n eu thereof 1.10 ; by strkng out 3 and nsertng
n eu thereof 3.30 ; and by strkng out 5 and nsertng n eu
thereof 5.50 .
(8) Cgarettes. Secton 2 00(c)(21 s amended by strkng out S3
and nsertng n eu thereof 3.25 and by strkng out 7.20 and nsert-
ng n eu thereof 7.80 .
(9) Pstos and revovers. Secton 2700(a) s amended by strkng out
10 per centum and nsertng n eu thereof 11 per centum .
(10) Fermented mat quors. Secton 3150(a) s amended by strkng
out . 5 and nsertng n eu thereof ( .
(11) Whoesaers of quor. Secton 3250(a)(1) s amended by strk-
ng out . 100 and nsertng n eu thereof 110 .
(12) Retaers of quor. Secton 3250(b) s amended by strkng out
25 and nsertng n eu thereof 27.50 .
(13) rewers. Secton 3250(c) s amended by strkng out 100 and
nsertng n eu thereof 110 and by strkng out 50 aud nsertng
n eu thereof 55 .
(1 ) Whoesaers of mat quors. Secton 3250(d) s amended by
strkng out 50 and nsertng n eu thereof 55 .
(15) Rf.ta.es of mat quors. Secton 3250(e) (1) s amended by strk-
ng out 20 and nsertng n eu thereof 22 , and secton 3250(e)(3)
s amended by strkng out 2 nnd Insertng n eu thereof 2.20 .
(16) Rectfers. Secton 3250(f)(1) Is amended by strkng out 200
and nsertng n eu thereof 220 ; and by strkng out 100 and
nsertng n eu thereof . 110 .
(17) Sts. Secton 3250(|) s amended by strkng out 50 and n-
sertng n eu thereof 55 ; and by strkng out 20 and nsertng
n eu thereof 22 .
(18) Frearms, etc. Secton 3107 s amended by strkng out 10 per
centum and nsertng n eu thereof 11 per centum .
(19) ectrca energy. Secton 3 11 s amended by strkng out 3
per centum and nsertng n eu thereof 3 - per centum .
(20) Gasone. Secton 3 12(a) s amended by strkng out 1 cent
and nsertng n eu thereof 1 cents .
(21) Lubrc tno os. Secton 3 13 s amended by strkng out cents
and nsertng n eu thereof cents .
(22) Transportaton of o by ppe ne. Secton 3 00(a) Is amended
by strkng out per centum and nsertng n eu thereof | per
centum .
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395
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(23) Transfer or bonds. Secton 3 S(a) Is amended by strkng out
cents and nsertng n eu thereof 5 cents .
(2 ) Conveyances. Secton 3 82 s amended by strkng out 50 cents
and nsertng n eu thereof 55 cents .
(b) The rates specfed n subsecton (a) sha e appcabe ony wth respect
to the perod after the date of the enactment of ths ct, and the rates specfed
n secton 16.10(a). secton 200 , and secton 3190 of the Interna Revenue Code
sha not appy wth respect to such p; rod.
Part III In( reases n Rates of stno cse Ta es.
Sec. 531. P.ay.no Cards.
Secton 1807(a) of the Interna Revenue Code s amended by strkng out 10
cents and nsertng In eu thereof 13 cents .
Sec. 532. Safe Depost o es.
Secton 1850(a) of the Interna Revenue Code s amended by strkng out 10
per centum and nsertng n eu thereof 20 per centum .
Sec. 533. Dsted Sprts.
(a) Rate on Dsted Sprts. Secton 2 00(a)() of the Interna Revenue
Code s amended by strkng out nt the rate of 2.25 (and on brandy at the
rate of 2) and by Insertng n eu thereof at the rate of , and by strkng
out (e cept brandy) .
(b) Rate on Imported Perfumes Contanng coho. Secton 2M)0(n)(3)
of the Interna Revenue Code s amended by strkng out 2.-|r am nsertng
n eu thereof .
(c) Drawback on Dsted Sprts. The thrd paragraph of secton 2 87 of
the Interna Revenue Code s amended by strkng out but sha not e ceed
a rate of 3 (or, n the case of brandy, 2.75) and nsertng n eu thereof but
sha not e ceed a rate of .
(d) Foor Stocks Ta . Secton 2S00 of the Interna Revenue Code s amended
by nsertng at the end thereof the foowng new subsecton :
() Foor Stocks Ta .
(1) Upon a dsted sprts upon whch the nterna-revenue ta m-
posed by aw has been pad, and whch on October 1, 19 1, are hed and
ntended for sae or for use n the manufacture or producton of any artce
Intended for sae, there sha be eved, assessed, coected, and pad a foor
stocks ta of . 1 (e cept that n the case of brandy, the rate sha be 1.25) on
each proof-gaon, and a proportonate ta at a ke rate on a fractona parts
of such proof-gaon.
(2) very M-rson requred by ths subsecton to pay any foor stocks t;
sha, on or before anuary 1, 19 2, under such reguatons as the Comms-
soner, wth the approva of the Secretary, sha prescrbe, make a return
and pay such ta . Payment of the ta shown to be due may he e tended to
a date not ater than ugust 1, 19 2, upon the fng of a bond for payment
thereof n such form and amount and wth such surety or suretes as the
Commssoner, wth the approva of the Secretary, may prescrbe.
(3) provsons of aw, Incudng penates, appcabe n respect of
nterna-revenue ta es on dsted sprts sha, nsofar as appcabe and
not nconsstent wth ths subsecton, be appcabe In respect of the foor
stocks ta mposed hereunder. For the purposes of ths subsecton the
term dsted sprts sha Incude products produced n such manner that
the person producng them s a rectfer wthn the meanng of secton
325 (g).
Seo. 53 . Wnes.
(a) Rate on St Wnes. Secton 3030(a)(1)( ) of the Interna Revenue
Code s amended by strkng out 5 cents and nsertng n eu thereof 8
cents ; by strkng out 15 cents and nsertng n eu thereof 30 cents ; and
by strkng out 25 cents and nsertng In eu thereof 65 cents .
(b) Rate on Sparkng Wnes, Lqueurs, Cordas, tc. Secton 3030(a) (2)
of the Interna Revenue Code s amended by strkng out 2 cents and nsert-
ng n eu thereof 7 cents ; and by strkng out 1 cents and nsertng
n eu thereof 3 cents .
(c) Subchapter F of Chapter 26 of the Interna Revenue Code s amended by
Insertng at the end thereof the foowng new secton:
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396
Sec nO . Foor Stocks Ta on Wnks.
(n) Fr.oon Stocks Ta . Upon a wnes upon whch the nterna-revenue ta
mposed by aw has been pad, and whch on October 1, 19 1, are hed aud ntended
for sae or for use n the manufacture or producton of an artce ntended for
sae, there sha be eved, assessed, coected, and pad a foor stocks ta at
rates equa to the ncreases n rates of ta (over the defense ta rates) made
appcabe to such artces by secton 53 of the Revenue ct of 10 1.
(b) Returns. very person requred by subsecton (a) to pay any foor
stocks ta sha, on or before anuary 1. 19 2, under such reguatons as the
Commssoner, wth the approva of the Secretary, sha prescrbe, make a return
and pay such ta . Payment o the ta shown to be due may be e tended to a
date not ater than ugust 1, 19 2, upon the tng of a bond for payment thereof
n such form and amount and wth such surety or suretes as the Commssoner,
wth the approva of the Secretary, may prescrbe.
(e) Laws ppcabe. provsons of aw, ncudng penates, appcabe
n respect of the ta es mposed by secton 3030(a) sha, nsofar as appcabe
and not nconsstent wth ths subsecton, be appcabe wth respect to the foor
Stocks ta mposed by subsecton (a).
Sec. 535. Tres and Tubes.
(a) Rate on Tres. Secton 3 00(1) of the Interna Revenue Code s amended
by strkng out 2 cents and nsertng n eu thereof 5 cents .
(I) Rato on Tubes. Secton 3 00(-) of the Interna Revenue Code s amended
by strkng out cents and nsertng n eu thereof 9 cents .
(c) Foor Stocks Ta on Tres and Innfr Tubes. Secton 3 00 of the
Interna Revenue Code s amended by nsertng (a) Ta . before the begnnng
thereof and by nsertng at the end thereof the foowng:
(b) Foor Stocks Ta . Upon tres aud nner tubes sub|ect to ta under sub-
secton (a) of the type used on vehces sub|ect to ta under secton 3 03 (a) or
(b) whch on October 1, 19 1, are hed for sae by auy person there sha be
eved, assessed, coected, and pad a foor stocks ta at the rate of 2 cents per
pound n the case of tres and cents per pound n the case of nner tubes.
The ta sha appy to tres and nner tubes hed for sae on, or n connecton
wth, or hed for use n the manufacture or producton of, artces the sae of
whch w be sub|ect to ta under secton 3 03 (a) or (b). The ta sha not
appy to tres and nner tubes hed for sae by the manufacturer, producer, or
Importer thereof, and to tres and nner tubes the sae of whch w be sub|ect
under the provsons of sectons 3 (a)(2) and 3 5 to the manufacturers ta
on tres and nner tubes.
Sec. 536. ffectve Pate of Part III.
The amendments made by ths Part sha be appcabe ony wth respect to the
perod begnnng wth October 1, 19 1, and the rates specfed n secton 1650(a),
secton 07(b), secton 200 . secton 2800(g), md secton 3190 of the Interna
Revenue Code sha not appy wth respect to such perod. Ths Part sha take
effect on October 1,19 1.
Part I Changes n ass of Computng Ta (Rates Increased n Certan-
Cases).
Sec. 5 1. dmssons Ta .
(a) Reducton of vmptton. Secton 1700(a)(1) of the Interna Revenue
Code s amended to read as foows:
(1) Rate. ta of 1 cent for each 10 cents or fracton thereof of the
amount pad for admsson to any pace, ncudng admsson by season
tcket or subscrpton. In the case of persons (e cept bona fde empoyees,
muncpa offcers on offca busness, chdren under tweve years of age,
members of the mtary or nava forces of the Unted States when u
unform, and members of the Cvan Conservaton Corps when n unform)
admtted free or at reduced rates to any pace at any tme when and under
crcumstances under whch an admsson charge .s made to other persons,
an equvaent ta sha be coected based on the prce so charged to such
other persons for the same or smar accommodatons, to be pad by the
person so admtted. No ta sha be mposed on the amount pad for the
admsson of a chd under tweve years of age f the amount pad s ess
than 10 cents.
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(b) Termnaton of emptons. Secton 1701 of the Interna Revenue Code
(reatng to e emptons from admssons ta ) sha not appy wth respect to
amounts pad, on or after the effectve date of ths part, for admsson.
(c) empton of Natona Park, tc., dmssons Termnated. The Inte-
ror Department ppropraton ct, 19 2, s amended by strkng out that part
1 hereof under the headng natona park servce whch reads as foows:
ereafter fees ncdent to admsson to the natona parks and monuments
and other areas n the natona park system, charged and coected wth the
approva of the Secretary of the Interor, sha be e empt from a Federa ta
on admssons.
The ct entted n ct makng appropratons for the Department of the
Interor for the fsca year endng une 30, 1836, and for other purposes ,
approved May 9, 1935, s amended by strkng out that part thereof under the
headng natona park servce whch reads as foows: : Provded, That
any admsson fee charged for entrance to Carsbad Caverns and any fee charged
for gude servce theren, sha be e empt from a ta es on admssons .
Sec. 5 2. Cabaret, Roof Garden, tc., Ta .
(a) Imposton. Secton 1700(e) of the Interna Revenue Code s amended
to read as foows:
(e) Ta on Cabarets, Roof Gardens, tc.
(1) Rate. ta equvaent to 5 per centum of a amounts pad for
admsson, refreshment, servce, and merchandse, at any roof garden,
cabaret, or other smar pace furnshng a pubc performance for proft,
f any payment, or part thereof, for admsson, refreshment, servce, or
merchandse, enttes the patron to be present durng any porton of such
performance. No ta sha be appcabe under subsecton (a)(1) on ac-
count of an amount pad wth respect to whch ta s mposed under ths
subsecton.
(2) y whom pad. The ta mposed under paragraph (1) sha be
returned and pad by the person recevng such payments.
(b) Pace of Payment. Secton 1715(b) of the Interna Revenue Code s
amended to read as foows:
(b) Pace of Payment. The ta es coected under subsecton (a), and the
ta es requred to be pad under secton 1700 (c), (d), or (e). ha be pad to
the coector of the dstrct n whch the prncpa offce or pace of busness
Is ocated.
(e) Returns. Secton 1716(a) of the Interna Revenue Code s amended to
read as foows:
(a) Requrement.- very person requred under subsecton (a) of secton
1715 to coect the ta es, or requred under secton 17( ) (c), (d), or (e) to
pay the ta es, mposed by ths chapter sha make returns under oath. In
dupcate, n such manner and contanng such nformaton as the Commssoner,
wth the approva of the Secretary, may, by reguaton, prescrbe.
(d) Secton 1700(c)(3) and secton 1700(d)(3) of the Interna Revenue
Code are repeaed as of the effectve date of ths Part.
Sec. 5 3. Ctth Dues.
(a) Reducton of empton and Defense Ta Rate Made Permanent.
Secton 1710(a) (1) and (2) of the Interna Revenue Code are amended to
read as foows:
(1) Dues or membershp fees. ta equvaent to 11 per centum of
any amount pad as dues or membershp fees to any soca, athetc, or
sportng cub or organzaton, f the dues or fees of an actve resdent
annua member are n e cess of 10 per year.
(2) Intaton fees. ta equvaent to 11 per centum of any amount
pad as ntaton fees to such a cub or organzaton, f such fees amount
to more than 10, or f the dues or membershp fees, not ncudng ntaton
fees, of an actve resdent annua member are n e cess of 10 per year.
(b) Defnton of Dues Secton 1712(a) of the Interna Revenue Code s
amended to read as foows:
(a) Dues. The term dues ncudes any assessment, rrespectve of the
purpose for whch made, and any charges for soca prveges or factes, or
for gof, tenns, poo, swmmng, or other athetc or sportng prveges or
factes, for any perod of more than s days; and .
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308
Sec. 5 . utomobe, Truck, ur. and Parts Ta .
(a) Increase of Rate and Cassfcaton of- usses. Secton 3 03 (a) and
(b) of the Interna Revenue Code are amended to read as foows:
(a) utomobe truck chasss, automobe truck bodes automobe bus
chasss, automobe bus bodes, truck and bus traer and semtraer chasss,
truck and bus traer and semtraer bodes, tractors of the knd chefy used
for hghway transportaton n combnaton wth a traer or semtraer (ncud-
ng n each of the above cases parts or accessores therefor sod on or n con-
necton therewth or wth the sae thereof), 5 per centum. sae of an auto-
mobe truck, bus, or truck or bus traer or semtraer, sha, for the purposes
of ths subsecton, be consdered to be a sae of the chasss and of the body.
(b) Other automobe chasss and bodes, chasss and bodes for traers or
semtraers sutabe for use n connecton wth passenger automobes, and
motorcyces (ncudng n each case parts or accessores therefor sod on or In
connecton therewth or wth the sae thereof), e cept tractors, 7 per centum.
sae of an automobe, traer, or semtraer sha, for the purposes of ths
subsecton, be consdered to be a sae of the chasss and of the bedy.
(b) Increase n Rate on Parts and cuson ok Rados From utomobe
Ta . The frst sentence of secton 3 03(c) of the Interna Revenue Code s
amended to read as foows: Parts or accessores (other than tres and nner
tubes and other than rados) for any of the artces enumerated n subsecton
(a) or (1)). 5 per centum.
(e) Credts on ccount of Tre and Tube Ta . Secton 3 03(e) of the
Interna Revenue Code s amended to read as foows:
(e) If tres or nner tubes on whch ta has been mposed under ths chapter
are sod on or n connecton wth, or wth the sae of, a chasss, body, or motor-
cyce, there sha (under reguatons prescrbed by the Commssoner, wt the
approva of the Secretary) be credted aganst the ta under ths secton an
amount equa to, n the case of an artce ta abe under subsecton (a), 5 per
centum, and n the case of an artce ta abe under subsecton (b), 7 per
centum
(1) of the purchase prce (ess, n the case of tres, the part of such prce
attrbutabe to the meta rm or rm base) f such tres or nner tubes were
ta abe under secton 3 00 (reatng to ta on tres and nner tubes) ; or
(2) f such tres or nner tubes were ta abe under secton 3 (reatng
to use by manufacturer, producer, or mporter) then of the prce (ess, n
the case of tres, the part of such prce attrbutabe to the meta rm or rm
base) at whch such or smar tres or nner tubes are sod, n the ordnary
course of trade, by manufacturers, producers, or mporters thereof, as deter-
mned by the Commssoner. In eu of the rates of credt of . per centum
and 7 per centum above provded, the rates, respectvey, for the foowng
perods, sha be as foows:
( ) Wth respect to the perod after une 30, 19 0. and before the
effectve date of the ncrease n ta on automobes made by the Revenue
ct of 10 1, 2 a per centum and 3 a per centum : and
( ) Wth respect to the perod before uy 1, 19 0. 2 per centum
and 3 per centum.
(d) Credts on Termnaton ov Ta . Secton 3103(f) of the Interna Reve-
nue Code (reatng to credts and refunds on termnaton of automobe ta ) s
repeaed.
Sec. 5 5. Rados. Phonographs, Records, and Musca Instruments.
Secton 3 0 of the Interna Revenue Code s amended to read as foows:
Sec. 3 0 . Ta on Rado Recevng Sets, Phonographs, Phonograph Records,
and Musca Instruments.
There sha be mposed upon the foowng artces (ncudng n each case,
e cept n the case of musca nstruments, parts or accessores therefor sod on
or n connecton wth the sae thereof) sod by the manufacturer, producer, or
mporter a ta equvaent to 10 per centum of the prce for whch sod:
(a) Rado recevng sets, automobe rado recevng sets, combnaton
rado and phonograph sets, and phonographs.
(b) Chasss, cabnets, tubes, reproducng unts, power packs, antennae
of the but-n type, and phonograph mechansms, whch are sutabe for
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use on or nconnecton wth, or as component parts of, any of th# artces
enumerated n subsecton (a), whether or not prmary adapted for such
use.
(c) Phonograph records.
(d) Musca nstruments.
Sec. 5 6. Mechanca Refrgerators.
Secton 3 05 of the Internn Revenue Code s amended to read as foows:
Sec. 3 05. Ta on Refrgerators, Refrgeratng pparatus, and r-
Condtoners.
There sha be mposed on the foowng artces (ncudng n each case
parts or accessores therefor sod on or n connecton wth the sae thereof)
sod by the manufacturer, producer, or Importer a ta equvaent to 10 per
centum of the prce for whch so sod :
(a) Refrgerators, etc. Refrgerators, beverage cooers, ce cream cab-
nets, water cooers, food and beverage dspay cases, food and beverage
storage cabnets, ce makng machnes, and mk cooer cabnets, each such
artce havng, or beng prmary desgned for use wth, a mechanca refrg-
eratng unt operated by eectrcty, gas, kerosene, or gasone.
(b) Refrgeratng apparatus. Compressors, condensers, evaporators,
e panson unts, absorbers, and contros, for, or sutabe for use as part of,
or wth, a refrgeratng pant, refrgeratng system, refrgeratng equpment
or unt, or any of the artces enumerated n subsecton (a).
(c) -conmtoners. Sef-contaned ar-condtonng unts.
(d) Components. Cabnets, compressors, condensers, fans, bowers, heat-
ng cos, coong cos, fters, humdfers, and contros, for, or sutabe for
use as part of, or wth, any of the artces enumerated n subsecton (c).
Sec. 5 7. Matches.
Secton 3 09 of the Internn Revenue Cede s amended to read as foows:
Sec. 3 09. Ta on Matches.
(a) Manufacturers Ta . There sha be mposed upon matches sod by
the manufacturer, producer, or mporter, a ta of 2 cents per 1,000 matches,
e cept that n the case of fancy wooden matches and wooden matches havng a
staned, dyed, or coored stck or stem, packed n bo es or n buk, the ta sha
be 5 6 cents per 1,000 mutches.
(b) Foor Stocks Ta . On matches sub|ect to ta under subsecton (a)
whch, on October 1, 19 1, are hed and ntended for sae, or for dsposton
n connecton wth the sae of other artces, there sha be eved, assessed,
coected, and pad a foor stocks ta at the rate of 2 cents per thousand matches.
The ta sha not appy to matches n reta stocks hed at the pace where
ntended to be sod or dsposed of. The ta sha not appy to matches hed
for sae by the manufacturer, producer, or mporter thereof, nor to fancy wooden
matches or wooden matches havng a staned, dyed, or coored stck or stem.
Sec. 5 S. Teephone, Teegraph, tc.
Sectons 3 05 and 3 06 of the Interna Revenue-Code are amended to read
as foows:
Sec. 3 65. Imposton and Rate of Ta .
(a) There sha be mposed:
(1) ( ) In the case of each teephone or rado teephone message or
conversaton whch orgnates wthn the Unted States, for whch the
charge s more than 2 cents, a ta of 5 cents for each 50 cents, or
fracton thereof, of the charge.
( ) In the case of each teegraph, cabe, or rado dspatch or message
whch orgnates wthn the Unted States, a ta of 10 per centum of the
amount of the charge.
Ony one payment of a ta mposed by subparagraph ( ) or ( ) sha
be requred notwthstandng the nes or statons of one or more persons
are used n the transmsson of such dspatch, message, or conversaton.
(2) ( ) ta equvaent to 10 per centum of the amount pad for
eased wre, teetypewrter, or takng crcut speca servce.
( ) ta equvaent to 5 per centum of the amount pad for any
wre and equpment servce (ncudng stock quotaton and nformaton
servces, burgar aarm or fre aarm servce, and a other smar servce
but not ncudng servce descrbed n subparagraph ( )).
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The ta sha appy under ths paragraph whether or not the wres or
servces are wthn a oca e change area.
(3) ta equvaent to 6 per centum of the amount pad by sub-
scrbers for oca teephone servce and for any other teephone servce n
respect of whch a ta s not payabe under paragraph (1) or (2). mounts
pad for the nstaaton of nstruments, wres, poes, swtchboards, ap-
paratus, and equpment sha not be consdered amounts pad for servce.
Servce pad for by nsertng cons n con-operated teephones sha not
be sub|ect to the ta mposed by ths paragraph.
(b) Ths secton sha not appy to the amount pad for so much of the
servce descrbed n paragraph (2) of subsecton (a) as s utzed n the
conduct, by a common carrer or teephone or teegraph company or a rado
broadcastng staton or network, of ts busness as such.
Sec. 3 66. kmpton Fkom Ta .
(a) No ta sha be mposed under secton 3165 upon any payment receved
for servces or factes furnshed to the Unted States or to any State or
Terrtory, or potca subdvson thereof, or the Dstrct of Coumba.
(b) No ta sha be mposed under secton 3 05(a) (1) and (2) upon any
payment receved from any person for servces or factes utzed n the
coecton of news for the pubc press, or a news tcker servce furnshng a
genera news servce smar to that of the pubc press, or rado broadcastng,
or In the dssemnaton of news through the pubc press, or a news tcker
servce furnshng a genera news servce smar to that of the pubc press,
or by means of rado broadcastng, f the charge for such servces or factes
Is bed n wrtng to such person. Secton 3-165(a 1(3) sha not be construed
as mposng a ta on servces and factes descrbed n secton 3 65(a) (1)
or (2) whch are e empt from ta under ths subsecton.
(c) The rght to e empton under ths secton sha bo evdenced n such
manner as the Commssoner wth the approva of the Secretary may by
reguat on prescrbe.
ec. 5 9. Instament, tc., Payments.
Secton 3 1(c) of the Interna Revenue Code s amended to read as foows:
(c) (1) In the case of ( ) a ease, ( ) a contract for the sae of an artce
wheren t s provded that the prce sha be pad by nstaments and tte
to the artce sod does not pass unt a future date notwthstandng parta
payment by nstaments, or (C) a condtona sae, there sha be pad upon
each payment wth respect to the artce that porton of the tota ta whch
s proportonate to the porton of the tota amount to be pad represented by
such payment.
(2) In the appcaton of paragraph (1) to the artces wth respect to
whch the rate of ta s ncreased by the Revenue ct of 19 1 or by the
Revenue ct of 19 0, where the ease, contract of sae, or condtona sae,
and devery thereunder
( ) was made before uy 1, 19 0, the tota ta referred to n paragraph
(1) sha be the ta at .the rate n force on une 30, 19 0, and not at any
greater rate; or
(11) was made after une 30, 1910. and before October 1, 19 1, the tota
ta referred to In paragraph (1) sha be the ta at the rate n force on
September 30, 19 1, and not at any greater rate.
(3) Despte the provsons of paragraph (1), no ta sha be mposed wth
respect to any artce not ta abe under the aw n e stence on the day before
the date of thq, enactment of the Revenue ct of 19 1, f wth respect to such
artce the ease, contract for sae, or condtona sae, and devery thereunder,
was made before October 1, 19 1.
Sec. 550. ffectve Date of Part I .
(a) The amendments made by ths Part sha be appcabe ony wth respect
to the perod begnnng wth the effectve date of ths Part, and the rates
spered n secton 1650(a), secton 1807(b), secton 200 , secton 2800(g), and
secton 3191) of the Interna Revenue Code sha not appy wth respect to
such perod. Ths Part sha take effect on October 1, 19 1.
(b) Despte the provsons of subsecton (a), the ta mposed by secton
1700(e) of the Interna Revenue Code, as amended by secton 5 2 of ths ct
(reatng to cabaret, etc., ta ), sha be appcabe ony wth respect to the
perod begnnng at 10 a. n. on October 1, 19 1, and the ta mposed by uch
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secton as n force pror to ts amendment by secton 5 2 of ths ct, as
fted by secton 1650(a) of the Interna Revenue Code, sha be appcabe
respect to the perod before 10 a. m. on such date.
e) Despte the provsons of subsecton (a), the amendment of secton
3(a) (2) made by secton 5 8 of ths ct (reatng to ta on eased-wre, etc.,
. ces) sha be appcabe ony to amounts pad on or after such effectve
e for servces rendered, on or after October 1, 19 1, and the provsons of
h subsecton before ts amendment by secton 5 8 sha be appcabe wth
pect to the perod before October 1, 19 1.
t) Despte the provsons of subsecton (a), secton 3 65(a)(3) of the
erna Revenue Code (reatng to ta on teephone bs), added to the Interna
venue Code by secton 5 8 of ths ct, sha appy ony to the amounts pad
pursuance of bs rendered, after October 5, 19 1, for servces for whch
prevous b was rendered. Such secton 3 05(a) (3) sha not appy to
ounts pad for servces otherwse ta abe under secton 3 05(a)(1) whch
re rendered before October 6, 19 1; nor to amounts pad for servces otherwse
;abe under secton 3 05(a)(2) whch were rendered or pad for before
tober 6, 19 1.
Pabt New cse Ta es.
c. 551. New Manufacturers cse Ta es.
Subchapter of Chapter 29 of the Interna Revenue Code s amended by
sertng after secton 3 05 the foowng new secton:
f . 3 06. cse Ta es Imposed by the Revenue ct or 19 1.
(a) Imposton. There sha be mposed on the foowng artces, sod by
e manufacturer, producer, or mporter, a ta equvaent to the rate, on the
ce for whch sod, set forth In the foowng paragraphs (ncudng n each
se parts or accessores of such artces sod on or n connecton therewth,
wth the sae thereof):
(1) Sportng coons. admnton nets; badmnton rackets (measurng
22 nches over-a or more In ength) ; badmnton racket frames (measurng
22 Inches over-a or more In ength) ; badmnton racket strng; badmnton
shuttecocks, badmnton standards; basebas; baseba bats (measurng
20 nches or more n ength) ; baseba body protectors and shn guards;
baseba goves and mtts; baseba masks; basketbas; bard and poo
tabes (measurng 5 nches over-a or more n ength) ; bard and poo
bas and cues for such tabes; bowng bas and pns; bo ng goves,
masks, head guards, and ear guards; cay pgeons; crcket bas; crcket
bats; croquet bas and maets; curng stones; deck tenns rngs, nets, and
posts; fencng equpment; fshng rods, crees, rees, and artfca ures,
bats, and fes; footbas; footba harness; footba hemets; gof bags
(measurng 26 nches or more n ength) ; gof bas; gof cubs (measurng
30 nches or more n ength) ; gymnasum equpment and apparatus; hockey
bas; hockey pucks; hockey stcks (measurng 30 nches or more n
ength); ndoor basebas; ndoor baseba bats (measurng 20 nches or
more n ength) ; ndoor baseba goves and mtts; acrosse bas; acrosse
stcks; mass bas; poo bas; poo maets; push bas; skates; sks; sk
poes; snow shoes; snow toboggans and seds; soccer bas; Softba bas;
softba bats (measurng 20 nches or more n ength) ; Softba goves and
mtts; squash bas; squash rackets (measurng 22 nches over-a or more
n ength) ; squash racket frames (measurng 22 nches over-a or more
n ength); squash racket strng; tenns bas; tabe tenns tabes, bas,
nets, and paddes; tenns nets; tenns rackets (measurng 22 nches over-a
or more n ength) ; tenns racket frames (measurng 22 nches over-a or
more n ength) ; tenns racket strng; track hurdes; traps for throwng
cay pgeons; vautng poes, cross bars, and standards; voey bas, nets,
and standards; water poo bas and goas; and wrestng head harness;
10 per centum.
(2) Lugoage. Trunks, vases, traveng bags, sutcases, hat bo es for
use by traveers, ftted toet cases (not ncudng contents), and other
traveer s uggage, and eather and mtaton eather bref cases, 10 per
centum.
(3) ectrc, gas, and on. appances. ectrc drect motor-drven
fans and ar crcuators; eectrc, gas, or o water heaters; eectrc fat rons;
eectrc ar heaters (not ncudng furnaces) ; eectrc mmerson beaters;
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eectrc heatng pads and bankets: eectrc, pas. or o appances of the
type used for cookng, warmng, or keepng warm food or beverages for
consumpton on the premses; eectrc m ers, wppers, and |ucers; aut
househod type eectrc vacuum ceaners; 10 per centum.
( ) Photographc apparatus. Cameras and enses; une posed photo-
graphc f ms (ncudng moton pcture fms but not Incudng -ray fm),
photographc pates and senstzed paper; photographc apparatus and
equpment; and any apparatus or equpment desgned especay for use
n the takng of photographs or moton pctures or n the deveopng, prnt-
ng, or enargng of photographs or moton pcture fms; 10 per centum.
(5) ectrc sgns. Neon-tube sgns, eectrc sgns, and eectrc
advertsng devces, 10 per centum.
(6) usness ano stoke machnes. ddng machnes, addressng
machnes, autographc regsters, bank proof machnes, bng machnes,
bookkeepng machnes, cacuatng machnes, card punchng machnes, cash
regsters, change makng machnes, check wrtng machnes, check sgnng
machnes, check canceng machnes, check perforatng machnes, check cut-
tng machnes, check datng machnes, other check protector machne
devces, computng machnes, con counters, dctographs, dctatng machne
record shavng machnes, dctatng machnes, dupcatng machnes, em-
bossng machnes, enveope openng machnes, erasng machnes, fodng
machnes, fanfod machnes, fare regsters, fare bo es, stng machnes, ne-
n-tme and smar machnes, mang machnes, mutgraph machnes, mu-
tgraph typesettng machnes, mutgraph type |ustfyng machnes, num-
berng machnes, portabe paper fastenng machnes, pay ro machnes, penc
sharpeners, posta permt mang machnes, punch card machnes, sortng
machnes, stenc cuttng machnes, shorthand wrtng machnes, seang ma-
chnes, tabuatng machnes, tcket countng machnes, tcket ssung ma-
chnes, typewrters, transcrbng machnes, tme recordng devces, and com-
bnatons of any of the foregong. 10 per centum.
(7) Rubber artces. rtces of whch rubber s the component ma-
tera of chef weght, 10 per centum. The ta mposed under ths para-
graph sha not be appcabe to footwear, artces desgned especay fur
hospta or surgca use, or artces ta abe under any other provson of
ths chapter.
(8) Washng machnes. Washng machnes of the knd used n com-
merca aundres, 10 per centum. No ta sha be mposed under ths
paragraph on washng machnes of the househod type.
(9) Optca equpment. Refractomoters; spectrometers: spectro-
scopes; coormeters; poarscopes; optca measurng nstruments: tee-
scopc sghts; pro|ecton enses and prsms; optca machnery; mcro-
scopes; teescopes; photo-mcro and mcro-pro|ecton apparatus; re contro
optca nstruments; and searchght mrrors and refectors; 10 per centum.
(10) ectrc ght Uy|s and tubes. ectrc ght bubs aud tubes,
not ncudng artces ta abe under any other provson of ths subchapter,
per centum.
(b) kmpton f rtce Ta abe as ewery. No ta sha be mposed
under ths secton on any artce ta abe under secton 2 00 (reatng to
|ewery ta ).
(c) ffectve Date. Ths secton sha take effect on October 1, 19 1.
Sec. .r). 2. New Retaers cse Ta es.
(a) Imposton or Ta . The Interna Revenue Code s amended by addng
after chapter 18 the foowng new chapter:
C PT R 19 R T IL RS CIS T S.
Sec. 2 00. Ta on ewery, tc.
There s hereby mposed upon the foowng artces sod at reta a ta
equvaent to 10 per centum of the prce for whch so sod: artces com-
mony or commercay known as |ewery, whether rea or mtaton; pears,
precous and sem-precous stones, and mtatons thereof; artces made of, or
ornamented, mounted or ftted wth, precous metas or mtatons thereof; watches
and cocks and cases and movements therefor; god, god-pated, sver, sver-
pated or sterng fatware or hoow ware; opera gasses; orgnettes: marne
gasses; fed gasses; and bnocuars. The ta mposed by ths secton sha
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not appy to any artce used for regous purposes, to surgca Instruments,
or to frames or mountngs for spectaces or eyegasses, or to a fountan pen
f the ony parts of the pen whch consst of precous metas are essenta parts
not used for ornamenta purposes.
Sec. 2 01. Ta on Fuks.
There s hereby mposed upon the foowng artces sod at reta a ta
equvaent to 10 per centum of the prce for whch so sod: rtces made
of fur on the hde or pet, and artces of whch such fur s the component
matera of chef vaue.
Sec. 2102. Ta on Toet Preparatons.
(a) Ta . There s hereby mposed upon the foowng artces sod at
reta a a equvaent to 10 per centum of the prce for whch so sod: Per-
fumes, essences, e tracts, toet waters, cosmetcs, petroeum |ees, har os,
pomades, har dressngs, har restoratves, har dyes, aromatc caehous, toet
powders, and any smar substance, artce, or preparaton, by whatsoever name
known or dstngushed; any of the above whch are used or apped or
ntended to e used or apped for toet purposes.
(b) eauty Parors, tc. For the purposes of subsecton (a) the sae
of any artce descrbed n subsecton (a) to any person operatng a barber
shop, beauty paror, or smar estabshment sha be consdered a sae at
reta; resae by such person sha be sub|ect to ta as a sae at reta, but
there sha be credted aganst the ta payabe by such person wth respect to
such resae the amount of ta pad on the sae to such person.
Sec-. 2 03. Uet rn and Payment of Retaers cse Ta es.
(a) very person who ses at reta any artce ta abe under ths chapter
sha make monthy returns under oath n dupcate and pay the ta es mposed
by ths chapter to the coector for the dstrct n whch s ocated hs prncpa
pace of busness or, f he has no prncpa pace of busness n the Unted
States, then to the coector at atmore, Maryand. Such returns sha contan
such nformaton and be made at such tmes and n such manner as the Com-
mssoner, wth the approva of the Secretary, may by reguatons prescrbe.
(b) The ta sha, wthout assessment by the Commssoner or notce from
(he coector, be due and payabe to the coector at the tme so f ed for fng
the return. If the ta s not pad when due, there sha be added as part of
the ta nterest at the rate of 0 per centum per annum from the tme when
the ta became due unt pad.
(c) In determnng, for the purposes of ths chapter, the prce for whch an
artce s sod, there sha be ncuded any charge for coverngs and contaners
of whatever nature, and any charge ncdent to pacng the artce n condton
packed ready for shpment, but there sha be e cuded the amount of ta m-
posed by ths chapter, whether or not stated as a separate charge. trans-
portaton, devery, nsurance, nstaaton, or other charge (not requred by
the foregong sentence to be ncuded) sha e e cuded from the prce ony
t the amount thereof s estabshed to the satsfacton of the Commssoner, n
accordance wth the reguatons. There sha aso be e cuded, f stated as
a separate charge, the amount of any reta saes ta mposed by any State or
Terrtory or potca subdvson of the foregong, or the Dstrct of Coumba,
whether the abty for such ta s Imposed on the vendor or the vendee.
Sec. 2 0 . Defnton of Sae.
For the purposes of ths chapter, the ease of an artce sha be consdered
the sae of such artce.
Sec. 2 05. Leases, Condton a Saes, tc.
In the ease of (a) a ease, (b) a contract for the sae of an artce wheren
t s provded that the prce sha be pad by nstaments and tte to the artce
sod does not pass unt a future date notwthstandng parta payment by nsta-
ments, or (c) a condtona sae, there sha be pad upon each payment wth
respect to the artce that porton of the tota ta whch s proportonate to
the porton of the tota amount to be pad represented by such payment. No ta
sha be mposed under ths chapter on the sae of any artce ta abe under
secton 2 00 or secton 2 01 f wth respect to such artce the ease, contract for
sae, or condtona sae was made, devery thereunder was made, and a part
of the consderaton was pad, before October 1, 19 1.
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Sec. 2 06. Ta -Free Sates.
Under reguatons prescrbed by the Commssoner wth the approva of the
Secretary, no ta under ths chapter sha be mposed wth respect to the sae
of any artce
(a) for the e cusve use of the Unted States, any State, Terrtory of
the Unted States, or any potca subdvson of the foregong, or the Dstrct
of Coumba ;
(b) for e port, or for shpment to a possesson of the Unted States, and
In due course so e ported or shpped.
Seo. 2 07. Credts and Refunds.
(a) credt aganst ta under ths chapter, or a refund, may be aowed wth
respect to an artce, when the prce on whch the ta was based s read|usted
by reason of return or repossesson of the artce, or by a bona fde dscount,
rebate, or aowance, n the amount of that part of the ta proportonate to the
part of the prce whch s refunded or credted.
(b) No overpayment of ta under ths chapter sha be credted or refunded,
n pursuance of a court decson or otherwse, uness the person who pad the
ta estabshes, n accordance wth reguatons prescrbed by the Commssoner
wth the approva of the Secretary, (1) that he has not ncuded the ta n
the prce of the artce wth respect to whch t was mposed, or coected the
amount of ta from the purchaser, or (2) that he has repad the amount of the
ta to the purchaser of the artce, or uness he fes wth the Commssoner
wrtten consent of such purchaser to the aowance of the credt or refund.
Skc. 2 08. ppr.c nn.TY or dmnstratve Provsons.
provsons of aw (ncudng penates) appcabe n respect of the ta es
mposed by secton 2700 sha, nsofar as appcabe and not nconsstent wth
fhs chapter, be appcabe n respect of the ta es mposed by ths chapter.
Seo. 2 00. Penaty for Representaton- Tat Ta Is Not Passed On.
Whoever n connecton wth the sae or ease, or offer for sae or ease,
of any artce ta abe under ths chapter, makes any statement, wrtten or ora.
In advertsement or otherwse, ntended or cacuated to ead any person to beeve
that the prce of the artce does not ncude the ta mposed by ths chapter,
sha on convcton thereof be punshed by a fue of not more than 1,000.
Sec. 2 10. Rues and Reguatons.
The Commssoner, wth the approva of the Secretary, sha prescrbe and
pubsh a needfu rues and reguatons for the enforcement of ths chapter.
Sec. 2 11. ffectve Date.
Ths chapter sha be effectve on and after October 1, 19 1.
(b) Termnaton of Manufacturers Ta on ToruT Preparatons. The ta
mposed by secton 3 01 of the Interna Revenue Code sha not appy to artces
sod on or after October 1, 19 1.
Skc. 5T 3. dmnstratve Changes n Manufacturers cse Ta Tte
of Code.
(a) Leases. Secton 3 0 of the Interna Revenue Code s amended to read
as foows:
Skc. 3 0. Dkfnton of Sae.
For the purposes of ths chapter the ease of an artce (ncudng any renewa
or any e tenson of a ease or any subsequent ease of such artce) by the
manufacturer, producer, or mporter sha be consdered a ta abe sae of such
artce.
(b) stng Contracts. Chapter 29 of the Interna Revenue Code s amended
by addng at the end thereof the foowng new secton:
Skc. 3 53. stng Contracts.
(a) Ta Payabe by endee. If (1) any person has, pror to the effectve
date of Part of Tte of the Revenue ct of 19 1, made a bona fde contract
for the sae on or after such date, of any artce wth respect to the sae of
whch a ta s mposed by that ct or an e stng rate of ta s ncreased by
that ct, and (2) such contract does not permt the addng to the amount to be
pad under such contract of the whoe of such ta or ncreased rate of ta ,
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then (unoss the contract prohbts such addton) the vendee sha, n eu
of the vendor, pay so much of the ta as s not so permtted to be added to
the contrac t prce.
(b) Ta Pad to endor. Ta es payabe by the vendee sha bo pad to the
vendor at the tme the sae s consummated, and sha be coected and pad to
the Unted States by the vendor n the same manner as provded n secton 3 67.
In case of faure or refusa by the vendee to pay such ta es to the vendor, the
vendor sha report the facts to the Commssoner who sha cause coecton of
such ta es to be made from the vendee.
(c) Une posed Moton Pcture Fms. Secton 3 3(a)(3)( ) of the In-
terna Revenue Code (reatng to credts or refunds of ta to manufacturer)
s amended by nsertng at the end thereof the foowng new cause:
(v) n the case of une posed moton pcture fms, used or
resod for use n the makng of news ree moton pcture tms.
(d) Cbemts, and Ta Free. Saes of utomobe Rados Secton 3 2, sec-
ton 3 3(a)(1), and secton 3 (a) (1) and (2) of the Interna Revenue Code
(reatng to ta n case of sae of tres to manufacturers of automobes, etc.,
and credt on sae) are amended by strkng out tres or nner tubes where-
ever appearng theren and nsertng tres, nner tubes, or automobe rados
ta abe under secton 3 0 ; and by strkng out tre or nner tube wherever
appearng theren and nsertng tre, nner tube, or automobe rado ta abe
under secton 3 0 . Secton 3 03(e) of the Interna Revenue Code, as amended
by ths ct, s further amended by strkng out tres and nner tubes where
the phrase appears the frst tme and nsertng tres, nner tubes, or automobe
rados ; paragraph (1) of subsecton (e) of such secton s amended by nsert-
ng before the semcoon or, n the case of automobe rados, f such rados
were ta abe under secton 3 0 ; paragraph (2) of subsecton (e) of such sec-
ton s amended by strkng out tres or nner tubes wherever such phrase
appears and nsertng tres, nner tubes, or automobe rados .
Sec. 55 . Transportaton or Persons, tc.
(a) The headng of subchapter C s amended to read as foows:
SU C PT R D DMINISTR TI PRO ISIONS.
(b) Chapter 30 of the Interna Revenue Code s amended by nsertng after
secton 3 C8 the foowng new subchapter:
SU C PT R C TR NSPORT TION OF P RSONS.
Sec. 3 G9. Ta on Tbans Ob aon of P-.rsons, tc.
(a) Transportaton. There sha be mposed upon the amount pad wthn
the Unted States, on or after October 10, 19 1, for the transportaton, on or
after such effectve date, of persons by ra, motor vehce, water, or ar, wthn
or wthout the Unted States, a ta equa to 5 per centum of the amount so pad.
Such ta sha appy to transportaton by motor vehces havng a passenger
seatng capacty of ess than ten adut passengers, ncudng the drver, ony
when such vehce s operated on an estabshed ne.
(b) empton of Certan Trps. The ta mposed by subsecton (a) sha
not appy to amounts pad for transportaton whch do not e ceed 35 cents,
to amounts pad for commutaton or season tckets for snge trps of ess than
thrty mes, or to amounts pad for commutaton tckets for one month or ess.
(c) Seats, ISerths, tc. There sha he mposed upon the amount pad
wthn the Unted States for seatng or seepng accommodatons n connec-
ton wth transportaton wth respect to whch a ta s mposed by subsecton
(a) a ta equvaent to 5 per centum of the amount so pad.
(d) Returns and Payment. The ta es mposed by ths secton sha be
pad by the person makng the payment sub|ect to the ta . ach person
recevng any payment specfed n subsecton (a) or (c) sha coect the
amount of the ta mposed from the person makng such payment, and sha,
on or before the ast day of each month, make a return, under oath, for the
precedng month, and pay the ta es so coected to the coector n the dstrct
n whch hs prncpa pace of busness s ocated, or f he has no prncpa
pace of busness n the Unted States, to the coector at atmore, Maryand.
Such returns sha contan such nformaton and be made n such manner as
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the Commssoner wth the approva of the Secretary may by reguatons
prescrbe.
(e) tensons or Tme. The Commssoner may e tend the tme for mak-
ng returns and payng the ta es coected, under such rues and reguatons
as he sha prescrbe wth the approva of the Secretary, but no such e tenson
sha be for more than nnety days.
(f) emptons.
(1) Governmenta e emptons. The ta mposed by ths secton sha
not appy to the payment for transportaton or factes furnshed to
the Unted Staes, or to any State or Terrtory, or potca subdvson
thereof, or the Dstrct of Coumba.
(2) empton of members ok mutary and navat. servce. The ta
mposed by ths secton sha not appy to the payment for transportaton
or factes furnshed under speca tarffs provdng for fares of nor more
that W cents per me appcabe to round trp tckets sod to personne
of the Unted States rmy. Navy, Marne Corps, and Coast Guard trave-
ng n unform of the Unted States at ther own e pense when on offca
eave, furough, or pass, ncudng authorzed cadets and mdshpmen,
ssued on presentaton of propery e ecuted certfcate.
(c) Stamp Ta on Passage Tckets Not to ppy. No ta sha be m-
posed under chapter 11 of the Interna Revenue Code on a tcket sod or ssued
for passage the amount pad for whch s ta abe under secton 3 G9 of the
Interna Revenue Code.
(d) Technca mendments.
(1) Secton 55(a)(2) of the Interna Revenue Code s amended by
strkng out subchapters and of .
(2) Secton 3 71 (a) and (c) are amended by nsertng after sub-
chapter 13 wherever occurrng theren or subchapter C .
(3) Secton 3 72 of the Interna Revenue Code s amended by strkng
out of subchapters and 15 .
Sec. 555. Con-Operated musement and Gamng Devces.
Subchapter of chapter 27 of the Interna Revenue Code s amended by
addng at the end thereof the foowng new part:
Part I Con-Operated musement and Gamng Devces,
Sec. 32C7. Ta on Con-Operated musement and Gamng Devces.
(a) Rate. very person who mantans for use or permts the use of, on
any pace or premses occuped by hm, a con-operated amusement or gamng
devce sha pay a speca ta as foows:
(1) 10 per year n the case of a devce denned n cause (1) of subsecton
(b) ;
(2) 50 per year, n the case of a devce defned n cause (2) of sub-
secton (b) ; and
(3) 10 or . 0, as the case may be. for each addtona devce so man-
taned or the use of whch s so ermtted. If one such devce s repaced
by another, such other devce sha not be consdered an addtona devce.
(b) Defnton. s used n ths part the con-operated amusement
and gamng devces means (1) so-caed pn-ba and other smar amusement
machnes, operated by means of the nserton of a con, token, or smar ob|ect,
and (2) so-caed sot machnes whch operate by means of nserton of a con,
token, or smar ob|ect and whch, by appcaton of the eement of chance, may
dever, or entte the person payng or operatng the machne to receve, cash,
premums, merchandse, or tokens. The term does not ncude bona fde vendng
machnes n whch are not ncorporated ganng or amusement features.
(c) ppcabty of dmnstratve Provsons. n operator of a pace or
premses who mantans for use or permts the use of any con-operated devce
sha be consdered, for the purposes of subchapter , to be engaged n a trade
or busness n respect of each such devce.
(d) ffectve Date of Ta . Wth respect to the year endng une 30. 19 2,
no ta sha be payabe under ths part for any perod pror to October 1, 19 1.
Sec. 5.|6. owng eys, tc.
Subchapter of chapter 27 of the Interna Revenue Code s amended by addng
at the end thereof the foowng new part:
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Part owng eys, and ard and Poo Tabes.
Sec. 3268. Ta on owng eys, and ard and Poo Tabes.
(a) Rate. very person who operates a bowng aey, bard room, or
poo room sha pay a speca ta of 10 per year for each bowng aey, bard
tabe, or poo tabe. very budng or pace where bows are thrown or where
games of bards or poo are payed, e cept n prvate homes, sha be regarded
as a bowng aey, bard room, or poo room, respectvey.
(b) ffectve Date of Ta . Wth respect to the year endng une 30, 19 2,
no ta sha be payabe under ths part for any perod pror to October 1. 19 1.
Sec 557. Use of Motor ehces and oats.
The Interna Revenue Code s amended by nsertng after chapter . 3 the
foowng new chapter:
cha ter 33a use oe motor vehces and boats.
Sec. 35 0. Ta on Use of Motor ehces and oats.
(a) Imposton of Ta . There sha 1k mposed upon the use of motor vehces
and boats a ta , wth respect to each year n whch such use occurs, at the
foowng rates:
(1) Motor vehces 5.
(2) oats.
Over-a ength 16 feet or over but not over 28 feet, 5.
Over-a ength over 2S feet but not over 50 feet, 10.
Over-a ength over 50 feet but not over 100 feet, -10.
Over-a ength over 100 feet but not over 150 feet, 100.
Over-a ength over 150 feet but not over 200 feet, 150.
Over-a ength over 200 feet, 200.
Such ta , n the case of a motor vehce, sha be pad by the person n whose
name the motor vehce s, or s requred to be, regstered under the aw of
the State, Terrtory, or the Dstrct of Coumba n whch such motor vehce s,
or s requred to be, regstered. Such ta , n the case of a boat, sha be pad by
the owner of the boat. The ta mposed by ths secton sha not appy to any
use before February 1, 19 2, and use before such date sha not be consdered to
be, use wthn the meanng of ths secton.
(b) Defntons. For the purposes of ths secton
(1) The term year means the year begnnng uy 1.
(2) The term motor vehce means a motor vehces of the knd chefy
used for hghway transportaton.
(3) The term boat means a boats propeed by machnery, sa, or both,
measurng s teen feet or more n over-a ength, owned by a ctzen or
resdent of the Unted States. Such term does not ncude boats used chefy
for trade, or commerca fshng, or boats used wthout proft by any benevo-
ent, chartabe, or regous organzaton e cusvey for furnshng ad,
comfort, or reef to seamen, or boats used by the sea scouts department of
the oy Scouts of merca chefy for tranng scouts n seamanshp.
( ) The term use In the case of the use of a motor vehce means use
on the pubc hghways. .
(c) Proraton of Ta . If n any year the frst use of the motor vehce or
boat s after uy 31 the ta sha be reckoned proportonatey from the frst
day of the month n whch such use occurs to and ncudng the 30th day of une
foowng.
(d) One Patment Per Year. If the ta mposed by ths secton s pad wth
respect to any motor vehce or boat for any year no further ta sha be mposed
for such year wth respect to such motor vehce or boat-.
(e) vdence of Ta Paymknt. The payment of the ta mposed by ths
secton sha be evdenced by such sutabe stamp, stcker, or tag of such form,
whch sha be aff ed to the motor vehce or boat n such manner, as the
Commssoner, wth the approva of the Secretary, may by reguatons prescrbe.
(f) Manner of Coecton. Tbe pace, tme, and manner of makng pay-
ment of the ta , and of furnshng such stamp, stcker, or tag sha be such
as may be provded n reguatons prescrbed by the Commssoner wth the
approva of the Secretary.
(g) Cooperaton of Post Offce Department. The Commssoner sha
furnsh to the Postmaster Genera wthout prepayment a sutabe quantty of
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stomps, stckers, or taps to be dstrbuted to md kept on sae by postmasters
n the Unted States. The I ostmaster Genera may requre each such post-
master to gve addtona or ncreased bond as postmaster for the vaue of the
stamps, stckers, or tags furnshed to hm. and each such postmaster sha
depost the recepts from the sae of such stamps, stckers, or tags to the credt
of and render accounts to the Postmaster Genera at such tmes and n such
form as he may by reguatons prescrbe. The Postmaster Genera sha at
east once monthy transfer a coectons from ths source to the Treasury as
nterna-revenue coectons. The Postmaster Genera s authorzed to cooperate
to the fuest e tent possbe wth the Commssoner n the sae of such stamps,
stckers, or tags and n forwardng to the Commssoner or to the coector of
nterna revenue such banks or forms as the Commssoner may determne
necessary to the coecton of the ta . There are authorzed to be approprated
such sums as may be necessary to enabe the Secretary of the Treasury to
advance from tme to tme to the Postmaster Genera such sums as the Post-
master Genera may show sha be requred for the e penses of the Post Offce
Department n performng n the Dstrct of Coumba and esewhere a servces
requred by ths secton.
(h) Sae of Stamps by Prvate Persons. If the Commssoner provdes
for the sae of stamps, stckers, or tags by persons not offcers or empoyees
of the Unted States he may requre bond, w suffcent suretes, n a sum to
be f ed by the Commssoner, condtoned for the fathfu return, whenever re-
qured, of a quanttes or amounts undsposed of, and for the payment for, a
quanttes or amounts sod or not reman ng on hand. The Commssoner, wth
approva of the Secretary, may from tme to tme make such reguatons as he
may fnd necessary to nsure the safekeepng or preventon of ega use of a
such stamps, stckers, or tags.
() Penates fob Unawf Use. ny person abe for the ta under
ths secton who uses or permts the use of the motor vehce or boat before
ta has been pad sha be guty of a msdemeanor and upon convcton thereof
sha be fned not more than 25 or mprsoned for not more than thrty days,
or both. ny person who uses or operates a motor vehce or boat at a tme
when the stamp, stcker, or tag does not ap) cnr on the motor vehce or boat
n the manner provded n the reguatons prescrbed under subsecton (e)
or (f) sha he guty of a msdemeanor and upon convcton thereof sha be
fned not more than 25.
(|) empt Uses. The ta Imposed by ths secton sha not appy to the
use of a motor vehce or boat by the Unted Staes, a State, Terrtory, the
Dstrct of Coumba, or a potca subdvson of any of the foregong.
Sec. 5.18. ffectve Date of Part .
Ths part sha take effect on October 1, 19 1.
Part I Processng Ta on Certan Os.
Sec. 5C1. Payment of Proceeds of Processng Ta to Guam and mercan
Samoa.
(a) Payment to Possessons. Chapter 21 of the Interna Revenue Code
(reatng to processng ta on os) s amended by addng at the end thereof
the foowng new secton:
Sec. 2 83. ta es coected under ths chapter wth respect to coconut o
whoy of the producton of Guam or mercan Samoa or produced from mate-
ras whoy of the growth or producton of Guam or mercan Samoa, sha be
hed as separate funds and pad to the Treasury of Guam or mercan Samoa,
respectvey. No part of the money from such funds sha be used, drecty or
ndrecty, to pay a subsdy to the producers or processors of copra, coconut o,
or aed products, e cept that ths sentence sha not be construed as prohbtng
the use of such money, n accordance wth reguaous prescrbed by the Com-
mssoner wth the approva of the Secretary, for the acquston or constructon
of factes for the better curng of copra or for bona de oans to copra pro-
ducers of Guam or mercan Samoa.
(b) ffectve Date of mendment. The amendment made by ths secton
sha be appcabe ony wth respect to ta es coected after the date of
enactment of ths ct.
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TITL I NON SS NTI L F D R L P NDITUR S.
Sec. 601. Nonessenta Federa pendtures.
(a) There s hereby estabshed a commttee to Investgate Federa e pend-
tures (herenafter referred to as the commttee ), to be composed of (1) three
members of the Semte Commttee on Fnance and three members of te Senate
Commttee on ppropratons, to be apponted by the Presdent of the Senate;
(2) three members of the ouse Commttee on Ways and Means and three mem-
bers of the ouse Commttee on ppropratons, to be apponted by the S|eaker of
the ouse of Representatves; and (3) the Secretary of the Treasury, and the
Drector of the ureau of the udget. vacancy n the commttee sha not
affect the power of the remanng members to e ecute the functons of the com-
mttee, and sha be fed n te same manner as the orgna seecton.
ma|orty of the commttee sha consttute a quorum, add the powers conferred
upon them by ths secton may be e ercsed by a ma|orty vote.
(b) It sha be the duty of the commttee to make a fu and compete study
and nvestgaton of a e pendtures of the Federa Government wth a vew
to recommendng the emnaton or reducton of a such e pendtures deemed
by the commttee to be nonessenta. The commttee sha report to the Presdent
and to the Congress the resuts of ts study, together wth ts recommendatons,
at the earest practcabe date.
(c) The commttee, or any duy authorzed subcommttee thereof, s author-
zed to hod such hearngs, to st and act at such tmes and paces, to empoy
such e perts and such cerca and other assstants, to requre by subpena or
otherwse the attendance of such wtnesses and the producton of such books,
papers, and documents, to admnster such oaths, to take such testmony, and
to make such e pendtures, as t deems advsabe. The provsons of sectons
102 to 10 , ncusve, of the Revsed Statutes sha appy In case of any faure
of any wtness to compy wth any subpena, or to testfy when summoned under
the authorty of ths secton.
(d) The commttee s authorzed to utze the servces, nformaton, factes,
and personne of the departments and agences of the Government.
(e) There s hereby authorzed to be approprated, the sum of 10,000, or so
much thereof as may be necessary, to carry out the provsons of ths secton.
(f) authorty conferred by ths secton sha termnate: upon the sub-
msson of the commttee s fna re rt.
Sec. 602. Secton 1303 of the Revenue ct of 1918, as amended, s amended by
strkng out Presdent of the Senate wherever t appears theren and nsertng
n eu thereof Presdent pro tempore of the Senate .
TITL II CR DIT G INST F D R L UN MPLOYM NT T S.
Sec. 701. Credt ganst Federa Unempoyment Ta es.
(a) owance of Credt ganst Ta for 193G, 1937, and 1938. ganst
the ta mposed by secton 901 of the Soca Securty ct for the caendar year
1936, 1937, or 1938, any ta payer sha be aowed credt (f credt s n ot aow-
abe under secton 902 of such ct) for the amount of contrbutons pad by hm
Into an unempoyment fund under a State aw
(1) efore the s teth day after the date of the enactment of ths ct,
f such credt s camed before the e praton of s months after such date
of enactment;
(2) Wthout regard to the date of payment, wth respect to wages pad
after September 19, 1939;
(3) Wthout regard to the date of payment, f the assets of the tn payer
are, at any tme durng the ffty-nne-day perod foowng such date of
enactment, or were at any tme durng the perod ugust 11. 1939. to Octo-
ber 8. 1939, Incusve, or the perod October 9, 19 0, to December 6, 19 0,
ncusve, n the custody or contro of a recever, trustee, or other fducary
apponted by, or under the contro of. a court of competent |ursdcton.
The provsons of the Soca Securty ct n force pror to Ft bruary 11, 1939
(e cept the provson mtng the credt to amounts pad before the date
of fng returns), sha appy to aowance of credt under ths subsecton;
e cept that the amount of credt aganst the ta for the caendar year 1936,
1937, or 1938, for contrbutons pad after December 6, 19 0, sha not (uness
the credt s aowabe on account of paragraph (2) or (3)) e ceed 90 per
centum of the amount whch woud have been aowabe as credt on account
1611 2 27
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10
of such contrbutons had they been pad before the ast day upon whch the
ta payer was requred under secton 905 of such ct to fe a return for such
year. The terms used n ths subsecton sha have the same meanng as when
used n tte I of such ct pror to February 11, 1039. The tota credt
aowabe aganst the ta mposed by secton 901 of such ct for the caendar
year 1936, 1937, or 1938 sha not e ceed 90 per centum of such ta .
(b) owance of Cbkdt ganst Ta fob 1939 and 19 0. ganst the ta
mposed by the Federa Unempoyment Ta ct for the caendar year 1939 or
19 0, any ta payer sha be aowed credt (f credt s not aowabe under
secton 1001 of such ct) for the amount of contrbutons pad by hn nto
an unempoyment fund under a State aw
(1) efore the s teth day after the date of the enactment of ths ct,
If such credt s camed before the e praton of s months after such
date of enactment;
(2) Wthout regard to the date of payment, f the assets of the ta payer
are, at any tme durng the ffty-nne-day perod foowng such date of
enactment, or were at any tme durng the perod from the ast day upon,
whch the ta payer was requred under secton 160 of the Federa Unem-
poyment Ta ct to fe a return of the ta aganst whch credt s camed
to une 30 ne t foowng such ast day. Incusve, or (n the case of credt
aganst the ta for the caendar year 1939) the perod October 9, 19 0, to
December 6, 19 0, ncusve, n the custody or contro of a recever, trustee,
or other fducary apponted by, or under the contro of, a court of com-
petent |ursdcton.
The provsons of the Federa Unempoyment Ta ct (e cept secton 1601
|(a)(3)), ncudng such provsons as modfed by secton 902(e) of the Soca
Securty ct mendments of 1939, sha appy to aowance of credt under ths
subsecton. The amount of such credt aganst the ta for the caendar year
1939 or 19 0, n the case of contrbutons pad after the ast day upon whch
the ta payer was requred under secton 160 of the Federa Unempoyment
Ta ct to fe a return for such year, sha not (uness the credt s aowabe
on account of paragraph (2)) e ceed 90 per centum of the amount whch woud
have been aowabe as credt on account of such contrbutons had they been
pad on or before such ast day. The terms used n ths subsecton sha have
the same meanng as when used n the Federa Unempoyment Ta ct. The
tota credt aowabe aganst the ta mposed by such ct for the caendar
year 1939 or 19 0 sha not e ceed 90 per centum of such ta .
(c) Refund. Refund, credt, or abatement of the ta (ncudng penaty and
nterest assessed or coected wth respect thereto, f any), based on any credt
aowabe under subsecton (a) or (b), may be made n accordance wth the
provsons of aw appcabe n the case of erroneous or ega assessment or
coecton of the ta (ncudng statutes of mtatons). No nterest sha be
aowed or pad on the amount of any such credt or refund. On and after
the date of the enactment of ths ct no refund, credt, or abatement sha be
aowed based on any credt aowabe under secton 810 of the Revenue ct
of 1938, secton 902(a) of the Soca Securty ct mendments of 1939, or
secton 701 of the Second Revenue ct of 19 0.
pproved, Sept. 20, 12.15 p. m. . S. T., 19 L
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19 1- 6-10901
. . R S. 235. PU LIC L W 285 S NTY-S NT CONGR SS
C PT R 6 FIRST S SSION .
ont Resouton To amend secton 12 of the Interna Revenue
Code by e tendng the tme for appcatons, and changng the
procedure, for certfcaton of natona-defense factes and con-
tracts for amortzaton purposes.
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That secton 12 (f)(1) of
the Interna Revenue Code, as amended, s amended to read as
foows:
(1) There sha be ncuded ony so much of the amount otherwse const-
tutng such ad|usted bass as s propery attrbutabe to such constructon,
reconstructon, erecton, nstaaton, or acquston after une 10, 19 0, as ether
the Secretary of War or the Secretary of the Navy has certfed as necessary
In the nterest of natona defense durng the emergency perod, whch cer-
tfcaton sha be under such reguatons as may be prescrbed from tme to
tme by the Secretary of War and the Secretary of the Navy, wth the approva
of the Presdent.
Sec. 2. Secton 12 (f)(3) of the Interna Revenue Code, as
amended, s amended by strkng out s ty days and nsertng n
eu thereof s months and by strkng out February 6, 19 1
and nsertng n eu thereof December 1, 9 1 .
Sec. 3. Secton 12 () of the Interna Revenue Code, as amended,
s amended to read as foows:
Protecton of the Unted States. If the ta payer has been or w be
rembursed by the Unted States for a or a part of the cost of any emergency
facty pursuant to any contract (n e cess of 15,000 n amount) wth the
Unted States, made on ts behaf after December 31, 1939, by the War Depart-
ment, the Navy Department, the Unted States Martme Commsson, or such
other department or agency as the Presdent may desgnate, ether
(1) drecty, by a provson theren deang e pressy wth such rem-
bursement, or
(2) ndrecty, because the prce pad by the Unted States (nsofar as
return of cost of the facty Is used by the Unted States as a factor n the
f ng of such prce) s recognzed by the contract as ncudng a return of
cost greater than the norma e hauston, wear, and tear: Provded, That
no such greater return of cost sha be deemed to have been used as a
factor n the f ng of such prce when the negotatng or contractng offcer
reports that after carefu consderaton he s satsed -that such greater
return was not ncuded n the prce,
no amortzaton deducton -wth respect to such emergency facty sha be
aowed for any month after the end of the month n whch such contract s
made uness ether the Secretary of War or the Secretary of the Navy certfes
to the Commssoner that the nterest of the Unted States s adequatey pro-
tected wth reference to the future use and dsposton of such emergency facty.
certfcate of ke effect may aso e ssued wth respect to emergency factes
for whch the ta payer has not been or w not be so rembursed. certfcate
by ether the Secretary of War or the Secretary of the Navy made to the
Commssoner, to the effect that under any such contract, rembursement for
a or a part of the cost of any emergency facty s not provded for wthn
te meanng of cause (1) or cause (2), sha be concusve for the purposes of
ths subsecton. cept n cases of appcatons therefor fed before December
1, 19 1, the certfcates provded for under ths subsecton sha have no effect
uness an appcaton therefor s fed ether before the e praton of s months
after the makng of such contract or before the e praton of s ty days after
the makng of a certfcate under subsecton (f), whchever s ater.
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12
The reports of negotatng and contractng offcers and the certfcates pro-
vded for n ths subsecton sha be ssued under such reguatons as may be
prescrbed from tme to tme by the Secretary of War and te Secretary of
the Navy, wth the approva of the Presdent.
The terms and condtons of contracts wth reference to rembursement of
the cost of emergency factes and the protectng of the Unted States wth
reference to the future use and dsposton of such emergency factes sha be
made avaabe to the pubc.
Sec. . The amendments made by ths |ont resouton to secton
12 of the Interna Revenue Code sha be appcabe as f they were a
part of such secton on the date of the enactment of the Second
Revenue ct of 19 0.
pproved, October 30, 19 1.
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COMMITT R PORTS.
19 1-37-10823
T R NU ILL OF 19 1.
ouse of Representatves Report No. 10 0, Seventy-seventh Congress, Frst Sesson
uy 2 . 19 1.
Mr. Doughton, from the Commttee on Ways and Means, submtted the foow-
ng report to accompany . R. 17 :
The Commttee on Ways and Means, to whom was referred the b ( . R.
5 17) to provde revenue and for other purposes, havng consdered the same, re-
port favoraby thereon wthout amendment and recommend that the b do
pass.
N D FOR T L GISL TION.
The unted effort on the part of the mercan peope adequatey to defend ths
Naton has paced a tremendous fnanca burden upon the Government.
Upon hs appearance before your commttee on pr 2 , 10 1, the Secretary
of the Treasury stated that as of that date the appropratons, authorzatons, and
recommendatons for the natona defense program totaed 39,000,000,000, n-
cudng the ease-end appropratons. ccordng to the estmate of the :renu
of the udget as of une 1, 19 1, ths fgure had then rsen to . : ,0001.00,000.
It s now set at appro matey 50,000,000,000. Thus, snce pr, the sco|)e of
our defense program has been e panded by 11,000,000,000.
Upon that occason, the Secretary further stated that actua e pendtures for
a Federa purposes for the fsca year 19 2 were then e ected to be 19,000,000,-
000. It s now antcpated Unt the e pendtures for the fsca year 19 2 w
e ceed 22,000,000,000. The udget message of anuary. 19 1, estmated that
the defct for the fsca year 19 2 woud be 9,200,000,000. The ureau of the
udget, as of une 1, 19 1, set ths fgure at 12,800,000,000. These fgures do
not refect any addtona revenue from proposed ta egsaton.
Tour commttee b s desgned to yed a net addtona revenue n e cess of
3,50:1,000,000 for a year of fu operaton. For the fsca year 19 2. t s estmated
to yed about 1,900,000,000. Thus, tt e net defct of 12.800,000 000, predcted
wthout regard to ths b, w be reduced to 10,900,000,000.
The b wth the present aw w meet about 60 per cent of the antcpated
e pendtures, eavng 0 per cent to be met by borrowng. Durng the Word
War ony one-thrd of the e pendtures were met by ta es and two-thrds by
borrowng.
In recent years, your commttee has recommended and the Congress has enacted
egsaton substantay ncreasng our ta revenues. These ncreases were
desgned to brng our recepts and e pendtures Into coser agnment. cept
for the enormous e pendtures made necessary by our defense program our goa
woud have been acheved. For e ampe, for the fsca year 19 1 our tota recepts
pggregated 7.607.000,000 and our tota e pendtures were 12,710,000,000, eavng
a defct of 5,103,000,000. Of the tota e pendtures of 12,710.000,000, 6,-
0 8,000,000 were for natona defense. Thus, had defense e pendtures been at
norma eves, a sma defct or perhaps no defct for 19 1 woud have occurred.
The b s unprecedented n the amount of revenue t s desgned to provde.
It ays a substantay ncreased burden upon the mercan peope. ut there s
convncng evdence that ths burden w be borne cheerfuy n the ght of (he
overwhemng mportance of natona defense to the contnued freedom and securty
of the Unted States. It s beeved that the rsk to fe and property from an
nadequate preparedness woud make even a much heaver burden attractve by
comparson.
In ts deberatons on ths measure, t has been your commttee s am and
desre to dstrbute the addtona ta burden as equtaby as possbe among the
severa casses of ta payers. Due consderaton has aso been gven to the
economc and soca effects of the ncreased eves. There was contnuay n
mnt the need for keepng to a mnmum, consstent wth our defense efforts, any
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1
dsrupton of our economy, and, at the same tme, suppyng a needed restrant
upon nfatonary tendences.
Your commttee s prncpa am n ths b, however, as n a ta egsaton, s
the procurement of revenue.
STIM T S OF R NU .
Of the more than 3,500,000,000 to be rased by the b, neary 2. 7r .O0O.OO0 s
to be derved from corporate and ndvdua ncome ta payers; - ,000.Ot)0 from
estate and gft ta payers; and about 900,000,000 from e cse ta es.
The foowng tabe sets out n deta the tems contaned n the b and the
e pected revenue therefrom. These fgures, supped by the Treasury Department,
contempate a year of fu operaton.
stmated ncrease or decrease ( ) n revenue yed due to rerenuc b of 19 L
Ta .
Proposed change.
stmated
ncrease or
decrease ( I
over present
aw .
Income ta es:
Cor ratorr
Norma ta ..
Surta
cess-profts ta .
ow e cess profts ta as a deducton n com-
putng norma ta net ncome; ncrease wth-
hodng rate and ncrease ncome ta rate on
nonresdent aen ndvduas and corpora-
tons.
5 per cent on surta net ncome not n e cess of
25,000; 6 mt cent on surta net ncome n
e cess of S25,000.
Revse bass: ncrease rates 10 percentage ponts
n each bracket.
fmu of
doars.
5311
6 . T
1.19S.S
Tota..
Indvdua .
1,222.1
1.152. e
Tota ncome ta es.
2. 17 .S
Msceaneous nterna revenue:
Capta stock ta
state ta
Gft ta
Increase rate from 1.10 to 1.25..
Increase rates _.
..-.do
22.3
1 .9
16.0
Tota.
17 .2
Manufacturers and retaers e cse
ta es:
Dsted sprts
Wnes
Passenger automobes, parts, and
accessores.
utomobe trucks, busses, and
traers.
Tres and tubes ,
Refrgerators, refrgeratng appa-
ratus, and ar-condtoners.
Matches
Increase rates 1 per gaon.
Increase rato
Doube rates; revse base...
....do
Payng cards
Rado recevng sets and parts.
Phonographs and phonograph
records.
Musca nstruments..
Sportng goods _
Luggage
ectrca appances
Photogra hc apparatus
ectrc sgns
Doube rates
Increase rates from per cent to 10 per cent;
revse base.
2 cents er 1,000, e cept fancy wooden or coored
wooden (unchanged).
InTease rate from 11 cents to 13 cents
Increase rate from 5 per cent to 10 per cent;
revse base.
10 per cent of manufacturers saes prce
122.3
5.0
7 .9
16.1
.6
21.0
8.3
do.
.do.
.do..
1.0
9.
.5
M
M
.1
12.6
12.
2,7
Fu year effect. stmates for corporaton and ndvdua ncome ta es and the gft ta are based on
Income eves estmated for caendar year 10 1; a other estmates are based on ncome eves estmated
for fsca year 19 2.
1 cudng nonrecurrng foor stocks ta es coectbe ony n fsca year 19 2 dsted sprts, 38.0
mons; wnes, 1.0 mons; tres and tubes, 6.7 mons.
do.
.do.
.do.
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15
Msc.
stmated ncrease or decrease ( ) n revenue yed due to revenue b Of 19 1
Contnued.
Ta .
Proposed change.
stmated
ncrease or
decrease ( )
over present
aw.
M sceaneous nterna revenue Con.
Manufacturers and retaers e cse
ta es C on t n ued.
usness and store machnes
Rubber artces
Washng machnes (commerca).
Optca equpment
Soft drnks
ewery, etc
Furs
Toet preparatons.
Tota manufacturers and re-
taers e cse ta es.
Msceaneous ta es:
dmssons
Cabarets, roof gardens, etc
Cub dues
Safe-depost bo es _ ,
Teephone, teegraph, rado, and
cabe factes, eased wres .etc.
Teephone b
Transportaton of persons ,
Use of motor vehces and boats...
owng aeys, and bard and
poo tabes.
Co In h per a ted amusement aud
gamng devces.
Rado broadcastng..
Outdoor advertsng. ,
Tota msceaneous ta es
Tota e cse and msceaneous
Tota msceaneous nterna
revenue.
TotaL.
10 per cent of manufacturers saes prce.
...do
.do.
arous rates on botted soft drnks, fnshed or
fountan straps, and carbonc acd gas.
10 per cent of retaers saes prce
do
Mon of
doars.
21.0
21.3
1. 1
1.0
22.6
-do.
Reduee e empton to 0 cents and emnate cer-
tan present aw e emptons. empt servce
men n unform when admtted free, or at
reduced rates on reduced admsson charee.
5 per cent of tota b . _
Reduce e empton to 10 and ta certan prv-
ege fees.
Increase rate from 11 per cent to 20 per cent
On dspatches, messages, or conversatons for
whch the charge fs 25 cents or more. 5 cents
for each 50 cents or fracton thereof; revse
defnton of eased wres
5 per cent of totu b e cudng messages sub-
|ect to ta above.
6 per cent of amount pad; 35-cent e empton
5 per motor vehce or boat per year wth grad-
uated rates on yachts.
15 per aey, bard or poo tabe per year
25 per devce per year
arous rates based on amount of net tme saes;
ptatnns wth net tme saes of ess than 100,-
000 per year e empt.
arous rates determned by sze of sgn
SUMM RY OP PRINCIP L F TUR S.
I. Indvdua Income Ta .
1. T L Y RS.
The changes made by the b wth respect to the ndvdua ncome ta are
effectve wth respect to ta abe years begnnng after December 31, 19 0.
2. D F NS T M D P RM N NT.
The 10 per cent defense tu , Imposed for fve years by secton 15 of the Interna
Revenue Code, s made permanent.
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16
8. P RSON L MPTIONS ND CR DITS FO D P ND NTS.

Under e stng aw a person though unmarred who supports n one househod

one or more other persons, actuay dependeut upon hm for ther chef support,
s deemed to be the head of a fnmy and s aowed an e empton of 2,000, pus
00 for each person dependent upon hm who s ess than 18 years of age or
Is ncapabe of sef-support. It s fet that such person shoud not be aowed
to obtan ths doube beneft on account of a dependent, namey, 1,200 (the
dfference between a snge person s e empton of 800 and that of 2,000 for
the bead of a famy), pus 00, or ,(00 n a.
Consequenty, the b provdes that a dependent counted to consttute an
ndvdua a.s the head of a famy can not be counted agan as a dependent
for purposes of the 00 credt.
The ndvdua ncome-ta e emptons were reduced ast year from 1,000 to
800 for a snge person and from 2,500 to 2,000 for a marred coupe.
marred person s e empton Is now as ow as t has ever been snce the Federa
ncome ta was adopted n 1913. Durng the perod 1917-20 t was 2.0OU.
snge person s e empton s now ower than t has ever been. Durng the
perods 1917-2 and 19:52-30 t was 1,000. The present e emptons on a weeky
bass are 15 for a snge person and 38 for a marred person. Tour com-
mttee fees that a further reducton n these e emptons s not warranted at
ths tme, especay n vew of the rsng cost of vng.
It shoud be remembered that because an ndvdua s e empt from the nd-
vdua ncome ta does not mean that he s free from ta aton. The revenue
system ncudes many ta es whch drecty and ndrecty burden these ower
ncome casses. In ths connecton t s mportant to consder, not the Federa
ta es aone, but aso the State and oca ta es, whch on the whoe are ess progres-
sve than the ta es mposed by the Federa Government. Furthermore, severa of
the e cse ta es w n substanta part fa upon ndvduas not reached by the
ncome ta . Moreover, the proposed use ta on automobes w resut n co-
ectng at east from many ndvduas who are not sub|ect to the ncome
ta . Statstcs ndcate that over 50 per cent of the passenger automobes are
owned by ndvduas wth ncomes of 2,000 or ess and over 18 per cent are
owned by ndvduas wth ncomes of 1,000 or ess.
the ncome ta payers have had ther ncome ta es ncreased by ncreases
n raes. reducton n the e emptons woud mpose upon ths same group
st further ncome-ta burdens. The addtona revenue resutng from reduced
e emptons comes amost entrey, not from new ta payers, but from ndvduas
aready sub|ect to the ncome ta .
It shoud be noted that whe the persona e emptons are not decreased by
ths b, a arge number of persons w pay ncome ta es under t who do not
pay under present aw. The amount of ncome e empt from ta aton woud, n
effect, be owered under the surta rate schedue adopted by the commttee snce
the surta s appcabe to the frst doar of ncome after persona e empton
and credt for dependents. The frst 88 above e emptons of a snge person
wthout de dents and the frst 222 above e emptons of a marred person
wthout dependents, now free from the norma ta on account of the earned
Income credt, become sub|ect to surta .
. TR TM NT OF INCOM FROM NONINT R ST-R RING S CURITI S SOLD T DISCOUNT.
Under ts program for fnancng the natona-defense e pendtures, the Treas-
ury Department s offerng severa types of securtes whch are nonnterest
bearng but are ssued at a dscount. These securtes are redeemabe at a f ed
amount, Increasng at stated ntervas. Ta payers on the accrua bass report
and pay ta on ths ncome as t accrues. The b e tends to ta payers on the
cash bass the prvege of eectng ths same treatment. If they so eect, the
Income w be reported graduay as t accrues and w not a fa nto the ta abe
year n whch the securty s redeemed, as woud be the case under e stng aw.
5. INDI IDU L SURT .
Whe no change s made n the ndvdua norma-ta rate, the surta rates
are ncreased substantay. In addton, the surta rates appy to the entre
surta net Income, the frst ,0U0 of whch s free from surta under the present
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17
Msc.
aw. In order ceary to demonstrate the effect of ths change, an e ampe
showng the computaton of the ta under the rates of the h Is gven. It may
aso be of vaue to show the determnaton of net ncome, surta net ncome, and
norma-ta net ncome.
marred man wth one dependent, havng the ndcated tems of ncome and
deductons, woud compute hs ta base and the ta thereon as foows:
Items of gross ncome :
Saary 7,000
Dvdends 3,()0
Partay ta -e empt Interest 300
Other nterest (fuy ta abe) 500
Gross ncome 11,000
Items of deductons :
Ta es 000
Interest 100
Losses (not capta osses) : 775
Contrbutons 1 5
Tota deductons 1,600
Net ncome 9, 00
Credts aganst net ncome for surta purposes
Persona e empton 2,000
Credt for dependent 00
2. 00
Surta net Income 7, 000
Surta 030
Net ncome 0, 00
Credts aganst net ncome for norma ta purposes
Persona e empton 2,000
Credt for dependent C0
arned ncome credt (10 per cent of earned
ncome or net ncome, whchever s ess) 700
Partay ta -e empt nterest 300
3, 00
Norma ta net ncome 6,000
Norma ta ( per cent of 6,000) 1 2 0
Tota norma ta and surta 870
10 per cent defense ta ; 87
Tota norma ta , surta , and defense ta 957
It w be noted that the amount sub|ect to surta Is greater than that sub|ect
to norma ta . Ths s true snce the credts aganst net ncome for norma-
ta purposes are greater than those aowed for surta purposes. The b makes
no change In ths respect, but t does appy the surta to the entre surta
net ncome whe under e stng aw the frst ,000 s not ta ed.
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Msc.)
18
The foowng tabe shows a comparson of the proposed surta rates and
cumuatve surta wth those under e stng aw:
Surta net Income casses.
Present
aw.
Proposed
aw.
Cumuatve sorta
hgher amount short
n bracket.
Present
aw.
0,000 to 2,000
2,000 to .000
,000 to 6,000
6,000 to ,000.
8,000 to 10.000
111,000 to 12.000
12,000 to 1 ,000
1 ,000 to 10,000 ,
10,000 to IS,000
18,000 to 20,000
20,000 to 22,000..
22,000 to 20,000.
20,000 to 32.000
32,000 to 38,000
38,000 to ,000
,000 to 50,000
50,000 to 60,000
60,000 to 70,000
70,000 to 80,000
80,000 to U0,000
00,000 to 11 1,000
100,000 to 150.000
150,000 to 200,000
200,000 to 250,000
250,000 to 300,000
300,000 to 00,000
00,000 to 500,000
500,000 to 750,000 ...
750,000 to 1,000,000. ..
1,000,000 to 2,000,000.
2,000,000 to 5,000,000.
Over 5,000.000
rent.
.....
Per cent.
5
8
11
IS
ID
22
25
28
31
33
36
39
2
5
8
50
53
55
67
59
61
62
M

6
68
70
71
73
7:
7t
76
660
800
1,100
1, 60
1,880
2,360
3, 0
5.2 0
7.220
0.380
11,780
16,180
20,880
25,880
31.180
36,780
65,780
95. 7 0
126.780
158,780
22 .780
292.780
67,780
6 7,780
1,377,780
3,597,780
The foowng tabes compare the ta payabe by ndvduas of desgnated
status on specfed net ncomes, under e stng aw and under the b; aso
the effectve rates of ta , e pressed as percentages of ta to net Income:
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19 Mso.
Proposed MOL
S
1
f
mmmmmmm
Present aw.

Proposed b.

g85g8 8S83gg8gSSSggg 88
1
Marred persona.
I

Present aw.
M s g g eg
: : :8SS8SgSSSS8Sg8S8 S8S88
Proposed b|.
S Sgg8gSgSSSSSSS3ggggggg
No dependents.

I
Proposed b.
a
s
Present aw.
a
s
SSSS38: ;33g g8gggg g3gSSg83gS8S3 g
- - - SS s 5 - S g grfss
1,100
10(1,000 _
Net ncome.
1,000

|
1

1
11
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k
2 M
m
:1
S
-

13
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20
Comparson of effectve rates of ndvdua ncome ta on specfed net ncomes
(a ncome earned) under e stng aw, and proposed revenue b of 19 1.
Snge person.
Marred persons.
Net Income.
No dependents.
2 dependents.
dependents.
Present
aw.
Proposed
Prasent
aw.
Proposed
bU.
Present
aw.
Proposed
b.
Present
aw.
Proposed
b.
b.
Per cent.
Per cent.
Per cent.
Per cent.
Percent.
Per cent.
Per cent.
Percent.
800
0. 000
0.000
0.000
0.000
0.000
0.000
0.000
0 000
900
.MS
.660
.000
.000
.000
.000
.000
.000
1,000.
. 0
1.5 0
.000
. 000
.000
.000
.000
.000
tuoo
.700
2.260
.000
.000
.000
.000
.000
.000
1.200
1.026
2.860
.000
.000
.000
.000
.coo
.000
1.300
1.252
3. 367
.000
.000
.000
.000
.ooo
.000
1, 00
1. 5
3.802
.000
.000
.000
.000
.000
.000
1,500
1.613
. ISO
.000
.01 1
.000
.000
.000
.000
1,600
1.760
.510
.000
.000
.000
.000
.000
,0M
1,700
1.889
.801
.000
.COO
.000
.000
.000
.000
1.800..
2.00
6.060
.000
.000
.000
.000
.ooo
.000
1,0(10
2. 107
6.291
.000
.000
.000
.000
.000
.000
2,000-
2.200
6.500
.000
.000
.000
.000
.000
.000
2,5co
2. 552
6.292
. 0
1.5 0
.000
.000
.000
.000
3.000
2. 786
7.0 0
1.026
2.8130
.000
.366
.000
.000
,000
3.080
8. 70
1. 760
. 510
.880
2. .530
.000
.560
6,000
3. 32
9. 60
2.200
6. 160
1. 96
.0 8
.792
2.915
6.000..
.253
10. 560
2. 93
7.260
1.906
5. .M
1.320
3. 7 0
7,000
.902
11. 71
3. 331
8.617
2.325
-
1.697
6.029
8,000
6.610
12.595
3.960
9. 60
3. 080
2.200
6.160
9.000
6. 208
13. .566
.693
10.682
3.715
-
2.88
7.260
10,000
6.86
1 . 696
5. 280
11.660
. 00
9.988
3. 620
8.316
15,000
0 -II
19. .565
8. 389
16. 969
7. 50
15.288
6.600
13.698
20,000
13.332
2 . 13
11. 682
21.692
10.71
20. 152
9.7 6
18.612
25,000
17. 010
28. 292
15. 373
26. 021
1 .282
2 .508
13. 270
23.073
30,000 _
20 210
31. 812
18. 71
29.7S8
17. 717
28. 38
16.720
27.089
50.000...
20. 18
1. 30
28.256
0.CO
27. 82
39.05
26.708
38. 10
60.000..
33. 2.16
931
32.200
3. 677
31. 96
12 M
30.792
2.005
80,000
30.31
50. 15
38. 23
9. 118
37.829
8. 77
37.235
7.806
100,000
. 268
8 , 16S
3. 76
63. 310
2.9 8
52. 738
2. 20
52. I
150,000
52. 233
59.3 1
51.688
58. 866
51.32
58.5 9
50.960
68.232
250,000
59. 030
63. 899
58. 7 5
63. 605
58. 555
63. 09
58.365
63.213
500,000
66. 186
00. 520
66. 031
69. 361
65. 927
69. 25
65.823
69.1 8
750,000
69 665
72. 179
69. .5 9
72. 071
69. 78
71.999
69. 07
71.927
.ooo. o
71.8 0
73. 731
71.758
73. 651
71. 703
73. 597
71.6 8
73. 2
2.000,000
75. 569
76.516
75. 528
76. 75
75. 500
76. 7
75. 72
76. 19
5.000.000
78. 3 7
78.726
78.330
78.709
78. 319
78.093
78.308
76.687
0. T ON NONR SID NT LI N INDI IDU LS.
The ta on nonresdent aen ndvduas not engaged n trade or busness
wthn the Unted States and not havng an offce or pace of busness theren
s ncreased from 16 per cent (15 per cent pus / per cent defense ta )
to 271/2 per cent (25 per cent pus 2 - per cent defense ta ). The provsons
for wthhodng of ta at the source are amended correspondngy to ncrease
the wthhodng rate from 16 to 27 2 per cent. These ncreased rates are
n proporton to the ncreased rates on mercan ctzens and resdents.
The rates generay appcabe to nonresdent aens do not appy where
they woud nfrnge a treaty obgaton. Under e stng aw these rates may
be reduced to not ess than 5 per cent as apped to resdents of a contguous
country f so provded by treaty. The b authorzes a smar reducton n the
case of resdents of any country n North, Centra, or South merca, the
West Indes, or Newfoundand. The e tenson of ths favorabe treatment
s a part of the program toward mprovng reatons wth our sster natons
n the Western emsphere.
7. OINT R TURN OF US ND ND WIF LI ING TOG T R.
The provson. The b as reported by your commttee requres husband
and wfe vng together at any tme durng ther |ont ta abe year to report
ther ncome n a snge |ont return and compute the ta on ther aggregate
ncome. husband and wfe are consdered vng together n any case
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Msc.
where they have not separated wth Intent to abandon permanenty the marta
reatonshp, whether or not the husband makes hs home at one pace and
the wfe at another pace. If one of the spouses has no ncome, deducton,
or credt appearng on the return, such spouse s not requred to sgn or
wear to such return. In the case of husband and wfe makng a |ont return,
the net ncome of each up to and ncudng 3,000 sha n every case be con-
sdered earned ncome and n the case of each the compensaton for servces
actuay rendered may be consdered earned ncome to the e tent of 1 ,000.
The earned ncome of each s to be added together and 10 per cent of such
earned net ncome bnt not n e cess of 10 per cent of the aggregate net Income
Is aowabe as a credt for the purposes of the norma ta . ther spouse
may eect to have the abty for the ta apportoned between them n a rato
whch a ta computed upon ther separate ncome bears to the sum of such
ta es computed upon ther separate ncomes.
In computng the separate ta for the purpose of the aocaton, each spouse
Is deemed to have a persona e empton of 1,000 and the credt for dependents
Is to be computed as f husband and wfe were snge persons. The foowng
e ampe w show how the secton operates:
usband s gross ncome 11,000.00
Wfe s gross ncome 11 , 000. 00
Tota gross ncome 125,000. 00
Tota deductons 15,000.00
Combned net ncome 110,000. 00
Credts:
arned ncome 2, 00. 00
Persona e empton 2, 000. 00
Tota credts , 00.00
Net ncome n e cess of credts for norma ta purpose 105, 600.00
Norma ta at per cent , 22 . 00
Surta on 108,000 50,780.00
Tota norma and surta 55,00 .00
Pus defense ta , 10 per cent of ( 5 ,906) dfference between
net ncome and tota norma and surta , or 5, 99. 60
Tota ta under commttee b 60,503.60
ocaton of ta abty:
usband s ta computed separatey
Gross ncome 11,000.00
Deductons 1, 0( ). 00
Net ncome 10, 000. 00
Credts:
arned ncome 1,000. 00
Persona e empton 1, 000. 00
Tota credts , 2,000.00
Net ncome n e cess of credts for norma ta pur-
pose 8, 000. 00
Norma ta at per cent 320.00
Surta on 9,000 970. 00
Tota norma ta and surta 1,290. 00
Pus 10 per cent defense ta 129. 00
Tota ta , husband computed separatey 1, 19.00
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Wfe s ta computed separatey:
Gross ncome 11 ,000.00
Deductons 1 , 000.00
Net ncome 100, 000. 00
Credts-
arned ncome 1, 00. 00
Persona e empton 1,000.00
Tota credts 2, 00.00
Net ncome n e cess of credts for norma ta purposes- 97, 600. 00
Norma ta at per cent 3, 90 . 00
Surta on 99,000 0, 210. 00
Tota norma ta and surta 9,11 . 00
Pus 10 per cent defense ta ,911. 0
Tota ta , wfe computed separatey , 5 .025. 0
Combned ta of husband and wfe computed separatey 55, . 0
Per cent of combned ta (separate returns)
usband, 2.559 per cent.
Wfe, 97. 1 per cent.
usband s and wfe s ta abty under |ont return
usband, 2.559 per cent of 60,503.60 1,5 8. 29
Wfe, 97. 1 per cent of 60,503.60 58, 503.60
Tota ta under |ont return 60, 503.60
The |ont ta abe year does not ncude the ta abe year In whch the mar-
rage took pace. For e ampe, f the spouses ted ncome ta returns on a
caendar-year bass and marred n 19 1, a |ont return woud not be requred
unt the caendar year 19 2. The |ont ta abe year s automatcay term-
nated upon dvorce or ega separaton. In the case of death, the survvng
spouse and the decedent s persona representatve are requred to te a |ont
return for the fu ta abe year In whch the death occurred.
Inequtes of the present aw. 1) ntre ncome earned by one spouse.
Under the present aw, f the entre ncome s earned by the husband, the
famy s requred to pay a greater ta than f the wfe had contrbuted to the
famy ncome. For e ampe, f the husband and wfe had an ncome of
10,0 ) per year but It was a earned by the husband, the ta under the pres-
ent aw wth the proposed rates n the b w amount to 1,166. On the
other hand, f 5,000 of the ncome was contrbuted by the wfe, the tota ta
to be pad by the famy under the present aw wth the proposed rates w be
880, or 0 by each spouse. These two fames have e acty the same ncome,
yet one w pay 286 more than the other. Snce n most cases the famy
ncome s contrbuted by the husband, the present aw operates un|usty aganst
the great ma|orty of fames n the country. The man whose wfe has a
separate ncome s n a better poston that the man whose wfe has no sep-
arate ncome. In the former case, he does not have to set asde as much of
hs earnngs to provde for hs wfe as n the atter case, yet the e stng aw
actuay favors the more fortunate famy.
(2) Fames vng n dfferent sectons of the country. The present aw per-
mts a famy vng n one secton of the country to pay a esser ta than a
famy vng n another secton of the country. For e ampe, f the husband s
a resdent of Caforna and earns a saary of 10,000 a year, ths saary s
dvded equay between husband and wfe for ncome-ta purposes. On the
other hand, f the husband was vng n New York or some other noncom-
munty-property State, he s requred to report hs entre saary as hs own for
Federa ncome ta purposes. The husband n the noncommunty-property State
has no means of mtgatng ths burden, for the reason that the Supreme Court
has hed (Lucus v. ar, 281 U. S., I) that an assgnment of ncome for
persona servces s not recognzed for Federa ncome-ta purposes. In com-
mentng upon ths nequty, Mark Graves, Commssoner of Ta aton and
Fnance, State of New York, stated In a etter to Congressman Reed, of New
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York, Inserted In the |ont hearngs on ta evason and avodance, 1937, page
87 :
famy vng n a noncommunty-property State, havng an ncome of a
certan sze, shoud, n a farness, contrbute as much to the support of the
Federa Government as does a ke famy wth the same ncome n any other
State.
(3) Famy recevng entre ncome from earnngs. The present aw aso
dscrmnates aganst a famy vng n a noncommunty-property State recev-
ng a or the greater part of the ncome from earnngs as contrasted wth a
famy recevng a or the greater part of the ncome from nvestments. us-
bands and wves frequenty transfer property between each other, thus spttng
up ther ncome for ta purposes. s prevousy ponted out, an assgnment
of earned ncome s not recognzed for Federa ncome-ta purposes.
( ) Opton to fe separate returns. The present aw by permttng husbands
and wves to fe separate returns or |ont returns at ther own opton aways
operates to the dsadvantage of the Government and n favor of the ta payers.
If each has ncome of any consderabe sze, each w ordnary make a sep-
arate return, n order to reduce hs ncome ta . If the husband and wfe can
no arrange ther affars that the wfe s n recept of a porton of the ncome,
ncome ta es can be consderaby reduced, especay n the case of the arger
ta payers. The awbooks are fed wth cases where the husband and wfe have
spt up ther ncomes for the purpose of avodng the progressve ncome-ta
schedue.
(5) Famy partnershps, gfts, and trusts.- Certan husbands and wves
not ony spt ther ncome through the creaton of trusts, or gfts, but aso
through the use of famy partnershps. There have been cases n whch such
partnershps have been recognzed, even though the wfe dd not contrbute ether
capta or servces to the partnershp. The purpose of many of these partner-
shps s to spt the famy ncome nto two parts. The arge amount of gfts
made, even afer the gft ta went nto effect n 1932, aso ndcates the effort
on the part of many weathy spouses to reduce ther ncome ta es through
famy transfers. The foowng, taken from the statstcs of ncome for 1938
and 1939, shows the arge number of gfts transferred after the gft ta enacted
n 1932 went nto effect:
Year: Tota gfts.
1932 81, 3S9, 000
1933 2 1,008,000 .
193 888, 753, 000
1935 2,130, 51 . 000
19. .6 82, 7S3. 000
1937 568.109, 000
1938 399, 773, 000
, 792, 329,000
It w be noted that durng ths 7-year perod, the tota gfts made amounted
to ,792,329,000. Whe there Is no break-down of the number of these gfts,
t seems cear that a arge part of then were famy transfers. There were
undoubtedy aso a great many gfts made durng the perod from the enactment
of the frst ncome ta n 1913 to une 2, 1932, the date of the present gft ta
ct. Durng ths perod, the ony gft ta n effect was one wth very sght
rates appcabe to the year 192 .
dvantages of the commttee proposa. It s the opnon of your com-
mttee that dvson of ncome between husband and wfe as a ta -savng
devce has no equtabe bass. It resuts n an unequa dstrbuton of the ta
burden as between fames smary stuated. The |ont return proposa w
overcome the nequtes referred to and w resut n a more equtabe dstrbu-
ton of the ta burden. It ap| ears proper to treat husbands and wves as
ta abe unts for purposes of the Federa ncome ta . The proposa has the
foowng vrtues:
(1) It prevents the ncome-ta aw from operatng unfary wth respect to
r famy where a the ncome s receved by one spouse as compared wth a
famy where the ncome s receved by both.
(2) It removes the dscrmnaton under the present aw aganst earned
ncome n favor of nvestment ncome.
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(3) It treats a famy vng n one part of the Unted States In the same
manner as a famy vng n another part of the Unted States, thus removng
the dscrmnaton at present e stng n favor of those resdng n communty-
property States.
( ) It does not nvade the rghts of a marred woman. It treats her e acty
n the same manner as her husband for Federa ta purposes. It merey
regards the marta communty as the ta abe unt nstead of the ndvduas
who make t up.
(5) The nherent property rghts of the separate members of the ta abe
unt are n no way nvaded. The proposa merey determnes the amount of
ta to be pad by the unt and permts the ta so determned to be apportoned
on an equtabe bass.
(6) It prevents the ncome ta from beng avoded through ntersponse
transfers or partnershps. Property acqured by one spouse may be transferred
to the other spouse many for the purpose of reducng the ta abty of the
one who woud otherwse have the greater ncome.
(7) It s not beeved that the |ont return w resut n any ncrease n
the dvorce rate n the Unted States or adversey affect the moras of mer-
can fames. compusory |ont return n Great rtan has been requred
snce 191 , and ther dvorce rate s not as hgh as n the Unted States.
The rate of dvorces by each 1,000 of popuaton n 1935 was, n the Unted
States, 1.71 per cent as aganst 0.10 per cent n ngand and Waes. The
number of dvorces for each thousand marrages was, n 1935, n the Unted
States, 16 dvorces for each 1,000 marrages, n ngand and Waes, 12 dvorces
for each 1,000 marrages.
(8) The mandatory |ont return w not resut n an ncrease n the ta of
any famy whose net ncome does not e ceed ,000. Where the famy has
one dependent, the net ncome woud have to e ceed , 00 before the |ont
return wt resut n an ncrease n ta . For every addtona dependent, the
net ncome woud have to be ncreased by 00 before the |ont return woud
resut n any ncrease n ta .
(9) The proposa eves the ta accordng to abty to pay. The ta abe
capacty s made to depend upon the ncome that accrued to the marta com-
munty and not upon the way that ncome happens fortutousy to be owned
by members of the unon. In the ma|orty of cases where the wfe has separate
ncome, she contrbutes to the common purse, ether by actua merger of her
ncome wth her husband s or by bearng e penses whch n ess fortunate
househods fa upon the husband.
(See the append of the report for a dscusson of Pror dvocacy of ont
Returns and Report of the Roya Commsson on the Income Ta , 1920.)
The foowng tabes w show the reatve ta burdens under the proposa:
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26
Ths tabe compares the ta under the rates n the b on the ncome of a
famy fng a |ont return, a of the Income of whch s earned by the
husband, wth the ta under the rates n the b on the ncome of a fam|
fng separate returns, where some of the ncome s contrbuted by the wfe.
The foowng tabe shows the number of marred coupes (husbands and
wves vng together) fng ncome ta returns for 1938, the number fng
ont returns, the number fng separate returns, and the percentage of those
rng separate returns to the tota. It shoud be ponted out that ths acton
was vountary; marred peope beng permtted to fe ether |ont or separate
returns, as they chose.
Tabe II.
State.
Number of marred coupes-
Fng |ont
Fng sep-
arate re-
turns.1
Tota fng
returns.
abama
rzona ...
rkansas
Caforna.
Coorado
Connectcut
Deaware _
Dstrct of Coumba.
Forda
Georga
awa
Idaho |.
Inos
Indana
Iowa
ansas .
entucky
Lousana...
Man 1 ..
Maryand
Massachusetts
Mchgan
Mnnesota
Msssspp
Mssour
Montana
Nebraska
Nevada
Ne w ampshre
New ersey
New Me co
New York
North Carona
North Dakota
Oho
Okahoma
Oregon
Pennsyvana
Rhode Isand
South Carona
South Dakota
Tennessee
Te as
Utah
ermont
rgna
Washngton 1
West rgna
Wsconsn
Wyomng
21.
9,
12.
213,
21,
IN.
7,
1.
30.
|
8,
6,
22s.
59.
39,
29,
2 .
25,
12.
111.
115.
132,
50,
11.
O.
13.
21,
3,

130,
a,
5.
2ft,
ft.
ftd.
32.
2 .
261.
16,
12.
ft.
20.
M.
1(1.
5.
3ft.
3.
2:.,
Gs.
ft.
768
1,261
383
28.5 0
939
3,532
68
2,502
2. 133
1,37
ns
856
10,273
1.982
1.223
1,003
1.3 7
5. 199
665
3.175
8,596
. 621
2.033
62
3.033
275
fft,-,
.-,
5 6
6.7 0
950
28.977
1, 96
156
6.2 2
1. 680
80
9,518
872
.W.I
1 1
1,097
17,2117
361
231
1.377
6,9 2
880
3,025
178
21.8 1
II. 110
12.751
2 1. 589
21.998
52, 2)15
8. 166
3, 672
32.968
33.321
9.281
6.7 3
238.513
61.317
0.973
30. .13
25.876
30.2.53
12.716
07. 82
12 .53
13ft, 701
52.316
11.956
72.037
13.310
22, 192
. 337
9.528
1 ft. 1)71
7.773
512. Ot
2 .223
6.729
166. 3 3
3 .222
25.735
271,2 0
17,290
13. 29
6.551
30,855
ft. .15
11,063
5,87
38. 108
9. 367
26.537
71.216
6,273
Tota 2,866,026
175,5
3,0 1.62
1 stmated on bass of number of separate returns fed by husbands and wves vng topether. as s
by Statstcs of Income. 1938
Incudes aska.
Thus, of 3,01 ,62 marred coupes fng ncome-ta returns, 2,S( C.02.. or more
than M per cent, chose vountary to fe |out returns, and ony 170,01 S, or 5
per cent, eected to fe separate returns.
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The foowng tabe demonstrates the ta burden the 9 per cent woud be
obged to assume n order to make up the revenue ost by aowng the other
6 per cent to fe separate returns:
Tabe III. Marred man no dependents.
Net Income.
Ta under
pan .
( )
Ta under the commttee surta
rates (wthout the appcaton
of the mandatory |ont return
provson) f the
Income s a
the husband s.
( )
Income s d-
vded 50-50 be-
tween husband
and wfe.
(C)
2,500..-.
3.000
,000
6,000....
6.000...-
7,000.--.
8,000
9,000...
10,000---
15,000..
20,000...
25,000.-
30,000
50,000
60,000
80,000...
100,000.-
150,000..
250,000--
.mooo-.
750,000 .
1,000,000
2,000,000.
5,000,000.
71.
r,
312.
fd
t .
015.
1,130.
1,379.
1,028.
3,073.
.S00.
6, 821.
, 000.
19. 5 0.
25,521.
38. S2.
52, 7 .
87,615.
158,329.
3 0, 121.
5 3, IMS.
738,0a5.
1,531,007.
3, 037,0 9.
38.50
85. 80
180. 0
308. 00
35.60
SU . 20
7.56.80
961. 0
1,166.00
2,5 5. 0
,338. 0
6, 505. 0
8,936. 0
20.002. 0
26, 208. (1
39, 318. 0
53, 310. 0
88. 290. 60
159,013 60
3 0,805.60
6 0. 537.60
736, 519. 60
529, 501. 60
935,1S3. 00
S 50
85.80
180. 0
275. no
369. 00
97.20
02 .80
752. 0
880.00
1.727.00
2, 838. 00
,180.00
f. 728. 80
13,956. 80
18,88 .80
29, 532. 80
1, 192 80
73, 208. 80
1 3,087.20
319,251.20
50 , 379. 20
091.913.20
1, 7 , 07.20
3,882,371.20
In coumn (C), Mr. and Mrs. ones each receve one-haf of the ncome shown.
In coumn ( ) Mr. Smth receves the entre ncome, Mrs. Smth havng no
ncome of her own. It woud be necessary to ncrease the ta on Mr. Smth
from the amount of ta shown n coumn ( ) to the amount shown n coumn
( ) to secure the same revenue that woud be produced by treatng Mr. and
Mrs. ones ke Mr. and Mrs. Smth.
Consttutonaty of proposa. It perms cear that Congress has the con-
sttutona power to enact ths proposed amendment. Genercay an ncome
ta s cassed as an e cse ( rushaher v. Unon Par. R. It., 2 0 U. S., 1). The
ony e press consttutona mtaton upon such ta es s that they be geo-
graphcay unform. The ony other possbe mtatons upon ths knd of
e ercse of the tn ng power are those mposed by the broad outnes of the
due process cause of the ffth amendment. Obvousy the proposed amend-
ment does not run counter to the consttutona mandate of unformty. th
respect to the possbe appcaton of the due process cause, the probem re-
voves essentay around the power of Congress to cassfy ncome for purposes
of ta aton. May Congress pace marred persons who ve together n a
separate cass and, by reason of the fact that each one of those persons has a
separate ncome, requre each of them to pay a hgher ta upon hs or her
ncome than he or she woud have been requred to pay had they ved
separatey
The Supreme Court has ndcated the scope of the power of Congress n
ths regard n the foowng anguage:
In evyng e cse ta es the most ampe authorty has been recognzed from
the begnnng to seect some and omt other possbe sub|ects of ta aton, to
seect one cang and omt another, to ta one cass of property and to forbear
to ta another. (Fnt v. Stone Tracy Co., 220 U. S., 107, 15S.)
ppyng ths prncpe specfcay to ncome ta es, t has aways been
recognzed that Congress has penary authorty to cassfy ncome for purposes
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28
of ta aton, and n fact Congress has frequenty e ercsed ths authorty. For
e ampe, n Fnt v. Stone Traey Co., supra, the Court sustaned the power of
Congress to evy a ta on ncome derved from dong busness n corporate
form athough persons who derved ncome from e acty the same knd of
busness were not sub|ect to ta f they dd not carry on that busness n the
corporate form. Under the Revenue ct of 1913, a snge person was aowed
an e empton of 3,000 but marred persons vng together were entted to an
e empton of ony ,000. If the husband and wfe- were separated and vng
apart from each other, each was entted to an e empton of 3,000. It w
be noted that under ths provson, a husband and wfe vng together were
entted to an aggregate e empton of ony ,01)0, regardess of whether they
fed |ont or separate returns. On the other hand, a husband and wfe not
vng together were entted to the e empton aowed two snge persons, or
(S.OO0 n the aggregate. It was contended n the rushaber case, supra, that
want of due process arses from the provsons of the ct aowng a deduc-
ton for the purpose of ascertanng the ta abe ncome of stated amounts on
the ground that the provsons dscrmnate between marred and snge peope
and dscrmnates between husbands and wves who are vng together and
those who are not. In denyng ths contenton, the Court sad:
So far as the due process cause of the ffth amendment s reed upon
t suffces to say that there s no bass for such reance snce t s equay we
setted that such cause s not a mtaton upon the ta ng power conferred upon
Congress by the Consttuton; n other words, that the Consttuton does not
confct wth tsef by conferrng upon the one hand a ta ng power and takng
the same power away on the other by the mtatons of the due process cause.
(Treat v. Whte, 181 U. S., 2G ; Pattonv. rady, 18 U. S., 608; MCrayw Unted
(States, 15)5 U. S., 27, 61; Fnt v. Stone Tracy Co., supra ; ngs v. Unted State ,
232 U. S., 261, 282.) nd no change n the stuaton here woud arse even f t
be conceded, as we thnk t must be, that ths doctrne woud have no appcaton
n a case where athough there was a seemng e ercse of the ta ng power, the
act companed of was so arbtrary as to constran to the concuson that t was
not the e erton of ta aton but a confscaton of property, that s, a takng of the
same n voaton of the ffth amendment, or, what s equvaent thereto, was so
wantng n bass for cassfcaton as to produce such a gross and patent nequaty
as to nevtaby ead to the same concuson. We say ths because none of the
propostons reed upon n the remotest degree present such questons.
In fact, comprehensvey surveyng a the contentons reed upon, asde from the
erroneous constructon of the amendment whch we have prevousy dsposed of,
we can not escape the concuson that they a rest upon the mstaken theory that
athough there be dfferences between the sub|ects ta ed, to dfferenty ta them
transcends the mt of ta aton and amounts to a want of due process, and that
where a ta eved s beeved by one who ressts ts enforcement to be wantng
n wsdom and to operate n|ustce, from that fact n the nature of thngs there
arses a want of due process of aw and a resutng authorty n the udcary
to e ceed ts powers and correct what s assumed to be mstaken or unwse
e ertons by the egsatve authorty of Its awfu powers, even athough there
be no sembance of warrant n the Consttuton for so dong.
More recenty the Court has sustaned the power of Congress to cassfy
ncome for the purposes of ta aton n Unted States v. udson (299 U. S 9S),
and n etterng v. Northwest Stee Ms (311 U. S., 6). In the udson case
the Court sustaned a speca ncome ta of 50 per cent on the profts derved
from the transfer of nterests In sver buon. In the Northwest Stee Ma
case the Court sustaned the surta mposed upon undstrbuted corporate
earnngs by the Revenue ct of 1936. st more strkng e ampe s the
recent ta on un|ust enrchment, mposed by the Revenue ct of 1936, whch
eves a ta of 80 per cent upon speca knds of ncome. These ustratons
ampy demonstrate the power of Congress to cassfy ncome for ta aton
purposes.
Comng down to the cassfcaton made by the proposed amendments, t
shoud be noted that the proposed evy does not change the fundamenta
abtes of the partes. ach spouse s requred to pay a ta ony upon hs
or her separate ncome. There s no Imposton of a abty upon one Derson
for the ta es payabe by another; there s ony an ncrease of ta upon the nd-
vdua ncome of each spouse. Prmary a ta s a forced contrbuton from the
members of a socety to provde the necessary funds for the functonng of
that socety us an Integrated unt. In evyng a graduated Income ta , Congress
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has gven recognton to te prncpe that these forced e actons shoud be
eved upon varous ndvduas wth reference to ther abty to pay. In pur-
suance of ths prncpe, Congress has from the begnnng recognzed the famy
status as suffcenty dstnct to permt of speca treatment. Thus the pro-
vson of the present aw whch aows a man to take a deducton from hs
gross ncome for dependents s merey a recognton that ths man s abty to
pay s not as great as that of the man who has no dependents and therefore
the ta abty of the former s reduced.
From 1013 on Congress has provded such speca treatment for the head of
a famy. Conversey, f Congress n the e ercse of ts |udgment concudes
that a man s abty to pay a hgher ta s materay affected by the fact that
other peope n hs economc unt the famy have ncomes of ther own,
then t may take that factor nto consderaton n f ng the ta such a man
shoud pay. Thus Congress has decared that deductons may not be taken
for osses resutng from saes of property between members of the same famy.
See secton 2 (a)(0) of the Revenue cts of 193 and 1936 and secton
2 (b)(1)( ) of the Revenue ct of 1938. Ceary Congress s not mted n
cassfcaton for the mposton of hgher ta es to a consderaton of the
amount of ncome ony. It has been demonstrated that t may consder as a
factor n cassfcaton the partcuar knd of source of the Income. It has
aso been shown that Congress has aways consdered as a factor n cassfcaton
the abty of the ta payer to pay as affected by hs famy obgatons. man
whose wfe en|oys an ndependent ncome may as a practca matter be thereby
reeved from suffcent fama burdens to materay ncrease hs abty to
support the Government. For e ampe, a man n such a poston s not under
the same practca burden to provde nsurance for hs wfe n case of hs
death as the man whose wfe has no ndependent ncome; or he may be reeved
from the burden of provdng her wth numerous sma u ures from hs own
ncome f she s abe to purchase those thngs for hersef. It has often been
sad by the Supreme Court that ta aton s essentay a practca matter.
Congress may therefore take nto consderaton the practcates of the stuaton
and cassfy accordngy.
The ony authorty aganst the consttutonaty of the proposed egsaton
s oeper v. Ta Comm on (28 U. S., 206). There the State of Wsconsn
had provded for treatment of spouses who en|oyed ndependent ncomes
smar to that provded for n the proposed amendments. There was, however,
one essenta dfference. Under the Wsconsn aw each person whose ncome
was ncuded wthn the ta computaton was abe for the entre ta . The
Supreme Court hed that ths egsaton was unconsttutona on the ground
that each person was abe for the tota ta and therefore was requred
to pay a ta on s ncome. ut ths concuson was reached over the vgorous
dssent of Mr. ustce omes, Mr. ustce randes, and Mr. ustce Stone, and
the vews of the dssenters n the oeper case have recenty been measuraby
strengthened by the Supreme Court n a seres of sgncant decsons: urnet
v. Wes (289 U. S., 670), everng v. Cfford (309 U. S., 331), see aso
everng v. ors (311 U. S.. 112), everng v. ubank (311 U. S., 122),
orme v. everng (85 L. d., 651), arrson v. Sehaffner (85 L. d., 69 ).
These cases concusvey demonstrate that the convenent phrase, may
not be ta ed on s ncome, s by no means an a-pervasve formua whch
w assst n the souton of ta probems. On the contrary may be ta ed
on s ncome f there are suffcent |ustfcatory facts. The nqury does not
cease wth a determnaton that s beng ta ed on ncome whch he dd not
receve, but must be further pursued wth a vew to dscoverng whether there
are suffcent facts to so |ustfy ta ng . The Wes, Cfford, orst, ubank,
orme, and Sehaffner cases are e ampes of stuatons n whch the Supreme
Court has concuded that coud be so ta ed.
Thus n the Wes case the ta payer had created certan rrevocabe trusts
the ncome from whch was used to pay premums on poces of nsurance on
hs fe. The Court hed that the provson of the Revenue ct of 192 whch
drected that such ncome be ta ed to the grantor was consttutona, sayng,
through Mr. ustce Cardozo (pages 677-679) :
The controversy s one as to the boundares of egsatve power. It must be
deat wth n a arge way, as questons of due process aways are, not narrowy
or pedantcay, n savery to forms or phrases. Ta aton s not so much con-
cerned wth the refnements of tte as t s wth the actua command over the
property ta ed the actua beneft for whch the ta s pad (Corss v. owers,
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supra, 378; cf. urnet v. Guggenhem, supra, 283). Refnements of tte have at
tmes supped the rue when the queston has heen one of constructon aud
nothng more, a queston as to the meanng of a ta ng act to be read u favor
of the ta payer. Refnements of tte are wthout controng force when a
statute, unmstakabe n meanng, s assaed by a ta payer as overpassng the
bounds of reason, an e ercse by the awmakers of arbtrary power. In sneb
crcumstances the queston s no onger whether the concept of ownershp
refected u the statute s to be squared wth the concept emboded, more or
ess vaguey, n common-aw tradtons. The queston s whether t s oue that
an enghtened egsator mght act upon wthout affront to |ustce. ven ad-
mnstratve convenence, the practca necesstes of an effcent system of ta a-
ton, w have heed and recognton wthn reasonabe mts ( ken v.
Unted States, 283 U. S., 15, 2 , 25; Renecke v. Smth, supra). Labty does
not have to rest upon the en|oyment by the ta payer of a the prveges and
benefts en|oyed by the most favored owner at a gven tme or pace (Corss v.
owers, supra, Renecke v. Smth, supra). Government n castng about for
proper sub|ects of ta aton s not confned by the tradtona cassfcaton of
nterests or estates. It may ta not ony ownershp but any rght or prveege
that s a consttuent of ownershp (Nashve, C. St. L. Ry. Co. v. Waace.
288 U. S., 2 9, 268; romey v. McCaughn, 280 U. S., 12 , 136). Labty may
rest upon the en|oyment by the ta payer of prveges and benefts so substan-
ta and mportant as to make t reasonabe and |ust to dea wth hm as f he
were the owner, and to ta hm on that bass. margn must be aowed for
the pay of egsatve |udgment. To overcome ths statute the ta payer must
show that n attrbutng to hm the ownershp of the ncome of the trusts, or
somethng fary to be deat wth as equvaent to ownershp, the awmakers
have done a whoy arbtrary thng, have found equvaence where there was
none nor anythng approachng It, and ad a burden unreated to prvege or
beneft.
In everng v. Cfford, supra, the Court ponted out that the fama rea-
tonshp has suffcent ndvduaty to have a substanta effect upon ta conse-
quences. In that case a husband had created a trust of certan securtes for
the term of fve years, the ncome from whch was to be pad to hs wfe. In
hodng the husband ta abe upon the ncome of that trust,1 the Court sad
(pages 335-336) :
We have at best a temporary reaocaton of ncome wthn an ntmate
famy group. Snce the ncome remans n the famy and snce the husband
retans contro over the nvestment, he has rather compete assurance that the
trust w not effect any substanta change n hs economc poston. It s hard
to magne that respondent fet hmsef the poorer after ths trust had been
e ecuted or, f he dd, that t had any ratona foundaton n fact, for as a
resut of the terms of the trust and the ntmacy of the fama reatonshp
respondent retaned the substance of fu en|oyment of a the rghts whch
prevousy he had n the property. That mght not be true f ony strcty
ega rghts were consdered, but when the benefts fowng to hm ndrecty
through the wfe are added to the ega rghts he retaned, the aggregate may
be sad to be a far equvaent of what he prevousy had. To e cude from
the aggregate those ndrect benefts woud be to deprve secton 22(a) of con-
sderabe vtaty and to treat as mmatera what may be hghy reevant
consderatons n the creaton of such famy trusts, for where the head of the
househod has ncome n e cess of norma needs, t may we make but tte
dfference to hm (e cept ncome-ta wse) where portons of that ncome a-e
routed so ong as t stays n the famy group.
Not ony does the oeper case have no authorty n the fed of Federa
ncome ta aton, but ts vtaty as an effectve mtaton upon the ta ng
power of the States has aso been dsspated by more recent decsons of the
Supreme Court whch have serousy undermned ts foundatons by hodng
that a State s not forbdden by the fourteenth amendment to make such cass-
fcatons as the egsature regards to be necessary to protect ts revenues.
In Madden v. entucky (309 U. S., 83), the Supreme Court uphed a entucky
statute whch ta ed deposts n banks outsde of the State at 50 cents per 100,
athough deposts n banks wthn the State were ta ed at ony 10 cents per
100. The Court there sad (pages 87-88) :
1 Though te tn p yer nrcued on the bass of t1 opper onso t nt t wns unconsttu-
tona to ta un s ncome, the Court dd not even deem t necessary to dscuss the
pont.
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The broad dscreton as to cassfcaton possessed by a egsature n the
fed of ta aton has ong been recognzed. Tradtonay cassfcaton
as been a devce for fttng ta programs to oca needs and usages n order to
acheve an equtabe dstrbuton of the ta burden. It has, because of ths,
been ponted out that n ta aton, even more than n other feds, egsatures
possess the greatest freedom n cassfcaton. Snce the members of a egs-
ature necessary en|oy a famarty wth oca condtons whch ths Court
can not have, the presumpton of consttutonaty can be overcome ony by the
most e pct demonstraton that a cassfcaton s a hoste and oppressve
dscrmnaton aganst partcuar persons and casses. The burden s on the
one attackng the egsatve arrangement to negatve every concevabe bass
whch mght support It.
It may fary be predcted that f the Supreme Court were presented today
wth the queston presented n the oeper case that that case woud not be
foowed. ut even f the oeper case be taken at ts face vaue, the provsons
of the b do not come wthn ts scope. The motvatng factor for the decson
In that case was the provson that each person whose ncome was ncuded
wthn the ta computaton was abe for the entre ta . It has been ponted
out that the egsaton here under consderaton does not make the spouses
|onty and severay abe for the entre ta uness they so eect. ach person
s requred to pay a ta ony upon hs own ncome and not upon the ncome of
any other person. The net effect s merey that the amount of the ta whch
he s requred to pay s condtoned by the fact that he ves n an economc unt
whch has other ncome accrung to It.
For these reasons t Is concuded that t s wthn the power of Congress to
make the suggested changes n the Interna Revenue Code.
II. CORPOR TION INCOM ND C SS-PROFITS T S.
1. T L Y S.
The amendments made wth respect to corporaton Income and e cess-profts
ta es are appcabe wth respect to ta abe years begnnng after December
31, 19 0.
2. CORPOR TION NORM L T .
The b makes the defense ta permanent but does not change the corporaton
norma ta rate. change s made, however, n the norma ta base, the
e cess-profts ta beng aowed as a deducton from gross ncome n arrvng
at net ncome sub|ect to norma ta .
8. CORPOR TION SURT .
The b mposes upon corporatons a surta of 5 per cent of the frst 25,000
of surta net ncome and 6 per cent of the baance. The surta s empoyed
as the ony means of reachng ncome from the arge voume of partay ta -
e empt Federa securtes hed by corporatons.
Of the tota amount outstandng of partay ta -e empt securtes hed by
prvate nvestors n the amount of 30,066,000,000, 15,817,000,000 are hed by
banks, 6,123,000,000 by nsurance companes, and the baance are hed by other
persons. Thus banks hod 51.1 per cent of the tota, nsurance companes 19.8
of the tota, and other persons 29.1 of the tota.
. FOR IGN CORPOR TIONS.
The rate of ta on foregn corporatons not engaged n trade or busness
wthn the Unted States and not havng an offce or pace of busness theren
s Increased from 16 per cent (15 per cent pus 1 per cent defense ta )
to 27 per cent (25 per cent pus 2 per cent defense ta ). The rates for
wthhodng ths ta at the source are ncreased accordngy.
Treatment smar to that accorded nonresdent aen ndvduas who are
resdents of the Western emsphere s accorded foregn corporatons organ-
zed under the aws of any country n North, Centra, or South merca, the
West Indes, or Newfoundand.
. C SS-PROFITS T .
Tour commttee has retaned the e cess-profts ta structure whch was
estabshed n the Second Revenue ct of 19 0. The aowance of the aternatve
methods of computng the e cess-profts credt that s, ether the nvested-
capta method or the average-earnngs method has been |ustfed by e per-
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ence. The soundness of the pocy of aowng the computaton of the credt
on the bass of average earnngs appears to your commttee to have been
adequatey demonstrated.
method for computng e cess profts based upon nvested capta aone w
penaze many corporatons and favor ther compettors. Fur e ampe, a
corporaton organzed n a perod of ow vaues woud be dscrmnated aganst
In favor of a corporaton organzed n a perod of hgh vaues. Compare, for
e ampe, a corporaton organzed n .r) wth a corporaton organzed n
1931. The dentca assets may have been turned n to each corporaton. Yet
such assets may be refected n nvested capta of one corporaton at many
tmes the vaue t woud have n computng the nvested capta of the other
corporaton. In the .summary of the testmony before the War Pocy Com-
msson, ouse Document No. 271, t s stated n reference to nvested capta
that, n some cases mere accdents of ncorporaton n one year, nstead of
one year ater, meant savngs n ta es of mons of doars. corporaton
reorganzed shorty before the Word War woud have a hgher bass than f
there had been no such reorganzaton. The Invested-capta method aone
woud aso favor a corporaton whch has dstrbuted n the past tte or no
dvdends as compared wth a corporaton whch has pursued a bera dv-
dend pocy. Ths s because the accumuated earnngs and profts of a corpora-
ton enter nto the computaton of ts nvested capta. It woud aso penaze
the stockhoders of a corporaton who pad for ther stock on the bass of the
present worth of the corporaton. It s we recognzed that there has been a
arge turn-over n the stock of many corporatons. The present owners n many
Instances acqured such stock on the bass of the earnng record of the corpora-
ton at the tme of purchase. To concude that they have reazed e cess
profts on the bass of what the orgna owners pad for the stock seems
contrary to equty and |ustce.
The nvested-capta method w aso gve no recognton to the fact that
many busnesses have been conservatvey captazed or but up. especay the
smaer ones, not many from capta but from good management, sk, deveop-
ment of good w, favorabe ocatons, trade advantages, and other mportant
factors of persona effcency. s we stated by the ate Professor Segnan
of Coumba Unversty: most a arge busnesses have grown from humbe
begnnngs and t s precsey n these humbe begnnngs that the percentage
of the profts to the capta nvested s apt to be the greatest. owever, your
commttee fet that there was ampe |ustfcaton for contnung the use of the
nvested-capta method as an optona base. It s necessary to provde a yard-
stck for those corporatons whch had no base-perod ncome or those whch
were operatng on a subnorma bass n the base perod. ut t s not beeved
that the treatment shoud be such as to gve corporatons too arge an
e empton of profts attrbutabe to the defense program.
Upon ths structure, your commttee has made the foowng changes:
(n) Increased rates. The e stng rates have been ncreased by 10
percentage ponts n each bracket, as foows:
d|usted e cess-profts net ncome.
0 to 2n,fpoo . -
20,(100 to 50,000 ...
50,000 to 1011,000 ..
100,0(10 to 5(I,( , 0
250,000 to 5WI,000 -
Over 500,000
ates under
stng aw
(per cent).
Proposed aw
(percent).
0
5
(6) Reducton n nvested capta credt. The Invested capta credt, whch
under e stng aw s 8 per cent of the nvested capta, s eft 8 per cent on the
frst 5.0110.000 of nvested capta but s reduced to 7 per cent on the baance.
(c) Reversa of the deducton for ncome and e cess-profts ta es. Under
e stng aw, the ncome ta s aowed as a deducton n the computaton of the
e cess-profts ta . It seems unfar to aow that part of the ncome ta whch
s computed on ncome whch s not sub|ect to the e cess-profts ta to reduce
the e cess-profts net ncome. Canada aows ony that part of the ncome ta
whch s computed upon ncome sub|ect to the e cess-profts ta . Under the
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Word War ct, the e cess-profts ta was aowed as a deducton In computng
the norma ta but the norma ta was not aowed as a deducton In com-
putng the e cess-profts ta . Ths s aso the rue whch s now apped by
the rtsh. The ta resut n Canada s practcay the same as the rtsh
rue and our 1918 rue. owever, t s beeved that the Word War rue s
much smper n ts appcaton. Your commttee has. therefore, deemed t
advsabe to return to the 1918 rue, and has dsaowed the deducton of ncome
ta es, both n the base perod and n the ta abe year, n computng the e cess-
profts ta . The deducton s aowed In computng both the norma tu and
the surta . The effect of the reversa of the deducton s that the 8 per cent
credt on nvested capta provded n the b s equvaent to a credt on nvested
capta of 5.0 per cent after deducton of the norma ta and surta , and the
7 per cent credt on nvested capta s equvaent to a credt on nvested capta
of .9 per cent after deducton of the norma ta and surta . The foowng
e ampe w show how the pan w operate:
CORPOR TION INCOM T D DUCTI L IN COMPUTING C SS-PROFITS N T INCOM .
(average
Corporaton (nvested
capta) :
Invested capta 1,250,000
Credt of 8 per cent. 100, (M )
Net ncome, ta abe
year 130, 000
Norma and surta 3S, 750
cess-profts net n-
come 91,250
Less credt of 8 per
cent pus specfc
e empton of
5,000 105, 000
d|usted e cess-
profts net ncome
(defct)
cess-profts ta
Tota ta .
13, 750
38, 750
Corporaton
earnngs) :
verage base perod earn-
ngs 103,000
ase perod ta at 17 per
cent 17,000
cess-profts base pe-
rod net ncome 83, 000
Net ncome, ta abe year- 130, 001)
Norma ta and surta 38, 750
cess-profts net n-
come 91,250
Less credt, 95 per cent
of 83,000 pus spe-
cfc e empton of
5,000 83, 850
d|usted e cess-profts
net ncome 7, 00
cess-profts ta 1,850
Tota ta 0,600
C SS-PROFITS T D DUCTI L IN COMPUTING CORPOR TION N T INCOM FOR NORM L
T ND S1RT .
Invested capta 1,250,000
Credt of 8 per cent 100. 000
Net Income, ta abe year 130,000
Less credt of 8 per cent pus
specfc e empton of
5,000 105, 000
d|usted e cess-prof-
ts Dot ncome 25, 000
cess-profts ta 9,000
Norma ta and surta .
Net ncome, ta abe year_ 130, 000
Less e cess-profts ta 9,000
d|usted net ncome. 121,000
Norma ta and surta 3(5, 050
Tota ta 0, 050
verage base perod earn-
ngs 100,000
Net ncome, ta abe year 130,000
Less credt 95 per cent of
100,000 pus specfc e -
empton of 5,000 100, 000
d|usted e cess-prof-
ts net ncome 0, 000
cess-profts ta 11,000
Norma ta and surta .
Net ncome, ta abe year. 130,000
Less e cess-profts ta 11,000
d|usted net ncome. 119,000
Norma ta and surta 35, 50
Tota ta 6, 50
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(d) Ten per cent ta on addtona profts net sub|ected to e cess-profts a
under e stng aw. The e stng aw does not sub|ect to the e cess-profts
ta earnngs whch are not n e cess of the greater of the average earnngs for
the base perod and the nvested capta credt. Thus, many corporatons whch
are makng added profts drecty or ndrecty attrbutabe to Government e -
pendtures for the natona defense are payng no addtona ta es upon such
profts. It s fet that such corporatons, beneftng so substantay from the
defense e pendtures, shoud make a arger contrbuton from ther ncreased
ncome even though ther ncome for the ta abe year s st ess than the
nvested capta credt.
For these reasons, your commttee recommends that corporatons usng; the
nvested capta credt pay a ta of 10 per cent upon ther ncreased earnngs
whch are not sub|ected to e cess-profts ta under e stng aw.
(c) cc capta. In order to encourage the nvestment of new capta n
corporate enterprse, your commttee s mpressed wth the desrabty of offer-
ng a speca nducement n the form of a more bera credt where new capta
s present. To acheve ths resut, new capta s counted at 125 per cent.
Thus for every 100 of new capta pad n to a corporaton, the nvested capta
of such corporaton s ncreased by 125. Ths method s the equvaent of
aowng an nvested capta credt on new capta of 10 per cent, where 8 per
cent s aowed on od capta, and 8 per cent where 7 per cent s aowed
on od capta.
New capta s mted to money or property pad n for stock durng ta abe
years begnnng after December 31, 19 0, and ta abe stock dvdends made
durng the same perod. orrowed capta does not consttute new capta nor
can transactons n certan ta -free e changes or between corporatons whch
are members of an affated group n whch more than 50 per cent contro s
present, create new capta. arnngs and profts retaned n the busness are
not consdered new capta.
To prevent corporatons from turnng od capta nto new by payng t out
to sharehoders and then havng t renvested, and to prevent borrowed capta
from b:|ug transformed nto new equty capta, a net capta ncrease concept
s used. For the purposes of measurng such net ncreases n capta, reference
s had to the capta as of the begnnng of the frst ta abe year begnnng n
19 1. Furthermore, capta that woud otherwse receve new capta treatment,
s dened such treatment to the e tent that there s a net ncrease n nad-
mssbe assets.
6. INCOM F OM MINING 8TR TF IC M T T.S.
The e stng aw e empts from the e cess-profts ta that porton of the
ad|usted e cess-profts ta net ncome of a domestc corporaton whch s at-
trbutabe to mnng wthn the Unted States of tungsten, qucksver, manga-
nese, patnum, antmony, chromte, or tn.
Your commttee has removed ths e empton, as t s beeved that these
corporatons whch make money out of the defense program shoud bear ther
share of the ta burden.
III. Capta Stock Ta and Decared aue cess-Pkofts Ta .
1. C PIT L STOC T .
The b ncreases the capta stock ta rate from 1.10 ( 1 pus 10 cents
defense ta ) per 1,000 of ad|usted decared vaue to 1.25 effectve for the
fsca year endng une 30, 19 1. The Commssoner has e tended the tme
for fng returns and payng the ta for the year ended une 30, 19 1, unt
September 29 of ths year. For the perod of ths e tenson, no nterest w
be requred.
2. D CL R D LU C SS-PROFITS T .
Under e stng aw, the same deductons (wth the e cepton of the decared
vaue e cess profts ta tsef) are aowed n computng net ncome for Income
ta purposes as for the purposes of the decared vaue e cess profts ta .
Whe the b adds the e cess-profts ta to the e stng deductons aowed
n computng net Income for ncome-ta purposes, t makes no such provson
for the computaton of net Income for the purposes of the decared vaue e cess-
prof s ta . Whe the effect of ths dsaowance woud be ordnary to |ustfy
a hgher decared vaue for capta stock, and therefore, a greater capta stock
ta , t s beeved that ths dsadvantage to the ta payer w be argey offset
by the arger deducton on that account for ncome and e cess profts ta pur-
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35
Msc.
poses and by the fact that the aowance of the deducton In queston woud
Introduce a factor of consderabe uncertanty In the determnaton of a de-
cared vaue that woud produce the smaest combned capta stock and
decared vaue e cess profts ta .
I . state and Gft Ta es.
1. ST T T .
The b provdes a new schedue of ncreased rates for the estate ta , ap-
pcabe ony to the estates of decedents dyng after the enactment of ths b.
In addton, the 10 per cent defense ta s made permanent. No other change
s made wth respect to the estate ta . The foowng tabe sets out a com-
parson of the rates and the cumuatve ta under e stng aw and under the
b. It shoud be noted that the ta computed under these rates s sub|ect 1o
reducton by the credt aowed for State death ta es pad and docs not ncude
the 10 per cent defense ta .
Net estate after specfc e empton.
Otn 5,000
5,000 to 10.000
f 10,000 U) 20,000
0,000 to 30,000
0,000 to 0,000
0,000 to 50,000
0.000 to 60,000
00,000 to 100,000
100,000 to 250.000
250,000 to 500,000
500,000 to 750,000
750,000 to ,000,000 ...
1,000,000 to 1,250,000 ..
1,250,000 to 1,500.0110
1,500,000 to 2,000,000 ..
2,000,000 to 2,500,000
2,500,000 to 3.01 10,000
3,000,000 to 3,500,000
3,500,000 to ,000,000
,000,000 to 5,000,000
5,000,000 to f,O0O,OO0 .
0,000,000 to 7,000,000 -
7,000,000 to 8,000,000 -
8,000,000 to 9,000,000 .
9,000,000 to 10,000,000
10,000,000 to 20,000,000
20,000,000 to 50,000,000
O ver 50,000,000 ...
stng aw.
racket
rate
(per cent).
Cumuatve
a on hph-
er amount.
2
2

.
8
n
12
12-1
17-20
20-23
23-26
20 29
32
2
36
38
1

7
50 53
56
69
SI
63
OS
67
69
70
100
200
600
1.200
2,000
3.000
,200
9,600
36.600
89.000
151,600
222,600
302, 900
382.600
S57,600
7 7,600
952. 600
1, 172. 600
1. 07,600
1,922,600
2, IS . DM
3.072.600
3, 582.600
,312,600
.962, 600
11. 662, 600
32, 362, 600
Proposed aw.
racket
rat
(per cent).
Cumuatve
ta on hgh
cr amount.
The foowng tabe shows a comparson of the Federa estate ta burden
(before aowance of credt for State death ta es) under e stng aw and
under the b upon net estates (before e empton) of seected szes:
Net estate before e empton.
mount of ta . t
stng
aw.
Proposed
aw.
ffectve rates.
stng
aw.
Proposed
aw.
Increase In ta .
mount.
Per cent.
50,000
60.000
80.000
100,000
200. Of/0
00,000
910.000
800,000
1,000.000
2,000.000
.000,000.
6,000,000
10,000,000
20,000,000
0,000,000
60,000, ( I..
100,000,000
220
600
2,200
,620
21,660
63,780
112.3 0
167.3 0
228,780
588,000
1, 99.6 0
2,655. 1 0
5,323. 500
12,532,700
27. 391, 820
2. 361. 380
72,621,380
550
1,650
,8 0
9,570
38,270
99.530
16 .590
23 ,330
308.090
727,370
1,781670
3,076, 50
5, 96 ,250
13, 503. 890
28. 583.890
3, 663, 890
73,823,890
0, t
1.1
2.8
.8
10.8
15 9
18.7
20.9
22.9
29.
37. 5
.3
53.2
62.7
68.5
70.6
72.5
1 1
2.8
6.1
9.6
19.1
2 .9
27.
29 3
30.8
36 3
.8
51.3
59.6
67. 6
71.
72.8
73.8
330
2,6 0
,950
16.610
35. 750
62.250
66,990
79.310
139.370
292.930
20. 310
6 0,750
971,190
1, 192,070
1,302,510
1, 302, 510
150.0
150.0
120.0
107.1
76.7
56.1
6.5
0.0
3 .7
23.7
19.5
15.8
12.0
7.7
.
3.1
1.8
Incudes 10 per cent defense ta .
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36
S. GIFT T .
The b provdes a Dew schedue of ncreased gft ta rates appcabe for
computng the tu for the caendar year 19 2 and subsequent caendar years.
In addton, the 10 per cent defense ta s made permanent. s under e stng
aw, the new gft ta rates are n each case three-fourths of the correspondng
estate ta rate. No other change s made wth respect to the gft ta .
. cse Ta es.
In connecton wth the ncrease In the rates of many e cse ta es and the
mposton of severa new eves, t shoud be noted that the Federa statutes
mpose a severe penaty upon persons makng fase statements to purchasers of
artces regardng Federa ta es thereon. Secton 3325 of the Interna Revenue
Code provdes as foows:
Whoever n connecton wth the sae or ease, or offer for sae or ease, of
any artce, or for the purpose of makng such sae or ease, make any statement,
wrtten or ora, (1) ntended or cacuated to ead any person to beeve that any
part of the prce at whch such artce s sod or eased, or offered for sae or
ease, conssts of a ta mposed under the authorty of the Unted States, or (2)
ascrbng a partcuar part of such prce to a ta mposed under the authorty
of the Unted States, knowng that such statement s fase or that the ta Is
not so great as the porton of such prce ascrbed to such ta , sha be guty
of a msdemeanor and upon convcton thereof sha be punshed by a fne of
not more than 1,000 or by mprsonment not e ceedng one year, or both.
t the outset, t shoud be ponted out that many e cse ta es under e stng
aw w e pre n 19 5. Other such ta es w then become effectve at reduced
rates. In addton, the temporary defense ta es mposed by the frst Revenue
ct of 19 0 w termnate n 19 5. s a resut of these varyng rues, both as
to the termnaton of ta es and as to the changes n rates, consderabe confuson
has arsen.
Your commttee deems t desrabe to remove these e praton dates and
future rate changes from the aw. Ths acton has been taken wthout pre|u-
dce to the temporary nature of these eves and rate ncreases, for the desr-
abty of ther repea or downward revson as soon as our revenue needs w
aow s fuy recognzed.
1. CIS T S M D P RM N NT.
. Temporary sub|ects of ta made permanent.
Sub|ect of ta .
Interna
Revenue
Code
secton.
praton
date under
e stng aw.
M MF CTrR RS CIS T S.
Tres and nner tubes -
Toet preparatons - -
utomobes -
Rado recevng sets
Mechanca refrgerators
Matches -
ectrca energy
Gasone - -
Lubrcatng os
IMPORT T S.
Petroeum and dervatves
Coa - -
Lumber - -
Copper .
TR NSPORT TION ND COMMUNIC TION T S
Transportaton of o by ppe ne
Teegraph, teephone, rado, and cabe factes
DOC MINT T ST MP T S.
Corporate securtes (transfer)
Conveyances
3 00
uy 31,19 5
3-101
une 30, 19 5
3 03
uy 31,19 5
3 0
une 30.19 5
3 05
Do.
3 09
Do.
3 11
Do.
3 12
Do.
3 13
Do.
3122
Do.
3 23
Do.
3 2
Do.
3 25
Do.
3 60
une 30,19 5
3 65
Do.
3 81
8 82
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. Ta es wth respect to whch temporary ncreases n rate are made permanent.
Interna
praton
Sub|ect of ta .
Revenue
dae of
ncrease n
rate under
e stng aw.
Code
secton.
1801
une 30,19 5
Do.
Do.
1802(a).
1802(b)
2. D NS T T S M D P RM N NT.
In the frst Revenue ct of 19 0, the rate of amost every e cse ta was
ncreased by the defense ta . In most cases, these ncreases amounted to 10
per cent of the then e stng ta rate. These defense ta rate ncreases woud
e pre under e stng aw n 19 5. ecause of the confuson whch mght resut
from these compe tes, the b makes these rate ncreases permanent.
Te amendments made by the h to the e stng aw n ths respect are
cerca n nature and do not change the rates or the scope of the ta es nvoved.
For convenence, the foowng tabe sets out the ta es to whch these technca
changes appy:
Sub|ect of ta .
(1) o seats
(2) Saes outsde bo offce
(3) Corporate securtes (ssue)
( ) Capta stock (Issue)
(5) Capta stock (transfer)
(6) Insurance poces -
(7) Passage tckets
(8) Cgarettes
(9) Pstos and revovers
(10) Fermented mat quors
(11) Whoesaers of quors
(12) ctaers of quors
(13) rewers
(1 ) Whoesaers of mat quors
(16) Retaers of mat quors...
Do -
(ft) Rectfers
(17) Sts --
(18) Frearms, etc
(19) ectrca energy
(20) Oasono
(21) Lubrcatng os
(22) Trans ortaton of o by p e ne
(23) Corporate securtes (transfer)
(2 ) Conveyances
Interna Revenue Code
secton.
1700(b)(1)
1700(c)(1)
1801
1802(a)
1802(b)
180
1806..,
2000(c)(2)
2700(a)
3150(a)
3250(a)(1)
3250(b)
32.50(c)
3250(C)
3250(e)(1)
3250(e)(3)
3250(f)(1)
3250(|)
3 07
3 11
3 12(a)
3 13
3 60(a)
3 81(a)
Permanent
rates.
11 per cent.
Do.
11 cents.
11 and 3 cents
5 and ft cents.
1 cents.
1.10, 3.30,
5.50.
3.25 and 7.80.
11 per cent.
6.
110.
27.50.
110 and 55.
55.
22.
2.20.
220 and 110.
55 and 22.
11 per cent.
8h per cent.
cents.
.-| cents.
per cent.
5 cents.
55 cents.
am
The above rates ncude the basc rates mposed by the ndcated sectons of
the Interna Revenue Code and the defense ta mposed by secton 1050(a).
3. INCR S IN R T S OF ISTING CIS T S.
The b ncreases the rates of certan e cse ta es but makes no change n
ther bases. Other e stng e cse ta rates are ncreased but there are aso
changes made n ther bases. Such changed rates and bases w be dscussed
n the ne t part of ths report.
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38
Those e cse ta es wth respect to whch the h makes rate ncreases ony
are sted n the foowng tabe, aong wth the pertnent sectons of the
Interna Revenue Code, the rate under e stng aw, and the rate under the b:
uhect of ta .
Payne cars
afe-depos: bo es
Dsted sr.rts
rnmy
Imported perfumes
St vnes. - -
Sparkng wnes (natura).
Sparkng wnes (artfca)
Lqueurs, cord ms. etc
Tns -
Tubes
Interna Revenue Code
secton.
1807(a)
1850(a), 1650(a)
2t 00(a ), (g
2s00(a)(), (g
2800(a)(3), (g)
3030(a)(U( ).3100
3030(a)(2). 3190
3030(a)(2), 3190
3030(a)(2). 31 0
3 00(1), ( 50(u)
3 00(2), 1650(a)
Rate of ta
stng aw. n-
cudng deense
ta rate.
11 cents __.
11 per cent

2.75
3
6 cents
18 cents .
30 cents
3 cents
a cents
11 cents
21 cents
2 cents
Proposed
av.
13 cents.
20 per cent.
St.
S3.75.
t.
8 ccnts.
2 cents.
50 cents.
2M
21. (
5 cents.
9 cents.
foor stocks ta of 1 per proof gaon s mposed wth respect to dsted
sprts whch on the effectve date of ths b are hed for sae or for use u the
further manufacture or producton of any artce ntended for ste.
ke foor stocks ta s mposed upon wnes at rates equa to the ncreases
n ta shown n the above tabe.
Foor stocks ta es are mposed upon tres and tubes hed for sae by anyone,
other than the manufacturer, on the effectve date of ths b. The foor stocks
ta rate on tres s 2 /a cents per pound an on tubes 16 cents per pound. These
rates are equa to the ncrease n ta es on these artces shown u the above tabe.
. C NO S IN SIS OF COMPUTING T (R T S INCR S D IN C RT IN C S S).
In addton to the ncreases made by the b n the rates of the e stng e cse
ta es descrbed under the precedng headng, certan other e cse ta es undergo
a change of base and, n some nstances, an ncrease n rate as we, under the b.
Those e stng e cses wth respect of whch a change of base ony s made are
dm sum ta . The e stng aw mposes a ta on admsson charges of 21
cents or more. The b ta es admsson charges of 10 cents or more. Your
commttee fet t desrabe to provde that where members of the mtary or
nava forces, or the Cvan Conservaton Corps, are admtted free or at reduced
raes, the ta sha appy ony to the amount actuay pad for admsson.
Certan admsson charges e empted from ta under e stng aw, however, are
dened e empton under the b. The prncpa category of such admsson
charges comprses those of whch the proceeds go to regous, educatona, or
chartabe nsttutons or organzatons. Your commttee regards these e emp-
tons as of tte or no beneft to such nsttutons or organzatons and, at te
same tme, as a source of serous admnstratve dffcutes and oss of revenue.
Ths ta s mposed upon the person admtted and not the organzaton.
In addton, the b woud repea a provson of the Department of the Interor
ppropraton ct (Pubc, No. 13(5, Seventy-seventh Congress, frst sesson)
whch e empts from the admsson ta fees for admsson to natona parks and
monuments.
Cabarets, roof gardens, etc. Under the e stng aw, an attempt s made to
segregate from the tota charge made at cabarets, roof gardens, and smar
paces of entertanment, the porton attrbutabe to a charge for admsson, where
such charge s whoy or n part ncuded n the patron s b. Ths method of
ta aton has entaed serous admnstratve dffcutes.
To obvate these dffcutes, the b makes the tota charge the bass of the
ta and appes to that base a rate of 5 per cent, n eu of the e stng rate
of appro matey 20 per cent of the porton of the b attrbutabe to an adms-
son charge. Under e stng aw the ta s upon the patron but the owner of
the estabshment s charged wth s coecton and payment nto the Treasury.
The b paces the ta drecty on the owner.
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Cub dues. The e stng aw ta es cub dues whch e ceed 25 a year. The
b ta es such dues f they e ceed 10 a year.
Furthermore, the h redefnes cub dues so that they ncude any charge
for soca, athetc, or sportng prveges or factes. The ncuson of such
charges w prevent the ta avodance possbe under e stng aw by the prac-
tce of makng separate charges for the varous prveges and factes. The
e empton aowed fraterna organzatons remans unchanged.
Those e stng e cse ta es, wth respect to whch both a change n base and
an Increase n rate are effected by the b, are:
utomobes, trucks, busses, and parts. The rate on passenger automobes
and motorcyces s ncreased from 3 to 7 per cent. In addton, traers sutabe
for use wth passenger automobes and motorcyces, whch are not ta ed under
e stng aw, are aso ta ed n ths category.
The rate on trucks s ncreased from 2 6 to 5 per cent. usses are made
ta abe under ths category rather than as passenger automobes. In addton,
truck and bus traers, whch are not ta ed under e stng aw, are made ta abe
at the 5 per cent rate.
The ta on parts or accessores Is Increased from 2 to 5 per cent. Rados
are e cuded from the st of automobe accessores snce they are separatey
ta ed at a hgher rate.
Rados, phonographs, phonograph records, and musca nstruments. Under
e stng aw the ta appes ony to parts and accessores for rado recevng sets
and combnaton rado and phonograph sets. Ths category has been e panded
to ncude competed rado sets, phonographs, phonograph records, automobe
rados, and musca nstruments.
The rate of ta s Increased from 5 to 10 per cent.
Refrgerators, refrgeratng apparatus, and ar-condtoners. Under e stng
aw the ta on mechanca refrgerators appes ony to those of the househod
type and components and parts thereof. Under the b ths ta w appy to
a mechanca refrgerators and refrgeratng unts whether of househod or
other type. In addton, sef-contaned ar-condtonng unts and ther com-
ponents are added to ths category.
The ta rate s ncreased from 5 to 10 per cent.
Matches. The e stng aw ta es ony fancy wooden matches at a rate of
5 cents per thousand. The b contnues ths tu at the same rate and
aso ta es a other matches at a rate of 2 cents per thousand.
Teephone, teegraph, etc. Under e stng aw teephone to charges, teegraph
messages, and rado messages are ta ed separatey and at dfferent rates.
Teephone to charges are now ta ed at 5, 15, and 20 cents on charges of
from 50 cents to 1, 1 to 2, and over 2, respectvey. Teegraph messages
are now ta ed at 5 per cent of the amount charged and rado messages at
10 cents each.
The b paces these three types of servces n the same category and ta es
them on an ad vaorem bass. Where the charge s more than 2 cents,
a ta of 5 cents for each 50 cents, or fracton thereof, of the charge s
mposed.
The 5 per cent ta on eased wres and takng crcuts Is retaned and
the base s e panded to ncude wre servces such as teetypewrter servce,
burgar aarm servce, news tcker servce, stock quotaton and nformaton
servces, and the ke. The e empton provded by e stng aw for the
servces of ths type utzed by a common carrer, teephone or teegraph com-
pany, or a rado broadcastng company or net work n the conduct of ts
busness as such, s contnued by the b.
new ta of 5 per cent s mposed upon the amount pad for oca tee-
phone servce, e cudng amounts pad for nstaaton and upkeep.
. N W CIS T S.
In addton to the present e cse ta es your commttee recommends the
adopton of the foowng new eves:
Soft drnks. ta on botted soft drnks, sod by the botter or mporter,
at one-s th of a cent per botte for bottes seng at reta for not more than
10 cents per botte; one-thrd of a cent for a botte seng for from 11 to
20 cents; and one-haf of a cent for a botte seng for more than 20 cents.
These rates appy to bottes contanng a quart or ess. If the botte contans
more than a quart, the ta s 6 per cent of the prce for whch sod by the
botter or mporter.
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s a coroary to tho tu on botted beverages, a manufacturers e cse ta of
6 cents per gaon s mposed upon fnshed or fountan srups sod to any
person other than a botter, and a ta of cents per pound s mposed upoc
carbonc acd gas sod to soda fountans.
Manufacturers e cse ta es. Ta es are mposed upon the foowng tems at
the rate of 10 per cent of the prce for whch sod by the manufacturer, producer,
or mporter:
Sub|ect of ta :
Sportng goods.
Luggage.
ectrca appances.
Photographc apparatus.
usness and store machnes.
Sub|ect of ta Contnued.
Rubber products.
Commerca washng machnes.
Optca equpment (not ncudng
eyegasses).
Retaers e cse ta es. The b mposes a ta of 10 per cent upon tbe
reta sae of |ewery, furs, and tdet preparatons. The ta s paced upon
the reta sae rather than the manufacturer s or mporter s sae because of ad-
mnstratve and equtabe consderatons. Manufacturers e cse ta es upon
these artces have been mposed by the Federa Government n the past. Such
a ta upon toet preparatons s, n fact, Imposed by e stng aw. pe-
rence has proven, however, that under such ta es evason s substanta and
nequtabe compettve stuatons are created.
In vew of these consderatons, your commttee s convnced of the desrabty
of pacng these ta es upon the reta sae. The manufacturers ta on toet
preparatons s repeaed.
Transportaton of persons. ta of 5 per cent s Imposed upon the amount
pad wthn the Unted States for tbe transportaton of persons by ra, motor
vehce, water, or ar. Transportaton by motor vehces seatng ess than
10 persons s e empt. Lkewse, the b e empts amounts pad for transporta-
ton whch do not e ceed 35 cents, amounts pad for commutaton tckets for
snge trps of ess than 30 mes, and amounts pad for commutaton tckets for
1 mouth or ess.
Con operated amusement and gamng devces. speca ta of 25 per
year s Imposed for each sot machne, pnba machne, or smar amusement
or gamng devce mataned on any pace or premses. The ta does not
appy wth respect to bona tde vendng machnes.
owng aeys, bard and poo tabes. speca ta of 15 per year s
Imposed for every bard or poo tabe and every bowng aey e cept those
n prvate homes.
Outdoor advertsng. speca ta s mpoed on advertsng on bboard
or other structures upon rea property, the rate of whch s reguated accordng
to the amount of advertsng-space area. For each bboard havng an adver-
tsng space of not over 300 square feet the ta s 5 per annum; for such
space amountng to more than 300 square feet and not more than 600 square
feet, the ta s 8 per annum; and for such space amountng to more than
600 square feet, the ta s 11 per annum. The ta s to be pad by the
essor of bboards, wth respect to each bboard mantaned or controed
by hm. owever, f such essor dscontnues the contro or mantenance of
a bboard wthn the ta abe year on whch he has pad ta , and ater empoys
another bboard of the same ta cassfcaton as the one on whch ta was
pad and contro or mantenance of whch was dscontnued, then wth respect
to such addtona bboard no ta sha be payabe.
Use of motor vehces. n annua ta of 5 s mposed upon the use of a
motor vehces of the knd chefy used for hghway transportaton. Consdera-
ton was gven by the commttee to the graduaton of the ta upon some such
bass as weght or horsepower. The ta s conceved of, however, as essentay
a prvege ta and not one to whch the prncpe of abty to pay has any
necessary appcaton. It s aso desgned to reach a arge number of ndvdu-
as who by reason of the persona e emptons have no ncome-ta abty.
In a measure, too, t accompshes the ob|ectves of the advocates of the mpo-
ston of an ncome ta return fng fee. Graduaton, moreover, woud enta
admnstratve dffcutes and e pnnse out of proporton to the revenue and
the equtabe consderatons nvoved.
Use of boats. n annua ta s so mposed on the use of boats. The ta
Is graduated on the bass of the over-a ength of the boat, as foows: 16 or
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over but not over 28 feet, 5; over 28 but not over 50 feet, 10; over 50 but not
over 100 feet, 1); over 100 but not over 150 feet, 100; over 150 but not over
2O0 feet, 150; over 200 feet, 200.
I. Rado roadcastng Statons and Networks.
Your commttee have mposed a U for caendar years begnnng after
December 31, 19 1, upon every person who durng the year operates a rado
broadcastng staton or engages n network broadcastng.
The desrabty of a speca ta on rado broadcastng (dstnct from a ta
on advertsng, one medum for whch s rado) s ndcated by severa
consderatons.
1. Rado broadcasters are the possessors of a vauabe prvege awarded to
them free of charge, on the condton that they operate In the pubc nterest,
e ause of the technca mtatons of the broadcastng band, the number of
commerca broadcasters at any one tme s for a practca purposes mted.
In consequence, the rght to operate a broadcastng staton n partcuar areas
carres wth t a measure of monopostc prvege and the opportunty for an
e tremey proftabe nvestment. Through the e ercse of that prvege and
the e potaton of that opportunty, nnny broadcasters make substanta
profts and vrtuay a broadcasters derve ess tangbe benefts n the form
of pubcty and good w.
2. The prncpa operators n commerca broadcastng earn hgh rates of
return on reatvey sma nvestments. They possess unusua ta payng abty
whch, n vew of the Government s present revenue requrements, can propery
Ik- sub|ected to speca ta aton.
3. Rado broadcastng requres pubc reguaton. Such reguaton s pro-
vded at pubc e pense, wth great beneft to the ndustry but wthout any
speca costs to that ndustry.
The ta mposed s to e equa to a gven percentage of net tme saes made
durng the year. net tme sae s n effect defned as the gross amount
receved or accrued from the sae of rado tme, not ncudng the amount of
any commsson (not to e ceed 15 per cent of the gross amount) pad to or
deducted by an advertsng agency, and mnus any amount pad by the ta -
puyer, pursuant to the sae by hm, for broadcastng tme to other persons
operatng rado statons or engaged In network broadcastng.
Ta payers are dvded Into three casses, wth rates prescrbed as foows:
(1) If the net tme saes are In e cess of 100,000, but not n e cess of
500,000, 5 per cent.
(2) If the net tme saes are n e cess of 500,000, but not n e cess of
1,000,000, 10 per cent.
(3) If the net tme saes are n e cess of ,0O0,0O0, 15 per cent.
The rate prescrbed wth respect to each cass of ta payer s appcabe to
the entre amount of the net tme saes for the ta abe year. The ct provdes,
however, th::t the abty of a ta payer n one cassfcaton can not e ceed
the ma mum abty under the ne t ower cassfcaton, pus the amount
of the ta payer s net tme saes n e cess of the ma mum net tmes saes
ta abe under the ower cassfcaton.
For e ampe, the ta n the case of a ta payer wth net tme saes of
500,000 woud be at the rate of 5 per cent of the net tme saes, or 25,000.
cept for t .e above notch provson, f the net tme saes were 500,001, the
rate woud be 10 per cent of the net tme saes, or 50,001.10. y reason of
the notch provson, the ta In the atter case woud be 25,000 pus the net
tme saes n e cess of 500,000, or 1, makng the ta In the atter case 25,001.
If the net tme saes do not e ceed 100,000 no ta s mposed.
D T IL D DISCUSSION OF T PRO ISIONS OF T ILL.
Tt.k I Indvdua nd Ooporaton Income Ta es.
secton o. surta on ndvduas.
The surta es appy upon the entre surta net ncome and hence the e emp-
ton from surta of the frst ,000 of surta net ncome found n e stng aw
Is aboshed. The owest surta bracket rate s 5 per cent as compared wth
t per cent under e stng aw. The surta es are ncreased n a brackets np
1611 2 29
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to 750,000 and from that pont the rates of e stng aw are retaned. Wnk
the rates attrbutabe to surta net ncome n e cess of 750,000 are not u-
creased, surta es payabe by ta payers n these upper brackets are ncreased
by reason of the hgher rates n the ower brackets.
S CTION 102. SURT ON CORPOR TIONS.
Ths secton, addng secton 16 to the Interna Revenue Code, Imposes upon
n corporatons (ncudng nsurance companes), e cept nonresdent foregt
corporatons and mutua nvestment companes (the atter beng ater deat
wth n the secton), a surta of 5 per cent upon the frst 25,000 of corporaton
surta nut ncome and 6 per cent upon the e cess of such ncome over 25.( O,
Compementary amendments are made to sectons 10 (b), 231(b), 251(c)(1),
and 2((a). Corporaton surta net ncome s defned as net ncome mnus tbe
credt for dvdends receved provded n secton 20(b) and thus ncudes Unted
States nterest n the ta base.
Ths secton aso mposes upon mutua nvestment companes a surta upon
Suppement surta net ncome of such companes at rates correspondng to those
mposed upon corporatons generay.
S CTION 103. INCOM D F NS T M D P RM N NT.
Ths secton makes permanent the defense ta mposed by secton 15 of the
Interna Revenue Code as added by secton 201 of the Revenue ct of 19 0.
S CTION 10 . T ON N0NR 8ID NT LI N INDI IDU LS.
Under e stng aw a nonresdent aen ndvdua not engaged In busness
wthn the Unted States, and not havng an offce or pace of busness theren,
s ta ed ony upon dvdends, nterest, and other f ed or determnabe annu.
or perodca ncome from sources wthn the Unted States and at the rate of
16 pfr cent. Ths rate may be reduced under e stng aw to 5 per cent n the
case of a resdent of a contguous country f so provded by treaty wth such
country. Secton 10 , amendng secton 211(a)(1) of the Code, ncreases such
rate to 25 per cent (n effect ncreased to 27 per cent through the defense
ta mposed by secton 15), whch corresponds to the proportonate ncrease n
burden mposed upon mercan ctzens and resdents by the ncrease n Income
ta es under the b.
Under e stng aw, f such a nonresdent aen ndvdua has a gross Income
of more ttan 2 ,000, whch s the eve at whch the average effectve rate
equas 16 per cent, he s sub|ect to the fu norma ta and surta on hs
f ed or determnabe annua or perodca ncome. The b ad|usts ths fgure
of 2 ,000 to 23,800, at whch under the b there s reached appro matey an
effectve rate of 27 per cent. Nonresdent aens engaged n busness n the
Unted States, or havng an offce or pace of busness theren, are sub|ect to the
same rates as appy to mercan ctzens, but ony wtt respect to ncome from
sources wthn the Unted States. They w therefore be sub|ect to the ncrease
n ta appcabe to mercan ctzens.
The rates thus mposed n the case of nonresdent aen ndvduas do not
appy n any case where ther appcaton woud be contrary to any treaty obga-
ton of the Unted States (secton 106). Under the provsons of secton 107
these rates may be reduced n the case of resdents of any country, ncudng
foregn coones and possessons, n North, Centra, or South merca, or n the
West, Indes or of Newfoundand, to 5 per cent f so provded by treaty wth such
country. For the purposes of the secton the ermuda Isands are consdered af
ncuded In the West Indes.
S CTION 10 S. T ON FOR IGN CORPOR TIONS.
Ths secton amends secton 231 of the Code to ncrease ta mposed upon
foregn corporatons not engaged n trade or busness n the Unted States and not
havng an offce or pace of busness theren from 15 to 25 per cent (27 per cent
wth the addton of the 10 per cent defense ta ). The ncrease s commensurate
wth the ncrease n the ta burden mposed upon domestc corporatons.
S CTION 106. WIT OLDING OP T T SOURC .
Ths secton provdes for wthhodng of the ta at the source (by means of
whch the ta n the case of nonresdent aens s very argey coected) at th
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rate of 27 per cent Instead of 16 per cent under e stng aw. The rate of
27 /(s per cent represents the combned effectve rate of ta mposed by secton
211(a) (1) ( ) after ts amendment by secton 10 of ths b and by secton 15
of the Code (defe nse ta ). The ncreased rates of wthhodng w not go nto
effect unt the tenth day after the enactment of the ct n order to afford a rea-
sonabe perod wthn whch wthhodng agents w be nformed of the hgher
rates appcabe to payments made to nonresdent aens or nonresdent foregn
corporatons.
S CTION 107 (TR TY O LIG TIONS) ND S CTION 108 (R DUCTION IN PURSU NC OF
TR TI S OF R T S OF T ND WIT OLDING ON NONR SID NT LI N INDI IDU LS
R SID NT IN, ND CORPOR TIONS ORG NIZ D UND R L WS OF, W ST RN MISP R
COUNTRI S).
The effect of these sectons and ther genera reaton to the ta aton of non-
resdent aen ndvduas have aready been treated under secton 10 . Sec-
ton 108 aso authorzes reducton by treaty n the rate of ta aton and of wth-
hodng wth respect to dvdends derved from sources wthn the Unted States
by nonresdent foregn corporatons organzed under the aws of any country n
North, Centra, or South merca, or In the West Indes, or of Newfoundand.
S CTION 100. D F NS T ON P RSON L OLDING COMP NI S ND TR NF S TO OID
INCOM T M D P RM N NT.
Ths secton makes permanent the defense ta mposed upon persona hodng
companes by secton 203 of the Revenue ct of 10 0 and upon transfers to avod
ncome ta by secton 208 of the Revenue ct of 19 0.
S CTION 110. CR DIT FOR D P ND NTS.
Secton 110 of the b amends secton 20(b)(2) of the Interna Revenue Code
reatve to the credt for dependents.
In the case of the head of a famy or a marred person vng wth husband
or wfe, the e stng aw provdes as a credt aganst net ncome a persona
e empton of 2,000 pus 00 for each dependent other than husband or wfe.
Under these provsons, a marred person vng wth husband or wfe and
havng no dependents receves as a ma mum credt the persona e empton of
2,000. On the other hand, an unmarred person mantanng a home for a
person who aso quates as a dependent may receve a persona e empton of
2,000 pns the credt of 00 for such dependent, or a tota credt of 2, 00.
The proposed egsaton dsaows the credt for one dependent n cases where
the ta payer s status as head of a famy s occasoned soey by the e stence
of one or more of such dependents. The amendment w not affect any case
e cept one n whch the ta payer occupes the status as head of a famy soey
by reason of the e stence of a person for whom he s aso entted to the credt
for a dependent. For nstance, t w not operate to reduce the credt fn the
case where a wdower s mantanng a home for two chdren, ony one of
whom quafes as a dependent. In such case, the status as head of a famy s
not occasoned soey by e stence of the chd n respect of whom the credt of
00 s aowed and consequenty the ta payer may be entted to the persona
e empton of 2,000 pus the 00 credt, or a tota of 2, 00, the same as under
e stng aw.
S CTION 111. OINT R TU N8 OF US ND ND WIF .
Secton 111 of the b amends sectons 25(a)( ), 25(b)(3), 7(c), 7(e),
51. nod 1 2(a) of the Interna Revenue Code, and adds new sectons 278 and
300 to the Code.
The secton provdes that a husband and wfe vng together at any tme
durng ther |ont ta abe year sha report ther ncome n a snge return
made by them |onty, and that the ta sha be computed on ther aggregate
ncome.
n ndvdua Is ony requred to partcpate n a |ont return f he s vng
wth husband or wfe at some tme durng a |ont ta abe year. Ths term s
Intended to have a broad appcaton. It does not requre that a husband and
wfe ve under the same roof. They are consdered to be vng together In
any case where they have not separated wth ntent to abandon permanenty
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the marta reatonshp, whether or not the husband makes hs home at one
pace and the wfe at another pace.
It s provded that no |ont return sha be made t one spouse s a nonresdent
aen ndvdua ta abe under secton 211(a).
If one spouse has no tem of gross ncome, deducton, or credt appearng on
the |ont return, such spouse s not requred to sgn or swear to such return.
return sfrued by ony one spouse s nevertheess a |ont return. In order to
obtan a foregn-ta credt, n the case of a |ont return, both husband and wfe
must make the requred eecton n the manner prescrbed by aw.
ther spouse may eect, under rues and reguatons prescrbed by the Com-
mssoner wth the approva of the Secretary, to have the abty for the ta
on aggregate ncome apportoned between the spouses rather than to have such
abty |ont and severa. In such case, the ta upon the aggregate ncome a
apportoned between husband and wfe In the rato whch a ta computed upon
the separate ncome of each bears to the sum of such ta es computed upon
ther separate ncomes. If a spouse has eected on the |ont return to have the
benefts of any deducton or credt, such spouse must compute hs separate ta ,
for purposes of the aocaton, n conformty wth such eecton. pproprate
provson has been made to nsure that the credts for foregn ta es for ta es
wthhed at the source aowabe aganst the ta on aggregate ncome sha be
appcabe n reducton of the ta abty of the spouse to whom they are
attrbutabe.
husband and wfe are requred |onty to make a return of ncome on the
bass of a |ont ta abe year. In genera, any ta abe year n whch a
husband and wfe ve together consttutes such a |ont ta abe year, but the
term does not embrace a ta abe year n whch the marrage occurs, a ta abe
year durng the whoe of whch the spouses dd not ve together, or, f no |ont
ta abe year has prevousy been estabshed, the ta abe year durng whch a
husband and wfe prevousy separated are reconced. pproprate provson
has been made to dea wth the stuaton whch arses n the few cases where
one of the spouses makes a return on a fsca-year bass.
The |ont ta abe year of a husband and wfe s automatcay termnated
upon the date of ther dvorce or ega separaton or upon the date of the
annument of ther marrage; and for the purposes of ths secton a marrage
termnated by annument s deemed to be a vad marrage from the date of
such marrage to the date of the decree of annument. The termnaton of the
|ont ta abe year n such case does not, however, ater the annua accountng
perod of such husband or wfe prevousy estabshed under ths secton.
Separate returns are requred for the perod from the date of termnaton of
the |ont ta abe year to the cose of such accountng perod. |ont ta abe
year s not termnated automatcay by the death of one of the spouses. In
such a case the survvng spouse and the decedent s persona representatve
are requred to fe a |ont return for the fu ta abe year n whch the death
occurred. In such a return there s to be ncuded the ncome of the decedent
and the survvng spouse for the entre |ont ta abe year, and the persona
e empton of a husband and wfe for an entre ta abe year s aowed.
Secton 25(a)( )(C), reatng to the defnton of earned net ncome, s
amended to provde that, n the case of a husband and wfe makng a |ont
return, the net ncome of each up to and ncudng . 3,000 sha n every case
be consdered earned ncome, and that n the case of each the compensaton
for servces nctuay rendered may be consdered as earned ncome to the e -
tent of 1 ,000. The earned net ncome of the husband and the earned net ncome
of the wfe are to be added together and 10 per cent of such earned net ncome,
but not n e cess of 10 per cent of the aggregate net ncome, s aowabe as a
credt for te purposes of the norma ta .
Secton 25(b) (3) s amended to provde that n every case where a husband
and wfe are requred to make a |ont return for any ta abe year, they sha be
entted to a persona e empton of 2,000 for such ta abe year.
In the case of any short perod for whch a return s requred under the pro-
vsons of secton 51, secton 7(c) s amended to provde that the ncome sha
be paced on an annua bass, and a compementary amendment s made to secton
7(e) to prevent the reducton of credts n such cases. It s provded that the
net ncome may be paced on an annua bass by a method other than that
descrbed n secton 7(c), where the Commssoner determnes that such other
method woud more ceary refect the ncome.
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Secton 1 2(a), deang wth tho requrements for fng fducary returns, s
amended to conform to te changes made n secton 51(a) n connecton wth
ndvdua returns.
Secton 111(h) of the h adds to the Interna Revenue Code a new secton
desgnated secton 278 and appcabe ony to cases n whch the ta on aggre-
gate wome s apportoned under the provsons of secton 51(b). If the
Commssoner determnes a defcency or an overpayment n respect of the ta
abty of one spouse, the secton provdes at east one year for the ad|ustment
of the ta abty of the other spouse wth respect to any overpayment or
defcency whch resuts soey from the reapportonment occasoned by the
Commssoner s determnaton. The 1-year perod begns to run from the date
of the Commssoner s determnaton whch, n the case of an overpayment,
s the date of sgnng of the schedue of ove assessments by the Commsso er
and, n the case of a defcency, s the date of mang of the statutory notce of
defcency or, f no such notce s maed, the date upon whch the Commssoner
sgns the schedue of assessments.
The Interna Revenue Code s amended by addng a new secton 300, whch
provdes that f there s an addton to the ta on aggregate ncome for wfu
negect n fang to make a return, or for neggence or fraud n connecton wth a
defcency, n the case of a husband and wfe requred to make a |ont return, and
but one spouse s responsbe for such negect, neggence, or fraud, such spouse
ony sha be abe for the payment of such addton to the ta . If both spouses
are responsbe n any degree, the abty for such addtons to the ta w be
|ont and severa, uness the ta on the aggregate ncome s apportoned under
secton 51(b)(2), n whch case the addtons w he aocated n accordance
wth the method of apportonment set forth n that subsecton.
The penaty for faure to te a return s a percentage of the entre amount of
the ta on aggregate ncome (computed after the aowance of the foregn ta
credt and credt for ta es wthhed at source) and the penaty for neggence or
fraud s a percentage of the entre amount of the ncrease n the ta on aggregate
ncome.
The same secton aso provdes that a spouse who has no gross ncome sha
not n any case be abe for an addton to the ta on aggregate ncome based
upon a faure to make a return, snce, n such a case, a return w be requred
soey because of ncome attrbutabe to the other spouse.
S CI ION 112. NONINT R ST- ING O LIG TIONS ISSU D T DISCOUNT.
Ths secton provdes that any ta payer who owns any nonnterest-hearng
obgatons ssued at a dscount and redeemabe for f ed amounts ncreasng at
stated ntervas and who, under the method of accountng used by hm n com-
putng hs net ncome, s not permtted to report the ncrement n vaue of such
obgatons as t accrues, may, at hs eecton, treat such ncrement n vaue as
consttutng ncome to hm n the year n whch t accrues rather than n the
year n whch the obgatons are dsposed of, redeemed, or pad at maturty.
Under e stng aw a ta payer on the accrua bass who owns, for e ampe,
nonnterest-hearng Unted States defense bonds s requred to report the ncre-
ment as t accrues, whereas a ta payer on the cash bass who owns such defense
bonds s requred to treat the entre ncrement n vaue as beng ncome receved
n the year of redempton or maturty. Therefore, wth respect to such non-
nterest-bearng Unted States defense bonds, the effect of ths secton s to e -
tend, at the eecton of the ta payer, the accrua method to a ta payer on the
cas bass, but ony for the mted purpose of reportng the ncrement n vaue of
such bonds as t accrues.
The eecton provded for n ths secton must be made n the ta payer s return,
and may be made for any ta abe year begnnng after December 81, 19 0. When
so made wth respect to any obgaton, the eecton sha appy aso to a
obgatons of the type descrbed n ths secton owned by the ta payer or
thereafter acqured by hm. The eecton appes to the ta abe year for whch
such return s fed and s bndng for a subsequent ta abe years uness the
Commssoner permts the ta payer, sub|ect to such condtons as the Comms-
soner deems necessary, to change to a dfferent method of reportng ncome
from such bonds. though the eecton, once made, s bndng upon the ta -
payer, t woud not appy to a transferee of such ta payer. For e ampe, ,
on the cash bass, buys nonnterest-bearng Unted States defense bonds n 1S) 2
and eects n hs return for 19 2 to treat the ncrement n vaue as beng ncome
to hm as t accrues. In 19 3 des and bequeaths such bonds to , who s
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6
aso on the cash bass. s not bound by s eecton, but he may, If he n
desres, make an eecton under ths secton wth respect to the ncrement In
vaue accrung after the acquston of such bonds by hm. If had prevousy
made an eecton under ths secton, such eecton woud appy . to the bonds
acaured from .
In any case n whch an eecton s made under ths secton, the amount
consdered to accrue n any ta abe year to whch the eecton appes s
measured by the actua ncreases n the redempton prce occurrng n that
year. Such amount sha not be consdered to accrue rataby between the
dates on whch the redempton prce changes. Thus, f two dates on whch
the redempton prce ncreases fa wthn the ta abe year and f the redemp-
ton prce ncreases n the amount of 50 cents on each such date, the amount
deemed to accrue n that year woud be 1. The precedng sentence, however.
Is sub|ect to an e cepton n the case of the frst ta abe year to whch the
eecton appes. If at the begnnng of the frst ta abe year to whch the
eecton appes the ta payer owns nonnterest-bearng bonds of the prescrbed
character acqured pror thereto, he s requred to report n such year. In
addton to the ncreases In the redempton prce actuay fang wthn that
year, the tota of the ncreases n such prce occurrng between the date of
acquston and the begnnng of such year. ccordngy, f a ta payer on the
caendar year bass makes an eecton under ths secton for 19 and f the
ta payer had purchased hs bonds n 19 0, he woud be requred to ncude
n hs gross ncome for the ta abe year 19 the tota of the ncreases n the
redempton prce of such bonds occurrng between the acquston n 19 0
and December 31, 19 .
S CTION 118. INFORM TION R TURNS WIT R SP CT TO F D R L O LIG TIONS.
s a consequence of the emnaton of ta e empton wth respect to Federa
obgatons brought about by the Pubc Debt ct of 19 1, secton 113 of the
b repeas, prospectvey, secton 1 7(d) of the Interna Revenue Code, w-heh
made nappcabe to nterest on obgatons of the Unted States those pro-
vsons of aw reatng to securng nformaton at the source. Secton 113
aso makes a compementary amendment to secton 1 7(b). Such amendments
w enabe the Commssoner to prescrbe reguatons requrng such nforma-
ton wth respect to nterest on Unted States obgatons as he may deem
necessary n the nterest of good admnstraton of the ncome ta aws.
Secton 113 s to take effect on the day foowng the enactment of the b.
S CTION 11 . T L Y RS TO W IC M NDM NTS PPLIC L .
The amendments reatve to ndvdua and corporaton ncome ta es made
by ths tte, e cept the amendments made by secton 10G (wthhodng of ta
at source) and secton 113 (nformaton returns wth respect to Federa obga-
tons), are appcabe ony wth respect to ta abe years begnnng after
December 31, 19 0.
Tte II cess Profts Ta .
S CTION 201. C SS PROFITS T R T S ND CR DITS.
Secton 201(a) ncreases the e stng e cess-profts rates and adds a speca
rue for the mposton of ta n certan cases where the nvested capta credt
s used. Secton 201(b) of the b aso amends secton 71 of the present aw
by reducng the credt wth respect to corporatons vsng the nvested capta
method n cases where the nvested capta e ceeds 5,000,000. In such cases,
the nvested capta credt s reduced from 8 to 7 per cent of the e cess of
the nvested capta over 5,000,000. The technca features of the amendment
made by secton 201(a) of the b are dscussed beow.
Raes n genera. Secton 710(a) of the present aw, reatng to the mposton
of the e cess-profts ta , s amended by secton 201(a) of the b to provde for
the ncreased rates of ta , whch are set forth n the tabe n secton 710(a)(1),
and for the addton of two new paragraphs consttutng secton 710(a) (2) and
(3), whch set. forth the speca rue, and mtatons thereon, for the mposton
of the ta n certan cases where the nvested capta credt s used. Secton
710(a)( ), reatng to the appcaton of the rates of ta n case of certan
e changes, s the same as secton 710(a) (2) of the present aw e cept for th
renumberng of the paragraph to ( ).
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Secton 710(a) (1) states the genera rue for the mposton of the e cess-
profts ta and the rates under whch corporatons usng the ncome credt
w determne the ta . These rates begn at 35 per cent upon ad|usted e cess
profts net ncome of not more than 20,(100 and ncrease upon a graduated
cae to GO per cent upon the amount o ad|usted e cess profts net ncome n
e cess of 500,000. The rates of ta set forth n secton 710(a)(1) represent
an ncrease of 10 percentage ponts n each rate bracket as compared wth the
rates under the present aw whch run from 25 per cent to 50 per cent.
Speca rue n certan cases where nvested capta credt s used. Secton
710(a)(2) provdes a speca rue for the measure of the e cess-profts ta n
the case of corporatons whch are entted to use ether the nvested capta
credt or the ncome credt n computng the ta under secton 710(a) (1) and for
whch the use of the nvested capta credt woud be more advantageous.
Secton 710(a)(3) mts the appcaton of secton 710(a)(2) to ony those
cases where the amount of ta computed under the speca rue w not be
nore than the amount of the ta computed under the genera rue of secton
710(a) (1) wth the use of the Income credt.
Secton 710(a)(2) sub|ects to ta that porton of e cess-profts net ncome
(determned under the ncome credt method) whch woud be ta ed f such
corporaton used the ncome credt but whch escapes the present e cess-profts
ta when computed wth the use of the nvested capta credt. The e cess-
profts ta mposed upon such corporatons by secton 710(a) (2) s therefore
composed of the foowng two parts, of whch t s the sum :
(1) n amount determned under secton 710(a)(1) wth the use of the
credt provded n secton 71 , pus
(2) Ten per cent of the amount, f any, by whch
(a) the ad|usted e cess-profts net ncome computed wth the use of the
credt under secton 713 and wth the e cess-profts credt carry-over whch
woud be avaabe for the ta abe year f the e cess-profts credt appcabe
to each of the precedng ta abe years for whch ta s mposed by Subchapter
had been the e cess-profts credt computed under secton 713, e ceeds
(6) the ad|usted e cess-profts net ncome computed wth the use of the
credt under secton 71 .
The ta computed under secton 710(a)(2) s m osed ony upon the corpo-
ratons specfed theren, sub|ect to the further mtaton of secton 710(a) (3)
that f the ta determned under secton 710(a)(1) s ess than the ta de-
termned under secton 710(a)(2). secton 710(a)(2) sha not be appcabe.
cept where ths mtaton operates or where the ta payer dscams the use
of the nvested capta credt, every corporaton whch s quafed to compute
Its e cess-profts credt under ether secton 713 (ncome credt) or secton 71
(nvested capta credt) and whch has an ad|usted e cess-profts net ncome
computed wth the use of the ncome credt but has a ower ad|usted e cess-
profts net ncome, or none at a, when the nvested capta credt s used, s
requred to compute the e cess-profts ta under secton 710(a)(2). Where
the use of a credt s referred to n secton 710(a)(2), the reference s to the
use of such credt wth the e cess-profts net ncome computed n accordance
wth that credt: for e ampe, the use of the credt under secton 71 wth the
e cess-profts net ncome computed wth the ad|ustments provded n secton
711(a)(2).
n e ampe of the computaton of the ta under secton 710(a)(2) s as
foows: Suppose a domestc corporaton n e stence snce December 31. 1035,
and reportng on a caendar year bass, has, for 10 1, an e cess-profts net
ncome of 355,000 computed under ether the ncome or the nvested capta
methods, an e cess-profts credt computed under secton 713 of 100,000, and
an e cess-profts credt computed under secton 71 of 300,000, wth no e cess-
profts credt carry-over. The ad|usted e cess-profts net ncome of the cor-
poraton woud be determned as foows:
1. Income method :
cess-profts net ncome
Less:
Specfc e empton
cess-profts credt under secton 713
355,000
5, 000
100, 000
105,000
d|usted e cess-profts net ncome computed on the ncome
method :. 250,000
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8
2. Invested capta method:
cess-profts net ncome 355.00O
Less:
Specfc e empton 5,000
cess-profts credt under secton 71 300,000
305. 00O
d|usted e cess-profts net ncome computed on the nvested
capta method 00. OOO
Snce the use of the nvested capta credt produces the ower ad|usted
e cess-profts net ncome, the corporaton s sub|ect to the ta computed under
secton 710(a)(2). Its e cess-profts ta w therefore be 39,000, computed as
the sum of the foowng two amounts:
1. mount determned under the rates of secton 710(a)(1) upon ad-
|usted e cess-profts net ncome computed wth the use of the
nvested capta credt 19,000
2. 10 per cent of the e cess of ad|usted e cess-profts net ncome computed
wth te use of the ncome credt over ad|usted e cess-profts net
ncome computed wh the use of the nvested capta credt (10
per cent of 200,000, . e., 250,000 ess 50,000) 20.000
In computng the amount under secton 710(a) (2) ( ), f there s no ad|usted
e cess-profts net ncome computed wth the use of the nvested capta credt,
that s, f the nvested capta credt, pus the 5,000 e empton pus the carry-
over, equas or e ceeds the e cess-profts net ncome under secton 711(a)(2),
the 10 ) er cent s computed on the e cess of the ad|usted e cess-profts net
ncome under the ncome method over zero. For e ampe, f n the ustraton
above, the e cess-profts net ncome were 255,000 nstead of 355,000, the e cess-
profts ta for 19 1 woud be 10 per cent of 150,000, the e cess of the ad|usted
e cess-profts net ncome under the ncome method ( 255,000 ess 5,000 ess
100,001)) over zero. (Snce there s no ad|usted e cess-profts net ncome com-
puted wth the use of the credt under secton 71 , there s no amount determned
under secton 710(a)(2)( ) whch w consttute a part of the ta .) If,
however, there s no ad|usted e cess-profts net ncome computed wth the use
of the ncome credt, that s, f the ncome credt, pus the 5,000 e empton pus
the carry-over, equas or e ceeds the e cess-profts net ncome under secton
711(a) (1), secton 710(a) (2) s not appcabe at a.
In computng the ad|usted e cess-profts net ncome for the purposes of
secton 710(a) (2) (15) (), the ad|usted e cess-profts net ncome s computed wth
the use of the credt under secton 713 and wth the e cess-profts credt carry-
over whch woud be avaabe for the ta abe year f the e cess-profts credt
appcabe to each of the precedng e cess-profts ta ta abe years had been
the e cess-profts credt computed under secton 713. The determnaton of
the carry-over for the purposes of ths provson may be ustrated by the
foowng e ampe: ssume that n the case of a corporaton quafed to use
ether the credt computed under secton 713 or the credt computed under
secton 71-1 and reportng ts ncome on the caendar-year bass, the foowng
facts e st:
19 0
19 1
19 2
19 3
80,000
50,000
80,000
60,000
sso.ooo
80,000
130,000
160.000
200,000
80,000
220,000
200.000
265.000
cess-proftsnet ncome under sec. 711(a)(1).
5,000
1.50,000
100,000
Invested capta credt ...
cess-profts net ncome under sec. 711 (a)(2) ...
In computng the corporaton s e cess-profts ta for 19 3, the actua e cess-
profts credt carry-over computed under secton 710(c) (2) s 0,000.
Under the facts n ths ustraton, the e cess-prt fts credt whch woud be
avaabe for 19 3 f the e cess-profts credt appcabe to 19 0, 19 1, and 19 2
had been the credt computed under secton 713 s 15,000, computed as foows:
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Unused e cess profts credt for 19 2 None
Unused e cess profts credt for 10 1 35, 000
Less:
cess of e cess-profts net ncome for 10 2 130, 000
Over sum of e cess-profts credt for 10 2 ( 80,000) pns
unused e cess-profts credt for 10-10 (. 30,000) 110,000
20,000
cess-profts credt carry-over for purposes of secton
710(a) (2) ( ) () 15,000
The corporaton s e cess-profts ta for 10 3 determned under secton 710(a) (2)
Is 17,000, computed as foows:
1. cess-profts net ncome for 10 3 under secton 711(a) (2) 205, 000
Less:
Specfc e empton . 5. 000
Invested capta credt 200,000
cess-profts credt carry-over 0, 000
2 5,000
d|usted e cess-profts net ncome under nvested capta method 20,000
mount determned at rates n secton 710(a)(1) (35 per cent
of 20,000) 7,000
2. cess-profts net ncome under secton 711(a) (1) 220,000
Less:
Specfc e empton 5, 000
Income credt : 80, COO
cess profts credt carry-over 15, 000
100,000
d|usted e cess profts net ncome 120, GOO
cess of ad|usted e cess-profts net ncome under the ncome method
over ad|usted e cess-profts net Income under the nvested capta
method ( 120,000 ess 20,000) 1C0. 000
10 per cent of much e cess (10 per cent of 100,000) 10,000
Tota e cess-profts ta for 19 3, computed under secton 710(a) (2)
( 7,000 pus 10,000) 17,000
S CTION 202. DISCL IM R OF CR DIT.
Secton 712(c), secton 729(b)(1), and secton 7 1(b) of the present aw are
amended to aow a dscamer of the use of ony the credt computed under secton
71 (uvested-capta credt). The present aw aows a dscamer of ether the
Iuvested-capta credt or of the ncome credt n the return of a corporaton
entted to use ether credt; f the use of a credt s dscamed, such credt s not
appcabe for the computaton of the e cess-profts ta for the ta abe year, and
the computaton and nformaton based on such credt may be omtted from the
return. The amendments made by secton 202 of the b are necesstated by the
enactment of the speca rue of secton 710(a) (2) under whch computatons of
both the ad|usted e cess-profts net Income wth the use of the ncome credt
and the ad|usted e cess-profts net ncome wth the use of the nvested-capta
credt are requred for the determnaton of the e cess-profts ta computed
under that secton.
S CTION 203. C S S IN W IC NO R TURN R UIR D.
Ths secton provdes a technca amendment to secton 729(b)(2) of the
present aw n order to requre the fng of a return n a cases where the ta
Is determned under the speca rue provded n secton 710(a)(2). The
amendment affects ony corporatons entted to use ether the ncome credt or
the nvested-capta credt, whch corporatons under the present aw are not
requred to fe a return f ther e cess-profts net ncome computed under the
Invested capta method and paced on an annua bass s not greater than 5,000.
Under secton 729(b)(2), as amended, such corporatons are not requred to fe
a return f ther e cess-profts net ncome computed under the ncome method
and paced on an annua bass s not greater than 5,000.
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S CTION 20 . D DUCTION OF C SS-P OITTS T .
Ths secton provdes that the ncome tu mposed by Chapter 1 of the Interna
Revenue Code and by correspondng provsons of pror Revenue cts sha not
consttute an ad|ustment n determnng e cess-profts net ncome for current
and base perod ta abe years. Secton 23(c) (2) s amended to provde for the
deducton of the e cess-profts ta n determnng ncome sub|ect to Chapter 1
ta . Furthermore, the ta payer, f usng the average-earnngs method, as ts
e cess-profts credt ncreased by the correspondng nondeducton of ncome ta es
n determnng ts average base perod net ncome.
It s provded that the deducton sha be aowed ony n computng the ncome
ta mposed for the ta abe year for whch the e cess-prcfts tu Is eved. y
provdng that any e cess-profts ta pad after the ta abe year sha be deemed
to have been pad wthn the ta abe year, the same treatment s accorded to
ta payers on the cash bass as s accorded to ta payers on the accrua bass. It
s aso provded that the e cess-profts ta sha be computed, for the purposes of
ths deducton, wthout reducton by the foregn ta credt, and wthout regard
to the ad|ustments provded for n secton 73 .
Snce the e cess-profts net ncome for a ta abe year s prmary the norma-
ta net ncome wt certan ad|ustments, t s necessary to amend secton 711(a)
to requre an ad|ustment to norma-ta net ncome n the form of a dsaowance
of the deducton of the e cess-profts ta . further ad|ustment s added to
ths secton n the form of a provson statng that, for the purpose of com-
putng any deducton or credt whch s mted to a certan percentage of the
ta payer s net ncome e. g., the deducton for chartabe contrbutons or for
percentage depeton such net ncome (or, n the ease of percentage depeton,
such net ncome from the property) sha be computed wthout regard to the
deducton on account of the e cess-profts ta . It s aso provded under secton
718(c)(3) wth reference to ta payers on the nvested-capta bass, that n
determnng whether dstrbutons were out of earnngs and profts of any e cess-
prcfts-ta ta abe year, the ncome ta sha be dsregarded n the computaton.
Fnay, n determnng the presence and e tent of the ta payer s rght to the
benefts of secton 722, deang wth abnormates, t s provded that the
e cess-profts ta sha be dsregarded.
Secton 602 of the Interna Revenue Code, deang wth the computaton of net
ncome for the purposes of the decared vaue e cess-profts ta , s amended
to provde that the net ncome sha be determned wthout regard to the deduc-
ton on account of the e cess-profts ta mposed by Chapter 2 . Secton 1202
of the Interna Revenue Code s amended n smar fashon.
It s aso provded that, n computng the e cess-profts credt carry-over, the
e cess-profts credt and e cess-profts net ncome for ta abe years begnnng
n 19 0 sha be computed as f the amendments made by ths b were appcabe.
S CTION 205. N W C PIT L.
Ths secton amends secton 71S(a) of the Interna Revenue Code, defnng
equty nvested capta, by addng a new paragraph desgnated as (G). The
effect of the amendment s to ncrease by 25 per cent the amount ncudbe n
equty nvested capta on account of new capta. The term new capta
s defned to mean the aggregate of the amount of money and property pad n
for stock or as pad-n surpus, or as a contrbuton to capta, and the amount
of ta abe stock dvdends made, durng a ta abe year begnnng after December
31, 19 0, sub|ect to certan mtatons. These mtatons are ntended, n
genera, to prevent a ta payer from treatng as new capta amounts resutng
from mere ad|ustments n the e stng capta, ncudng borrowed capta, of
the ta payer, or of a controed group of corporatons.
The mtatons provded by subparagraphs ( ), ( ), and (C) bar from
the concept of new capta the amount of any equty nvested capta acqured
n an e change occurrng durng a ta abe year begnnng after December 31,
19 0, to whch secton 112(b) (3), ( ), or (5), or so much of secton 112 (c),
(d), or (e) as refers to secton 112(b) (3), ( ), or (5) s appcabe, or woud
be appcabe f the term contro had been defned n secton 112(h) to mean
the ownershp of stock possessng more than 50 per cent of the tota combned
votng power of a casses of stock entted to vote or more than 50 per cent
of the tota vaue of a casses of stock. These mtatons aso bar from the
concept of new capta any equty nvested capta acqured n a transacton
between members of a controed group of corporatons as that term s defned
n subparagraph ( ).
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The mtatons provded- by subparagraph (D) have the effect of reducng
the amount of new capta as of any day by the e cess of the amount of nad-
mssbe assets hed on that day over the amount of such assets hed on the
frst day of the ta payer s frst ta abe year begnnng after December 31, 19 0.
Ths treatment s comparabe to the treatment of e cuded assets n the com-
putaton of day capta addtons under secton 713(g of the e stng aw.
The mtatons under subparagraph ( ) prevent new capta as of any day
from e ceedng the amount by whch the tota equty nvested capta and bor-
rowed capta as of such day, computed wthout ncudng the 25 per cent In-
crease, e ceeds the sum of the equty nvested capta and borrowed capta as
of the frst day of the ta payer s frst ta abe year begnnng after December 81,
19 0. ny ncrease n new capta s thus prevented where the amount of bor-
rowed capta s reduced by the same amount as that by whch the equty
nvested capta s ncreased, and no ncrease n new capta w resut from a
dstrbuton by a stock dvdend of earnngs and profts accumuated pror to
the frst day of a ta abe year begnnng after December 31, 19 0. Subparagraph
), however, Is so worded that there s no reducton to the e tent that the
snm of the equty nvested capta and borrowed capta as of any day s ess
than the sum of the equty nvested capta and borrowed capta as of the
frst day of a ta abe year begnnng after December 31, 19 0, due to an
operatng defct occurrng In any ta abe year durng the ntervenng perod.
The mtatons contaned n subparagraphs ( ) to ( ) may be ustrated by
the foowng e ampes:
ampe (/). subparagraph ( ). Corporaton ssues stock durng a ta -
abe year begnnng after December 31, 19 0, to Corporaton n e change for
the transfer of certan property by Corporaton . Immedatey after the
transfer the stock acqured by Corporaton has a vaue of 10,000, the tota
vaue of a casses of stock of Corporaton then outstandng amountng to
18,000. Corporaton obtans no new capta, snce the property for whch
the new stock was ssued was obtaned n an e change to whch secton 112(b)
(5) woud be appcabe f the term contro had been defned n secton 112(h)
so as to ncude ether the ownershp of stock possessng more than 50 per cent
of the tota combned votng power of a casses of stock entted to vote
or more than 50 per cent of the tota vaue of a casses of stock outstandng.
ampe subparagraph (R). Corporaton owns stock n Corporaton
, and Corporaton owns stock n Corporaton C. Corporaton transfers
property to Corporaton C n e change for stock of Corporaton C. Immedatey
after the transfer the stock owned by Corporaton n Corporaton possesses
more than 50 per cent of the tota combned votng power of a casses of
stock entted to vote. so mmedatey after such transfer the stock owned by
Corporaton n Corporaton C as a vaue equa to more than 50 per cent of
the tota vaue of a casses of stock of Corporaton C.
Corporaton C obtans no new capta through the acquston of the property
from Corporaton n e change for ts stock, snce mmedatey after the
transfer Corporaton , the transferor, and Corporaton C, the transferee, are
memers of the same controed group.
ampe (3), subparagraph (C). Corporaton makes a dstrbuton n ta -
abe stock dvdends to Corporatons and C durng a ta abe year begn-
nng after December 31, 1 0. Immedatey after the dstrbuton Corporatons
and C owns stock n Corporaton whch has a votng power of more than
50 per cent of the combned votng power ()f a casses of stock entted to
vote. so mmedatey after the transfer Corporaton owns stock In Cor-
poraton C whch has a vaue of more than 50 per cent of the tota vaue of
a casses of stock of Corporaton . The dstrbuton made by Corporaton
n the ta abe stock dvdend does not consttute new capta to Corporaton .
ampe (. ), subparagraph (D).- Corporaton makes ts e cess-profts ta
return on the caendar year bass. On uy 1, 19 1, cash n the amount of
11,0,100 s pad n for stock. There are no other changes made n ether the
amount of equty nvested capta or borrowed capta at any tme durng the
year 19 1 The ad|usted bass of nadmssbe assets as of anuary 1, 19 1,
amounts to 5,000. The ad|usted bass of such assets as of uy 2, 19 1, s
ncreased to 15,000. The new capta of 100,000 s reduced to 93,000 as of
uy 2, 19 1, by subparagraph (D), as shown by the foowng computaton:
100,000, new capta, mnus ( 15,000, amount of nadmssbes as of uy
2. 19 1, mnus 5,000, amount of nadmssbes as of uv 1, 19 1)
90,000.
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ampe (.5), subparagraph ( ). Corporaton Y makes ts return on te
caendar year bass. Its equty nvested capta as of anuary 1, 19 1, amounts
to 30,(100, consstng of money pad n for stock, 20,000, and accumuated earn-
ngs and profts, 10,000. Its borrowed capta as of anuary 1, 19 1, conssts
of bonds outstandng amountng to 15,000, makng the tota of ts equty nvested
capta and borrowed capta as of anuary 1, 19 1, 5,000. The corporaton
as no nadmssbe assets at any tme durng the year 10 1. On anuary 2.
19 1. the corporaton makes a dstrbuton n ta abe stock dvdends amountug
to 5,000. On uy 1, 19 1, money s pad n for stock amountng to 15,000,
and on uy 2, 19 1, bonds are retred n the amount of 10,000.
The new capta of 20,000 acqured durng the year 10 1 represented by a
dstrbuton n a ta abe stock dvdend amountng to 5,000 and by money pad
n for sock amountng to 15,000 s reduced to 5,000 on uy 3, 10 1, due to
the retrement of 10,000 of bonds on uy 2, 19 1, and the fact that the stock
dvdend s pad out of earnngs accumuated before anuary 1, 19 1, under
the appcaton of subparagraph ( ), shown as foows:
The sum of the equty nvested capta and borrowed capta on uy 3, 11 1
(computed wthout regard to the 25 per cent ncrease for new capta), amounts
to 50,000. Ths sum e ceeds the tota equty nvested capta and borrowed
capta on anuary 1, 19 1, amountng to 5,000, by 5,000. Under subparagraph
( ) the new capta sha not be more than such e cess. The new capta d
th S reduced from 20,000 to 5,000.
If the accumuated earnngs and profts of Corporaton as of anuary 1,
19 2, are reduced to zero due to the stock dvdend dstrbuton of 5,000 made
on anuary 2, 19 1, and an operatng defct of 5,000 durng the ta abe year
19 1. the new capta ncudbe n equty nvested capta as of anuary 1, 19 2,
woud be 10,000 nstead of 5,000 under the appcaton of subparagraph ( ), as
shown by the oowng computaton:
New capta as of anuary 1, 19 2, before appcaton of subparagraph ( ),
20,000, sha not be more than the e cess of 50,(;00 (tota capta on anuary
1, 10 2, before addng 25 per cent under secton 718(a)(6)) over 5,000 (tota
capta on anuary 1, 10 1) ess 5,000 (amount by whch the accumuated earn-
ngs and profts as of anuary 1, / 1, e ceed the accumuated earnngs and profts
(computed wthout regard to dstrbutons as of anuary 1, 10 2)), or the new
capta can not e ceed 0,000 mnus ( 5,000 mnus 5,000), or 10,000.
S CTION 208. COtrOR T O.N NG G D IN MINING STR T GIC M T LS.
Under secton 731 of the present aw n the case of corporatons engaged n
mnng certan metas, ony that porton of ad|usted e cess-profts net ncome
not attrbutabe to such mnng s sub|ect to the e cess-profts ta . Secton 208
of the b makes ths provson nappcabe to ta abe years begnnng ater
December 31, 19 0.
S CTION 207. T L Y S TO W IC M NDM NTS R PPLIC L .
The amendments reatve to the e cess-profts ta made by ths tte are
appcabe ony wth respect to ta abe years begnnng after December 31, 10 0.
Tte III Capta Stock Ta and Decared aue cess-Profts Ta .
S CTION 301. C PIT L STOC T .
The defense ta of secton 1200(c) of the Interna Revenue Code, whch ncreased
the capta stock ta from 1 to 1.10 for each 1,000 of the ad|usted decared
vaue of the capta stock of corporatons, s repeaed, and n eu thereof the
capta stock ta s Increased from 1 to 1.25. Ths provson s appcabe ony
wth respect to years endng une 30, 19 1, and subsequent years.
S CTION 302. D CL R D LU C SS-PROFITS T D F NS T M D P RM N NT.
The defense ta wth respect to the decared vaue e cess-profts ta s made
permanent.
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53
Msc.
Tte I state and Gft Ta es.
S CTION 01. ST T T R T S.
Ths secton ncreases the rates appcabe to the addtona estate ta wth
respect to decedents dyng after the date of enactment of ths ct.
Subsecton (c) of ths secton makes permanent the defense ta on net
estates mposed by secton 051.
S CTION 02. GIFT T T S.
Ths secton ncreases the rates for computng the gft ta for the caendar
year 19 2 and each caendar year thereafter. These Increases are not to
appy to the caendar year 19 1. These gft ta rates are 75 per cent of the
aggregate of the present estate ta rates and the proposed addtona estate
ta rates provded n secton 01 of ths ct, thus preservng the rato now
e stng between the gft ta rates and the aggregate of the estate ta and
addtona estate ta rates.
Subsecton (c) of ths secton makes permanent the defense ta mposed
for rve years by secton 1001(d) of the Interna Revenue Code.
S CTION 001. 1032 CIS T S M D P RM N NT.
Ths secton repeas secton 3 52 of the Interna Revenue Code, whch now
provdes that the manufacturers e cse ta es mposed by Chapter 29 sha
termnate as of uy 1, 19 5. It thus makes permanent aw the provsons
Imposng such ta es.
S CTION 802. PIP -LIN T .
Ths secton strkes out the termnaton date ( uy 1, 19 5) appcabe to
the ta on the transportaton of o by ppe ne.
S CTION 08. T C NIC L M NDM NT.
Ths secton revses the tte anguage of Subtte C of the Interna Revenue
Code to make t more descrptve of the ta es ncuded wthn Subtte C.
S CTION 50 . OND T .
S CTION 505. CON Y NC T .
The two sectons strke out the termnaton date ( uy 1, 19 5) appcabe
to the bond transfer and conveyance ta es.
S CTION 521. D F NS CIS T R T S M D P RM N NT.
Wth respect to the ta es sted herenafter secton 521 ncorporates, wthout
change, n the appcabe provsons of the Interna Revenue Code the defense
ta rates mposed by the frst Revenue ct of 19 0 and makes suc rates
permanent. These ta rates were orgnay prescrbed by the frst Revenue
ct of 19 0 to be effectve for the perod pror to uy 1, 19 5. The partcuar
ta es are those wth respect to
o seats.
Saes outsde bo offce.
Corporate securtes.
Capta stock Issues.
Capta stock transfers.
Insurance poces.
Passage tckets.
Cgarettes.
Pstos and revovers.
Fermented mat quors.
Whoesaers of quors.
Retaers of quors.
Rrewers.
Whoesaers of mat quors.
Retaers of mat quors.
Rectfers.
Sts.
Frearms, etc.
ectrca energy.
Gasone.
Lubrcatng os.
Transportaton of o by ppe Una.
Transfer of bonds.
Conveyances.
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5
S CTION 531. PL YING C RDS.
Ths secton Increases the rate of ta on the manufacture of payng cards
from 11 cents per pack to 13 cents per pack.
S CTION 032. S F -D POSIT O S.
Ths secton ncreases the rate of ta on the renta of safe-depost bo es
from 11 per cent of the amount pad to 20 per cent.
S CTIONS 533, 63 . LI UOR.
Secton r 33 amends secton 2800(a)(1) of the Interna Revenue Code, whch
mposes an e cse ta upon dsted sprts and mported perfumes contanng
dsted sprts at the rate of -t (and on brandy at the rate of 3.75).
The e stng rate of ta upon dsted sprts other than brandy, and upon
mported perfumes contanng dsted sprts, s 3 per proof gaon; and
upon brandy 2.75 per proof gaon. These are the defense-ta rates mposed
by secton 213 of the Revenue ct of 19 0, effectve uy 1, 19 0. The rates
proposed by the b, therefore, represent an ncrease of 1 per proof gaon
over the defense-ta rates. The defense-ta rates are 75 cents per proof gaon
over and above the rates n effect pror to uy 1, 19 0.
Subsecton (c) of secton 533 makes a compementary amendment to secton
2.SS7 of the Interna Revenue Code, whch provdes for the aowance of draw-
back of nterna-revenue ta upon the e portaton of dsted sprts n dsters
orgna packages.
Subsecton (d) w amend secton 2800 of the Interna Revenue Code by
addng a new subsecton () to provde a foor stocks ta of 1 per proof
gaon on a dsted sprts upon whch the ta has been pad and -whch
on the effectve date of the new rates are hed and ntended for sae or for
use n the manufacture or producton of any artce ntended for sae. Ths
subsecton w have the effect of pacng a dsted sprts ta -pad at the
od rates and hed for the purposes specfed on an equa ta bass wth other
dsted sprts wthdrawn and ta -pad at the new rates. It w precude oss
of revenue through the wthdrawa and ta payment of arge stocks before the
new rates become effectve. s n pror foor stocks ta statutes, provson
s made for the fng of returns and for deferrng payment of the ta upon
the submsson of satsfactory surety bonds.
Ths subsecton aso provdes that for the purposes thereof the term ds-
ted sprts sha ncude products produced n such manner that the person
producng them s a rectfer wthn the meanng of secton 325 (g) of the
Interna 1 Revenue Code. The ob|ect of ths provson s to sub|ect to the foor
stocks ta queurs, cordas, and smar compounds n the manufacture of
whch dsted sprts are a consttuent.
The e stng rates on st wnes are as foows: Not more than 1 per cent
of absoute acoho, G cents per wne gaon ; more than 1 per cent and not
e ceedng 21 per cent of absoute acoho, 18 cents per wne gaon; and more
than 21 per cent and not e ceedng 2 per cent of absoute acoho, 30 cents per
wne gaon. Secton 53 (a) of the b mposes rates of 8, 2 , and 50 cents,
respectvey. The proposed rates represent an ncrease of 2 cents, 6 cents,
and 20 cents per gaon over e stng rates.
The e stng fa rates on other wnes are as foows: Sparkng wnes, 3
cents on each one-haf pnt or fracton thereof; artfcay carbonated wnes,
1 - cents on each one-haf pnt or fracton thereof; queurs, cordas, and
smar compounds, 1 - cents on each one-haf pnt or fracton thereof. Sec-
ton 53 (b) of the b mposes rates of and 2 cents, respectvey. The pro-
posed rates represent an ncrease of 1 cent on sparkng wnes and three-fourths
of 1 cent on artfcay carbonated wnes, and queurs, cordas, and smar
compounds, over the ta rates on such products.
Subsecton (c) of secton 53 w amend Subchapter F of Chapter 28 of the
Interna Revenue Code by nsertng at the end thereof a new secton mposng
a foor stocks ta on a wnes on whch the ta has been pad and whch are
hed and ntended for sae or for use n the manufacture or producton of any
artce ntended for sae on the effectve date of the new rates. Ths Subsec-
1on, ke subsecton (d) of secfon 533 n the case of dsted sprts, w have
the effect of pacng a wnes ta -pad at the od rates and hed for the pur-
poses specfed on a bass of equaty, n so far as ta aton s concerned, wth
other wnes wthdrawn and ta -pad at the new ratea
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S CTION 535. TIR S ND TU S.
Ths secton ncreases the rate of the manufacturers e cse ta (defense ta
rates) on tres from 2 / cents per pound to 5 cents per pound and the rate of
ta on nner tubes from , cents per pound to 9 cents. It mposes a foor
stocks ta on tres and nner tubes hed for sae by any person other than
the manufacturer, producer, or mporter on the date the ncreased manufac-
turers e cse ta rates take effect. The foor stocks ta rates are n an amount
equa to the ncrease n the rates of the manufacturers ta . The foor stocks
ta s restrcted n ts scope to tres and nner tubes for automobes, trucks,
traers, motorcyces, etc., and w not be appcabe to such msceaneous tems
as bcyce tres, baby buggy tres, etc. The ta s specfcay made appcabe
to tres and tubes hed by automobe manufacturers as, or for, equpment on
new automobes. It s not made appcabe to tres and tubes actuay on
automobes hed by new and second-hand car deaers but s appcabe to the
stocks of unmounted tres and tubes hed by such deaers and by any person,
ncudng retaers, for sae. The foor stocks ta docs not appy to any tres
and tubes hed by a person who must pay the ncreased manufacturers e cse
ta rate on such artces when he ses them.
S CTION 530. FF CTI D T OF P T III.
Ths secton appes to sectons 531 to 535, ncusve, and provdes, n bref,
that the ncreased ta rates and new ta es mposed by such sectons sha take
effect on the frst day of the frst month whch begns more than 10 days after
the date of the enactment of the b.
S CTION 6 1. DMISSIONS T .
Ths secton sub|ects to the admssons ta admssons of 10 cents or more
at the rate of 1 cent for each 10 cents or fracton thereof, Under e stng aw
the admssons ta appes ony to admssons of 21 cents or more. Under ths
secton admssons under 10 cents w be e empt from the ta .
The speca treatment under the admssons ta wth respect to so-caed
free or reduced rate admssons now appcabe to empoyees, muncpa offcers,
and chdren under 12 years of age, s e tended to ncude members of the
mtary or nava forces of the Unted S atcs and of the Cvan Conservaton
Corps when n unform. For e ampe: If the estabshed prce s 50 cents
and a soder n unform s charged ony 20 cents, the ta woud be 2 cents
and not 5 cents. If he s admtted free, no ta s payabe.
Secton 5 1 repeas secton 1701 of the Inferna Revenue Code, whch aows
e empton from the admssons ta to certan organzatons.
Ths secton aso repeas the e empton provson appcabe to spoken
pays and certan e empton provsons appcabe to natona parks.
S CTION 5 2. C R T. ROOF G RD N, TC., T .
Ths secton revses the base of the present cabaret ta . It mposes a
ta of 5 per cent on amounts pad for admsson, refreshment, servce, and
merchandse at any roof garden, cabaret, or other smar pace furnshng a
pubc performance for proft. Labty for the ta s mposed on the pro-
pretor. The ta appes to a amounts pad. Under present aw the ta s
Imposed on the patron under a rather compcated rate of 2 cents (ncudng
the defense ta ) for each 10 cents of 20 per cent of the amount pad f 20
per cent of the amount pad e ceeds 50 cents.
Ths secton aso makes certan amendments to admnstratve provsons of
the Code appcabe to the cabaret ta and other admsson ta es.
S CTION 5 3. CLU DU S.
Ths secton reduces the amount used as a test for determnng abty to
the ta on cub (ues from . 115 annua dues of an actve resdent annua member to
10, and redefnes the term dues to ncude certan prvege fees and assess-
ments not now sub|ect to the ta .
Ths secton aso makes the defense ta rates appcabe to dues and ntaton
fees, as mposed by the frst Revenue ct of 19 0.
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56
S CTION 5 . UTOMO IL , TRUC , US, ND P TS T .
Ths secton ncreases the rates of ta on automobe truck
bodes, etc., from /| per cent to 5 per cent and brngs traers and semtraers
fur trucks wthn the scope of the ta . Passenger busses whch under present
aw are sub|ect to the hgher rate of ta appcabe to passenger automobes
have been ncuded wthn the truck casscatou, aud w be sub|ect to
the new 5 per cent rate.
The rate of ta on passenger automobe chasss and bodes, motorcyces,
etc., s ncreased from 3 P r cent to 7 per cent. Traers and semtraers
for such vehces are made sub|ect to the ta . Subsecton (b) of secton 5
ncreases the rate of ta on automobe parts and accessores from 2 | per cent
to 5 per cent. It e cudes automobe rados whch have heretofore been sub-
|ect to ta as automobe parts or accessores. utomobe rados are by
secton 5 5 made sub|ect to the manufacturers ta on rado sets and parts
at the rate of 10 per cent.
Subsecton (c) of secton 5 ncreases the rates of credt aowabe under
ths secton to automobe manufacturers wth respect to the tres and nner
tubes on such vehces from 2 to 5 per cent n the case of trucks, busses,
etc., and 3 / to 7 per cent n the case of other automobes and motorcyces.
Subsecton (d) repeas secton 3 03(f) of the Interna Revenue Code, whch
woud aow a ta ad|ustment wth respect to foor stocks of passenger auto-
mobes, trucks, etc., hed by deaers as of the termnaton date of the present
ta on such vehces. Ths s done because the termnaton date of such ta
has been deeted and the ta made of a permanent nature. Secton 3 03(f),
therefore, becomes unnecessary.
S CTION 5 5. DI08, P ONOGR P S, R CORDS, ND MUSIC L INSTRUM NTS.
Secton 3 0 of the Interna Revenue Code now mposes a ta on saes by
the manufacturer of certan rado components at the rate of 5 per cent of
the sae prce. Secton 5 5 amends secton 3 0 of the Code so as to mpose
a ta at the rate of 10 per cent on
Rado recevng sets. Certan prncpa components of
utomobe rado recevng nets. these artces.
Combnaton rado and phono- Phonograph records.
graph sets. Musca nstruments.
Phonographs.
The artces sted have been Incuded wthn the same secton of the Code
because argey reated.
S CTION 5 G. R FRIG R TORS, IR CONDITION RS.
Secton 3 05 of the Interna Revenue Code mposes a ta on saes by the
manufacturer of househod type mechanca refrgerators and certan prncpa
components of such artces at the rate of 5 per cent of the saes prce.
Secton 5 6 amends secton 3 05 of the Code to ncrease the ta rate to 10
per cent and to make the ta appcabe to the prncpa commerca types of
refrgerators, ncudng such artces as ce cream cabnets, food and beverage
dspay cases, water cooers, mk-cooer cabnets, and smar artces. In
addton, there are brought wthn the scope of the ta components of refrger-
atng apparatus such as compressors, condensers, evaporators, e panson unts,
absorbers, and contros. owever, the ta wth respect to, such components
s not mted to components for the househod, commerca, and ndustra type
of refrgerator unts referred to above. Refrgeratng components w be sub-
|ect to ta regardess of ther ntended use. For e ampe, components for re-
frgerator shps and refrgerator cars, and for the refrgeratng pants of
breweres and cod-storage warehouses w be sub|ect to the ta .
Secton 5 6 aso mposes a ta at the rate of 10 per cent on the sae by the
manufacturer of sef-contaned ar-condtonng unts and certan prncpa
components of such artces.
S CTION 5 7. M TC S.
Secton 3 09 of the Interna Revenue Code now mposes a ta at the rate of
5 cents per thousand on certan fancy wooden matches. Secton 5 7 amends
secton 3 09 of the Code to aso mpose a ta at 2 cents per thousand on other
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Msc.
types of matches. The types of matches sub|ect to the new ta at 2 cents per
thousand ncude the we-known types of wooden and paper matches now n
every day use.
S CTION 5 S. T L P ON , T L GR P , TC.
Secton 5 8 mposes on teephone conversatons, teegraph, cabe, and rado
dspatches, messages and conversatons, for whch the charge s more than
cents, a ta at the rate of 5 cents for each 50 cents or fracton thereof of the
amount pad. Under e stng aw, the ta on teephone to servce does not
appy to charges of ess than 50 cents. Teegraph dspatches and messages are
now sub|ect to ta at the rate of 5 per cent of the amount charged, and cabe
and rado dspntcb.es and messages at the rate of 10 cents per message.
Ths secton aso amends secton 3 65(b), whch mposes a ta wth respect
to eased wres and takng crcut speca servce, to more ceary specfy
the types of servce sub|ect to ta , to mpose the ta where the servce s
rendered wthn a oca e change area, and to aso ta ke servce furnshed
by companes other than teegraph and teephone companes. The present ta
s restrcted to servce furnshed by a teegraph or teephone company.
Ths secton aso mposes a ta on amounts pad by subscrbers for oca
teephone servce and a other teephone servce not otherwse wthn the ta
wth respect to teephone to charges and the ta wth respect to eased wres.
For e ampe, n addton to oca subscrbers servce, ths ta aso appes to
teephone to servce where the charge s 2 cents or ess. s the ta s
mposed ony on teephone servce, speca provson s made to nsure that
charges for nstaaton of nstruments, poes, swtchboards, apparatus, and
equpment are not sub|ect to the ta . though servce through con-operated
teephones s not sub|ect to the ta on oca subscrbers servce, t s sub|ect to
ta n the case of to charges of more than 2 cents. Con-operated teephone
servce can not be sub|ect to the ta because of the mpractcabty of charg-
ng the patron 5 per cent of 5 cents, and coectng the 5 per cent ta through
the nstrument. s the ta on teephone to servce s coected n mutpes
of 5 cents, t can be coected through con-operated teephones.
S CTION 5 9. INST LLM NT, TC., P YM NTS.
Secton 5 0 makes certan changes n secton 3 1(c) of the Interna Reve-|ue
Code whch reates to nrtces eased or sod under nstament or condtona
6aes contracts. Under secton 3 1(c) the ta payer s permtted to pay (he
ta as payments are made under the ease or condtona or nstament saes
contract. The provsons of secton 1650(b) of the Interna Revenue Code s
revsed and ncuded wthn secton 3 1(c), thus ncorporatng n the secton
a provson that where the ease or nstament or condtona saes contract
was entered nto before uy 1, 19 0 (and devery made before such date), the
rate of ta s to be that n force on une 30, 19 0. Wth respect to the perod
after une 30, 19 0, and before uy 1, 19 1, the rate of ta appcabe s to be
that n effect dnng such perod.
Provson s made n ths secton to take care of eases and condtona saes
of artces the sae of whch s newy sub|ect to an e cse ta by ths b or to
an ncreased rate of ta . Under ths secton, payments under eases and
nstament contracts entered nto on and after uy 1, 19 1, w be sub|ect
to the Increased rate of ta or, f the ta s mposed for the frst tme by the
b to the ta .
S CTION 550. FF CTI D T OF P T I .
Secton 550 contans provsons respectng the effectve date of new ta es, or
ncreases n e stng rates of ta , or changes n ta base, effected by sectons
5 1 to 5 8. Wth certan e ceptons, the provsons are the same as those de-
scrbed n the dscusson of secton 536, . e., the frst day of the frst month
whch begns more than 10 days after the date of the enactment of the b.
The changes wth respect to the cabaret ta become effectve at 10 a. m.
on the effectve date for consderatons pecuar to that ta . Speca provson
s made for the effectve date of the ta mposed by secton 5 8, wth respect
to oca subscrbers teephone servce, n order to gve teephone companes (who
w coect the ta for the Government) an opportunty to ad|ust ther
bng practces to the ta . It was aso desred to restrct the appcaton of
the ta , as far as s reasonaby practcabe, to servce rendered after the date
1611 2 30
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of the enactment of the ct. It Is recognzed, however, that some oca servce
rendered pror to the date the ct s enacted (but bed after such date) w
be sub|ect to the ta . It s ntended to ta such servce.
S CTION 551. SOFT DRIN S.
Ths secton mposes a ta on saes by the manufacturer of botted soft drnks,
fnshed or fountan srups, and carbonc acd gas.
The ta rate on botted soft drnks s one-s th cent per botte f made to
reta at not more than 10 cents; one-thrd cent per botte f made to reta at
more than 10 cents and not more than 20 cents; one-haf cent f made to reta
at more than 20 cents. ottes contanng more than 33 fud ounces are sub|ect
to ta at the rate of 6 per cent of the manufacturer s sae prce.
The rate of ta wth respect to fnshed or fountan srups s 6 cents per
gaon. The rate of ta wth respect to carbonc acd gas s cents per pound.
These partcuar rates of ta are as cosey equvaent, as may be practcaby
ascertaned, to the rates of ta appcabe to botted soft drnks. That s to
say, a soft drnk sod at a soda fountan, made wth srup and carbonc acd
gas. w bear, n most nstances, reatvey the same ta burden as a compettve
botted soft drnk.
In the case of srups, no ta Is mposed on srups sod for use by the vendee
In the preparaton of botted soft drnks or for consumpton by a vendee (not
engaged n the preparaton of soft drnks) n some use other than the prepara-
ton of soft drnks. Smary, no ta s mposed on the use of srups by the
manufacturer n the preparaton of botted soft drnks, or the consumpton of
srups by a manufacturer (who s not engaged In the preparaton of soft
drnks) n some use other than the preparaton of soft drnks. Under these
provsons, for e ampe, a baker (provdng he does not aso use srups at a
soda fountan) can buy srups ta -free from the manufacturer for use n
bakng. On the other hand, a grocer may not buy fnshed or fountan srups
ta -free for resae to hs trade. No provson s made for refund of tbe ta
n the case of srups resod by any person for consumpton other than n the
preparaton of soft drnks.
In the case of carbonc acd gas. the ta Is restrcted to carbonc acd gas n
gaseous, qud, or sod form, sutabe for use n the preparaton of soft drnks.
s there are reatvey few manufacturers of and deaers n ths product, pro-
vson s made that saes by deaers w be sub|ect to the ta , but the deaer
may purchase such gas ta -free. That s to say, the sae of carbonc acd gas
to a deaer n such gas for resae s not sub|ect to the ta . The resae by the
dener s, of course, sub|ect to the ta .
S CTION S52. N W M NUF CTUR RS CIS T S.
Ths secton mposes ta es on saes by the manufacturer, producer, or m-
porter, of the artce sted herenafter at the raes gven:
Per cent.
Sportng goods 10
Luggage W
ectrca appances 10
Photographc apparatus 10
ectrc sgns 10
usness and store machnes 10
Rubber products 10
Washng machnes , 10
Optca equpment 10
In the case of sportng goods, uggage, eectrca appances, photographc
apparatus, busness and store machnes, and optca equpment, the partcuar
artces the sae of whch s sub|ect to ta are named. Unforms and sport
cothng are not wthn the scope of the ta on sportng goods.
In the case of eectrc sgns, the ta appes to artces fang wthn tbe gen-
era cassfcatons of neon-tube sgns, eectrc sgns, and eectrc advertsng
devces.
It s recognzed that a number of nrtees fang wthn the scope of the
e cse ta es sted heren may aso fa wthn the scope of the |ewery reta
saes ta mposed by secton 553. Provson s accordngy made that such art-
ces w be sub|ect to the |ewery reta saes ta and not to the manufacturers
e cse ta es mposed by ths secton.
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8 CTI0N 553. N W R T IL RS CIS T S.
Ths secton adds a now chapter 19 mposng new ta es on reta saes of-
|ewery, furs, and toet preparatons each at the rate of 10 per cent of the
prce for whch the artce s sod. The artces fang wthn the |ewery
a (ncudng cucks, watches, cases, and movements) are artces whch have
n former |ewery e cse ta es been cassfed as |ewery. There are added fat
ware and hoow ware made of god or sver, or pated. The ta w not appy
to regous artces, surgca nstruments, or frames or mountngs for eyegasses.
The fur ta s to be mposed on the sae of artces made of fur on the hde
or h U and artces of whch such fur s the component matera of chef vaue.
Ths s a cassfcaton whch has been used n earer manufacturers e cse
ta es wth respect to furs.
ta on the sae at reta of toet preparatons s mposed n pace of the
e stng ta on saes by the manufacturer (mposed by secton 3 01 of the Inter-
na Ievenue Code). Provson s made that beauty parors and barber shops
sha make monthy returns of toet preparatons used n the treatment of
patrons and the quantty used durng the month sha be consdered to have
been sod at reta by such estabshments.
Secton .153 contans, or makes appcabe, the admnstratve provsons
necessary to the admnstraton of these reta saes ta es.
Ths secton aso provdes that the present ta on saes of toet preparatons
by the manufacturer (mposed by secton 3101 of the Interna Revenue Code)
sha not appy to artces sod after the effectve date of the reta saes ta .
Manufacturers ta prevousy pad wth respect to artces whch w aso be
sub|ect to the reta saes ta w not be refunded.
S CIION 55 . TR NSI OIT TION OF P RSONS, TC.
Ths secton mposes a ta on the amount pad wthn the Unted States for
the transportaton of persons by ra, motor vehce, water, or ar, wthn or
wthout the Unted States. The rae s 5 per cent of the amount pad and ta
abty s mposed on the person makng the payment. Where the amount pad
s ess than 35 cents the ta does not appy. In the case of commutaton or
season tckets the ta does not appy f the partcuar trps the hoder of the
commutaton or season tcket s entted to make under the tcket are ess than
30 mes. For e ampe, a commutaton tcket enttng a person to transporta-
ton for a certan number of trps between two ponts s not sub|ect to ta f
the dstance between the two ponts s ess than 30 mes. These provsons w
e empt oca street car, bus, and ta servce. mounts pad for commutaton
tckets for one month or ess are aso e empt from ta .
Ths secton aso mposes a ta on amounts pad for seatng or seepng
accommodatons n connecton wth ta abe transportaton.
Provson s made that the tme for fng returns may be e tended for as
much as 00 days n order that carrers may have the necessary tme to assem-
be, from wdey scattered ponts, necessary data for makng returns. Pro-
vson s aso made that the ta sha not appy to transportaton factes
furnshed the Unted States, to any State or Terrtory or potca subdvson
thereof, or the Dstrct of Coumba.
Secton 551(d) provdes that the stamp ta on steamshp passage tckets m-
posed by secton 31(59 of the Interna Revenue Code sha not appy to any
tckets the purchase of whch Is sub|ect to ta under the new transportaton ta .
S CTION 555. COIN-OP R T D MUS M NT ND G MING D IC S.
Ths secton Imposes an occupatona ta of 25 per annum per machne on
each person who mantans for use, or permts the use of, on premses occuped
by hm, a con-operated amusement or gamng devce. Con-operated amuse-
ment or gamng devces are, brefy, machnes whch fa wthn the genera
cassfcaton cooquay referred to as pn ba machnes and sot ma-
chnes. separate abty s Incurred wth respect to each machne, but f
one such machne s repaced by another, such other machne w not be
consdered an addtona machne.
S CTION 556. OWLING LL YS, TC.
Ths secton mposes an occupatona ta on persons operatng bowng
aeys, bardrooms, or poorooms. The rate of ta s 15 per annum for each
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bowng aey, bard tabe, or poo tabe. types of estabshments man-
tnnng such equpment, Incudng cubs or soca organzatons, etc., are sub|ect
to the ta . Mantanng such equpment n a prvate home Is not sub|ect to ta .
s In the case of other occupatona ta es, the ta year begns uy 1 of each
year.
owever, f after payment of ta and pror to the end of the ta year,
addtona bowng aeys, or bard or poo tabes, are paced n operaton, a
suppementa return must be fed and ta pad wth respect to the addtona
equpment for the perod begnnng wth the day of the month n whch opera-
ton (f the addtona equpment commenced.
6 CTI0N OT. T ON OUTDOOR D RTISING.
Secton . 507 Imposes an annua speca ta on persons engaged n the busness
of furnshng to others the use of bboards for outdoor advertsng. The
speca ta s based on the number of bboards mantaned or controed by
the ta payer durng the ta year, and the rate s graduated accordng to the
number of such bboards In each sze cassfcaton. There are three cass-
fcatons, ta abe, respectvey, at 5, 8, and 11 per bboard.
SUCTION 638. T ON US OF MOTOR ICL S ND O TS.
Ths secton Imposes a ta on the use of motor vehces and boats. In the
case of motor vehces the ta s 5 per annum. In the case of boats the rate
of ta ranges from 5 per annum on boats havng an over-a ength of 16
feet or over but not over 28 feet, to 200 per annum on boats over 200 feet n
over-a ength. In the case of motor vehces, the ta s to be pad by the
person n whose name the motor vehce s, or s requred to be. regstered.
In the case of boats, the ta Is to be pad by the owner of the boat. The
effectve date of the ta Is February 1, 19 2. That s, the use of motor vehces
and boats before that date s not sub|ect to ta .
The ta year begns, however, uy 1. Persons usng motor vehces after Feb-
ruary 1. 19 2, woud, therefore, pay a proportonate part of the 5 annua ta from
the 1st day of the month n whch the use began after February 1, 19 2, to uy 1,
19 2. That s, a person begnnng the use of a motor vehce In the month of
February, 19 2, woud pay fve-twefths of the 5 ta . person begnnng the
use of a motor vehce durng the month of uy, 19 2, woud pay the fu 5
ta for the perod from uy 1, 19 2, to une 30, 19 3.
The term motor vehce s denned to mean motor vehces of the knd
chefy used for hghway transportaton. ccordngy, no ta s mposed
wth respect to traers for motor vehces.
The term boat s defned to mean a boats propeed or equpped for pro-
puson by machnery, sa, or motor measurng 1G feet of more In over-a
ength, owned by a ctzen or resdent of the Unted States. ence, for e ampe,
a ctzen and resdent of Canada brngng hs boat nto terrtora waters of the
Unted States woud not be abe for the ta . oats used for trade or com-
merca fshng and certan boats used for the reef of seamen are not sub|ect
to the ta . Labty n the case of a boat does not depend on use for actua
transportaton. ny form of use s ta abe. boat mantaned and avaabe
for transportaton s n use.
If the ta Is pad wth respect to any motor vehce or boat for any year, no
further ta for that year s mposed wth respect to such vehce or boat. For
e ampe, f a person usng an automobe pays a ta wth respect to such use
and thereafter ses the automobe, the purchaser s not abe for the ta on
the use of such automobe for the baance of the partcuar ta year. owever,
the tag or other evdence of payment s not transferabe from one vehce or boat
to another, so that one who ses or trades n a vehce or boat wth respect
to whch a ta has been pad and procures another must pay a second ta .
In the admnstratve provsons made appcabe to the ta , wde attude s
gven to the Commssoner of Interna Revenue wth respect to the method
of coectng the ta , and for prescrbng a form of stamp, stcker, or tag to
be aff ed to the motor vehce or boat as evdence that the ta has been pad.
Provson s made for aowng the cooperaton of the Post Offce Department
or of prvate persons to assst n the coecton of the ta .
Persons abe for the ta who use or permt the use of a motor vehce or
boat before the ta has been pad sha be guty of a msdemeanor and be
punshed by a fne of 25 or 30 days mprsonment or both. smar penaty
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Is mposed on a person who wes or operates a motor vehce or boat whch does
not bear a stamp, stcker, or tag aff ed n the manner provded n the Comms-
soner s reguatons. The use of motor vehces or boats by the Unted States,
a State, Terrtory, or potca subdvson thereof or the Dstrct of Coumba
s not sub|ect to ta .
S CTION 539. FF CTI D T OF P RT .
Ths secton provdes that the new ta es mposed by sectons 551 to 558 w
take effect on the 1st day of the frst month whch begns more than 10 days
nfter the date of the enactment of the ct.
Tte I Rado koadcastng Statons and Networks.
S CTION 601. R DIO RO DC STING ST TIONS ND N TWOR S.
Ths secton mposes an e cse ta for the caendar year 19 2 and each suc-
ceedng caendar year upon every person who durng the year operates a rado
broadcastng staton or engages n network broadcastng at any tme durng
such caendar year. The ta s equa to a gven percentage of net tme saes
durng the year. net tme sae s the gross amount receved or accrued from
a sae of rado tme, not ncudng the amount of any commsson to an adver-
tsng agency (up to 15 per cent of the gross amount), and mnus any amounts
pad or ncurred by the ta payer, pursuant to the sae of rado tme by hm,
for broadcastng tme to other persons operatng rado statons or engaged n
network broadcastng. Such other persons are n turn abe wth respect to
the amounts so pad to them. If the ta payer s on a cash bass of accountng,
net tme saes are computed wth reference to amounts receved and amounts
pad. In the case of a ta payer on an accrua bass of accountng, net tme
saes are computed wth reference to amounts accrued and abtes ncurred.
The rates of ta are 5 per cent where the net tme saes durng the year e ceed
100,000 and do not e ceed 500,000, 10 per cent where the net saes e ceed
5500,000 and do not e ceed 1,000,000, and 15 per cent where the net saes e ceed
1,000,000. The ta s measured n each cave by the entre amount of the net
tme saes but the abty of a ta payer n one cassfcaton can not e ceed
the ma mum abty under the ne t ower cassfcaton pus the amount of
the ta payer s net tme saes n e cess of the ma mum net tme saes ta abe
under the ower cassfcaton. If the net saes do not e ceed 100,000 no ta
s mposed.
return for the caendar year must be made pror to March 1 of the
succeedng year.
PP NDI .
Mandatory ont Returns,
pror advocacy.
When the subcommttee met n 1933 to consder ncome-ta oophoes,
one of the ssues rased was that of communty property. t that tme the staff
of the ont Commttee on Interna Revenue Ta aton offered a proposa to ta
the ncome to the spouse havng management and contro of the property. Ths
proposa was defeated n the subcommttee by a very cose vote. The sub-
commttee n ts report sad:
The ncome-ta stuaton e stng n eght States of the Unon havng com-
munty-property aws has been carefuy consdered. No recommendaton n
regard thereto s made by your subcommttee n vew of the ega dffcutes
nvoved.
The fu commttee hed pubc hearngs on the. subcommttee report. t that
tme Dr. Mag appeared, representng the Treasury Department. In ths
connecton, he stated:
Under the present aw, a husband and wfe vng together may, at ther own
opton, make separate returns or may make a snge |ont return. If each has
nn ncome of any consderabe sze, each w ordnary make a separate re-
turn, In order to reduce the norma ta , and, more partcuary, the surta es
whch woud otherwse be payabe. The famy ncome s n fact frequenty
e pended and otherwse treated as a unt; -nevertheess, f the husband and
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wfe can so arrange ther affars that the wfe Is In recept of a porton of
the famy ncome, ncome ta es can be consderaby reduced. In other words,
the present prvege of fng separate returns operates to that e tent to defeat
the progressve rate schedue, .partcuary n the case of the arger ta -
payers.
The Treasury Department therefore recommends that the commttee con-
sder whether a husband and wfe vng together shoud not be requred to
fe a snge |ont return, each to pay the ta attrbutabe to hs share of the
Income. Such a provson has ong been n force n other countres.
Reference may be made n ths connecton to the oeper case (28 U. P.,
206), In whch the Supreme Court hed that a somewhat smar provson n the
Wsconsn Income-ta statute was nvad. The case s not, however, concusve
for two reasons. In the frst pace, the Wsconsn aw was evdenty nter-
preted by the Court as requrng that the husband shoud pay the ta on hs
wfe s ncome. Ths ob|ecton can be emnated by proper draftsmanshp
specfyng otherwse. In the second pace, the Federa Government s not under
the same consttutona restrctons as the States n ths respect
In the 103 hearngs (page f), Dr. Mag stated n answer to a queston
by Mr. Cooper as to the status of the aw:
My own vew s that a provson of ths knd s so far that the kehood s
that the court w uphod t, and I don t see anythng n these decsons whch
woud prevent them from so hodng.
On une 1, 1937, the Presdent of the Unted States transmtted to the
Congress a etter from the Secretary of the Treasury, dated May 29, 1937.
dscussng the devces beng empoyed by ta payers of arge ncomes to avod
ncome ta es. mong these devces were the foowng:
The devce of the creaton of mutpe trusts for reatves and dependents.
Spttng ncome two wa s, between husband and wfe, reduces ncome ta es
and eaves the famy ncome ntact. Spttng the famy ncome many ways by
means of many trusts, a for the same benefcares, may effect a much greater
savng, whe eavng the money actuay n the same hands. For the creator
of the trust often consttutes hmsef or hs wfe as trustee, and thus retans
fu contro over the nvestment and dsposton of the fund Itsef and of ts
ncome.
One thrfty ta payer has formed 0 trusts for the beneft of four members of
hs mmedate famy, and thereby cams to have saved them over 85,000 n
one year n ta es.
nother thrfty par have consttuted 0 trusts for ther reatves, and a
promnent awyer and hs wfe utze 16 trusts for the same purpose. The
frst par mantans numbered brokerage accounts, and ony at the end of
the year are the benefca owners dentfed. In ths way Innumerabe trans-
actons are carred on, often between accounts, whch do not actuay affect
the benefca nterests of ther owners, but whch are desgned soey to reduce
ta abty.
The devce of hushand and wfe or father and chdren partnershps.
The purpose of these partnershps, ke the mutpe trusts, s to spt the
famy ncome artfcay nto two parts; or, f the chdren are taken n, nto
s smaer fractons.
There are many nstances of ths knd; but to ustrate the pont, t s suff-
cent to cte the case of a New York brokerage frm whch ate n 1935 admtted
nto partnershp the four mnor chdren, two boys and two grs, of one of the
partners. The ta savng he sought thereby n 1 36 amounted to over 50,000.
The dvson of ncome between husband and wfe n the eght communty prop-
erty States.- Ths s another ma|or cause of revenue oss, whch s un|ustfabe be-
cause obtaned at e e pense of ta payers n the 0 States whch do not have
communty-property aws. New York resdent wth a saary of 100,000 pays
about 32,525 Federa ncome ta ; a Cafornan wth the same saary may cause
one-haf to be reported by hs wfe and the Federa ncome ta es payabe by the
two w be ony . 18,020. The tota oss ot revenue due to ths un|ustfabe ds-
crmnaton aganst the resdents of 0 States runs nto the mons.
Dr. Mag, as the representatve of the Treasury, n hs testmony before the
Ta vason and vodance Commttee n 1937, sad:
In hs statement to the Commttee on Ways and Means the ctng Secretary
aso ponted out that the probem of ta ng the ncomes of spouses has a broader
aspect than that of emnatng the dscrmnaton n favor of husbands and
wves vng together In communty-property States. Snce spouses vng
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together In noncommunty-property States may fe separate returns, there s
a strong ncentve for them to arrange ther property hodngs n such a way
as to reaze the greatest possbe ta advantage through a dvson of ncome
or an aocaton of osses (page 310).
nd then n answer to the remedy for ths stuaton. Dr. Mag sad:
I do not know whether we have got anythng essentay dfferent from
what was worked out n 1933 and 193 or not. I have not been abe to go
over that carefuy In the ast two or three weeks. s I say, our net suggeston
f that we thnk t woud be desrabe over the country as a whoe to provde
that the ncomes of husbands and wves vng together shoud be aggregated
aud the ta computed wth respect to the tota (page 312).
Report of tk Roya Commsson (Great rtan) on the Income Ta .
The foowng s taken verbatm from the Report of the Roya Commsson
(1920):
secton vn. the assessment of marred persons.
2 8. The correct method of assessng mnrred persons has receved a great
dea of pubc attenton both before and snce the appontment of ths com-
msson. The matter has been freey ventated n the press and has been
rased on severa occasons n the ouse of Commons. In the course of our
Inqury a consderabe voume of evdence on the sub|ect has been presented to
us, and we have e amned wtnesses from representatve women s socetes;
we have aso receved a arge number of etters n connecton wth ths part
of our nvestgaton.
2 9. Speakng generay, the e stng poston s that husband and wfe are
regarded as one unt for the purpose of ncome ta ; the ncome of a marred
woman vng wth her husband beng deemed to be (for ths purpose) the
ncome of the husband, and the husband beng responsbe for the ncuson of
hs wfe s ncome n hs own return; but ths genera poston s sub|ect to
two mportant modfcatons.
(a) It s n the power of ether spouse to eect to be separatey assessed, and
f that eecton s made, ncome ta s assessed, charged, and recovered on vhe
ncome of the husband and on the ncome of the wfe as f they were not marred.
(b) If a marred woman earns ncome by her own persona abor, and her
husband aso earns ncome unconnected wth hs wfe s busness or empoyment,
a separate cam of e empton or abatement can be made n respect of the
wfe s earned ncome provded the |ont ncome of husband and wfe does
not e ceed . 00.
250. The opton of separate assessment referred to n (a) dates from 191 ;
It appes to marred men equay wth marred women, but t does not appear
to be very wdey known ; ndeed, some of the wtnesses seem to have been
unaware of the e stence of any such provson. The opton s rarey taken
advantage of, ether because of ths prevang want of knowedge, or because
ts e ercse s not n fact often desred. though a marred woman can make
a separate return and be assessed separatey from her husband, f she wshes
t, the tota of ther separate abtes to ncome ta , f the eecton s made,
does not dffer from the combned abty that woud have arsen f the opton
had not been e ercsed. For e ampe, f husband and wfe have ncomes of
2,000 and 1,000 a year, respectvey, and cam to be separatey assessed,
nether Is granted e empton from superta , but the abty attachng to an
Income of 3,000 s dvded, and charged separatey upon husband aud wfe
n proporton to the sze of ther respectve ncomes.
251. Ths poston does not satsfy the more e treme advocates of separate
assessment; they say that husband and wfe shoud be assessed as though they
were separate ta abe unts wthout any regard to the amount of ther
combned ncomes. Ths contenton has been urged upon us by many wtnesses,
and t forms the burden of the many etters we have receved on ths sub|ect-
many wrtten by persons who woud themseves beneft by the change proposed.
y those who take ths vew t s camed that the rght to a competey separate
assessment s an essenta part of separate ctzenshp, and that the prncpe
of absoute equaty n regard to cv obgatons shoud overrde any prncpe
of ta aton. The statement was aso made that the present method of assessment
mposes a penaty on marrage.
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6
252. On the other hand, t has been contended by severa wtnesses that ths
proposa for separate assessment of husband and wfe s not reconcabe wth
a |ust vew of the prncpe of abty to bear ta aton, and that te common
menage whch s our genera mode of soca fe must be consdered n any
equtabe system of ta aton. From the pont of vew of abty to pay those
who oppose separate treatment contend that t woud be an anomay f dfferent
sums of ncome ta were eved on two marred coupes en|oyng equa ncomes,
merey because In one case the ncome beonged whoy to one spouse and n
the other to both. In the case of a marred man wth 1,000 a year unearned
Income, the sacrfce nvoved by ncome ta , say, 187 10s., may n most bose-
hods be regarded as borne equay by each spouse, a sacrfce of 03 15s. each.
If the husband and wfe each have 500 a year there Is no such dfference n
ther ta abe capacty as woud |ustfy a sacrfce of ony 00 a year each,
whch s what woud resut from treatng husband and wfe as two separate
unts.
253. If we conceve a number of househods where the wfe has a varyng
amount of separate ncome, but where the tota ncome (unearned) of the
husband and wfe s the same, the anomaes that woud resut from the proposed
method of separate assessment w be apparent. Let the tota ncome be
assumed to be 1,000.
s. d.
If the husband has the whoe ncome, the ta pad woud be 187 10 0
If the husband has 000 and the wfe 100, the ta pad woud be 108 15 0
If the husband has 800 and the wfe 200, the ta pad woud be 102 0 0
If the husband has 700 and the wfe 300, the ta pad woud be 1 5 2 6
If the husband has 000 and the wfe 00, the ta pad woud be 135 15 O
If the husband has 500 and the wfe 500, the ta pad woud be 120 0 O
The dfference n the sums borne by the frst and ast of these househods wth
dentca ncomes woud thus be 67 10s., a resut whch appears to us not ony
nequtabe but rdcuous under a system whch ams at ad|ustng the ta n
accordance wth the prncpe of abty to pay.
25 . Other wtnesses referred to the fact that the ncome of husband and wfe
under the ordnary condtons of marred fe s treated as a |ont one so far as
e pendture s concerned, and argued that t s, therefore, not unfar to make
ther e pendture for ta aton dependent upon ther tota resources. Under the
present aw and practce f the husband and wfe are vng apart ther ncomes
are treated as separate sub|ects for assessment. It was ponted out that If the
aegaton s correct that |ont assessment s conducve to mmoraty (an aega-
ton unproved n the course of our nqury and characterzed by one of the women
wtnesses as beng nether reasonabe nor probabe), the ogca, even f not the
practcabe, remedy s to render abe to |ont assessment the ncome of two
unmarred persons vng together.
255. It has been stated by the Chanceor of the chequer n the ouse of
Commons that the oss whch woud arse from the separate assessment of hus-
band and wfe woud be 20,000,000. ncreasng possby to 5,000,000 n conse-
quence of avodance of ta by transfer of Income from the husband to the wfe.
To shft a burden from the shouders of persons whose |ont ncome s such that
ther abty to pay permts of ts beng equtaby borne by them, and to pace
part of that burden, by means of an ncreased rate, upon the shouders of other
ta payers, woud be, In our opnon, entrey contrary to a prncpes of equtabe
assessment.
250. We fee that the demand of those who favor ths change s n effect not
so much a demand for separate assessment or separate recovery of ta ths
they can have under the e stng aw as for a dmnuton n ncome-ta abty
on te ground that part of the |ont ncome happens to beong to the wfe. There
ere two methods of recognzng, by dmnshed ta aton, the obgatons of mar-
rage. One s to make an aowance, a wfe aowance or marrage aowance,
from the |ont ncome; ths wfe aowance s aready granted under the present
aw, and we have made proposas whch w n effect ncrease t consderaby.
The other method s, by a compete severance n the treatment of husband and
wfe for ncome-ta purposes, to effect a dfferentaton the resuts of whch w
depend entrey on the partcuar manner n whch a gven ncome chances to be
dstrbuted between the two members of the househod. The frst method, seeng
that t affects every marred coupe, s far more key than the second to encourage
marrage.
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257. It strkes us as curous that, whe gnorng the |ont obgaton of hus-
band and wfe for the purpose of pressng ther cam to entrey separate treat-
ment, the same wtnesses have asked for ncreases n the wfe and chdren
aowances whch are e press recogntons of the |ont responsbtes created
by marrage. It seems to us that t woud be qute ogca, under the same
system of ta aton, to make an aowance whch recognzes the |ont respons-
btes of husband and wfe, and at the same tme to grant reef to each of the
partners to the unon as though they were compete strangers. If separate
assessment were granted the marrage aowance shoud ogcay be aboshed,
end the resut woud he a shftng of burdens from the rch to the poor, because
n the vast ma|orty of cases the wfe has ether no separate ncome at a or a
separate ncome ess than the amount of the present marrage aowance, and
far ess than aowance we suggest shoud be made.
258. The queston nvoved shoud not be regarded as a potca queston, but
purey as one of fnance and revenue, and we are satsfed that t must be decded,
not on any theoretca grounds of equaty of ctzenshp, but n accordance wth
the outstandng prncpe of abty to pay, whch we recognze as governng
a questons of ta aton. In the appcaton of ths prncpe, we must regard
the soca condtons of the country n whch the ta aton s mposed. The great
ma|orty of marred persons ve together and use ther severa ncomes for com-
mon purposes, and ths common menage and |ont dependency s recognzed, to
the beneft of the wfe, for other purposes of ta aton, e. g., egacy and successon
dutes payabe by a wdow are ess than those payabe by a person unreated to
the deceased.
259. The aggregaton for ncome-ta purposes of the ncome of husband and
wfe s not dependent upon any medeva concepton of the subordnaton of
women; nor s t a queston of se dsabty, snce ether partner can cam
separate assessment and separate coecton. The ncomes are aggregated because
the aw of ta abe capacty s the supreme aw n matters of ta aton, and ta abe
capacty s, n fact, found to depend upon the amount of the ncome that accrues
to the marred par, and not upon the way n whch that ncome happens for-
tutousy to be owned by the members of the unon. It s beyond queston that
n the mmense ma|orty of cases where the wfe has separate means she con-
trbutes to the common purse, ether by actua merger of her ncome wth her
husband s, or by bearng e penses whch n ess fortunate househods fa upon
the husband.
261). We have gven a great dea of tme and attenton to ths sub|ect and
have consdered wth the utmost care a the arguments that have been put before
us. and we have been forced to the concuson that the grevance companed of
s more voca than rea, n other words, that t s a grevance rather than a
hardshp. We therefore recommend that the aggregaton of the ncomes of rfo
and husband shoud contnue to be the rue.
2C1. In paragraph 2-)(h) we referred to the e ceptona treatment aowed
under the e stng aw to the earned ncome of a marred woman where the
|ont ncome does not e ceed . 00. The effect of ths provson, n a case where,
for e ampe, husband and wfe each earn 250 and have no other ncome, s that
two abatements of 120 each are aowed, as compared wth the snge abatement
of 100 whch woud be aowed f the whoe 500 were earned ether by the
husband or by the wfe. The mt of 500 has been represented to us as too
ow n present condtons. We agree wth ths pont of vew, and recommend
that the reef n ts present form shoud be dscontnued, and that where the
wfe as 50 or more of earned ncome the |ont e empton or abntemont aow-
ance to a marred coupe shoud he ncreased from 250 (earned) to 300 (earned ).
Where the wfe earns ess than 50. the |ont aowance for a marred coupe
shoud be ncreased from 250 (earned) by the amount of the wfe s earnngs.
2G2. In connecton wth ths sub|ect, our attenton has been drected to some
mnor detas n regard to whch we make the foowng suggestons: (a) that
the revenue shoud have power of assessment, apportonment, and recovery of
the ta aganst the spouses n respect of ther separate ncomes where necessary
to the coecton of the ta : (6) that the notce to be gven by a wfe or husband
requrng separate assessment shoud be aowed to be gven at any tme not
ater than une 30 n the year of assessment; and (c) that when husband and
wfe are separatey assessed any reef n respect of ther unearned or nvestment
Income shoud be gven to the husband and to the wfe n proporton to ther
respectve assessabe ncomes.
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66
19 1-38-1082S
T R NT ILL OF 19 1.
Senate Report No. 673, Part 1, Seventy-seventh Congress, Frst Sesson.
No. 703.
September 2, 19 1.
Caendar
Mr. George, from the Commttee on Fnance, submtted the foowng report
to accompany II. R. 5 17 :
The Commttee on Fnance, to whom was referred the b ( . R. 5 17) to
provde revenue, and for other purposes, havng had the same under consd-
eraton, report favoraby thereon wth certan amendments and, as amended,
recommend that the b do pass.
STIM T S OF R NU .
The h as passed by t-he onse was estmated to produce added ta revenue
of 3,216, 00,000 annuay. The amendments made by your commttee add fv ,-
0O.000 to ths fgure, brngng the tota addtona annua yed to 3,679,800,000.
The addtona revenue to be secured by your commttee b over that of the
ouse b comes prncpay from the foowng sources: corporaton norma
ta 19,000,000, corporaton surta 120,500,000, and ndvdua ncome ta
332, 00,000.
The foowng tabe sets out the estmated yeds of the ouse b and the
Fnance Commttee b, wth the ncrease or decrease of the Fnance Com-
mttee b over the ouse b. It shoud be noted that the fgures contempate
a year of fu operaton.
stmated revenue effect1 of the revenue b of f)| (U. R. 5. /7) as passed by
the ouse of Representatves ugust , 19 1, and as reported by the Senate
Fnance Commttee, September 2, 19 1.
In mons of doars.
Income u es:
Cor h raton
Norma ta ..
Surta
cess-profts ta .
Tota corporaton ncome ta es.
Indvdua
Tn ncome ta es
Msceaneous nterna revenue:
Capta stock ta
state ta
Cft ta
Tota.
stmated ncrease or decrease
(-) over yed or present aw.
stmated n-
crease ( ) or
decrease (-)
Senate Fnance
Commttee
ouse b.
Senate Fnance
Commttee.
over ouse b.
-520. 1
6 . 7
1. 198.3
-501.1
1,130.6
18.0
1S0.5
-67.7
1.322.9
86 .8
1,39 .7
1,197. 2
71.8
332
2, 187. 7
2.591.9
0 .2
22.3
135.9
16.0
-16.1
1 1.6
-38.
16.0
S.7
0
17 .2
I 5
-32 7
1 estmates show fu-year effect. stmate for corporaton and ndvdua ncome ta rs and-the eft
ta arc based on eves of ncome estmated for caendar year 19 1; a other estmates are based on ncome
eves estmated for fsca year 19 2.
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67
Msc.
stmated revenue effect of the revenue b of 19 1 ( . R. 5 17) as passed by
the ouse of Representatves ugust , 19. , and as reported by the Senate
Fnance Commttee, September 2,19 ft Contnued
In n ons of doars.1
ones.
Manufacturers and retaers eese ta es:
Dsted sprts
Wnes - -
Passenger automobes, parts, and acc
utomobe trucks, busses, and traers -
Tres and tubes -----
Refrgerators, refrgeratng apparatus, and ar con-
dtoners. -
Matches
Payng cards
Rado recevng sets and parts-
Phonographs and phonograph records
Musca nstruments
Sportng goods
Luggage
ectrca appances
Photographc apparatus
ectrc sgns
usness and store machnes
Rubber artces.
Washng machnes - -
Optca equpment -
Sort drnks -
as and o appances
ectrc-ght bubs
ewery, etc
Furs
Toet preparatons
Tota manufacturers and retaers e cse ta es...
M s eaneous ta es:
dmssons -
Cabarets, roof gardens, etc
Cub dues
Safe depost bo es ---
Teephone, teegraph, rado and cabe factes,
eased wres, etc
Teephone b -
Transportaton of persons
I so of motor vehces and boats
Rowng aeys and bard and poo tabes
Con-operated amusement and gambng devces..
Rado broadcastng
Outdoor advertsng.
Tota msceaneous ta es
Tota e cse and msceaneous ta es..
Tota msceaneous nterna revenue..
Tota
stmated ncrease or decrease
( ) over yed or present aw.
ouse b.
122.3
5.0
72.2
1G. 1
.6
I , 6
8.2
1.0
9.
I .-.
a 8
8.5
.5
12.6
10.0
2.7
13.0
21.3
.
.3
22.6
56.2
20.7
19.7
Senate Fnance
Commttee.
2.0

1.7
26.0
3.6
36.5
160.2
2.0
8.9
12.5
1.7
358. 5
85 .5
1,028.7
3,216.
123.0
II. I
72.2
16. 1
.6
16.6
8. 2
1.0
.
.5
3.6
8.2
15
12.6
9.9
2.7
13 0
21.3
6.7
.3
0
19.2
8.0
56.2
20.7
stmated n
crease ( ) or
decrease )
Senate Fnance
Commttee
over ouse b.
105. 9
2.0
2.8
1.7
2 .3
87.2
35.5
160.2
1.3
0.0
0
0
30.9
9 6.
1,087.9
3, 679. 8
cudng nonrecurrng foor stocks ta es coectbe ony n fsca year 19 2 dsted sprts, 538,000.000:
wnes. 1.000.000 under ouse b, 2,900,000 under Senate Fnance Commttee agreement: matches. 700,000:
tres and tubes, 6,700,000.
Treasury Department. Dvson of Research and Statstcs, ugust 29. 19 1
In order that a more compete summary of the entre revenue may be obtaned,
the foowng tabes set forth the estmated recepts under present aw couped
wth those e pected under the commttee b. The frst tabe deas wth the
ncome and e cess-profts ta es and the second sets out the estate, gft, capta
stock, and e cse ta es.
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68
ncome ta es stmated caendar year 19)1 abtes under present aw and
estmated ncreased ncome ta abtes under a fu year effect of the ncome
ta provsons of the revenue b of 19 1 ( . R. 5 17)1 at eves of ncome
estmated for caendar year 19 1.
In thousands of doars.)
stmated
abtes
under present
aw.
stmated
ncrease or
decrease ( )
due to
revenue b
of 10 1.
stmated
tota ncome-
ta abtes
under revenue
b of 1M1.
Income ta es:
Corporaton norma ta
Corporaton surta ...
Indvdua- _
ack a es-
cess-proft ta
Decared vaue e cess-profts ta .
Un|ust enrchment ta
2, 939, 200
2, 223. 300
260,000
1,026, 00
37.000
.000
-M, 100
765.200
1,197,200
1, 130, 600
2, 38. 100
765. 200
3, 20.5(0
260,000
2.157.000
37,000
.000
Tota ncome ta es.
6, 80, 900
2,591.900
9,081,800
1 s reported by the Senate Fnance Commttee, September 2, 19 1.
Treasury Department, Dvson of Research and Statstcs. September 2, 19 1.
Msceaneous nterna revenue stmated fsca year 19)2 recepts under pres-
ent aw and estmated fu year effect of the revenue b of 19 1 ( . R.
5)17) at eves of nco)ne. estmated fo fsca year 19)2.
(Thousands of doars.
stmated
recepts un-
der present
aw.
stmated
ncrease or
decrease ( )
due to reve-
nue b of
19 1.
ypothet-
ca fu vear
effect.
tota re-
cepts under
revenue b
of 19 1.1
ypothet-
ca fsca
Capta stock ta .
state ta
Gft ta
193, 00
350,700
100,000
-16, 100
111.600
16. ( )
Lquor ta es:
Dsted sprts (e cse ta ).
Fermented mat quors
Rectfcaton ta
Wnes (domestc, and mported) (e cse ta )
Contaner stamps
Speca aves n connecton wth quor occupatons.
other
58, 800
330.800
12,800
15.200
10, 00
10, 200
1,300
123.000
1 , 00
Tota quor ta es.
839, .500
137. 00
Tobacco aves:
Cgarettes (sma).
Cpars (nr e)
Tobacco chewng and smokng).
Snuff
Cgarette paper and tubes
other
0 5, 100
13,000
56, 100
6.800
1, 500
130
Tota tobacco ta es.
Stamp ta es:
1 sps f securtes, hon- transfers, and deeds or conveyance
Seek transfers _ _
Payng cards.
Sver buon saes or transfers
723, .530
25.300
1 . OI )
,800
80
1,000
Tota stamp ta es.
. )80
1,000
1 Deta of estmates reeased n summary form by the ureau of the udget, une 1, 19 1.
1 s reported by the Senate Fnance Commttee, September 2, 19 1.
ssumng that a provsons of the aw were fuy refected n recepts for an entre year.
177,300
92.300
116.000
581.800
330. M )
12. sen
MM
10. 00
10,200
1,300
6 5.100
13.900
66,100
6,800
1,500
130
723,530
25,300
1 .000
6,800
80
5, 180
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Msc.
Msceaneous nterna revenue stmated fsca year 19 2 recepts under pres-
ent aw and estmated fu year effect of the revenue b of 19-U ( . R.
5 17) at eves of ncome estmated for fsca year 19 2 Contnued.
Thousands of doars.
stmated
stmated
ncrease or
decrease ( )
due to reve-
nue b of
19 1.
stmated
tota re-
cepts under
revenue b
of 19 1.
recepts un-
der present
aw.
ypothet-
ca fu year
effect.
ypothet-
ca fsca
year.
Manufacturers e cse ta es:
37,100
399,800
51, 00
5 ,200
12. 00
73. 00
13.300
37.100
399.800
61. 00
98.800
28.500
1 5.600
13.300
17.300
28.900
5. 00
8, 200
12.600
,500
3.000
8.200
. .500
9.900
2.700
13.000
5,700
21.300
300
19.200
8.000
ectrca enemy
.600
16. 100
72,200
Passenger automobes and motorcyces
7,900
12.300
9. 00
16.600
Mechanca refrgerators
5, 00
8.200
ectrca appances -
12,600
.500
3.600
8.200
. 500
9.900
2, 700
Phonographs and phonograph records
13,000
5.700
21. 301)
300
ectrc ght bubs
19.200
8.000
-8.800
Toet preparatons .
8,800
Retaers e cse ta es:
070,000
271,800
917.800
Furs
56.200
20,700
28.500
56.200
20. 700
28,500
Tota retaers e cse ta es 10.5. 00
105. U )
Msceaneous ta es:
Teephone, teegraph, rado, and cabe factes, eased
28.000
13.300
21,300
f2.300
13. 31 )
3.900
191.000
Transportaton of o bv ppe nes
Leases of safe-depost bo es
2.200
83, 100
1,700
107.900
2,800
dmssons to theaters, concerts, cabarets, etc
Cub dues and ntaton fees.
7,000
9.891
Oeomargarne, etc., ncudng s eca ta es, and aduter-
ated buttor _ _
2.300
,500
.900
62, 00
2.300
.5O0
. 900
62, t)
Coconut and other vegetabe os processed _
tumnous-coa ta
Sugar ta . _ .
Transocaton of persons
35.500
160.200
1.300
9,900
0
0
35. 500
160. 200
1.3O0
9.900
0
0
Use of motor vehces and boats
owng aeys, and bard and poo tabes
Con-operated amusement and gamng devces
Rado broadcastng
Outdoor advertsng
620
87.200
87, 200
620
Tota msceaneous ta es
208.320
30,800
639,120
Tota msceaneous nterna revenue (other than capta
stock, estate, and gft ta es)
2. 91.530
9 6. 00
3, 37.930
3, 135.630
1,087,900
,223.530
Treasury Department, Dvson of Research and Statstcs. Septembpr 2. 1911.
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Msc.
70
SUMM RY OF PRINCIP L C NG S.
L Indvdua Income Ta .
1. Reduced persona e emptons. The ouse b made no changes In the per-
sona e emptons provded by e stng aw. The commttee b reduces the
persona e emptons n the case of marred persons from 2,000 to 1,500 and.
In the case of snge persons, from 800 to 750. Ths broadenng of the ncome
ta base s thought to be desrabe partcuary durng the present emergency n
order that the greatest possbe number of persons may contrbute drecty to the
costs of the defense program.
It has been estmated by the Treasury Department that ths reducton n the
persona e emptons w requre the fng of ,911,000 new Income ta returns
an w ncrease the number of ncome-ta payers by 2.256,000. Under the
ouse b, t s estmated that 17,107,000 ndvdua ncome ta returns woud
have been fed, of whch 10.925,000 woud have been ta abe. Under the Fnance
Commttee b t s estmated that 22,108 000 ndvdua ncome ta returns w
be fed, of whch 13.181.000 w be ta abe.
The decrease n the persona e emptons has the effect of Increasng the ta
throughout the bracket structure. Ths ncrease s substanta n the ower
brackets. The foowng tabe sets out the addtona burden on snge persons
and on marred persons wthout dependents caused soey by the reduced
e emptons:
ddtona ta due to deereased e emptons.
Net ncome.
Sm-. r man
Marred
ronn no
dependents.
Net Incon e.
Snge man
750....
18011....
Woo ...
1,000..
1,501)...
2,000...
2,500 ..
3,000...
,000...
6,000
6,000 ..
7,000 .
8,000
9,000
10,000
2. 75
.95
.05
.95
.95
.95
6.80
a GO
8. 25
8. 25
10 5
10. 5
12 St
12.05
11) 70
9. 50
9. 50
00. 00
,., m
82 SO
82.50
10 . SO
10 . SO
126. 50
15,000...
20,000....
25,000....
30,000...
50,000....
60,000 ...
80,000 ...
1(10.090...
150,000 ..
250,000...
500.000..
7.50.000 .
1,000,000
2,000,000
5,000,000
2. Integraton of defense ta . Under the e stng aw and under the ouse
b the 10 ) er cent defense ta s added to the ta computed under the rates
provded n the norma ta and surta schedue. The ouse b makes the
defense ta permanent. Your commttee recommends and the commttee b
go provdes that the defense ta be ntegrated nto the basc surta rates. In
order to avod the use of fractona percentages, the surta rates have been
carred to the nearest whoe percentage fgure.
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Mso
The foowng tabe shows the Increase n the surta rates and cumuatve
surta burden caused soey by the ntegraton of the defense ta :
Comparson of surta rates and cumuatve surta .
Strta net ncome casses.
0 to 2,000
2.000 to .000
,000 to 6.000
6,000 to 8.000
8,000 to 10,000 ...
10,000 to 12,000 ..
12,000 to 1 ,000...
1 ,000 to 16.000._.
16,000 to IS,000...
18,000 to 20.000...
20,000 to 22,000 ..
22,000 to 26.000...
(,U to
00 to
00,000 to 70.000
70,000 to SO.000
S0.0C0 to 90,000
00,000 to on.ooo
100,000 to 150.000
. /).000to 00.00O ....
200,0(0 to 2 f.OOO ....
2.-0.000 to rtoo.ooo
300000 to mw.ooo ...
00,000 to - 0 .00O ...
500,000 to 750,000 ...
750,000 to 1,000,000 ..
1,000.000 to 2,000,000
2,000,000 to 5,000,000.
Over 5,000,000
Surta rates.
Present
aw.
ouse
b.
I er cm .
5
8
11
IS
19
22
25
28
31
n
36
39
2
5
3
SO
a
55
57
59
61
62
63
6
66
M
70
71
72
TS
7
75
Fnance
Commt-
tee b.
Per cent.
6
0
13
17
21
25

2
85
38
II
1
7
50
53
56
57
59
61
63
M
65
66
67
69
71
-
73
7
75
76
77
Cumuatve surt on hgher
amount shown n bracket.
Present
aw.
S0
200
360
560
800
1.100
1, 60
1,880
2.360
3, 0
5,2 0
7, 220
9,380
11,780
16, 180
20.880
25,880
31, ISO
36.780
65,780
95,780
126,780
158,780
22 . 780
292,780
67, 780
6 7,780
1,377, 780
:. .17, 7su
II MISt
b.
100
260
80
780
1. 160
1.600
2. 100
2.660
3,280
3.9 0
.660
6,220
8,7 0
11, 0
1 .320
17.320
22.620
28. 120
33.820
39.720
5.820
76.820
108. 320
1 0.320
173, 320
2 1,320
311,320
88,820
668.820
1.398,820
3,618,820
The foowng tabe sets out the effect of the ntegraton of the defense ta by
showng the ncreases or decreases n ta caused soey thereby:
Net ncome.
Snge
Marred
man no
dependents.
Net Income.
Snge
man.
Marred
man no
dependents.
1.60
3 .10
81.85
72.10
127.35
122. 10
152.60
1 9.60
136.60
139.60
-23.65
-10.90
- 20.65
- 0 .90
-990. 15
-963.90
-1,335.60
-1, 07.60
-1, 587.10
-1.660.60
-1.98 . 10
-2,05 .60
-3,23 .85
-3.306.10
- . 235.60
- .307.60
-7,236,35
-7,309.10
-13, 237.10
-13,310.60
1.30
2.00
2.70
2.60
1.00
2.90
8.30
11.70
13.10
12.50
15,000....
20,000 ..
25,000...
30,000....
50,000...
60.000...
80,000...
100,000..
150.000..
250,000..
500,000..
750,000..
1,000,000
2,000,000
5,000,000
The foowng tabes compare the ta burdens and the effectve rates of the
present aw, the ouse b, and Ihe Fnance Commttee b on specfed net
ncomes of both marred and snge persons:
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72
Compartem of ndvdua ncome ta on specfed net ncomes (a ncome
corned) under present ar. ouse b, and Fnance Commttee b.
Net ncome.
750
800
800
1,000 ....
1,500
1,600 ...
2,000 ....
2,500
3,000
,000 ....
5,000 ...
8,000
7,000
8,000
9,000 ...
10,000 . .
15,000 ...
20,000 ...
25,000
30,000
50,000 ..
60,000 ...
80,000 ...
100,000 ..
150.000...
1250,000 ..
500.001) ...
750,000 .
1,000,000.
2, .1 10
5,000,000
Snge person.
Fnar.oe
Fnance
Present aw.
ouse b.
Comnuee
Present taw.
ouse b.
Commttee
b.
b.
3 00
0.
5
9
11. 11
0
15
0
21.00
2 . 20
62
70
00 00
28. 16
72
78.60
6 00
.00
110
00
117.00
2.00
63.80
157
30
165. 00
11
00
38 50
90.00
83.60
211
20
220. 50
30
80
85. SO
13100
123. 20
338
80
316. 50
70
III
ISO 0
2 9.00
171.60
73
d
82. 50
O
00
308 I I
375.00
255. 20
633

618. 50
1 9
50
35 60
521.00
3 3 20-
803
00
82 . 50
233
10
596.20
6S7.00
8. SO
1.007
Of
1. M30. .50
316
80
756 80
87100
5y . 80
1.221
(10
1.2 6.50
22
n
961. 0
1.079.00
686. 0
1. 69
60
1. 92. 50
52S
00
1.166. 00
1.305 00
1. 76.20
2. 93
80
2. 99 . 00
1. 258
0
2. 5 5. 0
2,739.00
2. 660. 0
.826
80
.929 00
2.336
In
,338. 0
,01 .00
, 252. 60
7. 073
n
7. 22 .00
3,8 3
.II
6, 505. 0
8.86 .00
6. 063. 20
9. 5 3
111
9. 721.50
5, 61
0
8,936. 0
9.339.03
1 , 709. 20
20. 71. .
20
20. SSI..50
It. 128
0
20.01)2. 0
20. S9.ro
19.05 . 00
26. 958
M
26. 66 .50
19,320
0
26. 206. 0
26.50t. 0)
31, 51.20
0. 12.1
III
39, 736. 50
3(1. 738
.
39.318. 0
39,2 9.00
, 268. 0
5 . 168
0
53.21 . O
3. 76
0
53.310 0
52.70 .00
78,350. 80
89.012
0
87. 700. .50
77. 532
I
S8.299. 60
87.189.00
1 7. 576. 0
159. 7 8
00
158. 191. 50
1 6. 863
60
159.013.60
157. 659 00
330, 033. 20
3 7, 60
80
3 5, 65 0(1
330.1.55
50
316,805.60
3 5.08 .00
522, 18.80
5 1,3 7
60
538. 1 6.50
521. 619
m
.5 0. 537. 60
537.569 00
718, 0 . 0
737. 3 0
0
733, 139 00
717. 5 3
60
736, 519. 60
732, 55 .00
1.511.307. 20
1, 530. 333
20
1.523. 131.50
1,510.505
60
1,529.501.00
1.522,539.00
3,917, moo
3,936, 326
00
3,923. 12 .00
3. 916, .5 7
50
3.935, 83.60
3.922.52 .00
Marred person.
Comparson of effectve rates of ndvdua ncome tar on specfed net ncomes
(a ncome earned) under present ac. ouse b, and Fnance Commttee
b.
Net ncome.
Snpe person.
Present
aw.
ouse b.
Marred person, no dependent
Fnance
Commt- I
tee b
Present
aw.
ouse b.
Fnance
Commt-
tee b.
Per cent.
Per cent.
Per cent.
Per cent.
Per cent.
Per cent.
0. 0 8
. 0
1.613
1. 760
2 200
2. 552
2.786
3 . 0S0
3. 32
. 253
.902
5. 610
6. 20S
6.86
9.8 1
13. 332
17. 010
20. 210
29. 18
33. 256
39 31
. 268
52. 233
59. 030
66.ISO
69. 665
71.8 0
75. 569
78. 3 7
0 660
1.5 0
. 180
. 510
5. 500
6.292
7. ( O
8. 70
9. 60
10. 560
11. 71
12. 595
13. 566
1 . 69(1
19. 565
2 . 13
28.292
31.812
1. 130
.931
50, 15
5 . 168
59.3 1
63. 899
69. 529
72. 179
73 73
76.516
78. 726
0 375
1. 266
2. 100
.600
. 912
5. S50
6.600
7. 350
8. 662
9.650
I. SO
11.778
12 SSI
13. 850
1 .925
19.960
2 . 6 5
28. 896
32. 05
1.763
1.91
9. 670
53.21
58. 71
63 276
69 130
71.752
73.313
76. 156
78. 62
0. 0
1.026
1.760
2. 200
2. 93
3.331
3. 960
.693
5. 280
15.373
18.71
28. 256
32.200
3S. 23
3 76
51.688
58.7 5
66.031
69. 5 9
71. 758
75.528
78.330
I 5 0
2.860
.510
6. 160
7.200
8. 517
9. 60
10.682
11.680
16.969
21 092
26.021
29. 7S8
0.00
3. 677
9 1 8
53.310
58.866
63.605
69 381
72.071
73. 651
76. 75
78.709
0.375
2. 10(1
3 600
.600
6.225
7.500
s. 6 3
9.81
10.912
II I v
13.050
I S 260
23.070
27 55
31.130
0.878
1M
9 061
52 70
58.126
61 t
69.016
71.675
73.255
76. 126
78. 50
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73
Msc.
3. Returns rere gross ncome s 3,000 or ess. In order that persons In the
ower Income ta brackets,, partcuary those brought n by the reducton of
the persona e emptons, may e caused a mnmum of dffcut; n fng out
ther returns, the optona use of a smpfed return s provded where the
gross ncome of the ta payer does not e ceed 3,000. If the ta payer eects
to use ths smpfed pan, the amount, of the ta may be ready ascertaned
by reference to a tabe contaned n the b. Ths smpfed return may be
used ony where the ta payer s Income, s derved soey from saares, wages,
compensaton for persona, servces,, dvdends, nterest, rent, annutes, or
royates. If the ta payer eects to use ths method, no deductons of credts
aganst net ncome are aowed. In eu of these deductons and credts, the
tn provded n the tabe represents a reductou of 10 per cent of the ta
that woud otherwse be payabe wthout such deductons or credts. Ths 10 per
cent reducton has been found to e the,effect of the average amount of de-
ductons tukea by persons. n the ower ncome brackets. , One set of rates Is
provded. for marred persons or heads of fames and another s provded
for snge persons (not heads,of fames). In determnng the amount payabe,
the ta payer n ether case reduces hs gross ncome by . 00 for each dependent,
then by reference to the approprate tabe he ascertans the ta set out
opposte the amount so determned.
It shoud be kept n mnd that the use of the smpfed return s at the
opton of the ta payer and he eects each year whether to use ths method or
to fe under the genera provsons. owever, once the return for any year has
been fed under ths method, the eecton sha he Irrevocabe, and f the ta -
payer fes under the genera provsons for any year e may not thereafter
eect for such year to be ta ed under the smpfed method. Nonresdent aen
ndvduas, estates, or trusts are not aowed to use the smpfed method.
Tbe foowng tabe taken from the b sets out the amount of ta to be pad
on specfed amounts of ncome:
If tte dross
ncome s Ovff
ut not
over
775
800
825
850
875
900
(20
MO
975
1,000
1,025
1,050
1,075
1, 100
1,125
1, 150
1, 175
1.200
1,225
1,250
1,275
1,300
1,325
1,350
1,375
1, 00
1, 25
1, 50
1, 75
1,500
1,625
1,550
1,575
1,600
1,625
1,650
The ta sha be
Snce
person
(not head
of a
famy).
ead of
famy or
marred
person.
If the dross
ncome s over
1.650..
1,675..
1,700 .
1,725 .
1,750 .
1,775..
1,800..
1,825 .
1.860..
1.875..
1,1)00..
1,825 .
1,950 .
1,975..
2,000..
2,025 .
2.050..
2,075 .
2.100..
2.125..
2,150..
2,175 .
2,200..
2,225..
2.250..
2,275..
2.3(10..
2,325..
2,350..
2.375..
2, 00 .
2. 25..
2. 50..
2. 75..
2,500..
2,525..
2,550..
M not
over
1,675
1,700
1,725
1,7.50
1,775
1.800
1.825
1,850
1,870
1,900
1,925
1,950
1. 975
2,000
2,026
2,050
2.075
2. 100
2, 125
2. 150
2, 175
2,200
2,225
2,250
2,275
2. 300
2,325
2,350
2.375
2, 00
2, 25
2, 50
2, 75
2,500
2,525
2,550
2,575
The ta sha bo
Snce
person
(not head
of a
famy).
76
78
80
83
85
87
80
I
93
00
98
100
102
10
10(1
M
n
113
115
117
119
a
t
126
12
130
III
13
137
130
1 1
1 3
1 5
1 7
150
152
16
ead of
famy or
marred
person.
9
11
13
15
17
U
23
2
26
18
80
32
35
37
39
1
a
u
8
60
02
M
66
68
00
08
65
87
69
71
73
70
78
1611 2 31
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Msc.
7
IT the gross
ncome s over
ut not
over
The ta sha be
Snge
person
(not bead
o a
famy).
ead of
famy or
marred
person.
If the
Income s over
at not
over
The ta sha be
Stape
person
(not bead
of a
famy).
2,157.5
2,600
2,625
2,650
2,675
2,700
2,725
2,750
2,776
2,600
2,626
2,650
2,675
2,700
2,725
2,750
2,775
2,800
156
168
160
163
161
167
f ,
172
17
89
91
03
95
97
99
102
10
106
2.800.
2,825.
2,850-
2,875-
2,900.
2,925.
2,950-
2,976-
2,825
2,860
2,875
2,900
2, 925
2,950
2,976
8,000
177
180
183
186
180
191
19
197
. Communty ncome. ver snce the advent of the ncome ta , the dsparty
n the ta aton of ncome In the communty-property States as compared wth
that n the nonconmunty-property States has caused consderabe concern.
Ths stuaton as become more accentuated as the graduated surta rates have
been ncreased from tme to tme. Marred persons n the communty-property
States under e stng aw are abe to effect substanta ta savngs as com-
pared wth marred persons n the other States. Remedes for ths Inequtabe
stuaton have been frequenty recommended to the Congress by the Treasury
Department and by varous other ta e perts. Wth the substanta ncreases
n the surta rates contaned n the b, these nequtes become more apparent
and ther termnaton more desrabe.
Consequenty, your commttee b provdes a method whereby ta payers In
communty-property States are paced on a party wth a other ta payers and
w pay the same amount of ta as do ndvduas smary stuated n the non-
conmunty-property States.
The foowng tabe shows the Federa ncome-ta benefts whch accrue to
the earner of ncome n a communty-property State as compared wth the
earner of ncome n a noncomnunty-property State:
Ta on specfed earned net ncomes.
Ta
Ta f
equay
dvded
between
husband
and wfe.
Ta sav-
ngs n
com-
munty-
property
States.
Ta
Ta f
equay
dvded
between
husband
and wfe.
Ta sav-
ngs n
com-
munty-
property
States.
under
Fnance
Coru-
mUeo
b.
under
Fnance
Com-
mttee
b.
arned net In-
comes.
arned not n-
comes.
3,500
186
2 9
186
30,000
9, 339
20, 39
26,509
39,29
62,70
87. 189
167, 559
3 5,08
637,569
732,55
1, 522, 539
3, 922, 62
5,988
1 , 8
19. 3
30,153
1,763
72,973
1 0,913
316,383
501,823
691,3ns
1, 66, 278
3,8 6,2 8
3,351
6.991
7,068
0.1 1
10,9 1
1 . 216
16,7 6
28,701
35,7 6
1,2
66,261
76,276
,000
23
330
1
15
6
50,000
6,000
375
621
687
873
1,079
1, 305
1,817
2.739
3.819
,61
6,80
60,000
6,000
80
120
180
260
3 0
620
88
1,328
1,629
2,509
80,000
7,000
667
693
819
965
1,297
1,855
2, 93
2,985
,355
100.000
8,000 .
150.000
9,000
10.000
12.000.,-
750.1 10-
15,000-
1.000,000
18.1 10
2.000.000
20.000
5,000,000
25,000
It w be noted that an Indvdua wth a net ncome of 10,000 saves 3 0
Federa ta soey by reason of beng a resdent of a communty-property State
n ndvdua wth an ncome of 5,000 saves 5. n ndvdua wth an n-
come of 30,000 saves 3,351, and an ndvdua wth an ncome of 500,000 saves
28,701.
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75
Msc.
There are ony a few persons n the communty-property States who derve
any Federa ta beneft out of the communty-property system. Ths s shown
by the foowng tabes:
Returns fed n communty-property States n 193S.
Tota
number
of returns.
Com-
munty-
prowty
returns.
Per cent
of tota.
Caforna
20. 7
623. ISMS
713
22,859
11
8,776
330
60S
13, 375
3.336
1. 9
.36
8.11
6. 0
8.78
.
6. 52
1.13
13,223
Nevada
59. O
8.909
Washngton 1
13.690
205. 25
106, 72
Tota
950, 770
5, 17
.78
Incudes aska.
Net ncomes shown on returns fed n communty-property States, 1038.
State.
Tota net
Income, a
returns.
Net Income,
communty-
property
returns.
Percent
of tota.
Caforna -
56,359,000
1,569,97 .000
3 . 180.0 )
6,832,000
27 , 29.000
3, 89,000
3. 137,000
3,712.000
5, 72.000
162.073.000
30.775.000
1112
17. 8
10.21
22.62
13.26
10.50
23.86
11.19
Nevada
191. 5 1.01 1
27. 9 9. 000
39,211.00(1
683,096,000
275.001,000
Tota - -
2, 877, 11,000
6)0,819.000
18. 6
Incudes aska.
Source: Statstcs of Income 1938.
Comparson of number of communty-property returns fed n 1938 by net-
ncome casses tota number of returns fed n the eyht communty-property
States.
Per cent
Tota num-
Communty-
communty-
Net-ncome cass.
ber of returns
pro||erty
property re-
fed.
returns.
turns to tota
returns.
Under .r ,000
8 ,8, 882
0
69. 7S9
30.53
3.75
10,000 to 15,000
10,907
7.38
67.70
6, 01
,381
67.81
25,000 to 50,000
8,187
2,331
66.85
60,000 In 100,000..
969
636
65.63
Over 100,000
275
151
5 .91
050, 770
5, 17
.78
Source: Statstcs of Income, 1938.
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76
Not ony does ths ta savng beneft ony a few Indvduas In the communty-
property States, but, as shown by the foowng tabe, ess than 1 per cent of the
tota returns fed In the country represent communty-property returns I
Indvdua returns wth net ncome (e cudng fducary returns), 1938, by se
and famy reatonshp: number of returns, net ncome, and percentages.
Returns.
Net ncome.
Famy reatonshp.
Number.
Per cent
of tota.
mount
(thousands
of doars).
Per cent
of tota.
ont returns of husbands, wves, and dependent chdren,
and returns of ether husband or wfe when no other re-
turn s fed
2,808,026
6.60
10,001,88
53-80
Separate returns of husbands and wves:
152, 6M
153,1 3
2. 8
2. 9
1,593.939
8.5
S.71
eads of fames:
Snge men and marred men not vn wth wves
895,073
6. 2
1,0 0,372
72,99
2,611.197
1
Snge women and marred women not vug wth hus-
bands _
210,1 3
8. 2
a S3
Not heads of fames:
Snge men and marred men not vng wth wves
Snge women and marred women not vng wth hus-
bands
1, 18, 389
23.06
13.99
909,935
5, 17
1 .79
1.717,196
20
.7
530,819
2.85
6,150, 776
100.00
18,660,929
Source: Statstcs of Income, 1938.
5. mony and separate mantenance payments. Under the e stng aw
perodc payments of amony or for separate mantenance are not deductbe
from the gross Income of the spouse makng such payments and are not ta abe
to the spouse recevng them. Tms, for e ampe, a husband s ta ed upon
hs entre ncome even though a consderabe amount thereof may be gong
perodcay to hs spouse or to hs former spouse under a court decree or under
a wrtten nstrument ncdent to a dvorce or separaton. Ths stuaton has
resuted n substanta hardshp n certan cases. Your commttee b there-
fore provdes that perodc payments of amony or for separate mantenance
sha, n ta abe years begnnng after December 31, 19 1, be ncudbe n the
gross ncome of the recpent and sha be deductbe from the gross ncome of the
payor. Lkewse, In the case of trusts for the payment of amony or separate
mantenance, the b provdes that the trust ncome sha be ta ed to the
benefcary, rather than to the grantor.
II. Corporaton Income and cess-Profts Ta es.
1. CORPOR TION NORM L T .
The e stng rate of norma ta appcabe to corporate ncomes generay s
equvaent to 2 per cent Ths percentage s the sum of 22.1 and 1.9, the former
beng the basc rate appcabe to net ncomes for ta abe years begnnng after
December 31, 1939, and the atter beng the 10 per cent ncrease over the basc
rate of 19 per cent, whch was made appcabe by the Revenue ct of 19 0
(though subsequenty ncreased to 22.1 by the Second Revenue ct of 19 0) to
ta abe years begnnng after December 31, 1939. The ntegraton of the defense-
ta rate of 1.9 per cent wth the basc rate removes consderabe confuson and
at the same tme accompshes the resut of the ouse b n makng the
defense ta permanent
The e stng rates (Incudng the defense-ta rates) appcabe to corporate
net ncomes of 25,000 or under are graduated as foows: 1 .85 per cent on
norma ta net ncomes not n e cess of 5,000; 16.5 per cent on the porton of
such net ncome In e cess of 5,000 and not n e cess of 20,000; and 18.7 per cent
on the e cess over 20,000. The commttee b ntegrates the defense ta app-
cabe to such net ncomes and at the same tme rounds them off to 15, 17, and 19
per cent, respectvey.
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Msc.
These rate changes requre an approprate rate change n the ta on corporate
net ncomes somewhat n e cess of 25,000. That ta s the esser of an amount
equvaent to 2 per cent of the tota net ncome and an amount equvaent
to the sum of ,250 and 37 per cent of the net ncome n e cess of 25,000. The
mount of net ncome upon whch the ta s the same, under whchever of these
two methods t s computed, s 38, 61.5 . The purpose of ths so-caed notch
provson s, of course, to avod an abrupt ascent from an effectve rate of 17
per cent (the ta on a net ncome of 25,000 s ,250, or 17 per cent) to one of
2 per cent.
2. CORPOR TION SURT .
The ouse b Imposed upon corporatons a surta of 5 per cent of the frst
25.0110 of surta net ncome and 6 per cent of the baance. Your commttee b
ncreases these rates to 6 and 7 per cent, respectvey. s stated In the report
of the Commttee on Ways and Means, the surta s empoyed as the ony means
of reachng ncome from the arge voume of partay ta e empt Federa se-
curtes hed by corporatons. Of the tota amount outstandng, neary 31,000,-
O00.000, over 51 per cent s hed by banks and neary 20 per cent by nsurance
companes.
Your commttee aso made a change n the corporate surta base, the purpose
of ths change beng to effect the equtabe operaton of the ta . Under the
ouse b, corporaton surta net Income s defned as the net ncome mnus
the credt for dvdends receved provded for n secton 20(b) of the Interna
Revenue Code. The credt aowed s 85 per cent of the amount of such dvdends
but s sub|ect to the mtaton that t may not e ceed 85 per cent of the ad|usted
net ncome. d|usted net ncome, for the purposes of the corporate ncome ta ,
s defned as the net ncome mnus the credt for nterest on obgatons of the
Unted States and ts nstrumentates whch s aowed to an ndvdua as a
credt for the purposes of hs norma ta . Inasmuch as such nterest s ncuded
by the h n surta net ncome for the purposes of the corporate surta , t s
thought to be n the nterest of the far operaton of the ta to substtute for the
mtaton under the ouse b a mtaton based on the amount of the net
ncome.
3. c .ss-rRoms ta
Speca 10 per cent e cess-profts ta . Your commttee b emnates the pro-
vson of the ouse b mposng a speca ta of 10 per cent upon the e cess
of the ad|usted e cess-profts net ncome computed under the ncome credt over
the ad|usted e cess-profts net ncome computed under the nvested capta credt.
Whe n sympathy wth the stated ob|ectve of the proposed ta to reach
profts whch, though substantay n e cess of those of the base perod, escape
e cess-profts ta by reason of the aowance of the credt based on nvested
capta your commttee beeves that t s nconsstent wth the fundamenta
pocy of Congress as e pressed n the e stng e cess-profts ta aw. The n-
consstency woud be more pronounced, n fact, under both the ouse and the
Fnance Commttee bs, n vew of .the fact that both dsaow norma ta as a
deducton n determnng e cess profts net ncome. The effect of the dsaow-
ance upon the e cess-profts credt, especay n the case of the credt computed
on the bass of nvested capta, s to mprove the effectveness of the e cess-profts
ta and, therefore, correspondngy to reduce the effectveness of the nvested
capta credt as a reef measure.
The emnaton of ths speca 10 per cent ta s aso |ustfabe, n the opnon
of your commttee, on the ground that n many cases the earnngs of the base
perod do not provde the proper measure for the determnaton of e cess profts
n the ta abe perod. Many crcumstances may have e sted n the base perod
as a resut of whch earnngs at that tme were qute abnorma. In the case
of corporatons organzed n the frst or a subsequent year of the base perod,
the average-earnngs credt woud kewse be entrey nadequate.
In the absence of ths ta there s no need for the compementary provson
of the ouse b under whch the dscamer of credt was restrcted to the
nvested capta credt.
Corporatons mnng strategc metas. Secton 206 of the ouse h repeas
secton 731 of the Interna Revenue Code, a provson e emptng from e cess-
profts ta ncome derved from the mnng of tungsten, qucksver, manganese,
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78
patnum, antmony, chromte, or tn. In strkng out ths secton of te ouse
b your commttee eaves the e stng e empton unchanged.
It was fet that the dscontnuance of the e empton woud operate unfary
to corporatons whch had proceeded n the estabshment und e tenson of the
mnng propertes affected. These enterprses, moreover, have the character
argey of emergency enterprses, and the purpose of the e stng provson was
many to encourage the dscovery and producton of the metas mentoned. It
s conceded that the producton of such metas n norma tmes s argey n
foregn countres and that after the e stng emergency s over ther mportaton
w be resumed.
Reversa of the deducton for ncome and e cess-profts ta es. Whe your
commttee b makes no change n ths provson of the ouse b, t s fet
that the foowng e panaton taken from the report of the Commttee on Ways
and Means reatve to ths provson may be of vaue:
Under e stng aw, the ncome ta s nowed as a deducton In the compu-
taton of the e cess-profts ta . It seems unfar to aow that part of the ncome
ta whch s computed on ncome whch s not sub|ect to the e cess-profts ta to
reduce the e cess-profts net ncome. Canada aows ony that part of the ncome
ta whch s computed upon ncome sub|ect to the e cess-profts ta . Under the
Word War ct, the e cess-profts ta was aowed as a deducton n computng
the norma ta , but the norma ta was not aowed as a deducton n computng
the e cess-profts ta . Ths s aso the rue whch s now apped by the rtsh.
The ta resut n Canada s practcay the same as the rtsh rue and our 1018
rue. owever, t s beeved that the Word War rue s much smper n ts
appcaton. Your commttee has, therefore, deemed t advsabe to return to
the 1918 rue, and has dsaowed the deducton of ncome ta es, both n the base
perod and n the ta abe year, n computng the e cess-profts ta . The deduc-
ton s aowed n computng both the norma ta and the surta . The effect of
the reversa of the deducton s that the 8 per cent credt on nvested capta pro-
vded n the b s equvaent to a credt on nvested capta of 5.6 per cent after
deducton of the norma tu and surta , and the 7 per cent credt on nvested
capta s equvaent to a credt on nvested capta of .9 per cent after deducton
of the norma ta and surta .
In eu, however, of the e ampe contaned n the Ways and Means Commttee
report showng the effect of ths provson, the foowng e ampe s substtuted
so as to refect the changes n surta rates made by your commttee b:
Corporaton wth an e cess-profts credt of 10,000,000, ether under the
average-earnngs or nvested capta method, and a ta abe year s net ncome of
12,000,000, or 2,000,000 n e cess of ts e cess-profts credt whch t made
from defense contracts.
WIT OUT R RS L OF CR DIT.
Net ncome 12, 000,000
Less norma ta and surta :
Norma ta at 2 per cent 2,880,000
Surta 6 per cent on frst 25,000 1,500
7 per cent on baance 838,250
Tota norma ta and surta 8,719,750
Net ncome ess norma ta and surta 8,280,250
cess-profts credt 10, OOP, 000
cess-profts carry-over 1, 719,750
WIT R RS L OF CR DIT.
Net ncome 12,000,000
cess-profts credt 10,000,000
d|usted e cess-profts net ncome 2,000,000
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T .
Frst 500,000 25 ,000
aance at 60 per cent 900-000
Tota e cess-profts ta 13 ,000
NORM L T ND SURT .
Net Income
Less e cess-profts ta 1, 15 , 00U
Norma ta net Income 10,8 6,000
Norma ta at 2 per cent 2, 603, 0 0
Surta , 6 per cent frst 25,000 1. OTO
aance at 7 per cent 757 u
Tota norma ta and surta 3
Pus e cess-profts ta 1,15 , 000
Tota ta wth reversa of credt , 516,010
Tota ta wthout reversa of credt 3 719, 7o0
Increased amount of ta 796,260
In the above case, t w be noted that wthout the reversa of credt ths
corporaton, athough t made an e cess proft of 2,000,000 out of defense con-
tracts, pays no e cess-profts ta and woud have a carry-over credt of 1,719,-
750 to appy aganst ts e cess profts n the foowng year, whereas under
tte reversa of credt t woud pay 1,15 ,000 e cess-profts ta , pus 3,362,101
norma ta and surta , or a tota of ,516,010, or 796,260 more than t woud
pay wthout the reversa of credt.
. C NG S ND DISTRI UTIONS IN OR DI NC TO ORD RS OF S CURITI S ND
C NG COMMISSION.
Suppement R of Chapter 1 of the Interna Revenue Code contans provsons
governng the nonrecognton of gan or oss and the bass for determnng gan
or oss upon e changes and dstrbutons n obedence to orders of the Securtes
and change Commsson. Secton 373 of the Code contans a defnton of
such orders, and one of the mtatons under that defnton s that the order
must be ssued after May 28, 1938, and pror to anuary 1, 19 1. The com-
mttee b contans a new provson under whch the e stng perod of ssuance
s e tended to anuary 1, 19 3. The amendment s desgned to e tend the
advantages of the suppement to e changes and dstrbutons the order for
whch by the Securtes and change Commsson can not be ssued wthn
the mted perod provded for n e stng aw.
III. Capta Stock Ta and Decared aue cess Profts Ta .
1. C PIT L STOC T .
The ouse b ncreased the capta stock ta rate from 1.10 ( 1 pus 10
cents defense ta ) per 1,000 of ad|usted decared vaue to 1.25, effectve for
the year endng une 30, 19 1. In addton, the Commssoner of Interna
Revenue e tended the tme for fng returns and payng the ta for such year
unt September 29, 19 1. Ths s the ongest e tenson of tme permssbe
under e stng aw.
Your commttee b retans the rate provded n the ouse b. In addton,
t authorzes te Commssoner to e tend the tme for fng returns and payng
the ta for the year endng une 30, 19 1, to not more than 90 days. Ths
w permt an e tenson of 30 days beyond September 29, 19 1.
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80
Under e stng aw corporatons must decare ths year a capta stock vaua-
ton bndng upon them for ths year and the two subsequent years. ecause of
the great dffcuty under present condtons n estmatng future Income, par-
tcuary n vew of the possbe restrctons that may resut from prortes,
your commttee deems t equtabe to aow an annua decaraton of capta
stock vaue.
2. D CL R D LTTO C SS-PROFITS T .
The Iouse b makes permanent the 10 per cent defense ta as apped
to the decared vaue e cess-profts ta . ere, as n the ncome ta , It s fet
desrabe to ntegrate the defense ta nto the basc decared vaue e cess-profts
rates. Thus the basc rate of 6 per cent becomes 6 o and the 12 per cent rate
becomes 13 o- No change n the effectve rate s accompshed thereby.
I . state and Gft Ta es.
The ouse b ncreased the estate and gft ta rates and made permanent
the 10 per cent defense ta . The Fnance Commttee b retans the rate
ncreases but-ntegrates n these basc rates the 10 per cent defense ta nstead
of havng t appy as a separate computaton. In addng 10 per cent to the
estate ta rates n the brackets, fractons of percentages have been avoded.
The foowng tabe shows the bracket rates under the ouse b and those
under the Fnance Commttee b, aong wth the cumuatve ta on the hgher
amount shown n the bracket. It shoud be noted that to the ta as computed
under the ouse b the defense ta adds 10 per cent of the amount of the
ta so computed, whe under the Fnance Commttee b the defense ta Is
ntegrated nto the rates shown.
Douse bU.
Fnance Commttee
bU.
Net estate.
Cumuatve
tu on
hRher
amount.
Cumuatve
ta on
hgher
amount
racket
racket
rate.
rate.
Pa cent.
Pa cent.
3
150
3
150
7
500
7
500
10
1,500
11
1,600
13
2,800
1
3.000
16
. 00
18
.800
0,0(10 to 50,000
20
6, 00
22
7,000
23
8,700
25
9,500
25
18.700
28
20.700
100,000 (o 2 1,000
27
59,200
30
65,700
29
131.700
32
1 5,700
32
2U, 700
85
233.200
750,000 to 1,000,000
3
296,700
37
325.700
36
3S8, 700
39
23.200
38
81,700
2
628.200
1
686,700
5
753.200
2,000,000 to 2,500,000
6
911,700
9
u am
2,500,000 to 3,000,000.
8
1,151,700
53
1,263.200
3,000,000 o 3,500,000 _
51
1, 06,700
66
1.5 3,200
5
1, 676, 700
59
1.838,200
,000,000 tn 5,000,000...
58
2, 256. 700
63
2, 68,200
5,000,000 to 0,000,000
61
2,866.700
67
3,138,200
6
3,506, 700
70
3,838.200
7,000,000 to 8,000,000
66
,166,700
73
.568,200
8,000,000 to 10,000,000.
69
5, 5 6,700
76
6,088,200
Over 10,000,000 --- .
70
77
The foowng tabe shows a comparson of the Federa estate ta burden
(before aowance of credt for State death ta es) under e stng aw, the ouse
b, and under the Fnance Commttee b upon net estates (before e empton)
of seected szes:
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81
Mso.
Net estate
mount of ta .
Present
aw.1
ouse
b.
Fnance
Commt-
tee bn.
ffectve rate.
Pres-
ent
aw.1
ouse
b.
Fnance
Com-
mttee
b.
Increase n ta over present aw.
mount.
ouse
b.
Fnance
Com-
mttee
b.
Per cent.
ouse
b.
Fnance
Com-
mttee
b.
SSO.OOO....
fO,000
I,000
S 100,000 ..
S2OO.000...
0,000...
o.ooo...
1,000...
1,000,000..
0,000
,000,000....
110.000,000 ..
).000,0O0 ..
.OOO.OOO..
o.ooo.ooo
- 10,000.
220
600
2,2(0
,620
21,660
63,780
112. 3 0
167, 3 0
228.780
5N8,mo
90.6 0
068,1 0
323,500
532,700
:w a
361,380
521,380
550
1,650
,8 0
9,570
38,270
99,530
16 .590
23 ,330
308.090
727,370
1, 792,570
3,075. 50
5,96 .250
13,503,890
28, 583,890
3,663, 890
73,823,890
500
, eoo
.800
9.500
38,700
100,9O0
166,700
236.900
310,9001
735,200
1,81 ,600
3, 111. 00
6,057.800
13, 757, 00
29, 157. 00
, 557, 001
75,357, 00
Per
cent.
M
2.8
.6
10.8
15.9
18.7
20 9
22.9
29.
37.5
3
53 2
62.7
68.5
70.6
72.5
Per
cent.
1.1
2. S
6.1
9. e
19. 1
2 .9
27
29.3
30.8
3h It
.8
51.3
69.6
67.5
71.
72.8
73.8
Per
cent.
1.0
2.7
6.0
9.5
19.
25.2
27.8
29.6
81.1
36.8
U
51.9
60.6
68.8
72.91
7 .31
75.
2,6 0
.950
16.610
35.750
62,250
66.990
79,310
139.370
292,930
20,310
6 0,750;
971, 190
1, 192,070
1,302.510
1, 302, 510
2,600
.880
17.0 0
37, 120
6 .360
69,560
82.120
nr. 2oo
31 ,960
56.260
73 ,300
1,22 ,700
1. 765,580
2, 190.020
2,836,020
150.0
150.0
120.0
107.1
76.7
66.1
6.51
0.0
3 .7
23.7
19.5
16.8
12.0
7.7
.
3. 1
1.81
127.3
1 2.
118.2
105.6
78.7
58.2
8.
1.6
35.9
25.0
21.0
17.2
13.8
9.8
6.
5.2
3.9
( Incudes the defense ta whch s equa to 10 per cent of the Federa ta after aowance of the credt for
State death ta es (the credt for State death ta es s assumed to be 80 per cent of the ta mposed under the
1926 ct).
s under both the e stng aw and the ouse b, the gft ta rates are f ed
at three-fourths of the comparabe bracket rates of the estate ta . The foowng
tabe compares the gft ta rates under the ouse b wth those under the
Fnance Commttee b and shows the cumuatve ta on the hgher amount shown
n the brackets. s under the estate ta . t shoud be noted here aso that the
10 per cent defense ta s added to the ta as computed under the rates of the
ouse b, whe under the Fnance Commttee b the defense ta Is ntegrated
nto the rates shown.
ouse b.
Net gft.
racket
rate.
Cumuatve
ta on
hgher
amount.
Fnance Commttee
b.
racket
rate.
Cumuatve
ta on
hgher
to to 5,000
0,000 to 10,000
10,000 to 20,000
20,000 to 30,000
30,000 to 0,000
0,000 to 50,000
50,000 to 60,000
60,000 to 100,000..
100,000 to 250,000
250,000 to 500,000
500,000 to 750,000
750,000 to 1,000.000
1,000,000 to 1,210,000
1,250,000 to 1,500,000
1, 500,000 to 2,000,000
2,000,000 to 2,500,000
2,500,000 to 3.011(1,000.
3,000,000 to 3,500.000
3,500,000 to ,000,000
1 ,000,000 to 5,000,000
5,000,000 to 6,000.000
6,000,000 to 7,000,000
7,000,000 to 8,000,000
8,000,000 to 10,000,000.
Over 10,000,000
Per cent.
2.25
5.25
7.50
9. 75
12.00
15.00
17.25
18.75
20.25
21.75
2 .00
25.50
27.00
28.50
30.75
33. 75
36.00
38.25
0.50
3.50
5. 75
8.00
9.50
51.75
52.50
112.5
375
1.125
2,100
3.300
,800
6, 525
1 .025
. 00
98,775
158,775
222, 525
290,025
361,275
515,025
683. 775
863. 775
1.055.025
1, 257. 525
1, 692. 525
2,150.025
2.630.025
3,125.025
,160,025
Per cent.
2.25
5.25
8.25
10.50
13.50
16.50
18.75
21.00
22.50
2 .00
26. 25
27.75
29.25
81.50
33.75
36.75
39. 75
2.00
.25
7.25
50.25
52.50
6 .75
57.00
67. 75
112.5
375
1,200
2,250
3,600
8,250
7, 125
15,525
9.275
109, 275
17 ,900
2 .275
317, 00
396, 150
86 .900
7 8,650
9 7, 00
1, 157. 00
1,378, 650
1,851,150
2,353, 650
2,878,650
3. 20, 150
,666,150
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82
. cse Ta es.
1. DISTILL D SPIRITS.
Under e stng aw the ta on dsted sprts (other than hrandy) Is 3 per
proof gaon and on brandy 2.75. The ouse b ncreased these ta es by t
makng the dsted sprts ta and that on brandy 3.75. Your commttee
b emnates ths dfferenta between brandy and other dsted sprts and
appes the rate to brandy as we as other dsted sprts.
a. WIN S.
The ouse b Increased the ta on wnes contanng not more than 1 per
cent of acoho from 6 cents per gaon to 8 cents; on wnes contanng more than
1 per cent but not more than 21 per cent of acoho, from 18 cents to 2 cents;
and on wnes contanng more than 21 per cent but not more than 2 per cent of
acoho, from 30 cents to 50 cents. Wnes contanng more than 2 per cent of
acoho are ta ed as dsted sprts.
It was ponted out by the Treasury Department that even these Increases were
not suffcent to brng the ta on wnes to a comparabe bass wth the ta es on
other acohoc beverages. Consequenty, your commttee recommends that the
8-cent rate be Increased to 10 cents, the 2 -cent rate Increased to 35 cents, and
the 50-cent rate ncreased to 65 cents. Lkewse, the rate of cents for each
one-haf pnt of champagne and sparkng wne, provded In the ouse b, s
ncreased to 7 cents, and the rate on artfcay carbonated wne and on queurs
and cordas s ncreased from 2 cents to 3 cents per one-haf pnt
3. DMISSIONS T .
Under e stng aw amounts pad for admssons of ess than 21 cents are
e empt from the ta on admssons. The ouse b reduced the e empton to
amounts of ess than 10 cents. Your commttee b emnates ths e empton
entrey. In addton, the ta rate provded n the ouse b of 1 cent for
each 10 cents or fracton thereof of the amounts pad for admsson has been
repaced by the foowng schedue of rates:
If the amount charged s The ta sha be
Not over 10 cents 1 cent.
Over 10 cents and not over 15 cents 2 cents.
Over 15 cents and not over 20 cents 3 cents.
Over 20 cents and not over 25 cents cents.
Over 25 cents and not over 35 cents 5 cents.
Over 35 cents and not over 0 cents 6 cents.
Over 0 cents and not over 5 cents 7 cents.
Over 5 cents and not over 50 cents 8 cents.
Over 50 cents 15 per cent of the amount
charged; fractons of
one-haf cent or more
sha be Increased to 1
cent; smaer fractons
sha be dsregarded.
Under e stng aw n the case of persons admtted free or at reduced rates,
a ta based on the estabshed charge appes, e cept when the person admtted
s a bona fde empoyee, muncpa offcer on offca busness, or a chd of ess
than 12 years of age. The ouse b e tends ths category to ncude members
of the armed forces of the Unted States and of the Cvan Conservaton Corps
when n unform.
ecause of the practce now generay foowed by many moton pcture the-
aters of admttng hgh-schoo-age boys and grs at reduced rates, the above
mtaton of 12 years of age has been Increased to 18 years by your commttee
b. Thus, wth respect to persons under 18 years of age, as we as the other
persons above descrbed, the ta s based upon the amount actuay pad and
not upon the estabshed prce.
The ouse b strkes from e stng aw a casses of e emptons from the
admssons ta e cept that based ony upon the amount pad. Your commttee
b restores the e empton of admssons to agrcutura fars and to certan
concerts conducted by cvc or communty membershp assocatons.
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. C R T, OOF G RD N, TC., T .
Whe your commttee has made no change n the ouse b wth respect
to ths ta , t fees that t may be desrabe to cear up a msunderstandng
whch has arsen regardng the rght of the operator of a cabaret, roof garden,
or smar estabshment to pass on to the patrons the amount of the ta pad.
s s the case wth respect to a other e cse ta es mposed by the Federa
Government, the aw mposes no restrcton upon the e tent to whch such ta es
may be passed on n the prce of the goods sod or In the payment for servces
rendered.
5. T O.N T L P ON , T L G r , ND C L M SS G S ND S R IC S.
Under e stng aw, teephone, teegraph, and rado or cabe messages are
ta ed n separate categores and at separate rates. The ouse b consodates
these tems and appes to the charge for such messages a ta of 5 cents for
each 50 cents or fracton thereof where the charge s more than 2 cents.
Your commttee b eaves the ta on teephone and radoteephone conversa-
tons as above descrbed, but on teegraph, cabe, or rado messages mposes,
n eu of the above rates, a ta of 10 per cent of the amount charged.
The ouse b contnued the present rate of 5 per cent .upon eased wre or
takng crcut speca servce but added to ths category certan wre and
equpment servces such as teetypewrter servce, burgar aarm servce, news
tcker servce, stock quotaton and nformaton servces. Your commttee b
paces eased wre, teetypewrters, or takng crcut speca servce n one
category and ncreases the ta on the amounts pad therefor from 5 to 10
per cent. It eaves n effect the 5 per cent rate wth respect to other wre and
equpment servces such as stock quotaton and nformaton servces, but spe-
cfcay e cudes news tcker servces where a genera news servce smar to
that contaned n the pubc press s furnshed. Lkewse, amounts pad for
burgar or (re aarm servces are e empted.
The ouse b mposed a ta of 5 per cent upon amounts pad by subscrbers
for oca teephone servce. The commttee b ncreases ths rate to 10 per cent
8. T ON SOFT DRIN S.
The ouse b contans a ta on botted soft drnks of one-s th of a cent per
botte on bottes to be sod at reta for ess than 10 cents per botte and at
correspondng rates on bottes to se for more than 10 cents. Smary, ta es
were mposed upon fnshed or fountan srups and upon carbonc-acd gas. It
was demonstrated to your commttee that these ta es woud prove a serous
hardshp upon botters, partcuary the smaer ones, and that the margn of
proft n many cases was ess than the ta whch woud have to be absorbed.
ta reduced to a pont where t coud be absorbed safey woud produce
very tte revenue but woud mpose the same admnstratve burden as the ta
at the hgher rate. Consequenty, your commttee has strcken ths ta from
the b.
T. T ON L CTRIC, G S, ND OIL PPLI NC S.
The ouse b Imposes a ta of 10 per cent upon the manufacturer s sae of
eectrc appances. It was ponted out that the e cuson of gas and o water
heaters and cookng appances created an unfar compettve stuaton. Conse-
quenty, these gas and o appances are ncuded n the ta abe category and
are ta ed at the 10 per cent rate.
8. W S ING M C IN S.
The ouse b ays a 10 per cent ta upon the manufacturer s sae of washng
machnes of the knd used n commerca aundres. Your commttee b appes
ths ta wth respect to a washng machnes.
9. L CTRIC LIG T UL S.
Your commttee has paced a ta of 10 per cent upon the manufacturer s
sae of eectrc ght bubs.
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10. R T IL RS CIS T S
In connecton wth the consderaton of these ta es, t was brought to th
attenton of your commttee that serous compettve stuatons mght arse
where some seers of toet preparatons, furs, or |ewery mght advertse or
otherwse represent that the prce for whch these artces are to be sod doea
not ncude the ta . Consequenty, a provson has been nserted mposng a
penaty of not more than 1,000 upon any person who n connecton wth the
sae or ease of furs, |ewery, or cosmetcs makes any statement ntended, or
cacuated to ead any person to beeve that the prce of such artce does
not ncude the ta .
11. T ON T TR NSPORT TION OF P RSONS.
No change s made n ths ta as contaned n the ouse b e cept to
e empt amounts pad for transportaton of not more than 1 cents per me
appcabe to round-trp tckets sod to soders, saors, marnes, and members
of the Coast Guard when n unform and traveng at ther own e pense.
12. T ON COIN-OP R T D MUS M NT ND 0 MINO D IC S.
The ouse b paces a speca ta of 25 per year upon each con-operated
amusement or gamrg devce mantaned for use on any premses.
Your commttee dvdes these devces nto two categores. Upon so-caed
pnba or other amusement devces operated by the nserton of a con or
token, the ta s reduced to 10 per year. Upon so-caed sot machnes,
however, the ta s paced at 200 per year.
IS. INST LLM NT S L S.
Where any artce sub|ect to a manufacturers e cse ta Is sod under an
nstament sae contract before the effectve date of Part I of ths b, and
devery s made before such date, the ta appcabe to the nstaments after
such date sha be at the rate n force pror to such date. s a resut, the
new ta es mposed by ths b or the ncreases n e stng ta es are not
appcabe to such nstaments.
smar rue s made appcabe wth respect to the new reta ta es
mposed by the b.
1 . OUTDOOR D RTISING.
The commttee emnated from the ouse b the secton mposng a speca
ta on persons mantanng or controng the use of bboards for outdoor
advertsng. The ta , an annua evy, was graduated on the bass of the
advertsng space area of the bboard.
In the opnon of the commttee ths ta woud enta admnstratve e pense
and dffcutes ncommensurate wth ts vaue as a revenue producer. It s
beeved aso that f such a ta were to be mposed t woud be desrabe to
provde for an e empton of bboards the use of whch s donated to the
Federa Government for the purpose of adng t In recrutng for the mtary
end nava forces and n the sae of ts securtes. It s regarded aso as a ta
reguatory n some degree of a matter whch mght preferaby be eft n the
hands of State and oca authortes.
15. R DIO RO DC STING ST TIONS ND N TWOR S.
The ta mposed by the ouse b on persons operatng rado broadcastng
statons or etgagng n network broadcastng has been strcken out. The
reasons n consderaton of whch the Ways and Means Commttee recom-
mended and the ouse adopted the ta are recognzed as havng consderabe
force, but t s beeved that the pecuar characterstcs of ths possbe source
of revenue requre carefu study before ether the proper bass or rate of ta
can be satsfactory determned. It s the opnon of the commttee aso that
the ta mposed by the ouse b woud operate wth some un|ustfed ds-
crmnaton aganst ths partcuar form of advertsng.
16. COCONUT OIL.
The commttee added to the nouse b a secton amendng Chapter 21 of
the Interna Revenue Code by addng at the end thereof a new secton, mun-
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85
Msc.
bered 2 83, whch provdes, under certan mtatons, that the processng ta
provded for n that chapter coected wth respect to coconut o whoy of
the producton of Guam or mercan Samoa or produced from materas whoy
of the growth or producton of those sands sha be hed as separate funds
and pad nto ther respectve treasures. The coectons affected are those
made after the date of the enactment of the b.
The provson s smar to an e stng provson, secton 2 75 of the Interna
Revenue Code, governng the dsposton of coectons from the processng
ta on coconut o whoy of Phppne producton or produced from materas
whoy of Phppne growth or producton.
I. Nonessenta Federa pendtures.
Ths amendment estabshes a commttee to Investgate nonessenta Federa
e pendtures. The commttee s to be composed of (a) three members of the
Senate Commttee on Fnance and three members of the Senate Commttee on
ppropratons, to be apponted by the Presdent of the Senate; (6) three mem-
bers of the ouse Commttee on Ways and Means and three members of the
ouse Commttee on ppropratons, to be apponted by the Speaker of the
ouse of Representatves; and (c) the Secretary of the Treasury and the Drector
of the ureau of the udget. It sha be the duty of such commttee to make
a compete study and nvestgaton of a e pendtures of the Federa Government
wth a vew to recommendng the emnaton or reducton of a such e pendtures
deemed to be nonessenta. The commttee sha report to the Presdent and
to the Congress the resut of ts study together wth ts recommendatons at the
earest practcabe date. It s gven the authorty and powers commony gven
to smar commttees of the Senate and w operate under an appropraton
not to e ceed 10,000.
Paraeng ths acton, your commttee aso adopted a commttee resouton
cang upon the Drector of the udget, under the udget and ccountng ct
of 1920, to submt to the charman of your commttee a report showng how
nondefense and nonessenta budget tems may be reduced by aternatve totas
of (1) 1,000,000,000; (2) 1,500,000,000; (3) 2,000,000,0110. Such report woud
be avaabe not ony to the approprate commttees of the ouse and Senate
but to the commttee estabshed under ths amendment. The acton of your
commttee n ths respect s n ne wth repeated recommendatons of the Secretary
of the Treasury before both the Commttee on Ways and Means of the ouse
and your commttee.
D T IL D DISCUSSION OF T PRO ISIONS OF T ILL.
Tte I Indvdua and Corporaton Income Ta es.
S CTION 101. SURT ON INDI IDU LS.
Under the ouse b, the surta es appy upon the entre surta net Income
and hence the e empton from surta of the frst ,000 of surta net ncome
found n e stng aw s aboshed. The owest surta bracket rate s 5 per cent,
as compared wth per cent under e stng aw. The surta es are ncreased n
a brackets up to 7.|0,000 and from that pont the rates of e stng aw are
retaned. Whe the rates attrbutabe to surta net Income In e cess of 750,-
000 are not ncreased, surta es payabe by ta payers n these upper brackets are
ncreased by reason of the hgher rates n the ower brackets.
Under the b as reported by your commttee, further ncreases n the surta
rates arc made as the resut of the ntegraton of the defense ta and the surta
rates. The owest surta bracket rate s therefore 6 per cent, as compared wth
5 per cent under the ouse b, end the rates on Income n e cess of 750,000
are kewse ncreased, the hghest rate beng 77 per cent, as compared wth the
75 per cent contaned n e stng aw and In the ouse b.
S CTION 102. OPTION L T ON INDI IDU LS WIT C RT IN GROSS INCOM
OF 3,000 OR L SS.
Secton 102 of the b adds to the Interna Revenue Code a new suppement
desgnated Suppement T and comprsng sectons 00 to 0 , ncusve. No
comparabe provsons are contaned n the ouse b.
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ft
Secton 00 of Suppement T Imposes a ta upon ndvduas whose gross ncome
s 3,000 or ess and conssts whoy of saary, wages, compensaton for persona
servces, dvdends, nterest, rents, annutes, or royates. The ta s mposed
at the eecton of the ta payer and s n eu of the ta mposed by sectons 11
and 12. If the ta payer s gross ncome e ceeds 3,000 or If he has ncome from
any source, or of any cass, other than those specfed n secton 00, he may
not ava hmsef of the eecton. For nstance, the secton s not avaabe to
a ta payer who has ncome from the conduct of a busness, or from a partnershp
or trust, or who has reazed gan from the sae or e change of property. If a
husband and wfe fe separate returns under the secton, the mtaton of 3,000
appes to the gross ncome of ech; f they fe a |ont return, the mtaton
appes to the combned gross ncome of the spouses.
The amount of the ta mposed on specfed amounts of gross ncome s deter-
mned by reference to the schedue set forth n secton 00, a dupcate of whch w
be prnted on the reverse of the form prescrbed for makng a return of the ta
under such secton. Gross ncomes are grouped n bocks of 25 wth the same
ta payabe for a ncomes fang wthn the partcuar bock. The ta mposed
s the amount appearng n coumn 3 or opposte the partcuar bock. If the
ta payer s a snge person who Is not the head of a famy, the ta mposed
s the amount set forth n coumn 3. If the ta payer s the head of a famy
or a marred person, the ta mposed s the amount set forth n coumn . If a
ta payer has one or more dependents, he merey subtracts from hs gross ncome
00 for each such dependent and fnds the bock n whch fas the reduced amount
The amount of the ta mposed n the varous bocks s the average of the ta
mposed by sectons 11 and 12 on the ower and upper mts of the bocks, reduced
by 10 per cent as an aowance n eu of deductons from gross ncome. The
schedue takes nto account a persona e empton of 750 for a snge person and
1,500 for a marred person or the head of a famy, the same as aowed by
secton 25 n respect of the ta mposed by sectons 11 and 12.
Secton 01 prescrbes certan rues to be observed n the appcaton of the
schedue set forth In secton 00. The secton states that ony a marred person
vng wth husband or wfe s to be deemed a marred person for the pur-
poses of Suppement T, and specfcay defnes a dependent. For the pur-
poses of ths Suppement, the status of a ta payer as a marred person,
head of a famy, or dependent s to be determned as of the ast day of
the ta abe year. Consequenty, the provsons of secton 25(b) (3) reatng to
the apportonment of the persona e empton and credt for dependents by reason
of a change of status durng the ta abe year have no appcaton In ascertan-
ng the amount of the ta under secton 00. Tms, f a ta payer has on the
ast day of the ta abe year a dependent wthn the meanng of the defnton
contaned n secton 01, he s entted to reduce hs gross ncome by 00 n
order to ascertan the amount of ta , and t s mmatera that the dependent
may have occuped such status for ony a porton of the ta abe year.
Secton 01 provdes that f a husband and wfe vng together fe separate
returns under secton 00, each sha be treated as a snge person. Thus, n
effect, each receves the beneft of one-haf the persona e empton aowed a
husband and wfe. If they fe separate returns and one spouse eects to be
ta ed under secton 00, such spouse Is ta ed as a snge person and n effect
receves the beneft of one-haf the persona e empton aowed a marred person.
The persona e empton and credt for dependents of the spouse who does not
eect to be ta ed under secton 00 s determned under the provsons of secton
25(b) and s not governed by hs status on the ast day of the ta abe year.
Under the provsons of secton 25(b), as amended by secton 111 of the b,
such spouse w be aowed for that porton of the ta abe year durng whch he
occuped the status of a marred person vng wth husband or wfe one-haf of
the persona e empton aowed a marred person for such porton of the ta abe
year.
For e ampe, . a wdower havng two dependents, marres W, a snge per-
son, on uy 1, 19 1. For the caendar year 19 1, they fed separate returns
and W eects to be ta ed under secton 00. W s ta ed as a snge person and,
snce she receves the beneft of a 750 e empton, she n effect receves the
beneft of haf the marta e empton of 750 for the second haf of the year by
reason of her status on the ast day of the ta abe year. , who Is ta ed
under sectons 11 and 12, s sub|ect to the provsons of secton 25(b)(8) re-
qurng an apportonment of the persona e empton and credt for dependents
by reason of a change of status durng the ta abe year. quafes as the
head of a famy for the frst s months of the ta abe year and as a mar-
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rec person vng wth husband or wfe for the ast s months. ccordngy,
hs persona e empton s s -twefths of 1,500 for the frst haf of the year
pus s -twefths of 750 for the second haf, or 1,125. Inasmuch as hs status
as the head of a famy arses from the fact that he mantaned a home for two
dependent chdren, the credt for one of such dependents for the frst s months
of the ta abe year Is dsaowed. e s therefore entted to a credt for one
dependent for the frst s months and a credt for two dependents for the ast
s months. s credt for dependents s therefore 000.
Secton 01 aso provdes that a marred person who s not the head of a
famy and s not vng wth husband or wfe on the ast day of the ta abe
year sha be sub|ect to the ta mposed upon a snge person.
n eecton to be ta ed under secton 00 can be made ony by affrmatve
acton of the ta payer. Secton 02 provdes that the eecton to be ta ed
under secton 00 sha be made by fng a return for the ta abe year on the
form prescrbed for makng a return of the ta under ths secton. Such an
eecton once made s rrevocabe. Consequenty, such eecton may not be
changed by an amended return. Moreover, f for any ta abe year the ta -
payer makes a return wthout regard to ths suppement he may not thereafter
eect for such ta abe year to have hs ta computed under ths suppement.
If the ta payer fas to fe a return for the ta abe year and the Commssoner
or the coector makes a return under the authorty of secton 3012, such return
sha be made wthout regard to the provsons of ths suppement and the ta -
payer sha be deemed to have ost hs rght to make an eecton for the ta abe
year under ths suppement.
Secton 03 provdes that the provsons of secton 31 (reatng to foregn
ta credt) and secton 32 (reatng to ta es wthhed at source) sha not appy
wth respect to the ta mposed by Suppement T. Ths provson s necessary
n the nterest of smpcty. If substanta amounts of ether such credt are
Invoved, the ta payer shoud make hs return under the genera provsons of
the statute.
Secton 0 provdes that Suppement T sha not appy to a nonresdent
aen ndvdua, or an estate or trust. Ths provson s aso necesstated n the
nterest o smpcty. Such ta payers are sub|ect to speca provsons of the
statute that are not ready adaptabe to the method of ta aton empoyed In
Suppement T.
Secton 102(b) of the b amends sectons 11 and 12 of the Code to ncude
cross-references to secton 00.
Secton 102(c) of the b amends secton of the Code to nsert references to
Suppements S and T.
S CTION 103. CORPOR TION D F NS -T R T INCORPOR T D IN R T SC DUL .
Secton 103 of the ouse b makes permanent the defense ta mposed by sec-
ton 15 of the Interna Revenue Code as added by secton 201 of the Revenue
ct of 19 0.
Secton 103 of the b as reported by your commttee ntegrates the defense-
ta rates wth the rates provded n secton 13(b) (1) and (2) of the Code.
Under the b the permanent norma ta rate appcabe to corporatons not
entted to the speca treatment provded for sma corporatons Is 2 per cent,
and s thus the same as under e stng aw ncudng the defense ta . The rates
of ta appcabe to corporatons havng norma ta net ncome of 25,000 or
ess are as foows:
Per cent.
Frst 5.000 15
Ne t 15,000 17
Ne t 5,000 19
The aternatve ta n the case of corporatons the norma ta net Income
of whch s sghty n e cess of 25,000 s ,250 pus 37 per cent of the norma
tu net ncome n e cess of 25,000. Under ths provson the fu ta rate of
2 per cent does not become effectve unt the norma ta net ncome of Che
corporaton reaches 38, 61.5 . Integraton of the defense-ta rates and the
norma ta rates causes the doube notch provson found n e stng aw to
dsappear.
There s a correspondng ntegraton of the defense ta wth the norma ta es
on resdent foregn corporatons and on mutua nvestment companes, and wth
the surta on corporatons mpropery accumuatng surpus.
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S CTION 10 . SURT ON CORPOR TIONS ND T RMIN TION OF D F NS T .
Secton 102 of the ouse b, addng secton 16 to the Interna Revenu
Code, mposes upon a corporatons (ncudng nsurance companes), e cept
nonresdent foregn corporatons and mutua nvestment companes (the atter
beng ater deat wth n the secton), a surta of 5 per cent upon the frst 25,f 00
of corporaton surta net ncome and 6 per cent upon the e cess of such ncome
over 25,000. Compementary amendments are made to sectons 10 (b), 231(b),
251(c) (1), and 261(a). Corporaton surta net ncome s defned as net ncome
mnus the credt for dvdends receved provded n secton 26(b) and thus
ncudes nterest on partay ta -e empt securtes n the ta base. Such sec-
ton aso Imposes upon mutua nvestment companes a surta upon Suppement
surta net ncome of such companes at rates correspondng to those Imposed
upon corporatons generay.
Secton 10 of the b as reported by your commttee corresponds to secton
102 of the ouse b and, n addton, termnates the defense ta , the defense-ta
rates beng ntegrated wth the other ncome ta es n other sectons of the
b.
In eu of the surta rates contaned In the ouse b, the b as reported
by your commttee provdes a surta of 6 per cent on the frst 25,000 of surta
net Income and 7 per cent on the remander. Snce the eredt for nterest on
partay ta -e empt Government securtes s not aowabe In computng su ta
net ncome, the b as reported by your commttee aso provdes that, for the
purposes of the surta , the dvdends-receved credt sha be mted to 85 per
cent of the net ncome rather than 85 per cent of the ad|usted net Income.
S CTION 105. T ON NONR SID NT LI N INDI IDU LS.
Ths secton corresponds to secton 10 of the ouse b, whch Increases the
rate of ta on nonresdent aen ndvduas to 25 per cent. Such rate has been
ncreased to 27 per cent, thereby ntegratng the 10 per cent defense ta
wt such ta . Ths secton aso amends secton 211(c) of the Interna Revenue
Code by changng to 23,000 the fgure at whch a nonresdent aen ndvdua
becomes sub|ect to the fu norma ta and surta rates. Such fgure represents
the appro mate pont at whch, under the provsons of the b, an effectve rate
of 27 per cent s reached.
S CTION 108. T ON FOR IGN CORPOR TIONS.
Secton 231(a) of the Interna Revenue Code, amended by secton 105 of the
ouse b so as to ncrease the rate of ta on nonresdent foregn corporatons
from 15 to 25 per cent, s further amended so as to ntegrate the defense ta
by ncreasng such rate to 27 per cent.
S CTION 107. WIT OLDING OF T T SOURC .
Ths secton s the same as secton 106 of the ouse b, whch provdes for
wthhodng of the ta at the souroe (by means of whch the ta n the case of
nonresdent aens s very argey coected) at the rate of 27 per cent nstead
of 16 per cent under e stng aw. The rate of 27 per cent represents the
rate of ta mposed by secton 211(a)(1) ( ) after Its amendment by secton
105 of the b. The ncreased rates of wthhodng w not go nto effect unt
the tenth day after the enactment of the ct n order to afford a reasonabe
perod wthn whch wthhodng agents w e nformed of the hgher rates
appcabe to payments made to nonresdent aens or nonresdent foregn
corporatons.
S CTION 108 (TR TY O LIG TIONS) ND S CTION 109 (R DUCTION IN PURSU NC OF
TR TI S OF R T S OF T ND WIT OI UN ON NONR SID NT LI N INDI IDU LS
R SID NT IN, ND CORPOR TIONS ORG NIZ D UND R L WS OF, W ST RN MISP R
COUNTRI S).
These sectons are the same as sectons 108 and 109 of the ouse b. Secton
108 provdes that no amendment made by ths tte sha appy In any case where
ts appcaton woud be contrary to any treaty obgaton of the Unted States,
Secton 109 authorzes reducton by treaty In the rate of ta aton and of wth-
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hodng wth respect to dvdends derved from sources wthn the Unted States
by nonresdent foregn corporatons organzed under the aws of any country n
North, Centra, or South merca, or n the West Indes, or of Newfoundand.
S CTION 110. D F NS T T T S ON P RSON L OT.DINO COMP NI S ND TR NSF RS
TO OID INCOM T INCORPOR T D IN R T SC DUL S.
Ths secton corresponds to secton 109 of the ouse b, whch amends secton
(500(b) and secton 1250(b) of the Interna Revenue Code In order to make per-
manent the defense ta es mposed by such sectons on persona hodng companes
and on transfers to avod ncome ta . The b as reported by your commttee
repeas these sectons, and the ta es mposed by them are ntegrated wth the
ta on persona hodng companes and te ta on transfers to avod ncome ta .
S CTION 111. P RSON L MPTION.
Ths secton, for whch there Is no correspondng provson n the ouse b,
amends secton 25(b) (1) by owerng the persona e empton of marred persons
from 2,000 to 1,500 and the persona e empton of snge persons from 800 to
750. The secton aso amends secton 21 of the Interna Revenue Code (reatng
to persona e empton of nonresdent aen ndvduas) and secton 251(f) of
the Interna Revenue Code (reatng to persona e empton of ctzens entted
to the benefts of secton 251) by strkng out 800 and nsertng n eu thereof
750 n conformty wth the changes made n secton 25(b).
Ths secton further amends secton 25(b) (1) reatve to the persona e empton
of a marred person whose spouse fes a separate return under Suppement T,
added by secton 102 of the b.
S CTION 112. R TURNS OF INCOM T .
In accordance wth the change n the persona e empton made by secton 111
of the b, ths secton amends secton 51(a) of the nterna Revenue Code to
requre a return n the case of any ndvdua whose gross ncome s equa to or
n e cess of the persona e empton as reduced by secton 111. Thus, a return s
requred from any ndvdua who s snge or marred but not vng wth husband
or wfe f hs gross ncome s 750 or over, and from a marred ndvdua vng
wth husband or wfe f havng a gross ncome of 1,500 or over f the other
spouse has no gross ncome, or havng a gross ncome together wth the other
spouse of 1,500 or over.
smar change has been made wth respect to fducary returns and wth
respect to the amount of payments to Indvduas whch requres an nformaton
return from the payor of the ncome.
S CTION 113. CR DIT FOR D P ND NTS.
Ths secton s the same as secton 110 of the ouse b, whch amends secton
25(b) (2) of the Interna Revenue Code reatve to the credt for dependents.
In the case of the head of a famy or a marred person vng wth husband
or wfe, the e stng aw provdes as a credt aganst net ncome a persona e emp-
ton pus 00 for each dependent other than husband or wfe. Under these pro-
vsons, a marred person vng wth husband or wfe and havng no dependents
receves as a ma mum credt the persona e empton. On the other hand, an
unmarred person mantanng a home for a person who aso quafes as a de-
pendent may receve n addton to the same persona e empton a credt for
00 for such dependent. The proposed egsaton dsaows the credt for one
dependent n cases where the ta payer s status as head of a famy s occasoned
soey by the e stence of one or more of such dependents. The amendment w
not affect any case e cept one n whch the ta payer occupes the status as head
of a famy soey by reason of the e stence of a person for whom he s aso
entted to the credt for a dependent. For nstance, t w not operate to reduce
the credt n the ease where a wdower s mantanng a home for two chdren,
ony one of whom quafes as a dependent. In such case, the status as head of a
famy s not occasoned soey by e stence of the chd n respect of whom the
credt of 00 s aowed and consequenty the ta payer may be entted to the
persona e empton aowed the head of a famy pus the 00 credt, the same
as under e stng aw.
1611 12 32
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90
S CTION 11 . NONINT ST- MNG O LIG TIONS ISSU D T DISCOUNT.
Ths n the same as secton 111 of the on.se b and provdes that any ta -
payer who owns any nonnterest-bearng obgatons ssued at a dscount and
redeemabe for f ed amounts ncreasng at stated ntervas and who, under the
method of accountng used by hm n computng hs net ncome, s not permtted
to report the Increment n vaue of such obgatons as t accrues, may, at hs
eecton, treat such ncrement n vaue as consttutng ncome to hm In the
year n whch t accrues rather than n the year n whch the obgatons are
dsposed of, redeemed, or pad at maturty. Under e stng aw a ta payer
ou the accrua bass who owns, for e ampe, nonnterest-bearng Unted States
defense bonds Is requred to report the ncrement as t accrues, whereas a
ta payer on the cash bass who owns such -defense bonds s requred to treat
the entre Increment n vaue as beng ncome receved n the year of re-
dempton or maturty. Therefore, wth respect to such nonnterest-bearng
Unted States defense bonds, the effect of ths secton s to e tend, at the
eecton of the ta payer, the accrua method to a ta payer on the cash bass,
but ony for the mted purpose of reportng the ncrement n vaue of such
bonds as t accrues.
The eecton provded for In ths secton must be made n the ta payer s
return, and may be made for any ta abe year begnnng after December 31,
10 0. When so made wth respect to any obgaton, the eecton sha appy
aso to a obgatons of the ty descrbed n ths secton owned by the ta -
payer or thereafter acqured by hm. The eecton appes to the ta abe year
for whch such return Is fed and s bndng for a subsequent ta abe years
uness the Commssoner permts the ta payer, sub|ect to such condtons as
the Commssoner deems necessary, to change to a dfferent method of reportng
ncome from such bonds. though the eecton, once made, s bndng upon the
ta payer, t woud not appy to a transferee of such ta payer. For e ampe,
, on the cash bass, buys nonnterest-bearng Unted States defense bonds n
10 2 and eects n hs return for 19 2 to treat the ncrement n vaue as beng
Income to hm as It accrues. In 10 3. des and bequeaths such bonds to
, who s aso on the cash bass. s not bound by s eecton, but he may,
f he so desres, make an eecton under ths secton wth respect to the ncre-
ment n vaue accrung after the acquston of such bonds by hm. If
bad prevousy made an eecton under ths secton, such eecton woud appy
to the bonds acqured from .
In any ease In whch an eecton s made under ths secton, the amount
consdered to accrue n any ta abe year to whch the eecton appes s
measured by the actua ncreases In the redempton prce occurrng n that
year. Such amount sha not be consdered to accrue rataby between the
dates on whch the redempton prce changes. Thus, f two dates on whch the
redempton prce ncreases fa wthn the ta abe year and f the redempton
prce ncreases n the amount of 50 cents on each such date, the amount deemed
to accrue In that year woud be 1. The precedng sentence, however, s sub-
|ect to an e cepton n the case of the frst ta abe year to whch the eecton
appes. If at the begnnng of the frst ta abe year to whch the eecton appes
the ta payer owns nonnterest-bearng bonds of the prescrbed character ac-
qured pror thereto, he Is requred to report n such year, n addton to
the ncreases n the redempton prce actuay fang wthn that year, the
tota of the ncreases In such prce occurrng between the date of acquston and
the begnnng of such year. ccordngy, f a ta payer on the caendar year
bass makes an eecton under ths secton for 19 and f the bonds have been
ssued to the ta payer on une 1, 10 1. he woud be requred to ncude In hs
gross Income for the ta abe year 19 the tota of the ncreases n the re-
dempton prce of such bonds occurrng between the acquston on une 1,
10 1, and December 31, 19 .
S CTION 115. S OUT-T RM O LIG TIONS ISSU D ON DISCOUNT SIS.
Ths secton, whch was not contaned n the ouse b, provdes that the
Issung dscount on certan short-terra Federa, State, and oca government
obgatons Issued on a dscount bass on or after March 1, 19 1, sha not be
deemed to accrue unt such obgatons are pad at maturty, sod, or otherwse
dsposed of, and thr.t such obgatons sha not be treated as capta assets.
n obgaton may be ssued on a dscount bass even though the prce pad
e ceeds the face amount. Thus, athough the Second Lberty ond ct pro-
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vdes that Treasury bs of the Unted States sha be Issued on a dscount
bass, the ssung prce pad for a partcuar b may, by reason of compet-
tve bddng, actuay e ceed the face amount of the b. Ths secton em-
nates the necessty for makng an aocaton between nterest and capta
gan or oss and w have partcuar appcaton n the case of Treasury bs
of the Unted States Issued after March 1, 19 1, whch are made ta abe by
secton of the Pubc Debt ct of 19 1.
The requrements of e stng aw wth respect to Treasury bs ssued on or
after March 1, 19 1, mpose on ta payers the duty of makng burdensome compu-
tatons. The porton of the gan attrbutabe to the orgna dscount on such
bs s consdered as nterest and the remander s treated as a capta gan.
Thus, where such a b s sod by the orgna hoder for an amount n e cess
of the purchase prce pus the ssung dscount accrued to the date of sae, aoca-
ton to nterest and capta gan s requred. In the case of a oss resutng from
the sae of such a Treasury b, the oss s treated as a capta oss and must
be segregated as such. eng a short-term capta oss, t s aowabe ony to
the e tent of short-term capta gans. Moreover, the e stng rue that the
orgna dscount on Treasury bs accrues rataby over the entre fe of the
bs requres each successve ta payer hodng a partcuar b to ascertan the
ssung dscount n order that he may determne the amount of such dscount
whch s treated as accrung durng the perod for whch he hed the b.
Under ths secton a person who ses a Treasury b ssued on or after March
1, 19 1, or has t pad at maturty, woud need ony to compare the saes prce,
or the amount pad at maturty, wth the purchase prce or other bass and
account for the net gan or oss. In such case there woud be two dfferent
eements, that s, nterest (orgna dscount) and ordnary gan or oss, but
snce no speca treatment s accorded such gan or oss, aocaton woud be
unnecessary. Ony the net gan or the net oss need be taken nto account. For
e ampe, f a 1,000 90-day b s ssued for 99 and the orgna purchaser
ses t at the end of 60 days for 997, he need report ony 3 as ordnary ncome,
athough there are of accrued dscount and a 1 oss. Under e stng aw
be woud be requred to report the dscount as nterest and the 1 oss as
a short-term capta oss.
Inasmuch as the gross ncome of fe nsurance companes s mted to nterest,
dvdends, and rents, these companes w st be requred to make an aocaton
n respect of obgatons of the prescrbed character any part of the dscount on
whch Is consdered as nterest ut, as most of the funds of fe nsurance
companes s Invested n ong-term obgatons, the probem of aocaton n ths
fed s not serous.
Ths secton Is appcabe to ta abe years endng after February 28, 19 1.
S CTION 116. INFORM TION TU NS WIT R SP CT TO F D R L O LIG TIONS.
Ths s the same as secton 112 of the ouse b.
s a consequence of the emnaton of ta e empton wth respect to Federa
obgatons brought about by the Pubc Debt ct of 19 1, secton 116 of the b
repeas, prospectvey, secton 1 7(d) of the Interna Revenue Code, whch made
nappcabe to nterest on obgatons of the Unted States those provsons of
aw reatng to securng nformaton at the source. Secton 110 aso makes a
compementary amendment to secton 1 7(b). Such amendments w enabe the
Commssoner to prescrbe reguatons requrng such nformaton wth respect
to nterest on Unted States obgatons as he may deem necessary n the nterest
of good admnstraton of the ncome-ta aws. Secton 116 s to take effect on
the day foowng the enactment of the bL
S CTION 117. LIMONT ND S P R T M INT N NC P YM NTS.
Ths secton amends sectons 22, 23, and 25 of the Interna Revenue Code and
adds a new secton to Suppement of Chapter 1 n order to provde n certan
cases a new ncome-ta treatment for payments n the nature of or n eu of
amony and aowance for support as between dvorced or egay separated
spouses. These amendments are ntended to dstrbute the ncome-ta burden
between such spouses by treatng such payments as ncome to the spouse actuay
recevng or actuay entted to receve such payments and by reevng the other
spouse from the ta burden upon whatever part of the amount of such payments
s under the present aw Incudbe n hs gross ncome. In addton, the amended
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2
sectons w produce unformty n the treatment of amounts pad In the nature
of or n eu of amony regardess of the varance n the aws of dfferent States
concernng the e stence and contnuance of any obgaton to pay amony. In
ts resptct the amendments are desgned to remove the uncertanty as to the
ta consequences of payments made to a dvorced spouse out of the net ncome
of so-caed rrevocabe amony trusts, arsng from the recent Supreme Court
decsons n nherng v. Ftch. (19 0) (309 U. S., 1 9), everngv. Fuer (19 0)
(310 U. S., 60), and everng v. Leonard (19 0) (310 U. S., 80), whch decsons
make the test of whether such ncome s ta abe to the husband the e stence
of a contnung ega obgaton under State aw.
Secton 22, reatng to the defnton of gross ncome, s amended by nsertng
at the end thereof a new subsecton desgnated (k). Ths subsecton appes ony
to an ndvdua who s dvorced or egay separated under a decree of dvorce
or of separate mantenance and to such ndvdua s spouse or former spouse
from whom such ndvdua was dvorced or egay separated by such decree.
Perodc payments receved (other than as benefcary or assgnee of a benefcary
of a trust) by such ndvdua, subsequent to the decree, n dscharge of, or
attrbutabe to property transferred n dscharge of, a ega obgaton mposed
upon or ncurred by such ndvdua s spouse or former spouse under such decree
or under a wrtten nstrument ncdent to such dvorce or separaton are defned
by secton 22(k) as gross ncome to such ndvdua and are ncudbe as such
n her ncome. Instament payments dschargng a part of an obgaton the
prncpa sum of whch s, n terms of money or property, specfed n the decree
or nstrument, are not consdered perodc payments for the purposes of secton
2 (k). and arc, therefore, not gross ncome to the recpent under that secton.
Secton 22(k) aso provdes that, n the case of a dvorce or ega separaton,
perodc payments whch are attrbutabe to property transferred n dscharge
of the ega obgaton of a spouse or former spouse sha not be ncudbe n the
gross ncome of such spouse or former spouse. s a compement to secton 22(k),
secton 23, reatng to deductons from gross ncome, s amended by addng a new
subsecton, desgnated (u), whch aows a deducton by the spouse or former
spoufe descrbed In secton 22(k) n hs ta abe year n whch are pad the
amounts ncudbe under secton 22(k) n the gross ncome of the ndvdua
descrbed n secton 22(k). owever, such spouse or former spouse s not aowed
a deducton under secton 23(u) for any perodc payments attrbutabe to prop-
erty transferred n dscharge of hs ega obgaton whch under secton 22(k)
or secton 171 are e cuded from hs gross ncome.
Sectons 22(k) and 23(u), beng based upon the terms receved and pay-
ment of whch s made, pace the spouses on the cash recepts and dsbursements
bass wth respect to ther treatment of the amounts descrbed n sectons 22(k)
and 2; (u) for any ta abe year. The provsons of secton 22(k) and secton
23(u) are appcabe ony wth respect to ta abe years of the spouses begnnng
after December 31. 19 1.
The operaton of sectons 22(k) and 23(u) may be Iustrated by the foowng
e ampes (n whch t s assumed that a payments are made and receved wthn
ta abe years of the spouses begnnng after December 31, 19 1) :
(1) Under the terms of a decree of separate mantenance entered by a State
court. Mr. s to pay Mrs. 200 a month as amony for her fe. Durng 19 2,
Mr. , pursuant to the decree, pays Mrs. 200 a month. In computng ther
ncome ta es for 19 2, Mrs. w ncude n her gross ncome the 2 00 thus
receved, and Mr. s entted to a deducton of 2, 00 from hs gross ncome.
(2) Mrs. fed sut for dvorce from Mr. . In consderaton of Mrs. not
requestng amony and not makng pubc hs fnanca affars, Mr. makes a
egay bndng promse n wrtng to Mrs. to pay to her 200 a month f a fna
decree of dvorce s granted wthout any provson for amony. ccordngy,
Mrs. does not request amony and no provson for amony s made under the
fna decree of dvorce. Durng 19 2 Mr. pays Mrs. 200 a month, pursuant
to the promse. The 2, 00 thus receved by Mrs. s Incudbe n her gross
ncome under the provsons of secton 22(k), and Mr. s entted to a deducton
of 2, 00 from hs gross ncome.
(3) Under the provsons of a dvorce decree. Mr. C Is to pay 200,000 to hs
dvorced spouse. Mrs. C. n Instaments of 10,000 a year. No part of the 200,000
or the nstaments thereof s ncome to Mrs. C under secton 22(k) or deductbe
by Mr. C under secton 23 (u).
( ) dvorce decree requres Mr. D to pay to Mrs. D, hs former wfe, 500
a month. To meet ths obgaton. Mr. D purchases an annuty for the fe of
hs dvorced wfe whch w pay her 500 a month. Under the provsons of
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secton 22(k) and notwthstandng the provsons of secton 22(b)(2), the fu
500 a month receved by Mrs. D s ncudbe n her gross ncome and no part of
such amount s ncudbe n the gross ncome of Mr. D or deductbe by hm from
hs gross ncome.
Suppement s amended by addng a new secton, secton 171, to state the
rue appcabe to trust ncome after a decree of dvorce or of separate mante-
nance. Secton 171 s desgned to ncude n the gross ncome of an ndvdua
who s dvorced or egay separated under a decree of dvorce or separate mante-
nance the amount of the ncome of any trust such ndvdua s entted to receve
whch, e cept for the provsons of secton 171, woud be ncudbe In the gross
ncome of such ndvdua, spouse, or former spouse and to e cude such amount
from the gross Income of such spouse or former spouse, regardess of secton 166,
secton 167, or any other provson of Chapter 1. The ta abe year for whch
such ncome Is to be accounted for s to be determned under the provsons of
secton 1(5 . Secton 171 s appcabe ony wth respect to ta abe years begn-
nng after December 81, 19 1.
The operaton of ths secton (and ts reaton to secton 22(k) and secton
23(u)) may be Iustrated by the foowng e ampes (n whch t s assumed
that a payments are made and receved wthn ta abe years begnnng after
December 31, 19 1):
(1) s part of a separaton agreement, Mr. transfers property to a trust,
the net ncome of whch s estmated by the partes to be suffcent to provde for
Mrs. s support. few years ater Mrs. obtans a dvorce from Mr. . Th
fna decree refers to the trust created prevousy under the separaton agreement
and provdes that the transfer In trust and the Income therefrom recevabe by
Mrs. sha be n en of amony. The court, however, retans, as s aowed
under the aw of the State n whch the dvorce s obtaned, |ursdcton to pro-
vde for further payments to Mrs. by Mr. shoud the ncome of the trust be
nsuffcent for her support. Under secton 171 the net ncome of the trust s
ncome to Mrs. and Is not ncome to Mr. .
(2) Under the same facts as n the prevous e ampe the decree of the court
provdes that n a events Mrs. sha receve 10,000 a year as amony. In
the frst ta abe year begnnng after December 31, 19 2, the net Income of the
trust Is ony . 8,000. The trustees, therefore, pay an addtona .000 from the
corpus of the trust to Mrs. . In such a case ony 8,000 s ncudbe n the
ncome of Mrs. under the provsons of secton 171. No part of the trust ncome
s ncudbe n the gross ncome of Mr. nor s he aowed any deducton for any
part of the 10,000 pad to Mrs. . nowever, If the addtona 2,000 Is not pay-
abe out of the corpus of the trust but s payabe by Mr. to Mrs. , then the
2,000 pad by Mr. to Mrs. s ncome to her under secton 22(k). Therefore,
for 19 2 Mrs. ncudes 10,000 n her ncome, Mr. docs not ncude n hs
ncome the 8,000 pad to Mrs. by the trust but s entted to deduct the 2,000
pad by hm to Mrs. .
(3) Mr. Y s the benefcary of a trust estabshed under the w of hs
father. Under the terms of the trust, the trustees are to pay to Mr. Y 10,000
a year from the net ncome of the trust, but f the net ncome of the trust for
any year does not equa 10,000, to pay the net ncome and so much more from
the corpus of the trust as w tota 10,000. In 19 2 Mrs. Y obtans a dvorce
from Mr. Y. Under the dvorce decree Mr. Y s to pay Mrs. Y 5,000 a year
for hs fe. To meet ths obgaton under the dvorce decree, Mr. Y assgns
to Mrs. Y for fve years one-haf of the amount he s otherwse entted to
receve from the trust, promsng to make another such assgnment or to pro-
vde another method of payment of the . ,000 a year to her at the e praton of
that perod. In 1 ) 2 the net ncome of the trust s 8,000. Under the terms of
the trust nstrument and nf the assgnment by Mr. Y to Mrs. Y the trustees pay
5,000 to Mr. Y and 5,000 to Mrs. Y. Snce ony eght-tenths of the amount
thus dstrbuted represents the net Income of the trust, ony ,000 of the
amount receved by Mrs. Y s ncome to her. Mr. w ncude n hs ncome
ony ,000 and w not ncude any amount on account of the 5,000 pad to
Mrs. Y.
Secton 22(k) and secton 171 do not appy to that part of such perodc pay-
ments under secton 22(k) and to that part of such trust ncome under
secton 171 whch by the terms of the decree, or of the wrtten nstrument
under secton 22(k), or of the trust nstrument under secton 171, Is specfcay
desgnated as a sum payabe for the support of mnor chdren of the spouses.
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If, however, the perodc payments and the trust ncome are receved by the
wfe for the support and mantenance of hersef and of mnor chdren of the
spouses wthout such specfc desgnaton of the porton for the support of such
chdren, then the whoe of such amounts are ncudbe n the ncome of the
wfe as provded n secton 22(k) and n secton 171. s a necessary com-
pement to these provsons, secton 25(b)(2), reatng to credt for dependents,
s amended so as to provde that payments to an ndvdua s spouse or former
spouse whch are ncudbe under secton 22(k) or secton 171 n the gross
ncome of such spouse or former spouse sha not be consdered payments by
such ndvdua for the support of the mnor chdren of such persons. Thus
where the porton of such payments for the support of the mnor chdren s
not specfcay desgnated, the wfe, f actuay contrbutng to the support of
the chdren, s entted to the credt for dependents, uness t s estabshed
that ndependenty of such amounts pad to the wfe the husband (or some
other person upon whom the chdren are fnancay dependent) s actuay
contrbutng a greater amount for the support of such chdren than s the wfe.
These rues may be ustrated by the foowng e ampes:
(1) Under a decree of dvorce whch awards to Mrs. Z the custody of the
two mnor chdren of hersef and Mr. Z, Mr. Z s obgated to pay 500 per
month for the mantenance and support of Mrs. Z and ther two chdren. In the
caendar year 10 2 Mr. Z makes such payments. The 0,000 receved by Mrs. Z
s to be ncuded n her gross ncome, am Mr. Z s entted to a deducton of 6,000.
If such payments consttute, the chdren s chef support, Mrs. Z s entted to the
e empton appcabe to the head of a famy and to a credt for one dependent.
(2) If, n the prevous e ampe, the decree had provded that Mr. Z shoud
pay Mrs. Z 300 per month for her mantenance and support and an addtona
200 per month for the mantenance and support of ther chdren, ony 3,000
woud be ncudbe n the gross ncome of Mrs. Z and deductbe from the gross
ncome of Mr. Z; . 2, 00 woud be consdered as payments by Mr. Z and not by
Mrs. Z for the purpose of determnng whch of them s entted to e empton for
the head of a famy and the credt for dependents,
S CTION 118. T NSION OF TIM OF O S SS OF S CURITI S ND C NG
COMMISSION.
Under Suppement R of the Interna Revenue Code certan transactons ars-
ng out of the smpfcaton or geographca ntegraton of pubc utty hodng
company systems may be treated us ta -free e changes and varous ad|ustments
of the bass of property are made. Under Suppement It, as amended by the
Revenue ct of 1939, such transactons must be n conformty wth orders of
the Securtes and change Commsson ssued before anuary 1, 19 1 (nstead
of anuary 1, 19 0, the date orgnay provded), or orders suppementary to
such orders. The amendment made by secton 118 e tends from anuary 1,
19 1, to anuary 1, 19 3, the tme durng whch such an order may be made.
S CTION 119. COMMUNITY INCOM .
Ths secton amends the Interna Revenue Code by nsertng a new secton
29, appcabe to ta abe years begnnng after December 31, 19 0, and reatng
to the ta aton of communty ncome.
Subsecton (a) provdes that, n the case of earned ncome, the ncome sha
be ta ed to the spouse who earned the Income. Ths rue sha appy regardess
of the fact that such earnngs may be treated as communty property under
the State aw.
Subsecton (b) Is appcabe to ncome derved from communty property.
It s provded that such ncome sha be ta ed to the spouse who has the
management and contro thereof under the aw of the |ursdcton n whch the
marta communty e sts.
Ths provson sha not be appcabe to ncome derved from property that
s consdered the separate property of one of the spouses under the aw of the
|ursdcton n whch the marta communty e sts, even though such ncome
s consdered communty property; nor s t appcabe to ncome derved from
property whch s acqured wth funds whch consttuted ncome from separate
property. The e cepton s ntended to appy to a ncome derved from property
the source of whch can be traced to ncome from separate property, regardess
of how many tmes such ncome may have been nvested or renvested, 1. e.,
ncome from separate property w not be affected by ths secton even
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though such Income Is communty property, and If such Income Is Invested In
property the Income from such property w aso not be sub|ect to ths secton,
nor w any Income from property n whch such ncome s n turn nvested, etc.
In the case of such ncome, t w contnue to be ta ed as t was pror to ths
umendment.
Subsecton (c) provdes that f spouses eect to fe separate returns, ony
the spouse who s requred to treat the ncome covered by the staton as hs
ndvdua ncome w be entted to the deductons and credts aowed under
the Interna-revenue aws whch are propery aocabe to such ncome.
S CTION 120. T L T RS TO W IC M NDM NTS PPLIC L .
Ths secton corresponds to secton 11 of the ouse b and makes the amend-
ments reatve to ndvdua and corporaton ncome ta es contaned n ths
tte, e cept the amendments made by secton 107 (wthhodng ta at source),
secton 115 (short-term obgatons ssued on dscount bass), secton 116 (nfor-
maton returns wth respect to Federa obgatons), and secton 117 (amony
and separate mantenance payments), appcabe ony wth respect to ta abe
years begnnng after December 31, 1S) 0.
Tte II cess-Profts Ta .
S CTION 201. C SS-PROFITS T R T S ND CR DITS.
Secton 201(a) of the ouse b amends secton 710(a) of e stng aw, reatng
to the Imposton of the e cess-profts ta , to provde for ncreased rates of ta ,
whch are set forth n the tabe n secton 710(a)(1). These rates begn at
85 per cent upon ad|usted e cess-profts net ncome of not more than 20,000 and
ncrease upon a graduated scae to 60 per cent upon the amount of ad|usted
e cess-profts net Income n e cess of 000,000. The rates of ta set forth In
secton 710(a)(1) represent an ncrease of 10 percentage ponts In each rate
bracket as compared wth the rates under the present aw, whch run from 25
to 50 per cent. Secton 201(a) of the ouse b aso provdes a speca ta
n certan cases where the nvested capta credt s used, amountng to 10
per cent of the e cess of the ad|usted e cess-profts net ncome computed under
the Income credt over the ad|usted e cess-profts net ncome computed under
the Invested capta credt.
Secton 201(b) of the ouse b amends secton 71 of e stng aw by reduc-
ng the credt wth respect to corporatons usng the nvested capta method
n cases where the nvested capta e ceeds 5,000,000. In such eases, the
nvested capta credt s reduced from 8 to 7 per cent upon so much of the
nvested capta as e ceeds 5,000,000.
In the b as reported by your commttee the ncrease In e cess-profts ta
rates and the reducton n the percentage appcabe to Invested capta n e cess
of 5,000,000 have been retaned, but for reasons set forth esewhere n ths
report, the speca 10 per cent ta n certan cases where the nvested capta
credt s used has been emnated.
S CTION 202. D DUCTION OF C SS-PROFITS T .
cept for the emnaton of subsecton (), whch s no onger necessary n
vew of secton 301(c) of the b, provdng for an annua decaraton of vaue
for capta stock ta purposes, ths secton s the same as secton 20 of the
ouse b. It provdes that the ncome ta mposed by Chapter 1 of the Interna
Revenue Code and by correspondng provsons of pror Revenue cts sha not
consttute an ad|ustment n determnng e cess-profts net Income for current
and bnse perod ta abe years. Secton 23(c) s amended to provde for the
deducton of the e cess-profts ta n determnng ncome sub|ect to Chapter 1
ta . Furthermore, the ta payer, f usng the ncome method, has ts e cess-
profts credt ncreased by the correspondng nondeducton of ncome ta es n
determnng ts average base perod net ncome.
It s provded that the deducton sha be aowed ony n computng the
ncome ta mposed for the ta abe year for whch the e cess-profts ta s
eved. y provdng that any e cess-profts ta pad after the ta abe year
sha be deemed to have been pad wthn the ta abe year, the same treatment Is
accorded to ta payers on the cash bass as s accorded to ta payers on the accrua
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96
bass. It s aso provded that tbe e cess-profts ta sha be computed, for the
purposes of ths deducton, wthout reducton by the foregn ta credt, and
wthout regard to the ad|ustments provded for n secton 73 .
Snce the e cess-profts net ncome for a ta abe year Is prmary the norma-
ta net ncome wth certan ad|ustments, t s necessary to amend secton
711(a) to requre an ad|ustment to norma-ta net ncome n the form of a
dsaowance of the deducton of the e cess-profts ta . further ad|ustment
s added to ths secton n the form of a provson statng that, for the purpose
of computng any deducton or credt whch s mted to a certan percentage
of the ta payer s net ncome e. g., the deducton for chartabe contrbutons or
for percentage depeton such net ncome (or, In the case of percentage depe-
ton, such net ncome from the property) sha be computed wthout regard
to the deducton on account of the e cess-profts ta . It s aso provded under
secton 718(c)(3) wth reference to ta payers on the nvested-capta bass,
that n determnng whether dstrbutons were out of earnngs and profts of
any e cess-profts ta ta abe year, the ncome ta sha be dsregarded n
the computaton. Fnay, In determnng the presence and e tent of the ta -
payer s rght to the benefts of secton 722, deang wth abnormates, t s
provded that the e cess-profts ta sha be dsregarded.
Secton 602 of the Interna Revenue Code, deang wth the computaton of
net ncome for the purposes of the decared vaue e cess-profts ta , s amended
to provde that the net Income sha be determned wthout regard to the deduc-
ton on account of the e cess-profts ta mposed by Subchapter of Chapter 2.
It Is aso provded that, n computng the e cess-profts credt carry-over, the
e cess-profts credt and e cess-profts net ncome for ta abe years begnnng
n 19 0 sha be computed as f the amendments made by ths b were
appcabe.
S CTION 203. N W C PIT L.
Ths secton s the same as secton 205 n the ouse b e cept for certan
changes of a technca nature made n subparagraph ( ) ntended to carry out
more competey the provsons of the ouse b.
Ths secton amends secton 718(a) of the Interna Revenue Code, defnng
equty nvested capta, by addng a new paragraph desgnated as (6). The
effect of the amendment s to ncrease by 25 per cent the amount ncudbe n
equty nvested capta on account of new capta. The term new capta s
defned to mean the aggregate of the amount of money and property pad n
for stock or as pad-n surpus, or as a contrbuton to capta, and the amount
of ta abe stock dvdends made, durng a ta abe year begnnng after Decem-
ber 31, 19 0, sub|ect to certan mtatons. These mtatons are ntended, n
genera, to prevent a ta payer from treatng as new capta amounts resutng
rom mere ad|ustments n the e stug capta, ncudng borrowed capta, of
the ta payer, or of a controed group of corporatons.
The mtatons provded by subparagraphs ( ), ( ), and (C) bar from the
concept of new capta the amount of any equty nvested capta acqured n
an e change occurrng durng a ta abe year begnnng after December 31, 19 0,
to whch secton 112(b) (3), ( ), or (5), or so much of secton 112 (c), (d), or
(e) as refers to secton 112(b) (3), ( ), or (5) s appcabe, or woud be
appcabe f tbe term contro had been defned In secton 112(h) to mean
the ownershp of stock possessng more than 50 per cent of the tota combned
votng power of a casses of stock entted to vote or more than 50 per cent
of the tota vaue of a casses of stock. In order to take care of e changes
under Suppement R of the Interna Revenue Code, whch reates to e changes
and dstrbutons n obedence to orders of the Securtes and change Cora-
msson, and to whch secton 112(b) (3), ( ), or (5) s made nappcabe by
secton 371(g), that porton of subparagraph ( ) of the ouse b readng:
There sha not be ncuded money or property pad n by a corporaton n an
e change to whch secton 112(b) (3), ( ), or (5), or so much of secton
112 (c), (d), or (e) as refers to secton 112 (b) (3), ( ), or (5) s appcabe
has been changed to read:
There sha not be ncuded money or property pad n by a corporaton n an
e change to whch secton 112(b) (3), ( ), or (5), or so much of secton
112 (c), (d), or (e) as refers to secton 112(b) (3), ( ), or (5) s appcabe
(or woud be appcabe e cept for secton 371(g)).
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These mtatons aso bar from the concept of new capta any equty nvested
capta acqured In a transacton between members of a controed group of
corporatons as that term Is defned n subparagraph ( ).
The mtatons provded by subparagraph (D) have the effect of reducng
the amount of new capta as of any day by the e cess of the amount of
nadmssbe assets hed on that day over the amount of such assets hed on
the frst day of the ta payer s frst ta abe year begnnng after December 31,
19 0. Ths treatment s comparabe to the treatment of e cuded assets n the
computaton of day capta addtons under secton 713(g) of the e stng aw.
The mtatons under subparagraph ( ) prevent new capta ns of any day
from e ceedng the amount by whch the tota equty nvested capta and bor-
rowed capta as of such day, computed wthout ncudng the 25 per cent
ncrease, e ceeds the sum of the equty nvested capta and borrowed capta
as of the frst day of the ta payer s frst ta abe year begnnng after Decem-
ber 31, 19 0. ny ncrease n new capta s thus prevented where the amount
of borrowed capta Is reduced by the same amount as that by whch the equty
nvested capta s ncreased, and no ncrease n new capta w resut from
a dstrbuton by a stock dvdend of earnngs and profts accumuated pror
to the frst day of a ta abe year begnnng after December 31, 19 0. Sub-
paragraph ( ), however, s so worded that there s no reducton to the e tent
that the sum of the equty nvested capta and borrowed capta as of any
day Is ess than the sum of the equty nvested capta and borrowed capta
as of the frst day of a ta abe year begnnng after December 31, 19 0, due to
an operatng defct occurrng n any ta abe year durng the Intervenng perod.
The mtatons contaned n subparagraphs ( ) to ( ) may be ustrated
by the foowng e ampes:
ampe (1), subparagraph ( ): Corporaton ssues stock durng a ta abe
year begnnng after December 31, 19 0, to Corporaton In e change for the
transfer of certan property by Corporaton . Immedatey after the transfer
the stock acqured by Corporaton has a vaue of 10,000, the tota vaue of
a casses of stock of Corporaton then outstandng amountng to 18,000.
Corporaton obtans no new capta, snce the property for whch the new
stock was ssued was obtaned n an e change to whch secton 112(b) (5) woud
be appcabe f the term contro had been defned In secton 112(h) so as
to Incude ether the ownershp of stock possessng more than 50 per cent of the
tota combned votng power of a casses of stock entted to vote or more
than 50 per cent of the tota vaue of a casses of stock outstandng.
ampe ( ), subparagraph ( ): Corporaton owns stock n Corporaton
, and Corporaton owns stock n Corporaton C. Corporaton transfers
property to Corporaton C n e change for stock of Corporaton C. Immed-
atey after the transfer the stock owned by Corporaton n Corporaton
possesses more than 50 per cent of the tota combned votng power of a
casses of stock entted to vote. so mmedatey after such transfer the
stock owned by Corporaton n Corporaton C has a vaue equa to mure
than 50 per cent of the tota vaue of n casses of stock of Corporaton C.
Corporaton C obtans no new capta through the acquston of the property
from Corporaton n e change for ts stock, snce mmedatey after the
transfer Corporaton , the transferor, and Corporaton C, the transferee, are
members of the same controed group.
ampe (3), subparayraph (C): Corporaton makes a dstrbuton n ta -
abe stock dvdends to Corporatons and C durng a ta abe year, begn-
nng after December 31, 19 0. Immedatey after the dstrbuton Corpora-
tons and C own stock n Corporaton whch has n votng power of more
than 50 per cent of the combned votng power of a casses of stock entted
to vote. so mmedatey after the transfer Corporaton owns stock n
Corporaton C, whch has a vaue of more than 50 per cent of the tota vaue
of a casses of stock of Corporaton . The dstrbuton made by Corpo-
raton n the ta abe stock dvdend does not consttute new capta to
Corporaton .
ampe (- ), subparayraph (D): Corporaton makes ts e cess-profts
ta return on the caendar-year bass. On uy 1, 19 1, cash n the amount of
100,000 s pad n for stock. There are no other changes made n ether the
amount of equty nvested capta or borrowed capta at any tme durng
the year 19 1. The ad|usted bass of nadmssbe assets as of anuary 1, 19 1,
amounts to 5,000. The ad|usted bass of such assets as of uy 2, 19 1, s
ncreased to 15,000. The new capta of 100,000 s reduced to 90,000 as of
uy 2, 19 1, by subparagraph (D), as shown by the foowng computaton:
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100,000, new capta, mnus 10,000 ( 15,000, amount of nadmssbes as
of uy 2, 19 1, mnus 5,000, amount of nadmssbes as of uy 1,
19 1) 90,000.
ampe (5), subparagraph ( ): Corporaton T makes ts return on the
caendar-year bass. Its equty nvested capta as of anuary 1, 19 1, amounts
to 30,000, consstng of money pad n for stock, 20,000, and accumuated earn-
ngs and profts, 10,000. Its borrowed capta as of anuary 1, 19 1, conssts
of bonds outstandng amountng to 15,000, makng the tota of ts equty
nvested capta and borrowed capta as of anuary 1,. 19 1, 5,000. The
corporaton has no nadmssbe assets at any tme durng the year 19 1. On
anuary 2, 19 1, the corporaton makes a dstrbuton n ta abe stock dv-
dends amountng to 5,000. On uy 1, 19 1, money s pad n for stock amount-
ng to 15,000, and on uy 2, 19 1, bonds are retred n the amount of 10,000.
The new capta of 20,000 acqured durng the year 19 1 represented by a
dstrbuton n a ta abe stock dvdend amountng to 5,000 and by money pad
In for stock amountng to 15,000 s reduced to 5,000 on uy 3, 19 1, due to
the retrement of 10,000 of bonds on uy 2, 19 1, and the fact that the stock
dvdend s pad out of earnngs accumuated before anuary 1, 19 1, under the
appcaton of subparagraph ( ), shown as foows:
The sum of the equty Invested capta and borrowed capta on uy 3, 19 1
(computed wthout regard to the 25 per cent ncrease for new capta), amounts
to 50,000. Ths sum e ceeds the tota equty nvested capta and borrowed
capta on anuary 1, 19 1, amountng to 5,000, by 5,000. Under subpara-
graph ( ) the new capta sha not be more than such e cess. The new capta
Is thus reduced from 0,000 to 5,000.
If the accumuated earnngs and profts of Corporaton Y as of anuary 1.
19 2, are reduced to zero due to the stock dvdend dstrbuton of 5,000 made
on anuary 2, 19 1, and an operatng defct of 5,000 durng the ta abe year
19 1. the new capta ncudbe n equty nvested capta as of anuary 1, 19 2,
woud reman at 5,000 under the appcaton of subparagraph ( ), as shown
by the foowng computaton:
New capta as of anuary 1, 19 2, before appcaton of subparagraph ( ),
20,00 ), sha not be more than the e cess of 5,000 (tota capta on anuary
1, 19 2, before addng 25 per cent under secton 718(a)(6)) over 5,000 (tota
c apta on . anuary 1, 19 1) ess 5,000 (amount by whch the accumuated earn-
ngs and profts as of anuary 1, 19 1, e ceed the accumuated earnngs and
profts (computed wthout regard to dstrbutons) as of anuary 1, 19 2), or
the new capta can not e ceed 5,000, mnus 0,000 ( 5,000 mnus 5,000), or
5,000.
Note. The st two paragraphs of e ampe (5) under secton 203 are here
prnted as corrected on the foor c|f the Senate. See unbound Congressona
Record of September 5, 19 1, page 75 5.
S CTION 20-1. T L Y RS TO W IC M NDM NTS PPLIC L .
Ths Is the same as secton 207 of the ouse b and provdes that the
amendments reatve to the e cess-profts ta made by ths tte are appcabe
ony wth respect to ta abe years begnnng after December 31,19 0.
Tte III Capta Stock Ta nd Decared aue cess-Profts Ta .
S CTION 301. C PIT L STOC T .
The ouse b ncreased the capta stock ta from the defense rate of
1.10 per 1,000 to 1.25 per 1,000 of the vaue of the capta stock as de-
cared by the corporaton. Ths provson s retaned n the h as reported by
your commttee. In addton, your commttee as revsed ths secton to pro-
vde for an annua decaraton of capta stock vaue. Certan technca amend-
ments necesstated by suc h provson have aso been made.
Secton 1203(a)(2) of the Interna Revenue Code s aso amended to permt
a 90-day e tenson of tme, n eu of the 60-day e tenson authorzed by e st-
ng aw, for fng of capta stock returns for ths year. owever, f a re-
turn has aready been fed, the fng of an amended return s not made com-
pusory, t beng provded that the vaue decaraton on a return fed n
accordance wth the statute sha consttute the decared vaue for purposes of
the statute as amended uness another return s fed wthn the tme prescrbed
by aw, whch ncudes the perod of any e tenson granted by the Commssoner.
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S CTION 302. D CL R D LU C SS-PROFITS T D F NS -T R T S
INCORPOR T D IN R T SC DUL .
The ouse b made permanent the defense-ta rates of the e cess-profts
ta . The amendment accompshes the same resut by ntegratng the defense-
ta rates wth the basc ta .
Other technca amendments are made to accord wth the amendments made
by secton 301 reatve to the capta stock ta .
Ttf. I . state and Gft Ta es.
S CTION 01. ST T T R T S.
Ths secton of the ouse b ncreases the rates appcabe to the add-
tona estate ta wth respect to decedents dyng after the date of enactment of
the ct and make permanent the defense ta on net estates mposed by secton
951. In the b as reported by your commttee these ncreases have been re-
taned, but the rates have been further ncreased by reason of the ntegraton of
the defense ta and the addtona estate ta .
S CTION 02. GIFT T T S.
Ths secton of the ouse h ncreased the rates for computng the gft
ta for the caendar year 10 2 and each caendar year thereafter. The 75
per cent rato prevousy e stng between the gft ta rates and the aggregate
of the estate ta and addtona estate ta rates was preserved. The ouse
b aso made permanent the defense ta mposed for fve years by secton
1001(d) of the Interna Revenue Code. In the b as reported by your commttee
these ncreases have been retaned, but the rates have been further ncreased by
reason of the ntegraton of the defense-ta and the gft-ta rates.
Tte . cse Ta es.
Part I. 1932 cse Ta es ade Permanent.
S CTION 501. 1032 CIS T S M D P RM N NT.
Ths secton repeas secton 3 52 of the Interna Revenue ( ode, whch now
provdes that the manufacturers e cse ta es mposed by Chapter 29 sha
termnate as of uy 1, 19 5. It thus makes permanent aw the provsons
mposng such ta es.
S CTION 502. PIP -LIN T .
Ths secton strkes out the termnaton date ( uy 1, 19 5) appcabe to
the ta on the transportaton of o by ppe ne.
S CTION 503. T C NIC L M NDM NT.
Ths secton revses the tte anguage of Subtte C of the Interna Revenue
Code to make t more descrptve of the ta es ncuded wthn Subtte C.
S CTION 50 . OND T .
Ths secton makes permanent the ta on the transfer of bonds.
S CTION 505. CON Y NC T .
The two sectons strke out the termnaton date ( uy 1, 19 5) appcabe to
the bond transfer and conveyance ta es.
Part II. Defense-Ta Rates Made Permanent (No Increase n Ta and No
Change of ase).
secton 621. defense e cse-ta rates made permanent whch abe hot
ncreased by ths act.
Wth respect to the ta es sted herenafter secton 521 ncorporates, wthout
change, n the appcabe provsons of the Interna Revenue Code the defense-ta
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500
rates mposed by the frst Revenue ct of 19 0 and makes such rates permanent
These ta rates were orgnay prescrbed by the frst Revenue ct of 19 0 to
be effectve for the perod pror to uy 1,19 5. The partcuar ta es are those
wth respect to
Corporate securtes.
Capta stock ssues.
Capta stock transfers.
Insurance poces.
Passage tckets.
Cgarettes.
Pstos and revovers.
Fermented mat quors.
Whoesaers of quors.
Retaers of quors.
rewers.
Whoesaers of mat quors
Retaers of mat quors.
Rectfers.
Sts.
Frearms, etc.
ectrca energy.
Gasone.
Lubrcatng os.
Transportaton of o by ppe ne.
Transfer of bonds.
Conveyances.
Secton 521 of the ouse b covered aso bo seats and saes outsde bo
offces, but under the commttee amendment these are covered by secton
5 1 (b) and (c) whch ncreases the ta n each case to 15 per cent.
Part III. Increases n Rates of stng cse Ta es.
S CTION 531. PL YING C RDS.
Ths secton ncreases the rate of ta on the manufacture of payng cards
from 11 cents per pack to 13 cents per pack.
S CTION 532. S F -D POSIT O S.
Ths secton ncreases the rate of ta on the renta of safe-depost bo es from
11 per cent of the amount pad to 20 per cent.
S CTIONS 533, 53 . LI UOR.
Secton 533 amends secton 2800(a) (1) of the Interna Revenue Code, whch
Imposes an e cse tu upon dsted sprts and mported perfumes contanng
dsted sprts at the rate of (and on brandy at the rate of . 3.75).
The e stng rate of ta upon dsted sprts other than brandy, and upon
mported perfumes contanng dsted sprts, s 3 per proof gaon, and upon
brandy 2.75 per proof gaon. These are the defense-ta rates mposed by
secton 213 of the Revenue ct of 19 0, effectve uy 1, 10 0. The rates pro-
posed by the b, therefore, represent an ncrease of . 1 per proof gaon over the
defense-ta rates. The defense-ta rates are 75 cents per proof gaon over and
above the rates n effect pror to uy 1,10 0.
Subsecton (c) of secton 533 makes a compementary amendment to secton
28.S7 of the Interna Revenue Code, whch provdes for the aowance of draw-
back of nterna-revenue ta upon the e portaton of dsted sprts n dsters
orgna packages.
Subsecton (d) w amend secton 2S00 of the Interna Revenue Code by
addng a new subsecton () to provde a foor stocks ta of 1 per proo
gaon on a dsted sprts upon whch the ta has been pad and whch on
the effectve date of the new rates are hed and ntended for sae or for use
In the manufacture or producton of any artce ntended for sae. Ths sub-
secton w have the effect of pacng a dsted sprts ta -pad at the od
rates and hed for the purposes specfed on an equa ta bass wth other
dsted sprts wthdrawn and ta -pad at the new rates. It w precude
oss of revenue through the wthdrawa and ta payment of arge stocks before
the new rates become effectve. s n pror foor stocks ta statutes, provson
s made for the fng of returns and for deferrng payment of the ta upon
the submsson of satsfactory surety bonds.
Ths subsecton aso provdes that for the purposes thereof the term dsted
sprts sha ncude products produced n such manner that the person pro-
ducng them s a rectfer wthn the meanng of secton 325 (g) of the Interna
Revenue Code. The ob|ect of ths provson s to sub|ect to the foor stocks ta
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Uqneurs, cordas, and smar compounds In the manufacture of whch dsted
sprts are a consttuent.
The e stng rates on st wnes are as foows: Not more than 1 per cent
of absoute acoho, 6 cents per wne gaon; more than 1 per cent and not
e ceedng 21 per cent of absoute acoho, 18 cents per wne gaon; and more
than 21 per cent and not e ceedng 2 per cent of absoute acoho, 30 cents
per wne gaon. Secton 53 (a) of the b mposes rates of 8, 2 , and 50 cents
respectvey. The proposed rates represent an Increase of 2 cents, 6 cents, and
20 cents per gaon over e stng rates.
The e stng ta rates on other wnes are as foows: Sparkng wnes, 3 cents
on each one-haf pnt or fracton thereof; artfcay carbonated wnes, 1 cents
on each one-haf pnt or fracton thereof; queurs, cordas, and smar com-
pounds, cents on each one-haf pnt or fracton thereof. Secton 53 (b) of
the b mposes rates of and 2 cents, respectvey. The proposed rates repre-
sent an ncrease of 1 cent on sparkng wnes and three-fourths of 1 cent on
artfcay carbonated wnes, and queurs, cordas, and smar compounds,
over the ta rates on such products.
Subsecton (c) of secton 53 w amend Subchapter F of Chapter 26 of the
Interna Revenue Code by nsertng at the end thereof a new secton mposng
a foor stocks ta on a wnes on whch the ta has been pad and whch are hed
and ntended for sae or for use n the manufacture or producton of any artce
Intended for sae on the effectve date of the new rates. Ths subsecton, ke
subsecton (d) of secton 533 n the case of dsted sprts, w have the effect
of pacng a wnes ta -pad at the od rates and hed for the purposes specfed
on a bass of equaty, In so far as ta aton s concerned, wth other wnes wth-
drawn and ta -pad at the new rates.
Your commttee made the foowng changes: The dfferenta n favor of brandy
was emnated, and brandy made sub|ect to the same rate as other dsted
sprts. The rates on st wnes of 8 cents, 2 cents, and 50 cents have been
changed to 10 cents, 35 cents, and 65 cents, respectvey. The rate of cents on
spurkng wnes has been changed to 7 cents and the rate of 2 cents on artfcay
carbonated wnes and on queurs, cordas, and smar compounds has been
changed to 3 cents.
S CTION 535. TT S ND TU S.
Ths secton ncreases the rate of the manufacturers e cse ta (defense ta
rates) on tres from 2y, cents per pound to 5 cents per pound and the rate of ta on
nner tubes from cents per pound to 9 cents. It mposes a foor stocks tu on
tres and nner tubes hed for sae by any person other than the.manufacturer,
producer, or mporter on the date the ncreased manufacturers e cse tu rates
tuke effect. The foor stocks ta rates are n an amount equa to the ncrease n
the rates of the manufacturers ta . The foor stocks ta s restrcted In ts scope
to tres and nner tubes for automobes, trucks, traers, motorcyces, etc., and w
not be appcabe to such msceaneous tems as bcyce tres, baby buggy tres,
etc. The ta s specfcay made appcabe to tres and tubes hed by automo-
be manufacturers as, or for, equpment on new automobes. It s not made
appcabe to tres and tubes actuay on automobes hed by new and second-hand
car deaers but s appcabe to the stocks of unmounted tres and tubes hed by
such deaers and by any person, ncudng retaers, for sae. The foor stocks
ta does not appy to any tres and tubes hed by a person who must pay the
ncreased manufacturers e cse tu rate on such artces when he ses them.
S CTION 536. FF CTI D T OF P T n.
Ths secton appes to sectons 531 to 535, ncusve, and provdes, n bref,
that the ncreased ta rates and new ta es mposed by such sectons sha take
effect on the 1st day of the frst month whch begns more than 10 days after
the date of the enactment of the b.
Pabt I . Changes n ass of Computng Ta (Rates Incbeased n
Cebtan Cases).
secton 5 1. admssons ta .
The ouse b sub|ected to ta admssons of 10 cents or more at the rate of 1
cent for each 10 cents or fracton thereof. Under e stng aw the admssons ta
appes ony to admssons of 21 cents or more.
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502
Under the commttee amendment the ta appes to a amounts pad for adms-
son. In addton to the consderaton of the ncreased revenue resutng from
emnaton of the e empton, whch was strongy urged on the commttee, many
operators of amusement enterprses woud prefer that there be no e empton at
amounts ess than 10 cents, as ths e empton woud encourage certan forms of
avodance, such as reducng a 10-cent admsson charge to 9 cents.
The commttee b mposes a schedue of rates as foows: 10-cent admsson
s ta abe at 1 cent, a 15-cent admsson at 2 cents, a 20-cent admsson at 3 cents,
etc. dmssons of more than 50 cents are to be sub|ect to a ta of 15 per cent of
the amount charged. Fractons of one-haf cent or more are to be ncreased to
1 cent and smaer fractous dsregarded. The rates of ta upon saes outsde the
bo offce and upon the permanent use or ease of bo es and seats are ncreased
from 10 to 15 per cent
Under the b as t passed the ouse, the speca treatment under the admssons
ta wth respect to so-caed free or reduced rate admssons now appcabe to
empoyees, muncpa offcers, and chdren under 12 years of age, s e tended to
Incude members of the mtary or nava forces of the Unted States and of the
Cvan Conservaton Corps when n unform. For e ampe: If the estabshed
prce s 50 cents and a soder n unform s charged ony 20 cents, the ta bass
Is 20 cents and not 50 cents. If he s admtted free, no ta s payabe.
In the case of reduced rates of admsson of chdren under 12 years of age,
the present aw provdes that the ta sha be computed on the amount actuay
charged such chdren and not on the reguar charge for aduts. Your commttee
recommends that the age mt of 12 years be changed to 18 years.
The b, as t passed the ouse, provded that secton 1701 of the Interna Reve-
nue Code whch aows a number of e emptons from the admssons ta sha not
e appcabe after the effectve date of Part III of the b. The amendment con-
tnues the e emptons aowed by sectons 1701 (b) and (c) whch the commttee
regards as approprate. Secton 1701(b) reates to admssons to agrcutura
fars, and secton 1701(c) reates to admssons to certan concerts conducted by
cvc or communty membershp assocatons.
S CTION 5 2. C R T, OOF G D N, TC., T .
Ths secton revses the base of the present cabaret ta . It mposes a ta
of 5 per cent on amounts pad for admsson, refreshment, servce, and merchan-
dse at any roof garden, cabaret, or other smar pace furnshng a pubc
performance for proft. Labty for the ta s mposed on the propretor.
The ta appes to a amounts pad. Under present aw the ta s mposed
on the patron-under a rather compcated rate of 2 cents (ncudng the defense
ta ) for each 10 cents of 20 per cent of the amount pad f 20 per cent of the
amount pad e ceeds 50 cents.
Ths secton aso makes certan amendments to admnstratve provsons of
the Code appcabe to the cabaret ta and other admsson ta es.
The commttee made no change In ths secton. It was urged before the
commttee that shftng of abty for the ta from the patron to the propretor
woud make t unawfu for the propretor to add the amount of the ta to the
patron s b. Ths contenton s mstaken. The amendment merey shfts tre
ega ncdence of the ta from the patron to the propretor and makes the
propretor prmary abe for the payment of the ta to the Government.
There s nothng n the secton whch woud prevent the ta payer, the propretor,
from shftng the ta burden to hs customer.
y secton 550 of the b the cabaret ta mposed by secton 5 2 s made
appcabe to the perod begnnng 10 a. m. on the effectve date of Part I of the
b. The tme 10 a. m. means the standard tme for the tme bet
S CTION 6 S. CLU DU S.
Ths secton reduces the amount used as a test for determnng abty to
the ta on cub dues from 25 annua dues of an actve resdent annua mem-
ber to 10, and redefnes the term dues specfcay to ncude certan prvege
fees and assessments.
Ths secton aso makes permanent the defense-ta rates appcabe to dues
and ntaton foes, as mposed by the frst Revenue ct of 19 0.
The commttee made no change In ths secton. It beeves the redefnton
of the term dues to be very hepfu n avodng tgaton. Under e stng
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aw a number of prvege fees and assessments are sub|ect to ta as cub
dues. Some ta payers bave aeged ether that there s an ambguty n the
present aw or that t can not be construed to cover certan types of fees. It
s, therefore, desrabe, n order to avod tgaton, to defne n very drect terms
what s ntended to be covered by the term dues.
S CTION 6 . UTOMO IL , T UC , US, ND P TS T .
Ths secton Increases the rates of ta on automobe truck chasss, truck
bodes, etc., from 2 / per cent to 5 per cent and brngs traers and semtraers
for trucks wthn the scope of te ta . Passenger busses whch under present
aw are sub|ect to the hgher rate of ta appcabe to passenger automobes
have been ncuded wthn the truck cassfcaton, and w be sub|ect to the
new 5 per cent rate.
The rate of ta on passenger automobe chasss and bodes, motorcyces, etc.,
Is ncreased from Z per cent to 7 per cent. Traers and semtraers for
such vehces are made sub|ect to the ta . Subsecton (b) of secton 5 n-
creases the rate of ta on automobe parts and accessores from 2 per cent
to 5 per cent It e cudes automobe rados whch have heretofore been sub-
|ect to ta as automobe parts or accessores. utomobe rados are by
secton 5 5 made sub|ect to the manufacturers ta on rado sets and parts at
the rate of 10 per cent
Subsecton (c) of secton 5 Increases the rates of credt aowabe under
ths secton to automobe manufacturers wth respect to the tres and Inner
tubes on such vehces from 2 a to 5 per cent n the case of trucks, busses, etc.,
aud 3 to 7 per cent In the case of other automobes and motorcyces.
Subsecton (d) repeas secton 3 03(f) of the Interna Revenue Code, whch
woud aow a ta ad|ustment wth respect to foor stocks of passenger auto-
mobes, trucks, etc., hed by deaers as of the termnaton date of the present
ta on such vehces. Ths Is done because the termnaton date of such ta
has been deeted and the ta made of a permanent nature. Secton 3 03(f),
therefore, becomes unnecessary.
It was urged that ths secton be amended to specfy that repared, recond-
toned, and rebut automobe parts and accessores are not sub|ect to the
parts and accessores ta . Your commttee e amned the probem very care-
fuy. Repared and recondtoned parts are not now sub|ect to ta . There are
severa decsons of the Unted States crcut courts of appeas hodng rebut
parts aud accessores to be sub|ect to the manufacturers ta . Rebut parts
compete wt new parts, and t appears approprate that they shoud be sub-
|ect to the same ta . ccordngy, no change has been made.
S CTION 8 8. DIOS, P ONOGR P S, CORDS, ND MUSIC L INSTRUM NTS.
Secton 3 0 of the Interna Revenue Code now mposes a ta on saes by the
manufacturer of certan rado components at the rate of 5 per cent of the sae
prce. Secton 5 5 amends secton 3 0 of the Code so as to mpose a ta at the
rate of 10 per cent on
Rado recevng sets. Certan prncpa components of
utomobe rado recevng sets. these artces.
Combnaton rado aud phono- Phonograph records.
graph sets. Musca nstruments.
Phonographs.
The artces sted have been Incuded wthn the same secton of the Code
because argey reated.
S CTION 5 6. FRIG TOUS, IR CONDITION RS.
Secton 3 05 of the Interna Revenue Code mposes a ta on saes by the
manufacturer of househod-type mechanca refrgerators and certan prncpa
components of such artces at the rate of 5 6 per cent of the saes prce. Secton 5 6
amends secton 3 05 of the Code to ncrease the ta rate to 10 per cent and to make
the ta appcabe to the prncpa commerca types of refrgerators, ncudng
such artces as ce cream cabnets, food and beverage dspay cases, water cooers,
mk cooer cabnets, and smar artces. In addton, there are brought wthn
the scope of the ta components of refrgeratng apparatus such as compressors,
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cond nsors, evaporators, e panson unts, absorbers, and contros. owever, the
ta wth respect to such components s net mted to -components for the hou.se-
hod, commerca, and ndustra type of refrgerator unts referred to above.
Refrgeratng components w be sub|ect to ta regardess of ther ntended use.
For e ampe, components for refrgerator shps and refrgerator cars, and for
the refrgeratng pants of breweres,and cod-storage-warehouses w be sub|ect
to the ta .
Secton 5 6 aso mposes a ta at the rate of per. cent on the-sae by the
manufacturer of sef-contaned ar-condtonng unts and certan prncpa
components of such artces.
S CTION 5 7. M TC S.
Secton 3 09 of the Interna Revenue Code now mposes a. ta at the rate of
5 cents per thousand on certan fancy wooden matches. Secton,5 7 amends
secton 3 09 of the Code to aso mpose a ta at 2 cents per thousapd on other
types of matches. The-types of matches sub|ect to te new ta at 2 cents per
thousand ncude the we-known types of wooden and paper matches now n
everyday use.
S CTION 5 S. T L P ON , T L GR P , TC.
Secton 5 S as t passed the ouse woud mpose on teephone conversatons,
teegraph, cabe, and rado dspatches, messages, and conversatons, for whch
the charge s more than 2 cents, a ta at the rate of 5 cents for each 50 cents
or fracton thereof of the charge. Under e stng aw, the ta on teephone to
servce does not appy to charges of ess than 50 cents. Teegraph dspatches and
messages are now sub|ect to ta at the rate of 5 per emt of the amount charged,
and cabe and rado dspatches and messages at the rate,of 10 cents per message.
The commttee amendment contnues the dstncton made by the e stng aw
between teephone servce and teegraph servce and makes the new rates f ed
by the ouse b appcabe ony to teephone or radoteephone messages or
conversatons. Teegraph, cabe, and rado messages and dspatches are made
sub|ect to ta at 10 per cent of the amount charged. The 10 per cent rate s
doube the rate provded by e stng aw. Your commttee fet that the ta rates
f ed by (e ouse b woud pace teegraph, cabe, and rado servce at a
compettve dsadvantage.
Ths secton aso amends secton 3 65(b), whch mposes a ta wth respect
to eased wres and takng crcut speca servce, to more ceary specfy the
types of servce sub|ect to ta , to mpose the ta where the servce s rendered
wthn a oca e change area, and to aso ta ke servce-furnshed by companes
other than teegraph and teephone companes. The present ta s restrcted
to servce furnshed by a teegraph or teephone company.
The b as t passed the ouse contnues the present 5 per cent rate. The
amendment ncreases the rate to 10 per cent n the case of eased-wre servce,
teetypewrter servce, and takng crcut speca servce (whch competes wth
teegraph servce sub|ect to ta under the amendment at 10 per cent). Other
wre and equpment servce s n a somewhat dfferent category, and as to t no
change n the 5 per cent rate provded by the ouse b s recommended. urgar
and fre aarm servce s not ta ed under the amendment. Smary, news tcker
servce carryng geuera news has been e empted from the ta to be consstent
wth the ke e emptons aowed n the case of newspapers wth respect to the
easod-wre ta .
Ths secton aso mposes n ta on amounts pad by subscrbers for oca tee-
phone servce and a other teephone servce not otherwse wthn the ta wth
respect to teephone to charges and the ta wth respect to eased wres. For
e ampe, n addton to oca subscrbers servce, ths ta aso appes to teephone
to servce where the charge s 2 cents or ess. s the ta s mposed ony on
teephone servce, speca provson s made to nsure that charges for nstaaton
of nstruments, poes, swtchboards, apparatus, and equpment are not sub|ect
to the ta . though servce through con-operated teephones s not sub|ect
to the ta on oca subscrbers servce, It s sub|ect to ta n the case of to
charges of more than 2 cents. Con-operated teephone servce can not be sub|ect
to the ta because of the mpractcabty of chargng the patron a percentage of
5 cents and coectng the 5 per cent ta through the nstrument. s the ta
on teephone to servce s coected n mutpes of 5 cents, t can be coected
through con-operated teephones.
The commttee b ncreases the rate to 10 per cent. No other change Is made.
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S CTION 5 9. INST LLM NT, TC.. P YM NTS.
Secton 5 9 makes certan changes n secton 3 1 (c) of the Interna Revenue
Code, whch reates to artces eased or sod under nstament or condtona
saes contracts. Under secton 3 1(c) the ta payer s permtted to pay the
ta as payments are made under the ease or condtona or nstament saes
contract. The provsons of secton 1650(b) of the Interna Revenue Code are
revsed and ncuded wthn secton 3 1(c).
Under the h as t passed the ouse, payments under eases and nstament
and condtona saes contracts, and e stng saes entered nto after une 30,
19 1. woud he sub|ect to ta . If an e stng ta rate were ncreased, payments
after the effectve date of the Increase woud be sub|ect to the ncreased rate
of ta . If a new ta were mposed, payments after ts effectve date woud be
sub|ect to the new ta . Your commttee s opposed to makng sech ncreased
rates of ta retroactve to the e tent that they woud cover saes and enses
made durng the nterm perod pror to the ncepton of t-e ta . ccordngy,
the secton has been amended so that where the partcuar ty|)e of contract has
been entered nto before the effectve date of Part I of the b, and devery
made before such date, the ncreased ta rate, or the new ta , as the case may
be, sha not appy.
S CTION 550. FF CTI D T OF P RT T .
Secton 550 contans provsons respectng the effectve date of new ta es, or
ncreases n e stng rates of ta , or changes n ta base, effected by sectons
5 1 to 5 8. Wth certan e ceptons, the provsons are the same as those de-
scrbed n the dscusson of secton 536, . e., the 1st day of the frst month
whch begns more than 10 days after the date of the enactment of the b.
The changes wth respect to the cabaret ta become effectve at 10 a. m. on
the effectve date, for consderatons pecuar to that ta . Speca provson Is
made for the effectve date of the ta mposed by secton 5 8, wth res ect to
oca su)scrbers teephone servce, n order to gve teephone companes (who
w coect the ta for the Government) an opportunty to ad|ust ther bng
practces to the ta . It was aso desred to restrct the appcaton of the ta ,
as far as s reasonaby practcabe, to servce rendered after the date of the
enactment of the ct. It s recognzed, however, that some oca servce rendered
pror to the date the ct s enacted (but bed after such date) w be
sub|ect to the ta . It s ntended to ta such servce.
Part . New cse Ta es.
S CTION 551. N W M NIF CTUR RS CIS T .
s passed by the ouse ths secton mposes ta es on saes by the manufac-
turer, producer, or mporter, of the artces sted herenafter at the rate gven:
Per cent.
usness and store machnes 10
Rubber products 10
Washng machnes 10
Optca equpment 10
Per cen t.
Sportng goods _ 10
Luggage 10
ectrca appances 10
Photographc apparatus 10
ectrc sgns 10
In the case of sportng goods, uggage, eectrca appances, photographc
apparatus, busness and store machnes, and optca equpment, the partcuar
artces the sae of whch s sub|ect to ta are named. L nforms and sport
cothng are not wthn the scope of the ta on sportng goods.
In the case of eectrc sgns, the ta appes to artces fang wthn the
genera cassfcatons of neon tube sgns, eectrc sgns, and eectrc advertsng
devces.
It s recognzed that a number of artces fang wthn the scope of the e cse
ta es sted teren may aso fa wthn the scope of the |ewery reta saes
ta mposed by secton 552. Provson s accordngy made that su h artces
w be sub|ect to the |ewery reta saes ta and not to the manufacturers
e cse ta es mposed by ths secton.
Your commttee has made the foowng changes:
Sportng goods. rtfca ures, bats, and es have been removed from the
scope of the sportng-goods ta .
1611 2 33
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ectrca appances. The scope of ths ta has been e panded by the Incu-
son of gas and o water heaters and gas and o stoves and cookng apparatus.
Such added artces are drecty compettve wth the eectrca artces ta ed
by ths secton as t passed the ouse.
Photographc apparatus. Une posed moton-pcture fm for use In makng
news rees s e empted from the ta by a provson ncuded n secton 553, whch
provdes for approprate credt or refund to the manufacturer.
usness and store machnes. cerca change has been made n the pro-
vson wth respect to these machnes. In ths secton as t passed the ouse
certan machnes were ncuded by trade names. The trade names have been
deeted, and the partcuar machnes ncuded by approprate descrpton. In-
cuded n the st of busness machnes are fare regsters and fare bo es. Fare
regsters and fare bo es for. use on streetcars, busses, and other vehces are
ta abe under ths secton and not as automobe accessores.
Washng machnes. s passed by the ouse ths secton ta ed ony washng
machnes of the knd used n commerca aundres. s many other househod
appances are sub|ect to ta under the b, ths secton was changed to brng
wthn the scope of the ta a washng machnes, domestc as we as commerca.
ectrc-ght bubs. Under the commttee b, a 10 per cent ta on the sae
of eectrc:ght bubs by the manufacturer, producer, or mporter s mposed.
Ths proposed ta has been ncuded as paragraph 10 of new secton 3 08 to be
added to the Interna Revenue Code.
S CTION 552. N W T IL S CIS T S.
Ths secton adds a new Chapter 19, mposng new ta es on reta saes of
ewery, furs, and toet preparatons each at the rate of 10 per cent of the prce
for whch the artce s sod. The artces fang wthn the |ewery ta (ncud-
ng cocks, watches, cases, and movements) are artces whch have n former
|ewery e cse ta es been cassfed as |ewery. There are added fat ware and
hoow ware made of god or sver, or pated. The ta w not appy to regous
artces, surgca nstruments, or frames or mountngs for eyegasses.
The fur ta s to be mposed on the sae of artces made of fur on the hde or
pet and artces of whch such fur s the component matera of chef vaue.
Ths s a cassfcaton whch has been used n earer manufacturers e cse ta es
wth respect to furs.
ta on the sae at reta of toet preparatons s mposed n pace of the
e stng ta on saes by the manufacturer (mposed by secton 3 01 of the Interna
Revenue Code). Provson s mnde that beauty parors and barber shops sha
make monthy returns of toet preparatons used n the treatment of patrons and
the quantty used durng the mouth sha be consdered to have been sod at reta
by such estabshments.
Secton 552 contans, or makes appcabe, the admnstratve provsons neces-
sary to the admnstraton of these reta saes ta es.
Ths secton aso provdes that the present ta on saes of toet preparatons
by the manufacturer (mposed by secton 3 01 of the Interna Revenue Code) sha
not appy to artces sod after the effectve date of the reta saes ta . Manu-
facturer s ta prevousy pad wth respect to artces whch w aso be sub|ect
to the ret saes ta w not I)e refunded.
Your commttee made a number of changes wth respect to.the reta saes
ta es.
Fountan pens are e cuded from the |ewery ta f the ony part thereof whch
conssts of precous metas s the pont.
Reatve to the ta on toet preparatons, secton 552 adds secton 2 07(c) to
the Interna Revenue Code to permt a barber shop or beauty paror to take
credt for any reta saes ta mposed by the b whch has aready been pad on
toet preparatons as to whch the barber shop or beauty paror s sub|ect to ta .
provson has aso been added specfyng certan rues for determnng the
prce base on whch the ta s to be computed. Ths provson s smar to that
whch hns been n effect for many years n the case of the manufacturers e cse
ta es. Partcuary mportant s the provson that the amount of the reta
saes ta mposed by the b sha be e cuded In determnng the prce base for
ta purposes. Smary, State saes ta es may be e cuded provded they are
stated by the retaer as a separate charge. If States saes ta es are not sepa-
ratey stated, but are ncuded n the gross seng prce, the ta s computed on
the gross seng prce. The Federa ta s to be e cuded whether or not stated
as a separate charge.
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In the case of eases, condtona saes, and nstament contracts, substantay
the same treatment s gven wth respect to the reta saes ta es as s gven wth
respect to the manufacturers saes ta es, as more fuy e paned n the ds-
cusson of secton 5 9. That s to say, the anguage of the secton as t passed
the ouse has been changed so that where the partcuar contract was made,
devery was made, and a part of the consderaton was pad, before the effectve
date of the reta saes ta es, no ta Is mposed.
Wth a vew to preventng the reta saes ta from beng used as a means of
securng unfar compettve advantages, a penaty provson has been ncuded
mposng a fne of not more than 1,000 on any person who n connecton wth
the sae of an artce represents that the prce does not ncude the reta saes
ta mposed by the b.
CTION 5.13. DMINISTR TI C NG S IN M NUF CTUR RS CIS TITL OF COD .
Ths secton, added by the commttee amendment, contans severa admns-
tratve provsons beeved mportant n the effectve admnstraton of the e cse
ta es mposed by the b.
Leases. number of the artces sub|ect to manufacturers saes ta by the
b are artces whch are generay eased by the manufacturer and not sod.
Secton 3 0 of the Code aready defnes the term sae to Incude a ease. In
carfcaton of e stng anguage, ths secton s amended to provde specay
that a ease, ncudng a renewa or e tenson of a ease, or a subsequent ease,
of an artce sha he consdered a ta abe sae.
tnu contracts. Ths secton aso adds an e stng contracts secton to the
Interna Revenue Code. Ths secton s qute smar to the e stng contracts
secton ncuded n the Revenue ct of 1932 when the ast arge boc of manufac-
turers saes ta es was mposed. Your commttee beeves that provson shoud
be made permttng ta abty to be shfted from the manufacturer to the
vendee n the case of saes contracts entered nto before the effectve date of the
partcuar saes ta or ncreased rate of ta , but consummated after that date,
where the contract does not permt the ncuson of the ta n the saes prce.
Ths affords reef to those cases where manufacturers have not been abe to
protect themseves by nsertng a ta cause n ther saes contracts to provde
that ta es, such as those ncuded n the b, woud be passed on to ther vendees.
The cause n queston s, n anguage, qute cose to the te t of secton 025 of
the Revenue ct of 1932, whch now appears as secton 3 7 of the Interna
Revenue Code.
Secton 553 aso ncudes the refund and credt provsons wth respect to
news-ree and moton-pcture fm referred to n the dscusson of secton 551.
S CTION 30 . TR NSPORT TION OF P RSONS, TC.
Ths secton mposes a ta on the amount pad wthn the Unted States for
the transportaton of persons by ra, motor vehce, water, of ar, wthn or
wthout the Unted States. The rate s 5 per cent of the amount pad and ta
abty s mposed on the person makng the payment. Where the amount pad
s ess than 35 cents the ta does not appy. Round-trp tckets are not sub|ect
to ta f the amount payabe for a on -way trp s ess than 35 cents. In the
case of commutaton or season tckets the ta does not appy f the partcuar
trps the hoder of the commutaton or season tcket s entted to make under
the tcket are ess than 30 mes. For e ampe, a commutaton tcket enttng
a person to transportaton for a certan number of trps between two ponts s
not sub|ect to ta f the dstance between the two ponts s ess than 30 mes.
These provsons w e empt oca streetcar, bus, and ta servce, ncudng
amounts pad for token and passes. mounts pad for commutaton tckets
for one month or ess are aso e empt from ta .
Ths secton aso mposes a ta on amounts pad for seatng or seepng accom-
modatons n connecton wth ta abe transportaton.
Provson s made that the tme for fng returns may he e tended for as
much as 90 days n order that carrers may have the necessary tme to assembe,
from wdey scattered ponts, necessary data for makng returns. Provson s
aso made that the ta sha not appy to transportaton factes furnshed
the Unted States, to any State or Terrtory or potca subdvson thereof, or
the Dstrct of Coumba.
Secton 55 (c) provdes that the stamp ta on steamshp passage tckets
Imposed by secton 3 09 of the Interna Revenue Code sha not appy to any
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508
tckets the purchase of whch s sub|ect to ta under the new transportaton
ta .
One change has been made n the secton as t passed the ouse. Provson
has been made to e empt from the ta , wth certan quafcatons, amounts
pad for transportaton of personne of the rmy, Navy, Marne Corps, and
Coast Guard, when n unform and whe on eave, and authorzed cadets and
mdshpmen.
8 CTCON 555. COIN-OP R T D MUS M NT ND G MING D IC S.
Ths secton mposes an occupatona ta of 25 per annum per machne on
each person who mantans for use, or permts the use of, on premses occuped
by hm, a con-operated amusement or gamng devce. Con-operated amuse-
ment or gamng devces are, brefy, machnes whch fa wthn the genera
cassfcaton cooquay referred to as pnba machnes and sot ma-
chnes. separate abty s ncurred wth respect to each machne, but f
one such machne s repaced by another, such other machne w not be
consdered an addtona machne.
y commttee amendment the rate of ta on so-caed pnba machnes s
reduced from 25 to 10 per annum and the rate of ta on so-caed sot ma-
chnes s ncreased from 25 per annum to 200 per annum.
S CTION 556. OWLING I YS, TC.
Ths secton mposes an occupatona ta on persons operatng bowng aeys,
bardrooms, or poorooms. The rate of ta s 15 per annum for each bowng
aey, bard tabe, or poo tabe. types of estabshments mantanng
such equpment, ncudng cubs or soca organzatons, etc., are sub|ect to the
ta . Mantanng such equpment n a prvate home s not sub|ect to ta .
s n the case of other occupatona ta es, the ta year begns uy 1 of
each year.
owever, f rtfter payment of ta and pror to the end of the ta year, add-
tona bowng aeys, or bard or poo tabes, are paced n operaton, a
suppementa return must be fed and ta pad wth respect to the addtona
equpment for the perod begnnng wth the day of the month n whch opera-
ton of the addtona equpment commenced.
y commttee amendment the rate s changed from 15 per annum to 10
per annum.
S CTION 557. US OF MOTOR ICL S ND O TS.
Ths secton mposes a ta on the use of motor vehces and boats. In the
case of motor vehces the ta s 5 per annum. In the case of boats the rate
of ta ranges from 5 per annum on boats havng an over-a ength of 16 feet
or over but not over 28 feet to 200 per annum on boats over 200 feet n over-
a ength. In the case of motor vehces the ta s to be pad by the person n
whose name the motor vehce s, or s requred to be, regstered. In the case of
boats, the ta s to be pad by the owner of the boat. The effectve date of
the ta s Febrnary 1, 19 2; that s, the use of motor vehces and boats before
that date s not sub|ect to ta .
Secton 35 0(b)(3) of the ouse b defnes the term boat but e cudes
from the defnton boats used e cusvey for trade or commerca fshng.
The commttee b changes e cusvey to chefy. The commttee b aso
e empts from the ta boats used by the Sea Scouts Department of the oy Scouts
of merca chefy for tranng scouts n seamanshp.
S CTION 55S. FF CTI D T OF P RT .
Ths secton provdes that the new ta es mposed by sectons 551 to 558 w
take effect on the 1st day of the frst month whch begns more than 10 days
after the date of the enactment of the ct.
CTION 581. P YM NT OF PROC SSING T TO OU M ND M RIC N S MO ,
Ths secton was added by commttee amendment. It provdes that the ta es
coected wth respect to the processng of coconut o orgnatng n Guam of
mercan Samoa sha be hed as separate funds and pad to the treasures of
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these possessons. condton s mposed that such funds sha not be used
to subsdze producers of cocoa, coconut o, am aed products n such
possessons.
S CTION (502. S N T L GISI. TI COINS L.
Secton 602 amends secton 1303 of the Revenue ct of 1918 so as to provde
that certan matters reatng to the offce of the egsatve counse of the
Senate shoud be under the drecton of the Presdent pro tempore of the
Senate.
Tte II Credt ganst Federa Unempoyment Ta es.
S CTION 701. CR DIT G INST F D R L UN MPLOYM NT T S.
Ths secton, added by your commttee to the ouse b, aows further tme
wthn whch a ta payer may pay contrbutons nto an unempoyment fund
under a State aw and obtan credt therefor aganst the Federa unempoyment
ta for 1936, 1937, 1938, 1939, or 19 0.
In each of the past three years a smar provson of aw has been enacted.
owever, snce ths ta has been n effect for more than fve years, a perod n
whch ta payers have had ampe opportunty to famarze themseves wth
the tme mtaton provded n the permanent aw and to take advantage of
pror reef egsaton, your commttee states that ths reef egsaton shoud
be the ast of ts knd to be enacted.
Under subsecton (a), paragraph (I credt Is aowabe aganst the ta
for 1936, 1937, or 11)38, mposed by Tte I of the Soca Securty ct, for con-
trbutons pad before the s teth day after the date of enactment of ths ct,
f credt s camed before the e praton of s months after such date of
enactment. If the contrbutons are pad on or after December 7, 19 0 (the
s teth day after the date of enactment of the Second Revenue ct of 19 0,
contanng smar reef provsons n secton 701 thereof), the credt on account
of such contrbutons s mted M 90 per cent of the amount whch woud have
been aowabe f they had been pad before the due date of the Federa return.
Paragraphs (2) and (3) provde n certan speca cases for the aowance of
credt, whch s not sub|ect to the foregong mtatons. These paragraphs con-
tnue wthout curtament the reef heretofore granted n these cases by secton
902(a) (2) and (3) of the Soca Securty ct mendments of 1939 and secton
701(a) (2) and (3) of the Second Revenue ct of 19 0.
Subsecton (b) provdes smar reef n the case of the ta for 1939 or 19 0
mposed by the Federa Unempoyment Ta ct (Subchapter C, Chapter 9,
Interna Revenue Code).
Subsecton (c) provdes for refunds, credts, and abatements, wthout nterest,
based on the credt aowabe under subsectons (a) and (b). It aso provdes
that on and after the date of enactment of ths ct no refund, credt, or abate-
ment sha be aowed whch s based on any credt aowabe under certan
pror reef egsaton, that Is, secton 810 of the Revenue ct of 1938, secton
902(a) of the Soca Securty ct mendments of 1939, and secton 701 of the
Second Revenue ct of 19 (1. Ths secton does not affect any credt for contr-
butons pad whch s aowabe soey by reason of the provsons of secton
902 of the Soca Securty ct or secton 1601 of the Federa Unempoyment
Ta ct.
19 1-39-10835
T R NU ILL OF 19 1.
ouse of Representatves teport No. 1203, Seventy-seventh Congress, Frst Sesson.
September 15, 19 1.
Mr. Doughton, from the commttee of conference, submtted the foowng
conference report I to accompany II. It 5 17 :
The commttee of conference on the dsagreeng votes of the two ouses on the
amendments of the Senate to the b (II. R. 5 17) to pro de revenue, and for
other purposes, havng met, after fu and free conference, have agreed to recom-
mend aud do recommend to ther respectve ouses as foows:

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510
ST T M NT OF T M N G RS ON T P RT OF T OUS L
The managers on the part of the ouse at the conference on the dsagreeng
votes of the two ouses on the amendments of the Senate to the b ( . R. 5 17)
to provde revenue, and for other purposes, submt the foowng statement In
e panaton of the effect of the acton agreed upon by the conferees and recom-
mended n the accompanyng conference report:
mendment No. 1: Ths amendment changes the tabe of contents and the
ouse recedes wth an amendment conformng the tabe of contents to the b
as agreed to n conference.
mendment No. 2: Ths amendment ntegrates the defense ta wth the basc
surta rates n the ouse b. The owest surta bracket rate s therefore 6
per cent as compared wth 5 per cent under the ouse b and the hghest rate
s 77 per cent as compared wth 75 per cent under the e stng aw and under the
ouse b. The ouse recedes.
mendment No. 3: The Senate amendment adds to the Interna Revenue Code
a new suppement, desgnated Suppement T, to provde for the optona use of a
smpfed return where the gross ncome does not e ceed 3,000, n order that
persons n the ower ncome ta brackets, partcuary those brought n by the
reducton of the persona e empton, may be caused a mnmum of dffcuty n
fng out ther returns. There were no comparabe provsons n the ouse bL
If the ta payer eects to use ths smpfed pan, the amount of the ta may
be ready ascertaned by reference to a tabe contaned n the b. Ths sm-
pfed return may be used ony where the ta payer s ncome s derved soey
from saares, wages, compensaton for persona servces, dvdends, nterest,
rent, annutes, or royates. If the ta payer eects to use ths method, no
deductons or credts aganst net ncome are aowed. In eu of these deduc-
tons and credts, the ta provded n the tabe represents a reducton, wth
respect to the average ta payer n the bracket, of 10 per cent of the ta that
woud otherwse be payabe wthout such deductons or credts. Ths 10 per
cent reducton has been found to be the effect of the average amount of deduc-
tons taken by persons n these brackets. One set of rates s provded for
marred persons or heads of fames and another s provded for snge per-
sons (not heads of fames). In determnng the amount payabe, the ta -
payer n ether case reduces hs gross ncome by 00 for each dependent; then
by reference to the approprate tabe he ascertans the ta set out opposte the
amount so determned.
It shoud be kept n mnd that the use of the smpfed return s at the
opton of the ta payer and he eects each year whether to use ths method or
to fe under the genera provsons. owever, once the return for any year
has been fed under ths method, the eecton sha be rrevocabe, and f the ta -
payer fes under the genera provsons for any year he may not thereafter
eect for such year to be ta ed under the smpfed method. Nonresdent aen
ndvduas, estates, or trusts are not aowed to use the smpfed method.
The ouse recedes.
mendment No. : The ouse b made permanent the defense ta mposed
by secton 15 of the Interna Revenue Code as added by secton 201 of the
Revenue ct of 19 0. The Senate amendment ntegrates the defense ta rates
wth the rates provded n secton 13(b) (1) and (2) of the Code, makng the
basc rate 2 per cent. In the case of corporatons havng net ncomes of
25,000 or ess, the rates under e stng aw (ncudng the defense ta ) are
graduated as foows: 1 .S5 per cent on norma ta net ncomes not n e cess of
5,000; 1(5.5 per cent on the porton of such net ncome n e cess of 5,000 and
not n e cess of 20,000; and 18.7 per cent on the e cess over 20,000. The
Senate amendment ntegratng the defense ta appcabe to such net ncomes
makes the rates 15, 17, and 19 per cent, respectvey. Under the Senate amend-
ment the aternatve ta appcabe to corporatons havng net ncomes sghty
n e cess of 25,000 s ,250 pus 37 per cent of the norma ta net ncome
n e cess of 25,000. Under ths provson the fu ta rate of 2 per cent
does not become effectve unt the norma ta net ncome of the corporaton
reaches 38, 61.5 .
Ths amendment aso ntegrates the defense ta wth the norma ta es on
resdent foregn corporatons and on mutua Investment companes, and wth
the surta on corporatons mpropery accumuatng surpus.
The ouse recedes.
mendments Nos. 5, 6, 7, 8, 9, 10, 11, 12, 13, 1 , 15, 16, and 171 Secton 102
of the ouse b mposed upon a corporatons (Incudng nsurance companes)
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e cept nonresdent foregn corporatons, and mutua nvestment companes (the
atter beng deat wth separatey) a surta of 5 per cent upon the frst 25,000
of the corporaton s surta net ncome and 6 per cent upon the e cess of such
ncome over 25,000. Corporaton surta net ncome was defned as net
ncome mnus the credt for dvdends receved provded n secton 26(b) and
thus Incudes partay ta -e empt nterest n the ta base. The secton aso
mposed upon mutua nvestment companes a surta upon Suppement
surta net ncome of such companes at rates correspondng to those mposed
upon corporatons generay.
The Senate amendments retan the surta but n eu of the rates provded
n the ouse b the amendment provdes a surta of 6 per cent ou the frst
25,000 surta net ncome and 7 per cent on the remander. Snce the credt
for Interest on partay ta -e empt Government securtes s not aowabe n
computng surta net ncome, the Senate amendment aso provdes that for the
purposes of the surta the dvdends receved credt sha be mted to 85 per
cent of the net ncome rather than 85 per cent of the ad|usted net ncome.
These amendments aso termnate the defense ta , the defense ta rates
beng ntegrated wth the basc rates.
The ouse recedes.
mendments Nos. 18, 10, 20, 21, 22, 23, 2 , 25, 26, and 27: The ouse b
ncreased the rates of ta on nonresdent aen Indvduas and foregn corpora-
tons and made permanent the defense ta . These amendments retan the
ncreased rates but termnate the defense ta and ntegrate the 10 per cent
defense ta wth the basc rates. The amendments aso reduce from 23,800
to 23.(100 the amount of the gross ncome at whch a nonresdent aen ndvdua
becomes sub|ect to the fu norma ta and surta rates. The amount of
23,000 represents the appro mate pont at whch, under the provsons of the
b, an effectve rate of 27 per cent s reached. The ouse recedes.
mendments Nos. 28, 20, and 30: These are changes n secton numbers; and
the ouse recedes.
mendment No. 31 : Ths amendment ntegrates the defense ta wth the
basc rates of ta mposed upon persona hodng companes an transfers to
avod ncome ta and termnates the defense ta . The ouse recedes.
mendment No. 32: Ths amendment ncorporates a new secton amendng
secton 25(b)(1) of the Code to ower the persona e empton of a marred person
or the head of a famy from 2.0110 to 1,500 and the persona e empton of a
snge person or a marred person not vng wth husband or wfe from 800
to 750. The secton aso amends secton 25(b)(1) to provde a persona
e empton of 750 for a marred person whose spouse fes a separate return
under Suppement T, added by secton 102 of the b. See amendment No. 3.
The secton aso amends sectons 21 and 251(f) of the Interna Revenue Code
to provde n the case of nonresdent aens and ctzens entted to the benefts
of secton 251 a persona e empton of 750 n eu of 800 to conform wth the
changes made n secton 25(b).
The ta b as reported by the Commttee on Ways and Means contaned a
provson requrng a |ont ncome ta return from a husband and wfe vng
together. Ths provson was estmated to yed addtona revenue of about
300,000,000. It was strcken from the b by the ouse.
s reported by the Fnance Commttee to the Senate, the b contaned a pro-
vson ta ng a husband and wfe n a communty property State on e acty the
same bass as persons smary stuated n noncommunty property States.
Ths provson was estmated to yed 6,800,000. It was emnated by the
Senate wth the understandng that t woud be the sub|ect of hearngs and
acton n the admnstratve b.
In vew of the acton by the ouse and Senate n ths regard, n order to
make up ths substanta oss n revenue, t s necessary to ower the persona
e empton of marred persons from 2,000 to 1.5(10 and of snge persons from
800 to 750. Ths secton w produce added revenue of 303,000,000, or
appro matey the amount ost by the emnaton of the |ont return provson.
Ts reducton n the persona e empton w requre the fng of ,930,000
new Income ta returns and w ncrease the number of ncome-ta payers
by 2,275,000. Of the ,930,000 new returns, . 53,000 w come from marred
persons and heads of fames and 77.000 w come from snge persons. Of
the 2,275,000 new ta payers, 1,850,000 w be marred persons and 25,000 w
be snge.
Of the tota amount of addtona revenue to be secured from owerng the
e emptons, appro matey 7,000,000 w come from new ta payers. Of ths
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512
amount, ony 10,000,000 w come from new Income ta returns. The baance
of ths addtona revenue, 256,000,000 w be secured from persons ta abe
under e stng aw.
The queston of the |ont return and the treatment of communty-property
ncome w be further consdered by the Commttees on Ways and Means and
Fnance n connecton wth the b deang wth admnstratve matters.
The ouse recedes.
mendment No. 33: Ths amendment ncorporates a new secton to amend
sectons 51(a), 1 2(a), and 1 7(a), reatng to the requrement for ndvdua
and fducary returns and nformaton returns n order to conform such re-
qurement wth the changes n the persona e empton. The ouse recedes.
mendment No. 3 : Ths Is a change n secton number; and the ons
recedes.
mendment No. 35: Ths s a change n secton number; and the ouse
recedes.
mendment No. 36: Ths amendment makes a cerca change; and the ouse
recedes.
mendment No. 37: Ths amendment provdes that the ssung dscount on
certan short-term Federa, State, and oca government obgatons ssued on
a dscount bass on or after March 1, 19 1, sha not be deemed to accrue unt
such obgatons are pad at maturty, sod, or otherwse dsposed of, and that
such obgatons sha not be treated as capta assets wthn the meanng of
secton 117 of the Interna Revenue Code. The prncpa effect of ths amend-
ment s to emnate the necessty (e cept n the case of fe nsurance com-
panes) for makng an aocaton between nterest and capta gan or oss
on the dsposton of any such obgaton and the necessty for ncudng any
porton of the orgna dscount n ncome for any ta abe year other than
that n whch such obgaton s pad at maturty, sod, or otherwse dsposed of.
Thus, under the amendment a person ownng a Treasury b ssued on or after
March 1, ) t, woud not be requred to ncude any porton of the orgna
dscount n ncome for any ta abe year unt that n whch t s pad at
maturty, sod, or otherwse dsposed of, and for such year woud need ony
to compare the saes prce, or the amount pad at maturty, wth the purchase
prce or other bass, and account for the net gan or oss. Ths amendment a
appcabe to ta abe years endng after February 28, 19 1. The ouse recedes.
mendment No. 38: Ths s a change n secton number; and the ouse
recedes.
mendment No. 39: y ths amendment, the Senate adds a new secton to
the b, secton 117, entted mony and separate mantenance payments.
Ths secton of the b amended sectons 22, 23, and 25 of the Interna Revenue
Code and added a new secton to Suppement of Chapter 1 of the Code n
order to treat -roc payments n the nature of or n eu of amony or an
aowance for support as ncome to a dvorced or egay separated spouse or
former spouse actuay recevng such payments and to aow the other spouse
(or former spouse) to deduct or e cude from hs ncome an amount ou account
of such paymeuts. The confereees have deferred acton on the merts of ths
amendment wth the understandng that t w be consdered u a ater b
deang wth admnstratve matters. The Senate recedes.
mendment No. 0: Ths amendment e tends from anuary 1, 19 1, to an-
uary 1, 19 3, the tme durng whch an order may be ssued by the Securtes
and change Commsson, reatng to certan transactons arsng out of the
smpfcaton or geographca ntegraton of pubc utty hodng company
systems, under whch orders such transactons are treated as ta -free e changes
under Suppement R of the Interna Revenue Code.
The ouse recedes wth a technca amendment.
mendment No. 1 : Ths amendment amends secton 23(a) (1) of the In-
terna Revenue Code by nsertng after the words ta abe year the words
n conservng and conductng the busness affars of the ta payer. The con-
ferees have deferred acton on the merts of ths amendment wth the under-
standng that t w be consdered n a ater b deang wth admnstratve
matters. They were advsed by the Treasury Department that wherever pos-
sbe fna decson by the ureau of Interna Revenue on ssues arsng under
the ggnn v. Smth decson woud be deferred pendng such ater egsaton.
The Senate recedes.
mendment No. 2: Ths s a change n secton number and the ouse recedes
wth an amendment makng a further change n secton number.
mendment No. 3: Ths s a technca amendment; and the ouse recedes.
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513
Msc.
mendments No. , 5, 6, and 7: The ouse b Imposed a speca 10 per
cent e cess-profts ta , n certan cases where the nvested capta credt Is used,
upon the e cess of the ad|usted e cess profts net ncome under the ncome
method over the ad|usted e cess profts net ncome under the nvested capta
method.
These amendments strke from the ouse b the provsons reatng to ths
ta . The ouse recedes.
mendment No. 8: Ths Is a change n secton number; and the ouse
recedes.
mendment No. 9: Ths Is a technca amendment reated to amendment No.
57. In vew of the acton on amendment No. 57, the Senate recedes.
mendment No. 50: Ths s a change n secton number; and the ouse
recedes.
mendment No. 51 : Ths s a technca amendment desgned to make the m-
tatons of secton 718(a) (0) ( ) of the Interna Revenue Code, added by secton
205 of the ouse b, appcabe to certan e changes of the same character as
those descrbed n the ouse b but whch were techncay not wthn such
provson because they are governed by Suppement 11 of the Code rather than
secton 112(b) (3), ( ) or (5). The ouse recedes.
mendment No. 52: Ths amendment makes a cerca change; and ouse
recedes.
medment No. 53: Ths amendment has the effect of preventng a dstrbu-
ton of ta abe stock dvdends out of pre-19 1 accumuated earnngs and profts
from consttutng new capta soey because of subsequent operatng osses or
because of subsequenty accumuated but undstrbuted earnngs and profts, and
aso has the effect of preventng money or property pad n from consttutng
new capta f such money or property merey takes the pace of pre-19 1 ac-
cumuated earnngs and profts prevousy dstrbuted after the begnnng of the
frst ta abe year whch begns after December 31, 10 0. The ouse recedes.
mendment No. 5 : Ths amendment strkes out secton 206 of the ouse b,
whch provdes that secton 731 of the Interna Revenue Code (e emptng from
e cess-profts ta ncome derved from mnng certan metas) sha not appy
wth respect to any ta abe year begnnng after December 31, 19 0. The
Senate recedes.
mendment No. 55: Ths s a change n secton number, and the ouse recedes
wth an amendment makng a further change n secton number.
mendment No. 56: Ths s a technca amendment rendered unnecessary by
the acton taken on Senate amendment No. 57; and the Senate recedes.
mendment No. 57: Ths amendment aows corporatons sub|ect to the
capta stock ta to make a new decaraton of capta stock vaue annuay
and permts the Commssoner to grant an addtona e tenson of 30 days
for the fng of capta stock ta returns for the year endng une 30, 19 1. The
ouse recedes wth an amendment restorng the e stng aw wth respect to
the decaraton of capta stock vauaton.
mendment No. 58: Ths amendment changed a subsecton desgnaton from
(c) to (f). The ouse recedes wth an amendment changng the desgna-
ton to (d).
mendment No. 59: Ths s a cerca amendment; and the ouse recedes.
mendment No. CO: Ths amendment ntegrates the defense ta rate of the
decared vaue e cess profts ta wth the basc rate, and makes technca chancres
n connecton wth amendment No. 57. aowng decaraton of capta stock vaue
annuay for capta stock ta purposes. The ouse recedes wth an amend-
ment emnatng the technca changes, rendered unnecessary by the acton
on Senate amendment No. 57.
mendments Nos. 01 and 02: The ouse b ncreased the rates appcabe
to the addtona estate ta wth respect to decedents dyng after the date of
enactment of the ct, and made permanent the defense ta on net estates mposed
by secton 951 of the Interna Revenue Code. y reason of the ntegraton of
the defense ta and the addtona estate ta , these amendments further ncrease
the rates appcabe to the addtona estate ta , and repea secton 051 of the
Interna Revenue Code, whch reates to the defense ta rate. The ouse recedes.
mendment No. 63: Ths s an admnstratve amendment to the estate ta
provsons of the Interna Revenue Code and the Revenue ct of 1926. reatng
to the deducton from the gross estate of property prevousy ta ed. The con-
ferees have deferred acton on the merts of ths amendment wth the under-
standng that t w be consdered n a ater b deang wth admnstratve
matters. The Senate recedes.
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51
mendment No. 6 : Ths s an admnstratve amendment to the estate ta
provsons of the Interna Revenue Code, reatng to the determnaton of the
deducton for chartabe, etc., bequests. The conferees have deferred acton wth
the understandng that t w be consdered u a ater b deang wth admns-
tratve matters. The Senate recedes.
mendment No. 65: Ths amendment makes a change n secton number;
and the Senate recedes.
mendments Nos. 66 and 70: The ouse b ncreased the rates for com-
putng the gft ta for the caendar year 19 2 and each caendar year there-
after, and made permanent the defense ta mposed for fve years by secton
1001(d) of the Interna Revenue Code. y reason of the ntegraton of the
defense tn and the gft ta , these amendments further ncrease the rates for
computng the gft ta , and repea secton 1001(d) of the Interna Revenue
Code, whch reates to the defense ta rate. The ouse recedes.
mendments Nos. 67, 68, and 69: These amendments make cerca changes;
and the ouse recedes.
mendments Nos. 71, 72, 73, 7 , and 76: These amendments emnate the df-
ferenta n favor of brandy and sub|ect brandy to the same rate as other
dsted sprts. In connecton wth ths change a cerca amendment s made
n the headng of secton 533(a) and the foor stocks ta on brandy s made
1.25, the dfference between the rate of 2.75 under e stng aw and the rate
under the Senate amendment The ouse recedes.
mendments Nos. 75, 77, and 78: These are cerca amendments dependent
upon amendment No. 89, whch changes the effectve date of Part III; and the
ouse recedes.
mendments Nos. 79, 80, 81, 82, and 83: These amendments ncrease the
ouse b rates on st wnes from 8, 2 , and 50 cents to 10, 35, and 65 cents,
respectvey; the rate of cents on sparkng wnes to 7 cents; and the rate
of 2 cents on artfcay carbonated wnes and on queurs, cordas, and smar
compounds to 3 cents. The ouse recedes on amendments Nos. 81, 82, and 83
and recedes on amendment No. 80 wth an amendment reducng the 35 cent rate
on st wnes contanng more than 1 per cent and uot e ceedng 21 per cent
of absoute acoho to 30 cents. The Senate recedes on amendment No. 79, thereby
revertng to the 8 cent rate n the ouse b on st wnes contanng not more
than 1 per cent of absoute acoho.
mendments Nos. 8 , 85, and 86: These are cerca amendments dependent
upon amendment No. 89, whch changes the effectve date of Part III; and the
ouse recedes.
mendment No. 87: The ouse b mposed a foor stocks ta on tres and
tubes hed for sae on the effectve date of Part III of Tte of the Revenue
ct of 10 1. The amendment makes the ta appcabe to tres and tubes hed
on O tober 1, 19 1, the effectve date of such part under amendment No. 89; and
the ouse recedes.
mendment No. 88: The ouse b made amendments made by Part III of
Tte appcabe wth respect to the perod begnnng wth the effectve date
of ths part. The amendment makes the amendments made by Part III of
Tte appcabe wth respect to the perod begnnng wth October 1, 19 1;
and the ouse recedes.
mendment No. 89: The ouse b provded that Part III of Tte sha
take effect on the 1st day of the frst month whch begns more than 10 days
after the date of the enactment of ths ct. The amendment makes Part I
effectve October 1, 19 1; and the ouse recedes.
mendments Nos. 90 and 92: The ouse b e empted from admssons ta
payments for admsson whch are ess than 10 cents. It aso provded that
amounts pad for admsson by season tcket or subscrpton shoud be e empt
ony f the amount whch woud be charged to the hoder or subscrber for a
snge admsson woud be ess than 10 cents. These amendments aow the
e empton wth respect to charges under 10 cents ony as to chdren under 12
years of age and emnate the provson of the ouse b reatve to season
tckets or subscrptons; and the ouse recedes.
mendment No. 91: The ouse b e empted chdren under 12 years of
age from the provson that n the case of persons admtted free or at
reduced rates an equvaent ta sha be coected based on the prce charged
to other persons for the same or smar accommodatons. The amendment
e tends the e empton to persons under 18 years of age; and the Senate
recedes.
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515
Msc.
mendments Nos. 93 and 0 : The ouse b termnated the e emptons
from admssons ta e tended by secton 1701 of the Interna Revenue Code
wth respect to, among others, certan regous, educatona, or chartabe
entertanments; agrcutura fars; and certan concerts conducted by certan
cvc or communty membershp assocatons. The amendments restore these
e emptons and aso e empt admssons to entertanments conducted by pubc
or parocha, eementary, or hgh schoos; and the Senate recedes.
mendment No. 95: Ths amendment makes the foor stocks ta on matches
mposed by the ouse b effectve on October 1, 19 1, the effectve date of
Part I of Tte of the b under amendment No. 103; and the ouse
recedes.
mendment No. 96: y secton 5 8 the ouse b mposed on teephone,
teegraph, cabe, and rado dspatches, messages, and conversatons for whch
the charge s more than 2 cents, a ta at the rate of 5 cents for each 50
cents or fracton thereof of the charge. The amendment confnes ths ta
to teephone or rado teephone messages or conversatons and mposes n
the case of each teegraph, cabe, or rado dspatch or message a ta of 10
per centum of the amount of the charge.
Secton 5 8 of the ouse b aso mposed a ta equvaent to 5 per cent
of the amount pad for ( ) eased wre or takng crcut speca servce or
( ) wre and equpment servce (ncudng teetypewrter servce, burgar
aarm servce, news tcker servce, and stock quotaton and nformaton
servces, and a other smar servces). The amendment mposes a 10 per
cent ta wth respect to eased wre, teetypewrter, or takng crcut speca
servce and a 5 per cent ta wth respect to amounts pad for wre and equp-
ment servce, hut not ncudng burgar or fre aarm servce.
The ouse recedes wth an amendment sub|ectng burgar and fre aarm
servce to the 5 per cent ta .
mendment No. 97: Ths amendment ncreases the ta mposed on the
amount pad by subscrbers for oca teephone sen-ce from 5 per cent as
f ed by the ouse b to 10 per cent; and the ouse recedes wth an amend-
ment f ng the rate at 0 per cent.
mendments Nos. 98 and 99: The ouse b, In certan cases, e empts
from the ta es under secton 3105 of the Interna Revenue Code, as amended
by secton 5 8 of the ouse b, any payment receved from any person
for servces or factes utzed n the coecton of news for the pubc
press, or rado broadcastng, or In the dssemnaton of news through the
pubc press. The amendments aso e empt news tcker servces furnshng a
genera news servce smar to that of the pubc press; and the ouse
recedes.
mendments Nos. 100, 101, and 102: The ouse b provded that n the case
of eases, contracts of sae, or condtona saes and deveres thereunder made
before uy 1, 19 1, payments made subsequent to the effectve date of Part I
of Tte were to be ta ed at the rate In force pror to such effectve date.
The amendments appy ths provson to eases, contracts of sae, and condtona
saes and deveres thereunder made pror to October 1. 19 1, the effectve date
of such part under amendment No. 103. The ouse recedes.
mendments Nos. 103, 10 , 105, 100. 107, and 108: These amendments change
the effectve dates of certan provsons, the effectve date n the case of amend-
ments Nos. 103, 10 , and 105 beng October 1, 19 1, and the effectve date n
the case of amendment No. 106 beng October 5, 19 1. and n the case of amend-
ments Nos. 107 and 108 beng October 6, 19 ; and the ouse recedes.
mendment No. 109: Ths amendment emnates the ta es on soft drnks,
fnshed or fountan srups, and carbonc add gas mposed by the ouse b;
and the ouse recedes.
mendment No. 110: Ths s a change of secton number; and the ouse
recedes.
mendment No. I: Ths amendment emnates the ta mposed by the
ouse b on artfca ures, bats, and es; and the Senate recedes.
mendments Nos. 112, 113, and 11 : These amendments make the ta m-
posed by the ouse b on certan eectrca appances appcabe aso to gas
or o water heaters and gas or o appances used for cookng, warmng, etc.;
and the ouse recedes.
mendments Nos. 115 and 116: These amendments deete the names of cer-
tan busness appances made ta abe by the ouse b and provde appro-
prate descrptons for such appances not aready covered under other desg-
natons ; and the ouse recedes.
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516
mendment No. 117: The ouse b ta ed ony washng machnes of the knd
used n commerca aundres. The amendment e tends the ta to domestc
washng machnes and other washng machnes generay; and the Senate
recedes.
mendment No. 118: Ths amendment mposes a 10 per cent manufacturers
e cse ta on eectrc ght bubs. The ouse recedes wth an amendment e -
cudng artces otherwse ta abe, reducng the ta to 5 per cent, and makng
t cear that the ta appes to eectrc ght tubes.
mendments Nos. 119 and 12 : The ouse b mposed a ta on |ewery
and other enumerated artces sod at reta. mendment No. 12 deetes ths
ta , but amendment No. 119 substtutes a ta on smar artces sod by the
manufacturer, producer, or mporter wth an e empton of fountan pens f the
ony part of the pen whch conssts of precous metas s the pont or other
essenta part not used for ornamenta purposes. The Senate recedes on amend-
ment No. 119. The ouse recedes on amendment No. 12 wth an amendment
restorng the ta on artces sod at reta, and e ceptng fountan pens f the
ony parts of the pen whch consst of precous metas are ponts or other
essenta parts not used for ornamenta purposes.
mendment No. 120: Ths amendment emnates a provson of the ouse
b that an artce sub|ect to |ewery ta sha not be sub|ect to any other ta
Imposed by secton 551 (552 of the ouse b) ; and the Senate recedes.
mendment No. 121: Ths amendment s cerca; and the Senate recedes.
mendment No. 122: Ths amendment makes the effectve date of secton 551,
October 1, 19 1, nstead of the 1st day of the frst month whch begns more than
10 days after the enactment of the ct; and the ouse recedes.
mendment No. 123: Ths s a change n secton number; and the ouse
recedes.
mendments Nos. 125 and 126: These are changes n secton numbers; and
the Senate recedes.
mendment No. 127: Under the ouse b, toet preparatons used by a barber
shop, beauty paror, or smar estabshment, n the treatment of any customer
or patron were consdered as sod at reta and were sub|ect to ta at 10 per cent
of ther far reta prce, as determned by the Commssoner. Under the amend-
ment, saes of toet preparatons to such estabshments are treated as saes at
reta. Saes by such estabshments ate aso consdered saes at reta under
the amendment, but n such a case the ta mposed s credted wth the ta pad
on the sae to the estabshment. The ouse recedes.
mendment No. 128: Ths s a change n secton number; and the Senate
recedes.
mendment No. 129: Ths amendment provdes certan rues for determnng
the ta abe prce of an artce sub|ect to retaers e cse ta . It provdes that
charges for coverngs and contaners and for pacng the artce n condton packed
ready for shpment sha be ncuded, but e cudes the ta tsef. There s aso
e cuded, f stated as a separate charge, the amount of any reta saes ta m-
posed by any State, or Terrtory, or potca subdvson of the foregong, or the
Dstrct of Coumba. The ouse recedes.
mendments Nos. 130 and 131: These amendments change secton numbers;
and the Senate recedes.
mendments Nos. 132 and 133: The ouse b provded that the reta e cse
ta es shoud not appy to |ewery or furs f the artce was the sub|ect of a ease,
contract for sae, or condtona sae and devery was made and part of the
consderaton was pad before uy 1. 19 1. n endment No. 132 s n technca
amendment reated to amendments Nos. 12 and 126. mendment No. 133 changes
uy 1, 19 1 to October 1, 19 1. The Senate recedes on amendment No. 132,
n conformty wth the acton on amendments Nos. 12 and 126. The ouse
recedes on amendment No. 133.
mendments Nos. 13 . 135, and 136: These amendments change secton num-
bers : and the Senate recedes.
mendment No. 137: Ths amendment prohbts, under penaty, n connecton
wth the sae or ease, or offer for sae or ease, of any artce sub|ect to retaers
e cse ta , the makng of any statement, wrtten or ora, n advertsement or
otherwse, ntended or cacuated to ead any person to beeve that the prce
does not ncude the ta . The ouse recedes wth a cerca amendment.
mendments Nos. 138 and 139: These amendments make the retaers e cse
ta es effectve as of October 1. 19 1, and termnate the manufacturers ta on
toet artces as of the same date; and the ouse recedes.
mendment No. 1 0: Ths amendment, n carfcaton of e stng anguage,
amends secton 3 0 of the Interna Revenue Code to provde specfcay that
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517
Msc.
a renewa or e tenson of a ease, or subsequent ease, sha be consdered a
ta abe sae. The ouse recedes.
mendment No. 1 1: Ths amendment permts abty for a manufacturers
e cse ta mposed by the b to be shfted from the manufacturer to the vendee
n any case where, pror to the effectve date of Part of Tte of the b
(October 1, .19 1, under amendment No. 156), any person has made a bona
fde contract for the sae after that date of any artce wth respect to the
sae of whch a ta s mposed or an e stng ta s ncreased by the b and
such contract does not permt the addng of the ta , uness the contract pro-
hbts such addton. The ouse recedes.
mendment No. 1 2: Ths amendment provdes a refund of the ta on photo-
graphc apparatus mposed by secton 551 (552 n the ouse b) pad on
une posed moton pcture fms used or resod for use n the makng of news
ree moton pcture fms: nrd the ouse recedes.
mendment No. 1 3: Ths amendment aows, wth respect to automobe
rados sod or used n connecton wth the sae of automobes and smar
artces, a credt smar to that aowed wth respect to tres and tubes when
WO sod or used. The ouse recedes wth a carfyng amendment.
mendment No. 1 : Under ths amendment, refund of ta pad on dsted
sprts woud, under certan mtatons theren provded, be aowed at the rate
of 1 per proof gaon n the case of dsted sprts used n the manufacture
or producton of an artce ntended for use for noubeverage purposes and sod
for such use. The Senate recedes.
mendment No. 1 5: Ths amendment makes the ta on payments for
transportaton of persons appcabe wth respect to payments on or after
October 1. 19 1, nstead of the frst month whch begns more than 10 dnys after
the date of the enactment of the ct, as provded n the ouse b. The ouse
recedes wth an amendment changng the date to October 10, 19 1.
mendment No. 1 6: Ths amendment, n certan cases, e empts from trans-
portaton ta payments for transportaton of mtary or nava personne; and
the ouse recedes.
mendment No. 1 7: The ouse b mposed an occupatona ta of 25 per
annum wth respect to the operaton of a pn-ba game, a sot machne, or smar
amusement or gamng devce. The amendment estabshes two dfferent rates
of ta : 10 per annum n the case of a pn-ba game, or smar game or
amusement machne, and 50 wth respect to so-caed sot machnes, the opera-
ton of whch nvoves nn eement of chance: and te ouse recedes.
mendment No. 1 8: The ouse b provded wth respect to the year endng
une 30, 19 2, that the ta on the operaton of a con-operated game or other
amusement or gamng devce shoud not be appcabe wth respect to operaton
pror to the effectve date of Tart of Tte of the Revenue ct of 19 1.
The amendment f es October 1. 19 1, as the date pror to whch operaton of
such devce sha not cause ta abty to te ncurred. The ouse recedes.
mendments Nos. 1 9 and 150: These amendments reduce the ta on the
operaton of a bowng aey, bard tabe, or poo tabe from 15 to 10 per
annum, and make the date pror to whch operaton sha not cause ta abty
to be ncurred October 1, 19 1. The ouse recedes.
mendment No. 151: Ths amendment emnates the ta mposed by the
ouse b upon every person who engages n busness as a essor of bboards;
and the ouse recedes.
mendment No. 152: Ths amendment makes a change n secton number; and
the ouse recedes.
mendments Nos. 153 and 15 : The ouse b e empted from the ta on the
use of boats, boats used e cusvey for trade, and so forth. These amendments
change e cusvey to chefy and aso e empt boats used by the Sea Scouts
Department of the oy Scouts of merca chefy for tranng scouts n seaman-
shp. The ouse recedes.
mendment No. 155: The ouse b authorzed the Postmaster Genera to
cooperate wth the Commssoner of Interna Revenue In the sde of stamps,
stckers, or tags used for payment of the ta on the use of motor vehces and
boats. y the Senate amendment, the Secretary of the Treasury s authorzed
and drected to advance from tme to tme to the Postmaster Genera such sums
as the Postmaster Genera may show sha he requred n the performance of
such servces. The ouse recedes wth an amendment authorzng the appro-
praton of such sums as may be necessary to enabe the Secretary of the
Treasury to make the advances to the Postmaster Genera.
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Msc.
518
mendment No. 156: Ths amendment changes a secton number; and the
ouse recedes.
mendment No. 157: Ths amendment provdes that Part of Tte of the
b sha be effectve October 1,19 1; and the ouse recedes.
mendment No. 158: Ths amendment provdes that the ta es coected wth
respect to the processng of coconut o orgnatng n Guam or mercan Samoa
sha be hed as separate funds and pad to the treasures of ttese possessons,
wth a condton that such funds sha not be used to subsdze producers of
copra, coconut o, or aed products n such possessons; and the ouse recedes.
mendment No. 159: Ths amendment emnates the ta mposed by the ouse
b wth respect to the operaton of a rado broadcastng staton or engagng n
network broadcastng; and the ouse recedes.
mendment No. 160: Ths amendment estabshes a commttee to nvestgate
nonessenta Federa e pendtures. The commttee s to be composed of (a)
three members of the Senate Commttee on Fnance and three members of the
Senate Commttee on ppropratons, to be apponted by the Presdent of the
Senate; (6) three members of the ouse Commttee on Ways and Means and
three members of the ouse Commttee on ppropratons, to be apponted by
the Speaker of the ouse of Representatves; and (c) the Secretary of the
Treasury and the Drector of the ureau of the udget. It sha be the duty
of such commttee to make a compete study and nvestgaton of a e pendture
of the Federa Government wth a vew to recommendng the emnaton or
reducton of a such e pendtures deemed to be nonessenta. The commttee
sha report to the Presdent and to the Congress the resut of ts study together
wth ts recommendatons at the earest practcabe date. It s gven the author-
ty and powers commony gven to smar commttees of the Senate and w
operate under an appropraton not to e ceed 10,000. The ouse recedes.
mendment No. 161: Ths amendment amends secton 1303 of the Revenue
ct of 1918, as amended, to strke out Presdent of the Senate wherever t
appears theren and nsert n eu thereof Presdent pro tempore of the Senate.
The ouse recedes.
mendment No. 162: Ths amendment aows further tme wthn whch a
ta payer may pay contrbutons nto an unempoyment fund under a State aw
and obtan credt therefor aganst the Federa unempoyment ta for 1936, 1937,
1938, 1939, or 19 0. There was no comparabe provson n the ouse b. In
each of the past three years a smar provson of aw has been enacted. Snce
ths ta has been n effect for more than fve years, a perod n whch ta payers
have had ampe opportunty to famarze themseves wth the tme mtaton
provded n the permanent aw and to take advantage of pror reef egsaton,
the conferees are n agreement wth the statement of the Fnance Commttee of
the Senate that ths reef egsaton shoud be the ast of ts knd to be enacted.
The ouse recedes wt a cerca amendment.
mendment No. 163: Ths amendment adds a new secton whch amends
the provsons of Tte II of the Labor-Federa Securty ppropraton ct,
19 2, reatng to the appropraton avaabe to the Soca Securty oard for
grants to States for unempoyment compensaton admnstraton. The con-
ferees were mpressed wth the purpose of ths amendment, but due to dffcutes
of workng out a sutabe provson, acton on the merts was deferred wth the
understandng that t woud be consdered n a ater b. The Senate recedes.
mendment No. 16 : Ths amendment adds a new secton amendng secton
01 of the Second Revenue ct of 19 0 (reatve to the suspenson of the
nson-TrammeU ct n the case of contracts or subcontracts not competed be-
fore the contractors or subcontractors frst e cess profts ta ta abe year)
to provde that for the purposes of such secton a contract or subcontract sha
be deemed to be competed on the date on whch fna devery and acceptance
of the vesse or other artce specfed theren s made. The conferees have
deferred acton on the merts of ths amendment wth the understandng that
t w be consdered n a ater b deang wth admnstratve matters. The
Senate recedes.
R. L. DOU TON,
Thos. . Cuew,
erk Cooper,
ohn W. ISoehne, r.,
en T. Teeaowat,
arod nutson,
Dane . Reed,
Managers on the part of the ouse,
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519
Msc.
19 1- 7-10908
M NDING S CTION 12 OF T INT RN L R NU COD .
ouse of Representatves Report No. - 07, Seventy-seventh Congress, Frst Sesson.
September IS. 19 1.
Mr. Doughton, from the Commttee on Ways and Means, submtted the foow-
ng report I to accompany II. .1. Res. 2. . :
The Commttee on Ways and Means, to whom was referred the ont resouton
( . . Res. 230) to amend secton 12 of the Interna Revenue Code by e tendng
the tme for appcatons, and changng the procedure for certfcaton of natona-
defense factes and contracts for amortzaton purposes, havng had the same
under consderaton, report favoraby thereon, wth amendments, and recom-
mend that the |ont resouton, as amended, do pass.
The amendments are as foows:
In ne 2 on page 2 nsert after the comma, the foowng words whch
certfcaton sha be .
In ne 8 on page strke out the word and nt begnnng of the ne and nsert
the foowng words whch reguatons sha be .
In ne 9. page 1, strke out the word have and nsert the word has .
In ne 11, page 3, strke out the word certfy and nsert the word
certfes .
Representatves of the War Department and the Navy Department appeared
before the commttee and urged the speedy enactment of ths egsaton. They
ponted out that the varous agences concerned wth the admnstraton had
agreed upon the changes proposed.
The purposes of the proposed egsaton are to make certan changes n the
procedure for appyng for amortzaton based on e perence obtaned In the
admnstraton of secton 12 and to carfy the meanng of certan provsons
of sad secton. It s beeved that the proposed amendments w greaty sm-
pfy the admnstraton of ths secton and e pedte the carryng out of the
defense program.
Secton 1 of the |ont resouton proposes to .strke out the requrement n
the e stng aw that the dvsory Commsson to the Counc of Natona
Defense act as a |ont certfyng agency for necessty certfcates. When the
present aw was enacted, the dvsory Commsson to the Counc of Natona
Defense was an actve functonng body. t the present tme, ts other func-
tons have been taken over by other governmenta agences. The War Depart-
ment and the Navy Department are presenty equpped to act upon appcatons
for amortzaton prveges, and have secured the cooperaton and assstance
of other governmenta agences. perence has shown that consderabe un-
certanty and deay s created by the necessty for |ont acton of two govern-
menta agences n passng upon appcatons for certfcaton.
In eu of requred acton by the dvsory Commsson, t s now proposed
that certfcatons be made ony by the Secretary of War or the Secretary of
the Navy, as the case may be, but under such reguatons as may be prescrbed
from tme to tme by the Secretary of War and the Secretary of the Navy and
sub|ect to such poces and procedures as may be prescrbed from tme to tme
by the Presdent or by such agency or offcer as he may desgnate. It s thought
that by ths means contro of the pocy and procedure as to certfcaton for
ta purposes w be as effectve as prevousy provded by requrng |ont
certfcaton by the dvsory Commsson wth the Secretary of War or the
Secretary of the Navy, but wthout the nherent deay resutng from dupca-
ton of effort by requrng n each case an agency outsde of the rmy or
Navy to |on In the certfcaton.
Secton 2 of the |ont resouton proposes to change from ff days to f months
as the tme, after the begnnng of constructon, nstaaton, or acquston of
the emergency factes, wthn whch appcatons for necessty certfcates
must be fed. perence has shown that n many cases t s mpossbe for
the appcant to dentfy the factes sought to be certfed wth any degree
of accuracy wthn the tme now prescrbed. Ths s due to the fact that
e pandng emergency factes under present condtons requre the constant
change of tems due to the dffcuty n securng sum , and the changng re-
qurements of the Government as to others. ccordngy, under the present
aw t s necessary for many appcants to fe numerous suppementa and new
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520
appcatons wth addtona append es, descrbng tems of factes n the
process of constructon. Ths occasons a great amount of work on the part
of the appcant and a tremendous amount of tme and effort on the part of
Government offcas. The e perence of the certfyng unts |ustfes the beef
that these dffcutes w be obvated by e tendng the perod for fng to s
months after the begnnng of the constructon wthout pre|udce to the nterest
of the Government.
In secton 3, provson s made for carfcaton of the meanng of certan pro-
vsons of the e stng aw reatng to nonrembursement and Government pro-
tecton certfcates, and changng the procedure to be foowed n appyng for
such certfcates. The foowng ndcates the changes to be effected:
(a) The |ont resouton proposes to emnate the necessty of certfyng
contracts under 15,C00. In the absence of a certfcate of Government pro-
tecton, the present statute denes amortzaton deducton f the ta payer has
been rembursed (beyond norma e hauston, wear, and tear) by the Unted
States for the cost of a or any part of emergency factes pursuant to any
contract wth the Unted States regardess of amount. arge number of
appcatons have been fed requestng certfcaton that contracts or pur-
chase orders, many nsgnfcant n amount, do not so remburse. Ths has
necesstated a vast amount of work on the part of the War Department and
the Navy Department, as we as other agences of the Government n coect-
ng and revewng the facts n reference to sad contracts n order to deter-
mne ths queston. The provson emnatng the necessty for certfcaton
of contracts under 15,000 woud dspense wth a arge amount of work
whoy unnecessary to adequatey protect the nterests of the Government
and w emnate unnecessary e pense.
(6) The |ont resouton proposes to mt the contracts requred to be
e amned for rembursement to those made on behaf of the Unted States
wth the War Department, the Navy Department, the Unted States Martme
Commsson, or any other department or agency whch the Presdent may desg-
nate. The present aw requres e amnaton of a the appcant s contracts
wth a departments or agences of the Government. The vast ma|orty of
these contracts wth the departments other than the War Department, Navy
Department, and the Martme Commsson, are for routne suppes havng
no connecton wth the defense program, and there s very tte, f any,
possbty of rembursement theren for the cost of emergency factes.
Snce n the future there may be certan departments other than the War
Department, Navy Department, and the Martme Commsson whose contracts
mght nvove such rembursement, t s proposed to provde for the ncuson
of the contracts of such departments or agences as the Presdent may desgnate.
(c) The |ont resouton proposes to carfy the meanng of ndrect rem-
bursement by provdng that the test shoud be whether the contract recog-
nzes that n f ng the prce to be pad, the return of cost of factes n
e cess of norma e hauston, wear, and tear was used by the Unted States
as a factor. The nserton of the words by the Unted States s beeved
to be n ne wth the orgna ntent of the statute. The present wordng
of the statute rases the queston as to whether t s necessary to ascertan
the state of mnd of the contractor. stabshng proof of such state of mnd
s dDcut n any one case and, n vew of the fact that many thousands of
contracts have been submtted for certfcaton, presents an e tremey dffcut
probem of admnstraton.
(d) provso has aso been Inserted to the effect that a return of cost
greater than norma e hauston, wear and tear sha not be deemed to have
been used as a factor n the f ng of the prce when the negotatng or
contractng offcer reports that after carefu consderaton he s satsfed that
such greater return was not ncuded n the prce. These reports are to be
sub|ect to reguatons dscussed beow.
(e) The |ont resouton proposes to strke out the requrement of the e -
stng aw that the dvsory Commsson to the Counc of Natona Defense
shoud act as a |ont certfyng agency for nonrembursement and Government
protecton certfcates. The reasons gven above for ths proposa n connecton
wth necessty certfcates appy wth even greater force to certfcates of non-
rembursement and Government protecton.
(f) The |ont resouton proposes to change the provsons for certfcaton as
to Government protecton by provdng that such certfcaton sha be made wth
reference to the emergency factes nstead of wth reference to each contract.
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Msc.
The reason for ths proposa s to emnate the possbe requrement of contnued
e amnaton of ater suppy contracts. If the orgna contract, under whch re-
mbursement s made for factes, adequatey protects the Government s n-
terest n the future use and dsposton of the factes and s so certfed, the
makng of subsequent suppy contracts w not deprve the Government of the
protecton whch has been afforded under the orgna contract.
(g) The |ont resouton proposes to add a provson for ssuance of a certfcate
of Government protecton n cases n whch the ta payer has not been or w not
be rembursed, as we as n cases n whch t has been rembursed. Ths proposed
change w make t possbe for a ta payer who cams that t has npt been or
w not be rembursed to obtan amortzaton, nevertheess, by agreeng to protect
the Government s nterests n the future use and dsposton of the factes.
(h) The |ont resouton proposes to e tend the tme for tng appcatons for
nonrembursement certfcates and Government protecton certfcates from 60
days to 6 months after the makng of the contract for whch certfcaton s re-
quested, or before the e praton of 60 days after the ssuance of a necessty
certfcate, whchever s ater. There appears to be no more reason for a shorter
perod for fng appcatons for Government protecton and nonrembursement
certfcates than n the case of necessty certfcates. The e stng requrement
that the appcaton be fed wthn 60 days compes ta payers tor fe a arge
number of separate appcatons whch Invove unnecessary work and e pense n
the departments. There are aso nstances n whch the contractors shoud be
entted to fe appcatons coverng contracts, whch were entered nto more than
60 days, and possby even more than 6 months, pror to the tme of constructng
or acqurng emergency factes, and the proposed provson permts fng of
such appcatons wthn 60 days after the ssuance of a necessty certfcate.
() Consstent wth the proposed change wth regard to certfcaton of neces-
sty of factes, t s proposed to provde that reports of negotatng and con-
tractng offcers and certfcates of adequate Government protecton and certfcates
of nonrembursement provded for n the ct sha be ssued under such regua-
tons as may be prescrbed from tme to tme by the Secretary of War and the
Secretary of the Navy, whch reguatons sha be sub|ect to such poces and
procedures ns may be prescrbed from tme to tme by the Presdent, or by
such agency or offcer ns he may desgnate.
Secton of the resouton woud requre that the amendments to secton 12
contaned n the resouton have the same force and effect as f a part of the
e stng aw as of the date of ts orgna enactment. y ths means, t w be
possbe to preserve to the ta payer the same prveges wth respect to seectng
the year n whch to take the amortzaton deducton as f the certfcate had
been secured n accordance wth the procedure provded n the present aw and
to preserve to ta payers the beneft of appcatons fed under the mtatons
provded by the present aw.
19 1- 7-10909
M NDING S CTION 12 OF T INT RN L R NU COD .
Senate Report No. G88, Seventy-seventh Congress, Frst Sesson. Caendar No. 717.
September 29, 19 1.
Mr. George, from the Commttee on Fnance, submtted the foowng report to
accompany . . Res. 235 :
The Commttee on Fnance, to whom was referred the ont resouton ( . . Res.
235) to amend secton 12 of the Interna Revenue Code by e tendng the tme
for appcatons, and changng the procedure, for certfcaton of natona-defense
factes and contracts for amortzaton purposes, havng consdered he same,
report favoraby thereon wth amendments and recommended that the |ont reso-
uton as amended do pass.
The commttee amendments are as foows:
On page 2, begnnng n ne , strke out and sub|ect to such poces and
procedures as may be prescrbed from tme to tme by the Presdent, or by such
agency or offcer as he may desgnate and nsert n eu thereof a comma and the
words wth the approva of the Presdent.
On page 2, ne 10, nsert, before the perod, the words and by strkng out
February 6,19 1 and nsert n eu thereof December 1,19 1 .
1611 2 8
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522
On page 2, ne 17, after the word beaf , nsert after December 17,
1939, .
On page 3. ne 23, strke out February 6, 19 1 and nsert n eu thereof
December 1, 19 1 .
On page , begnnng wth ne 7, strke out Navy whch reguatons sha be
sub|ect to such poces and procedures as may be prescrbed from tme to tme by
the Presdent, or by such agency or offcer as he may desgnate and nsert n
on thereof Navy, wth the approva of the Presdent .
Represent fves of the War Department and the Navy Department appeared
before the commttee and urged the speedy enactment of ths egsaton. They
ponted out that the varous agences concerned wth the admnstraton had
agreed upon the changes proposed.
The purposes of the proposed egsaton are to make certan changes n the
procedure for appyng for amortzaton based on e perence obtaned n the
admnstraton of secton 12 and to carfy the meanng of certan provsons
of sad secton. It s beeved that the proposed amendments w greaty sm-
pfy the admnstraton of ths secton and e pedte the carryng out of te
defense program.
Secton 1 of the |ont resouton proposes to strke out the requrement n the
e stng aw that the dvsory Commsson to the Counc of Natona Defense
act as a |ont certfyng agency for necessty certfcates. When the present
aw was enacted the dvsory Commsson to the Counc of Natona Defense
was an actve functonng body. t the present tme ts other functons have
been taken over by other governmenta agences. The War Department and
the Navy Department are presenty equpped to act upon appcatons for
amortzaton prveges, and have secured the cooperaton and assstance of
other governmenta agences. perence has shown that consderabe uncer-
tanty and deay s created by the necessty for |ont acton of two govern-
menta agences n passng upon appcatons for certfcaton.
In eu of requred acton by the dvsory Commsson, t s now proposed
that certfcatons e made ony by the Secretary of War or the Secretary of
the Navy, as the case may e, but under such reguatons as may be prescrbed
from tme to tme by the Secretary of War and the Secretary of the Navy.
Under the ouse anguage, such reguatons were to be sub|ect to such poces
and procedures as may e prescrbed from tme to tme by the Presdent or by
such agency or offcer as he may desgnate. s heretofore noted, your com-
mttee, n the nterest of smpfcaton, struck out the ouse provson and
amended the resouton to provde that such reguatons sha be sub|ect to
the approva of the Presdent. It s thought that by ths means contro of the
pocy and procedure as to certfcaton for ta purposes w e as effectve as
prevousy provded by requrng |ont certfcaton by the dvsory Commsson
wth the Secretary of War or the Secretary of the Navy, but wthout the n-
herent deay resutng from dupcaton of effort by requrng n each case an
agency outsde of the rmy or Navy to |on n the certfcaton.
Secton 2 of the |ont resouton proposes to change from 60 days to 6 months
as the tme, after the begnnng of constructon, nstaaton, or acquston of
the emergency factes, wthn whch appcatons for necessty certfcates
must be fed. perence has shown that n many cases t s mpossbe for the
appcant to dentfy the factes sought to be certfed wth any degree of accu-
racy wthn the tme now prescrbed. Ths s due to the fact that e pandng
emergency factes under present condtons requre the constant change of
tems ue to the dffcuty n securng some, and the changng requrements of the
Government as to others. ccordngy, under the present aw t s necessary for
many appcants to fe numerous suppementa and new appcatons wth add-
tona append es, descrbng tems of factes n the process of constructon.
Ths occasons a great amount of work on the part of the appcant and a tre-
mendous amount of tme and effort on the part of Government offcas. The
e perence of the certfyng unts |ustfes the beef that these dffcutes w be
obvated by e tendng te perod for rng to s months after the begnnng
of the constructon wthout pre|udce to the nterest of the Government. In
addton to the change to s months, whch was ncuded n the resouton as t
passed the ouse, your commttee has amended the resouton to change from
February 6. 19 1, to December 1. 19 1. the aternate date for the fng of app-
catons. Ths ct was passed n October, 19 0. and was amended n anuary.
19 1, to provde that the appcatons must be fed before February 0, 19 1, or
wthn the above-mentoned (30-day perod, whchever was ater. Owng to the
short tme between the date of ths amendment and February 6, 19 1, some ta -
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523
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payers were unabe to fe ther appcaton wthn the tme specfed, and t s
now proposed that the aternate tme for fng be e tended to a date subsequent
to the enactment of ths |ont resouton, namey, December 1, 19 1, so as to gve
an opportunty for a proper ta payers to fe tmey appcatons.
In secton 3, provson s made for carfcaton of the meanng of certan pro-
vsons of the e stng aw reatng to nonrembursement and Government pro-
tecton certfcates, and changng the procedure to be foowed n appyng for
such certfcates. The foowng ndcates the changes to be effected:
(a) The |ont resouton proposes to emnate the necessty of certfyng con-
tracts under 15,000. In the absence of a certfcate of Government protecton,
the present statute denes amortzaton deducton f the ta payer has been rem-
bursed (beyond norma e hauston, wear, and tear) by the Unted States for the
cost of a or any part of emergency factes pursuant to any contract wth the
Unted States regardess of amount. arge number of appcatons have been
fed requestng certfcaton that contracts or purchase orders, many nsgnf-
cant n amount, do not so remburse. Ths has necesstated a vast amount of
work on the part of the War Department and the Navy Department, as we as
other agences of the Government, n coectng and revewng the facts n refer-
ence to sad contracts n order to determne ths queston. The provson em-
natng the necessty for certfcaton of contracts under 15,000 woud dspense
wth a arge amount of work whoy unnecessary to adequatey1 protect the
nterests of the Government and w emnate unnecessary e pense.
In addton to the contracts under 15,000, whch were emnated from the scope
of the e amnaton by the |ont resouton as t passed the ouse, the commttee
amended the |ont resouton aso to e empt from such e amnaton contracts
made pror to anuary 1, 19 0. Ths s deemed advsabe to make certan that
contracts antedatng the adopton of the amortzaton prncpe need not be
e amned.
(6) The |ont resouton proposes to mt the contracts requred to be e am-
ned for rembursement to those made on behaf of the Unted States wth the
War Department, the Navy Department, the Unted States Martme Comms-
son, or any other department or agency whch the Presdent may desgnate. The
present aw requres e amnaton of a the appcant s contracts wth a- depart-
ments or agences of the Government. The vast ma|orty of these contracts wth
the departments other than the War Department, Navy Department, and the
Martme Commsson, are for routne suppes havng no connecton wth the
defense program, and there s very tte, f any, possbty of rembursement
theren for the cost of emergency factes. Snce n the future there may be
certan departments other than the War Department, Navy Department, and the
Martme Commsson whose contracts mght nvove such rembursement, It s
proposed to provde for the ncuson of the contracts of such departments or
agences as the Presdent may desgnate.
(c) The |ont resouton proposes to carfy the meanng of ndrect remburse-
ment by provdng that the test shoud be whether the contract recognzes that
n f ng the prce to be pad, the return of cost of factes n e cess of norma
e hauston, wear, and tear was used by the Unted States as a factor. The nser-
ton of the words by the Unted States s beeved to be n ne wth the org-
na ntent of the statute. The present wordng of the statute rases the queston
as to whether t s necessary to ascertan the state of mnd of the contractor.
stabshng proof of such state of mnd s dffcut n any one case and, n vew
of the fact that many thousands of contracts have been submtted for certfcaton,
presents an e tremey dffcut probem of admnstraton.
(d) provso has aso been nserted to the effect that a return of cost greater
than norma e hauston, wear, and tear sha not be deemed to have been used
as a factor n the f ng of the prce when the negotatng or contractng offcer
reports that after carefu consderaton he s satsfed that such greater return
was not ncuded n the prce. These reports are to be sub|ect to reguatons
dscussed beow.
(e) The |ont resouton proposes to strke out the requrement of the e stng
aw that the dvsory Commsson to the Counc of Natona Defense shoud act
as a |ont certfyng agency for nonrembursement and Government protecton
certfcates. The reasons gven above for ths proposa n connecton wth neces-
sty certfcates appy wth even greater force to certfcates of nonrembursement
and Government protecton.
(f) The ont resouton proposes to change the provsons for certfcaton
as to Government protecton by provdng that such certfcaton sha be made
wth reference to the emergency factes nstead of wth reference to each
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52
contract. The reason fur ths proposa s to emnate te possbe requre-
ment of contnued e amnaton of ater suppy contracts. If the orgna con-
tract, under whch rembursement s made for factes, adequatey protects
the Government s nterest n the fu;ure use and dsposton of the factes
and s so certfed, the makng of subsequent suppy contracts w not deprve
the Government of the protecton whch has been afforded under the orgna
contract.
(g) The |ont resouton proposes to add a provson for ssuance of a cer-
tfcate of Government protecton n cases n whch the ta payer has not
been or w not be rembursed, as we as n cases In whch t has been rem-
bursed. Ths proposed change w make t possbe for a ta payer, who cams
e has not been or w not be rembursed, to obtan amortzaton by grantng
to the Government contro over the future use and dsposton of the factes.
(h) The ont resouton as passed the ouse proposed to e tend the
tme for fng appcatons for nonrembursement certfcates and Government
protecton certfcates from 60 days to 6 months after the makng of the con-
tract for whch certfcaton s requested, or before the e praton of 60 days
after the ssuance of a necessty certfcate, whchever s ater. There appears
t(. be no more reason for a shorter perod for fng appcatons for Government
protecton and nonrembursement certfcates than n the ea. e of necessty
certfcates. The e stng requrement that the appcaton be fed wthn 60
days compes ta payers to fe a arge number of separate appcatons whch
nvove unnecessary work and e pense n the departments. There are aso
nstances n whch the contractors shotd be entted to fe appcatons cov-
erng contracts whch were entered nto more than 60 days and possby even
more than 0 months pror to the tme of constructng or acqurng emergency
factes, and the proposed provson permts fng of such appcatons
wthn 60 days after the ssuance of a necessty certfcate. Tour commttee
has amended the |ont resouton to provde that appcatons for the certfcates
of Government protecton and nonrembursement provded for n subsecton ()
may be fed In tme before December 1, 19 1. Ths amendment corresponds
to the amendment made by your commttee n secton 2 of the |ont resouton.
() Consstent wth the proposed change wth regard to certfcaton of
necessty of factes, t s proposed to provde that reports of negotatng and
contractng offcers and certfcates of adequate Government protecton and
certfcates of nonrembursement provded for n the ct sha be ssued under
such reguatons as may be prescrbed from tme to tme by the Secretary of
War and the Secretary of the Navy. Conformng wth the acton of the com-
mttee wth respect to the amendment made to secton 1 of the |ont resouton, a
smar amendment s made wth regard to these reguatons.
Secton of the resouton woud requre that the amendments to secton 12
contaned n the resouton have the same force and effect as f a part of the
e stng aw as of the date of ts orgna enactment. y ths means, t w
be possbe to preserve to the ta payer the same prveges wth respect to
seectng the year n whch to take the amortzaton deducton as f the cer-
tfcate had been secured n accordance wth the procedure provded n the
present aw and to preserve to ta payers the beneft of appcatons fed under
the mtatons provded by the present aw.
19 1- 7-10910
M NDING S CTION 12 OF T INT RN L R NU COD .
ouse of Representatves Report No. 1261, Seventy seventh Congress, Frst Sesson.
October 15, 19 1.
Mr. Doughton, from the commttee of conference, submtted the foowng con-
ference report to accompany II. . Res. 2, 5 :
The commttee of conference on the dsagreeng votes of the two ouses on the
amendments of the Senate to the |ont resouton ( . . Res. 235) to amend
secton 12 of the Interna Revenue Code by e tendng the tme for appcatons,
and changng the procedure, for certfcaton of natona-defense factes and
contracts for amortzaton purposes, havng met, after fu and free conference,
have agreed to recommend and do recommend to ther respectve ouses as
foows:

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ST T M NT OF T M N G RS ON T P RT OF T OUS .
The managers on the part of the ouse at the conference on the dsagreeng
votes of the two ouses on the amendments of the Senate to the |ont resouton
( . . Res. 235) to amend secton 12 of the Interna Revenue Code by e tendng
the tme for appcatons, and changng the procedure, for certfcaton of
natona-defense factes and contracts for amortzaton purposes, submt the
foowng statement n e panaton of the effect of the acton agreed upon by the
conferees and recommended n the accompanyng conference report:
mendment No. 1: Under e stng aw a ta payer must secure a certfcate
that ts facty s necessary n the nterest of natona defense n order to
secure the amortzaton aowances provded theren. The ouse |ont resou-
ton provded that such certfcates, to be ssued ether by the Secretary of War
or the Secretary of the Navy, shoud be under such reguatons as were to be
prescrbed by the Secretary of War and the Secretary of the Navy and sub|ect
to such poces and procedures as were to be prescrbed from tme to tme by
the Presdent, or by such agency or offcer as he mght desgnate. The Senate
amendment provded that such reguatons were to be prescrbed by the sad
Secretares wth the approva of the Presdent. The ouse recedes.
mendment No. 2: stng aw provdes that appcatons for certfcates
thereunder must be fed before February 6, 19 1, or wthn a prescrbed 60-day
perod, whchever s ater. The ouse ont resouton ncreased the 00-day
perod to 6 months but faed to change the aternate date of February 6, 19 1.
The Senate amendment e tends such aternate date to December 1, 19 1. The
ouse recedes.
mendment No. 3: Ths Is a carfyng amendment whch carres out the
present nterpretaton of e stng aw by makng t certan that contracts made
before anuary 1, 19 0, need not be e amned. The ouse recedes.
mendment No. : Ths amendment s smar to amendment No. 2 and merey
e tends the tme for fng appcatons for certfcates of Government protecton
and nonrembursement from February 6, 19 1, to December 1, 19 1. The ouse
recedes.
mendment No. 5: Ths amendment s smar to amendment No. 1 and pro-
vdes that reports of negotatng and contractng offcers and certfcates of
adequate Government protecton and certfcates of nonrembursement sha be
ssued under such reguatons as may be prescrbed from tme to tme by the
Secretary of War and the Secretary of the Navy wth the approva of the
Presdent. The ouse recedes.
R. L. Dorc TON,
ohn W. oene, r.,
-en T. Tbeadway,
Frank Cbowthkb,
Managers on the part of the ouse.
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dmnstratve Code, tentatve draft
dmssons ta . (See Msceaneous ta es.)
coho:
Formuae 12, 13, and 1 , ppend to Reguatons 3
amended
Markng packages of, reguatons amended
Symbos and sera numbers of packages, reguatons
amended
Transfer of ta -pad by ppe ne, reguatons amended
coho ta , dsted sprts and wnes, foor stocks ta es,
reguatons
mendments:
Code of Federa Reguatons
Part , Chapter I, Tte 27
Secton .32
Subpart (D) (added), Part 171, Tte 26
Secton 171. e
Secton 171. f
Gaugng Manua, paragraph 60
Reguatons 3
rtces 111 and 1 6...
rtces 171 to 180 (added)
Reguatons 3. ppend (1938), formuae Nos. 12, 13, and
1
Reguatons
Sectons 183. 7, 183.155, 183.21 1. 183.362, 183.376,
183.377, 183.378. 183.381, 183.383
Sectons 183. 37 to 183. 7 (added)
Reguatons ( coho Ta ) secton 37 (a), (b), rtce
II --
Reguatons 5 (19 0)
Sectons 18 . 7a and 18 .399a (added)
Sectons 18 .138(a) ( ), 18 .383, 181.398, 18 . 00,
18 . 03, and 18 . 05
Reguatons 7, paragraph 1 3
Reguatons 8 (193 ), artce 72(a)
Reguatons 9, artce 28
Reguatons 10
Sectons 185.382, 185.395, and 185. 01
Sectons 185. 99 to 185.505 (added)
Reguatons 13, sectons 175.3 and 175.9
Reguatons 15, sectons 190.33, 190. 5, 190.170, 190.173,
190.17
Reguatons 18
Sectons 192.197 and 192.230
Sectons 192.261 to 192.266 (added)
Reguatons 28, sectons 176.3, 176.5, 176.12. 176.16 to
176.2 , 176.27, 176.3 . 176.35, 176.39 to 176. 1, 176. 9,
176.50, 176.55, 170.57, 176.69, and 105.6
Reguatons 3 (19 1), secton 101.2
Reguatons (1939), sectons 31 .2 to 31 . , 31 .35,31 . ,
31 .50, 31 .52 --.
. (526)
Rung
No.
10839
1089
10819
10863
1086
108 1
10907
10821
10821
10779
10819
10863
1086
1089
10S69
10860
10881
10916
10916
108 9
10906
10831
108 8
108 8
10796
10861
10850
10850
10862
10895
10857
G
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527
mendments Contnued.
Reguatons 5, artce 383
Reguatons 6 (19 0), sectons 316.0, 316.2, 316.3, 316.9,
316.29 (added), 316.32, 316. 0 (substtuted for 316. 0,
316. 1, 316. 3, and 316. ), 316.50, 316.50 (added),
316.51, 316.52, 316.5 to 316.56, 316.60 to 316.6 (sub-
sttuted for 316.60 to 316.62), 316.70 to 316.73 (subst-
tuted for 316.70 to 316.73) 316.81, 316.82. Subpart
(reettered), 316.90 to 316.96 (renumbered), Subparts
to T (added), 316.200 and 316.201 and 316.20 as re-
numbered
Reguatons 7 (1939), artce 1
Reguatons 8, artce 8
Reguatons 51, sectons 320.30, 320.31, 320.32, 320.37, and
320.6
Reguatons 62, art ce 383
Reguatons 6 (1938), artces 36, 1, 6, and 61
Reguatons 65, artce 383
Reguatons 66 (1933), artces 8and9
Reguatons 69, artce 383
Reguatons 7 , artce 693
Reguatons 77, artce 693
Reguatons 79 (1936), artces 5, 6, and 7 --.
Reguatons 80 (1937), artces 1, 7, and 8
Reguatons 86
rtces 23(g)- (added), 23(o)-, 25-2, 51-1, 117-5,
120-1 (added)
rtce 131-3
rtces 131-9 (added) and 251-1
Reguatons 90
rtce 206( ) - -.
rtces 211, 211(1), 503/,, and 503
Reguatons 9
rtces 23 (g)- (added), 23(o)-, 25-2, 51-1, 117-5,
and 120-1 (added)
rtce 131-3
rtces 131-9 (added), 251-1
rtce 291-1 -
Reguatons 101
rtce 23(h)- (added)
rtce 23(o)-
rtce 25-2__. -
rtce 51-(b) -
rtce 117-5 -
rtce 120-1 (added)
rtce 131-3 -
rtce 131-9 (added)
rtce 251-1
rtce 291-1
Reguatons 103
Sectons 19. -1, 19.11-1, 19.12-1, 19.12-2, 19.13-1,
19 13-5 to 19.13-7, 19.1 -1,19.1 -2, 19.15-1,19.15-2
(added), 19.23(c)-, 19.23(c)- (added), 19.23(e)-.
Sccton 19.23 (h)- (added)
Secton 19.23(o)-.
Secton 19.25-2
Sectons 19.25-3, 19.25-6, 19.25-7, 19.26-2, 19. 2-1,
19. 2-6 (added), 19. 2-7 (added), 19.51-1 to 1951-3
Secton 19.51-1 (c)
Sectons 19.102-1, 19.102- , 19.10 -1, 19.112(0-1
Secton 19.115-3
10769
10919
10858
10928
10929
10769
10855
10769
10859
10769
10769
10769
10878
II
10773
10769
10773
10795
10876
10773
10769
10773
10777
10773
10773
10773
10773
10773
10773
10769
10773
10773
10777
10SG6
10773
10773
10866
10773
10866
10773
10866
10778
G
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528
mendments Contnued.
Reguatons 103 Contnued.
Sectons 19.115-5, 19.117-1
Secton 19.117-5
Secton 19.120-1 (added)
Secton 19.122-3
Secton 19.122- -
Secton 19.122-5
Secton 19.131 3
Secton 19.131-9 (added)
Sectons 19.1 2-1, 19.1 2-5
Secton 19.1 3-1
Secton 19.1 3-3
Secton 19.1 -1
Secton 19.1 -2
Sectons 19.1 7-1 to 19.1 7-3, 19.1 7-7, 19.1 8-1,
19.1 8-3, 19.201 (b)-, 19.20 (a)-, 19.207-1,
19.211-7, 19.213-1, 19.21 -1, 19.215-1, 19.217-2,
19.219-1, 19.231-1, 19.236-1
Secton 19.251-1
Sectons 19.251-3, 19.261-1, 19.262-2
Secton 19.262- ..
Secton 19.291-1
Sectons 19.362-1, 19.363-1 (added)
Sectons 19.12 -1, 19.12 -2, 19.12 -6, 19.12 -7,
19.12 -9
Sectons 19.1 3-1, 19.1 3- , 19.1 3-7, 19.1 -1,
19.1 7-3, and 19.1 7-
Secton 19.1 9-1
Sectons 19. 00-1, 19. 01-1, and 19. 02-1
Sectons 19.500-1, 19.3801 (h)-0
Reguatons 10 , secton 23.11(a)
Reguatons 106, secton 02.211 -
Reguatons 107
Secton 03.212
Sectons 03. 01 and 03.602
Reguatons 109
Secton 30.710-2, 30.711(a)-2, 30.711(a)-3, 30.711(b)-
1, 30.71 -1
Secton 30.718-1
Secton 30.718-2..
Sectons 30.718-2(o), 30.718-3, 30.718- (added),
30.718- , 30.718-5, 30.722- , 30.731-(a)
Reguatons 110, secton 33.11(a)
Treasury Decson 961
mortzaton deducton, emergency factes:
Certfcaton, procedure
Interna Revenue Code amended
Reguatons amended
Defense Pant Corporaton, status of, avaabty of cer-
tfcates of nonrembursement
nnutes, e cess of aggregate premums over dscounted vaue
of prepad premums, gross ncome
rmy, mtary forces at bases eased from foregn countres,
compensaton, gross ncome
utomobes, parts or accessores. (See Manufacturers e cse
ta es.)
.
anks:
Insovent, e empton of whoy-owned subsdary
10866
10773
10773
10773
10773
10866
10773
10769
10773
10866
108 2
108 2
108 2
108 2
10866
10773
10866
108 2
10777
10866
109 2
10932
109 3
10851
10866
10868
10795
10795
10876
10880
10778
10880
10778
10880
10868
10820
10923
10901
109 2
10808
10883
10836
1082
10825
1090
G
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529
Rung
No.
onds, ta -free covenant, nterest pad by bondhoders com-
mttee, wthhodng
randy, producton of, reguatons amended
rokers, nformaton returns, reguatons amended
usness e penses:
penses ncdent to carryng on trade or busness, n-
dvduas, trusts
ountary payments under ermont unempoyment com-
pensaton aw
C.
Caforna, communty property, agreement defnng wfe s
nterest, gross estate of decedent husband
Canada:
cse and ncome ta es, credts
Income ta conventon wth, fng perod of fna nforma-
ton return
Nonresdent aens, ncome from Unted States sources,
19 1 ta rates
Capta gans and ouses:
Offset n |ont return
Capta stock ta :
d|usted decared vaue, effect of net operatng oss
and net operatng oss carry-over
ppcabty of secton 22, March 1, 1879, ct, as amended,
to subsdary of nsovent bank
tenson of tme for fng returns and payment of ta
Reguatons amended.
Casuaty, bombardment destructon of persona property, oss..
Cent, fractona part of, retaers e cse ta es
Cgarettes. See Msceaneous ta es: Stamp ta es.)
Crcut courts of appeas, number of |udges authorzed by aw_.
Cv defense commttees, contrbutons to, deducton
Coconut o. (See Processng ta .)
Commttee reports:
Interna Revenue Code, amendment, secton 12
Conference (Report No. 1261)
ouse of Representatves (Report No. 1207)
Senate (Report No. 688)
Revenue ct of 19 1
Conference (Report No. 1203)
ouse of Representatves (Report No. 10 0)
Senate (Report No. 673)..
Commonweath of Phppnes, shps earnngs, e empton
Communty property, agreement defnng wfe s nterest, gross
estate of decedent husband, Caforna
Compensaton, mtary or nava forces at bases eased from
foregn countres, gross ncome
Consodated returns, rght of eecton n subsequent years
Contrbutons:
Cv defense commttees
Corporaton s e penses ncurred n procurng egsaton
ont returns, percentage mtaton
Conveyances. (See Msceaneous ta es: Stamp ta es.)
Corporatons:
Credts, contracts restrctng payment of dvdends
Dstrbutons, earnngs or profts, reguatons amended
10775
10916
109 3
10783
1078
10788
10792
1077
10803
10789
10813
1081
10871
10825
1079
108 0
10855
10912
10892
10933
10852
10910
10908
10909
10835
10823
10828
10903
10792
10836
10868
10889
10852
10933
10900
10939
10778
G
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530
Corporatons Contnued.
Lqudaton, stockhoders method of reportng gan or oss
where amount wthhed for contngences
Returns, e tenson of tme for fng .
Court decsons:
rmature change, Inc.; Unted States v .
Cty of Greenve, S. C, e a. (n the case of Unted States
v. Woodsde e a.); Unted Staes v
Commssoner; Campo Rce Mng Co., Inc., v
Commssoner; onorbt Products, Inc., v
Commssoner; Te te Ms Securtes Corporaton v
Campo Rce Mng Co., Inc., v. Commssoner
Ferte Cooperatve Dary ssocaton v. uston
Goodyear; Unted States v
everng v. ueen Insurance Co
everng v. The New Presdent Corporaton
onorbt Products, Inc., v. Commssoner
uston; Ferte Cooperatve Dary ssocaton v
aes; Unted Staes v
rk Co. v. Unted States.
ueen Insurance Co.; everng v
Te te Ms Securtes Corporaton v. Commssoner
The New Presdent Corporaton; everng v
Thrd Scottsh mercan Trust Co. v. Unted States
Unted States v. rmature change, Inc
Unted States v. Cty of Greenve, S. C, e a. (n the case
of Unted States v. Woodsde e a.)
I ned States v. Goodyear
I ned Staes v. aes.
Unted Sates; rk f- Co. v
Unted States; Thrd Scottsh mercan Trust Co. v
Credt or refund, cam for refund, etter of protest, nforma
cam perfected by forma cam
Credts aganst net ncome, earned ncome credt, |ont return-
Credts aganst ta , contrbutons pad nto State unempoyment
funds, reguatons amended
Credts, corporatons, contract restrctng dvdend payments...
Credts, foregn ta es:
Canadan e cse and ncome ta es
vdencc requred for aowance of, reguatons amended.
des for acceptng secondary evdence
Guatemaan ncome ta
D.
Decared vaue e cess-profts ta :
Computaton, fsca years uy 31-Novembcr 30, 19 1
Reguatons
Defense ta , computaton where net ong-term capta oss
Depeton, o and gas wes, computaton of net ncome, aoca-
ton of deductbe tems
Ds d sprts:
Foor stocks ta es, reguatons
Markng and brandng packages, Gaugng Manua amended
Suppes for vesses and arcraft, reguatons amended
Traffc n contaners of, reguatons amended
Transfer of ta -pad by ppe ne, reguatons amended
Unfnshed sprts tanks, reguatons amended
Wnes, drawback, reguatons amended
Dvdends, credt re contracts restrctng payment
Dues and ntaton fees. (.See Msceaneous ta es.)
No.
10921
10781
10767
10790
10905
10856
10933
10905
10890
10792
1077
1092
10856
10890
1093
10922
1077
10933
1092
10793
10767
10790
10792
1093
10922
10793
1093
10813
1081
10876
10939
1077
10769
10800
10811
10926
10879
10806
10897
108 1
10779
108 8
10796
10860
10869
10S62
10939
G
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531
mpoyment ta es:
Interna Revenue Code
Credts aganst, refunds of, Federa unempoyment
ta es, Reguatons 107, amended
mpoyees
ar pots
Drectors of banks as commttee members
ousemother performng servces for sororty dur-
ng summer schoo term
Indvduas engaged n the operaton of a fshng
vesse
Pot drectng rver nagvaton of ocean-gong
vesses
mpoyers, essee of beauty shop n department store..
cepted servces
grcutura abor
Dogs, breedng, rasng, and carng for
Famy empoyment, Reguatons 106 and 107,
amended
Martme servces, ndvduas engaged n the
operaton of a fshng vesse..
Reguatons 107 amended
Soca Securty ct
Credts aganst, refunds of, Federa unempoyment
ta es, Reguatons 90, amended
Famy empoyment, Reguatons 106 and 107, amended
Reguatons 90, amended
Wages, what consttutes, dsmssa payments
quty nvested capta, determnaton, reguatons amended
states or trusts, e penses ncdent to carryng on trade or
busness
state ta :
Gross estate, communty property, agreement defnng
wfe s nterest, Caforna
Rates, reguatons amended
Unted States savngs bonds, ta abe status
cess profts ta :
Consodated returns, eecton for subsequent years
Reguatons 110 amended
tenson of tme for fng Form 991
Reguatons 109 amended
empt corporatons:
Farmers cooperatve marketng assocaton, equaty of
treatment accorded members and nonmembers
Unted Servce Organzatons
empt ncome:
arnngs of shps documented under foregn aws
Commorfweath of the Phppnes
cess of aggregate premums over dscounted vaue of
prepad premums
Interest
Unted States savngs bonds hed by e empt organza-
ton
Unted States Treasury bs
Share accounts, Federa savngs and oan assocatons
tenson of tme, fng returns:
Payment
|f capta stock ta .
Form 991, e cess profts ta ..
Rung
No.
10876
10826
10786
108 5
1085
109 0
10785
1083
10795
1085
10876
10870
10795
10876
10891
10778
10783
1078
10792
10877
10776
10889
10868
10853
10880
10890
10765
10903
10883
10810
10763
10772
1079
108 0
10853
G
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3
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1
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532
P.
Federa savngs and oan assocatons, share accounts, ncome
from, e empton,..
Fees:
Dog cense, auto nspecton and regstraton, deducton as
ta es T
Servce charges under mortgage servce agreement, accrua
hass, when ta abe
Fermented mat quors, suppes for vesses and arcraft, regu-
atons amended
Frearms:
Contraband, etc., sezure of vesses, arcraft, etc., trans-
portng, reguatons
nforcement of aws reatng to, Code of Federa Regua-
tons amended
Machne guns, pstos equpped wth ug, spur, sot, etc.,
attachment to shouder stock
Foor stocks ta es:
Dsted sprts and wnes, reguatons
Tres, nner tubes, and matches
Premnary nstructons ;
Reguatons
Foregn corporatons, ncome from sources wthn Unted States,
deducton of ratabe part home offce e penses, nterest, etc.
Foregn ta es, credt for. (See Credts.)
Furs, reta saes. (See Retaers e cse ta es.)
G.
Gan or oss:
changes, new notes e changed for od notes of Recon-
structon Fnance Corporaton
Reorganzaton, acquston of property by notehoders at
forecosure sae, transfer to new corporaton
Saes-
Share accounts, Federa savngs and oan assocatons. _
Unted States Treasury bs
Gft ta :
Rates, reguatons amended
Unted States savngs bonds, ta abe status
Guatemaan ncome ta , credt
.
usband and wfe, |ont returns:
Capta gans and osses
Chartabe contrbutons, deducton mtaton
arned ncome credt
Reguatons amended
I.
Inos unempoyment fund, contrbutons to, deducton
Income from sources wthn Unted States, foregn corporatons,
deducton of ratabe part home offce e penses, nterest, etc_.
Income from sources wthn Unted States possessons, Unted
States nava vesses personne
Inner tubes, foor stocks ta es. (Sec Foor stocks ta es.)
Rung
No.
10772
1087
10802
10850
10820
10821
1091
108 1
10837
10886
10793
10937
1092
10772
10763
10878
10776
10811
10813
1081
10900
10813
1081
10773
108S8
10793
10766
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533
Rung
No.
Interest:
ddtona manufacturers e cse ta es, accrua date
Property mprovement oans. Natona ousng ct
Ta -free covenant bond, abty of bondhoders commttee
as assgnee, wthhodng
Unted States savngs bonds
Defense Seres G, when ncuded n gross ncome
empt organzaton owner, ta abty
Unted States obgatons, wthhodng of ta , nformaton
returns
Unted States Treasury bs, ta abe status
Interna Revenue Code, amendment, secton 12 :
Commttee reports
ewery, reta e cse ta .

(See Retaers e cse ta es.)

L.
Legsaton:
Interna Revenue Code amended
Revenue ct of 19 1
Lens, Federa ta es, ens for State and oca ta es, prorty
Losses:
ombardment, destructon of persona property
Interest refunded upon redempton pror to maturty of
Unted States savngs bonds, Defense Seres G
M.
Manufacturers e cse ta es:
utomobe, parts or accessores
rmatures made from dscarded armatures and new
materas, saes
Gasone, ubrcatng o, matches, reguatons amended
Pstos and revovers, reguatons amended
Reguatons 6 (19 0) amended to conform to 19 1 Revenue
ct
Sportng goods, |g-saw bow ba machne, ta abty
Matches, foor stocks ta es. (See Foor stocks ta es.)
Mtary forces at bases eased from foregn countres, compensa-
ton, gross ncome
Msceaneous ta es:
dmssons ta
mounts pad for attendng e cusvey regous serv-
ce, reguatons amended
Changes made by Revenue ct of 19 1
Dues and ntaton fees, changes made by Revenue ct of
19 1
Stamp ta es
Cgarettes, rates of ta , reguatons amended
Conveyances pursuant to a statutory merger or con-
sodaton
Frearms and machne guns, pstos equpped wth ug,
spur, sot, etc., for attachng shouder stock
Payng cards, reguatons amended
N.
Natona ousng ct, property mprovement oans, nterest,
computaton
Nava forces at bases eased from foregn countres, compensa-
ton, gross ncome :
10782
10771
177
71
10775
213
10829
10810
93
78
10932
10763
1 7
76
10908
10909
10910
519
521
52
10901
108 6
10790
11
377
173
10912
96
10829
93
10767
10857
10858
289
263
293
10919
10922
267
296
10836
72
10895
10870
260
260
10870
260
10906
316
10927
308
1091
10859
31
312
10771
71
10836
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53
Navy personne, Unted States vesses, ncome from sources wth-
n Unted States possessons
onresdent aens, ta aton of, Canadans, ncome from Unted
States sources, 19 1 ta rates
O.
O and gas wes, depeton aowance, aocaton of deductbe
tems
Oeomargarne:
Packages: reguatons amended
Schedue of producton and materas used
une, 19 1 and 19 0
uv, 19 1 and 19 0
ugust, 19 1 and 19 0
September, 19 1 and 19 0.
October, 19 1 and 19 0
November, 19 1 and 19 0
Oregon property ta es, accrua date
P.
Pam o. (See Processng ta es.)
Payment of ta es. (See Ta es: Payment.)
Pennsyvana property ta es, accrua date
Processng ta es:
Certan os, Unted States possessons, reguatons amended.
Cam for refund, use of ta -payment warrants by rce pro-
cessor
Pam o used n manufacture of cod-roed stee sheets
Refund mted to ta burden borne by ta payer
Property ta es, State. (See Ta es: State.)
It.
Reconstructon Fnance Corporaton notes, e changes, gan or
oss
Refunds, processng ta , mted to ta burden borne by ta -
payer
Reguatons:
cceptance of Treasury notes, Ta Seres -19 3 and
-19 3, n payment of ncome ta es
mendments. (See mendments: Reguatons.)
cess profts ta , decared vaue
Foor stocks ta es, tres, nner tubes, and matches
Reorganzaton, gan or oss, acquston of property by note-
hoders at forecosure sae, transfer to new corporaton
Retaers e cse ta es:
Deductbty
Fountan pens, essenta parts, etc
Fractona part of cent
Furs, nstament, ayaway, etc., saes made pror to
October 1, 19 1
ewery, uncoectbe nstament payments, credt or
refund of ta
Reguatons amended
Returns:
rokers, nformaton, reguatons amended
Capta stock ta , e tenson of tme for fng
Consodated, rght of eecton n subsequent year
Corporatons, e tenson of tme for fng
Rung
No.
10766
10789
10897
10831
10797
10815
108 7
10885
10917
109 1
10818
10833
10928
10905
10830
10856
10937
10856
1080
10879
10886
1092
10867
10893
10892
10872
10915
10929
109 3
1079
108 0
10868
108S9
10781
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535
Returns Contnued.
Faure to fe, addton to ta , reguatons amended...--..
usband and wfe, |ont returns. (See. usband and wfe.)
Indvdua, optona ta (Form 10 0 )
mended returns under genera provsons
Reguatons amended
Informaton
Interest, Unted States obgatons
Ta wthhed from Canadan addressees, fna fng
perod
Revenue ct of 19 1..
Commttee reports-
Saes, gan or oss:
Share accounts, Federa savngs and oan assocatons
Treasury bs
Servce fees under mortgage servce agreement, accrua bass,
when ta abe
Shps, foregn, e empton of earnngs. (See empt ncome.)
Sprts and wnes, ta -pad, ppe ne conveyance, reguatons
amended
Sportng goods. (See Manufacturers e cse ta es.)
Stamp ta es. (See Msceaneous ta es.)
States:
Ta es. (See Ta es: State.)
Unempoyment compensaton aw, vountary payments
under, ermont
Ta es:
ddtona, faure to fe return, reguatons amended
Defense ta , computaton where net ong-term capta oss.
Fees pad for dog censes, automobe nspecton and
regstraton, deducton
Foregn, credt for
Canadan e cse and ncome ta es
vdence requred for aowance, reguatons amended..
Rues for acceptng secondary evdence
Guatemaan ncome ta
Indvdua ncome ta return
Optona ta (Form 10 0 )
mended returns under genera provsons
Reguatons amended
Interna Revenue Code, aowabe deductons for ncome
ta purposes .
Manufacturers e cse, addtona, nterest, accrua date
Payment
tenson of tme, capta stock ta
Treasury notes. (See Unted States obgatons.)
Retaers e cse. (See Retaers e cse ta es.)
State-
Contrbutons to Inos unempoyment fund, de-
ducton
Property ta es, accrua date
Oregon
Pennsyvana
Tres, foor stocks ta es. (See Foor stocks ta es.)
Tobacco:
Statement of manufactured, produced, by casses
pr, 19 1 and 19 0
May, 19 1 and 19 0.
une, 19 1 and 19 0.
Rung
No.
10777
10938
10851
10938
10803
108 6
10823
10828
10835
10772
10763
10802
10861
10788
10777
10806
1087
1077
10769
10800
10811
10938
10851
1076
10782
1079
108 0
10888
10818
10833
10768
10799
10816
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5.36
Tobacco- Contnued.
Statement of manufactured, produced, by casses Con.
uy, 19 1 and 19 0._-_
ugust, 19 1 and 19 0
September, 19 1 and 19 0 ...
Treasury notes, payment of ta es. (See Unted States obga-
tons.)
Trusts, trustees commssons, busness e pense deducton
U.
Unted Servce Organzatons, e empton
Unted States oard of Ta ppeas, decsons of, st of ac-
quescence and nonacquescences
Unted States obgatons:
Interest, wthhodng of ta , nformaton returns, regua-
tons amended
Treasury bs, nterest, e empton
Treasury notes, payment of ta es
Unted States savngs bonds
Defense Seres C, nterest refunded upon redempton
pror to maturty
empt organzaton owner, nterest, e empton
Status for Federa estate and gft ta purposes
.
ermont, unempoyment compensaton aw, vountary payment
under, deducton
w.
Wnes:
Four stocks ta es, reguatons
Labeng and advertsng
Code of Federa Reguatons amended
Reguatons amended
Shpments to mercan possessons, reguatons amended..
Wthhodng ta at source:
Income from mercan securtes hed by rtsh Govern-
ment
Informaton returns (ta wthhed from Canadan address-
ees), fna fng perod
Interest, bond
Rates of wthhodng, reguatons amended
Ta -free covenant, abty of bondhoders commttee
as assgnee
Trust dstrbutons, ncudng capta gans, to non-
resdent aen benefcares :
Unted States obgatons, reguatons amended
Mng
No.
10838
1088
10918
10829
10810
10776
1078S
108 1
10907
10881
108 9
10935
10803
108 2
10775
10791
10932
10783
1S5
1078
187
10765
123
10936
1-25
10932
1 7
10763
76
1080
110
10807
112
108
118
10875
12 )
10898
121
10899
121
10913
122
10935
1 6
c
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