WAR REVENUE AND INCOME TAX GUIDE BUASH. HENDERSON erf the Illinois Bar SECOND EDITION War Revenue and Income Tax Guide for 1915 Second Edition Price $1.50 (Copyrighted 1914) ELIAS H. HENDERSON Attorney and Counselor First National Bank Building Chicago, Illinois Table of Contents CHAPTER I War Revenue Law Treasury Decisions War Revenue Law, annotated Page ,63-69 , 1-63 ADDITIONAL SPECIAL TAXES IMPOSED BY THE ACT OF OCTOBER 22, 1914, TAKING EFFECT NOVEMBER 1, 1914, TO CONTINUE TO JANUARY 1, 1916. Rate of Page Tax Bankers, for each $1,000 of capital employed $ 1.00 7-11 Brokers who have not paid as bankers 30.00 13 Pawnbrokers 50.00 12 Commercial brokers 20.00 13 Customhouse brokers 10.00 14 Commission merchants who have not paid as commercial brokers 20.00 13 Proprietors of theaters, museums, and concert halls: Seating capacity not over 250 25.00 Seating capacity over 250 and not exceeding 500... 50.00 Seating capacity over 500 and not exceeding 800... 75.00 Seating capacity over 800 100.00 Proprietors of circuses 100.00 16 Proprietors or agents of other exhibitions -or shows for money 10.00 16 Proprietors of bowling alleys and billiard rooms, for each alley or table 5.00 16 Dealers in leaf tobacco (annual sales of 1,000 pounds or less exempt) : 18 Sales not over 50,000 pounds 6.00 Sales over 50,000 and not over 100,000 pounds 12.00 Sales over 100,000 pounds 24.00 Dealers in tobacco (manufactured touacco, snuff, cigars, and cigarettes) exempt when annmi receipts are not over $200 -;-.- 4 - 80 19 Manufacturers . ^f toba.c' ,o : 19 Sales not over 100,000 pounds 6.00 Sales over 100,000 and not over 200,000 pounds. 12.00 Sales over 200,000 and not over 400,000 pounds. 24.00 Sales over 400,000 and not over 1,000,000 pounds. 60.00 Sales over 1,000,000 and not over 5,000,000 pounds. 300.00 Sales over 5,000,000 and not over 10,000,000 pounds. 600.00 Sales over 10,000,000 and not over 20,000,000 pounds. 1,200.00 Sales o,ver 20,000,000 pounds 2,496.00 Manufacture of cigars: Annual sales not over 100,000 cigars 3.00 19 Annual sales exceed 100,000 and do not exceed 200,000 cigars -.-. 6.00 Annual sales exceed 200,000 and do not exceed 400,000 cigars 12.00 TREASURY DECISIONS Rate of Page Tax Annual sales exceed 400,000 and d<J notv;xeegd ;:,::. 1,000,000 cigars .."....,...,...............,..,..,. Annual sales exceed 1-,000,00() and do . not exceed 5,000,000 cigars' .............. ? 150,00 -. Annual sales exceed 5,000,000 and do not exceed. 20,000,000 cigars .. , 600.00 Annual sales exceed 20,000,000 and do not exceed 40,000,000 cigars ...... 1,200.00 Annual sales exceed 40,000,000 cigars ....2,496.00 Manufacturers of cigarettes: Manufacturers whose annual sales do not exceed 1,000,000 cigarettes 12.00 20 Annual sales exceed 1,000,000 and do not exceed 2,000,000 cigarettes ...... ....... ...... .. 24.00 Annual sales exceed 2,000,000 and do not exceed 5,000,000 cigarettes 60.00 Annual sales exceed 5>000,000 and do not exceed 10,000,000 cigarettes ... 120.00 Annual sales exceed 10,000,000 and do not exceed 50,000,000 cigarettes 600.00 Annual sales exceed 50,000,000 and do not exceed 100,000,000 cigarettes 1,200.00 Annual sales exceed 100,000,000 cigarettes ........... 2,496.00 Distilled Spirits (Act of Oct. 22, 1914). Grape brandy or wine spirits used in the fortification of sweet wines (to be assessed), per gallon $0.55 . 3 Fermented Liquors (Act of Oct. 22, 1914). Fermented liquors, per barrel, containing not more than 31 gallons . . . . $1.50 1 (And at a proportionate rate for any other quantity or for fractional parts of a barrel authorized by law.) Wines, Liqueurs, Cordials, Etc., Domestic and Imported. (Act of Oct. 22, 1914.) 1 Still wines, per pint. .. $0.01 2 (In bottles containing less than pint in proportion.) Per quart .02 Per gallon .08 Champagne and other sparkling wines and artificially carbonated wines, per V-2 pint or less .05 3 More than l / 2 pint and not more than 1 pint .10 More than 1 pint and not more than 1 quart... .20 (Larger quantities same rate) Liqueurs, cordials, and similar compounds, per l /2 pint.. .01^2 . .1 More than % pint and not more than 1 pint. ....... .03 More than 1 pint and not more than 1 quart . .06 Larger containers, per gallon ..-..- .24 STAMP TAXES ON AND AFTER DECEMBER 1, 1914, TO CON- TINUE TO JANUARY 1, 1916. Schedule A. Documentary. Bonds, debentures, or certificates of indebtedness of. any ' association, company, or- corporation, on each $100 of face value or fraction thereof. / $0.05', - 33 On each original issue of certificates of stock, whether on organization or reorganization, on each $100 of face value or fraction thereof.. . .. .05 3:> :On all sales, agreements t to , sell, memoranda of sales, d- - liveries or transfers of snares, or certificates of stock of any association or corporation, on each $100 of face " value TW fraction thereof. . .02 34 314006 WAR REVENUE LAW Rate of Page Tax Upon each sale, agreement to sell, or agreement of sale of any products or merchandise at any exchange or board of trade, or other similar place, either for pres- ent or future delivery, for each $100 in value of said sale 01 36 And for each $100 or fractional part thereof in excess of $100 .01 Promissory notes, and for each renewal, for a sum not exceeding $100 .02 47 For each additional $100 or fraction thereof .02 Bills of lading, manifests, etc., issued by express com- panies or public carriers, etc .01 Bonds, except those required in legal proceedings .50 44 Certificates of profits or certificates or memoranda show- ing interest in the property or accumulations of any association, company, or corporation, and all transfers thereof, on each $100 of face value or fraction thereof .02 45 Certificate of damage or otherwise and all other certifi- cates or documents issued by port warden or marine surveyor .25 46 Certificates of any description required by law, not otherwise specified .10 46 Contract: Broker's note, or memorandum of sale of goods, or merchandise, stocks, bonds, exchange, notes of hand, real estate, or property of any kind, issued by brokers, etc., for each note or memorandum of sale not otherwise provided for in act .10 48 Conveyance: Deed, instrument, or writing conveying lands, tenements, or other realty, etc., value over $100 and not exceeding $500 .50 48 For each additional $500 or fraction thereof .50 Entry of goods, wares, or merchandise in customhouse, not exceeding $100 in value .25 50 Exceeding $100 and not exceeding $500 .50 Exceeding $500 in value 1.00 Entry for withdrawal of goods or merchandise from customs bonded warehouse .50 50 Insurance, marine, inland, and fire (except purely co- operative or mutual), lightning or other peril, on each policy, or renewal on amount of premium charged on each $1 or fractional part .OOJ/2 51 Insurance, fidelity, and guarantee on each policy, on each $1 or fractional part thereof of premium received .00^ 52 Passage tickets by any vessel from the United States to a foreign port, costing not exceeding $30 (tickets cost- ing $10 or less exempt) 1.00 53 More than $30 and not exceeding $60 3.00 More than $60 5.00 Power of attorney or proxy for voting at an election of officers of any incorporated company or association, except religious, charitable, literary societies, or public cemeteries .10 53 Power of attorney to sell or convey real estate or to rent or lease the same, to collect or receive rent, to sell or transfer stock, bonds, etc .25 53 (Papers used in the collection of pension, back pay, or bounty claims, or claims for property lost in military or naval service are exempt) 54 Protest: Upon the protest of every note, bill of ex- change, acceptance, check, or draft, or any marine pro- test .25 54 TREASURY DECISIONS Rate of Page Tax Telegraph and telephone messages: Every person, firm, or corporation operating any telegraph or telephone line or lines is required to make a sworn statement to the collector of the number of messages or conver- sations transmitted over their lines during preceding month for which a charge of 15 cents or more was imposed, and for each of such messages or conver- sations to pay a tax of .01 41 On seats in palace or parlor cars and berths in sleeping cars (to be paid by the company selling the same) . . . .01 54 Schedule B. In Effect December 1, 1914. Perfumery and cosmetics and other similar articles: For and upon every packet, box, bottle, pot, or phial, etc., where such packet, box, bottle, pot, phial, and contents shall not exceed retail price of 5 cents , $0.00^ When retail price exceeds 5 cents and does not exceed 10 cents .00^4 When retail price exceeds 10 cents and does not exceed 15 cents .00^ When retail price exceeds 15 cents and does not exceed 25 cents And for each additional 25 cents of retail price or value or fractional part thereof in excess of 25 cents Chewing gum or substitutes therefor: For and upon each box, par, or package containing chewing gum, when the retail value does not ex- ceed $1 .04 56 If exceeding $1, for each additional dollar or frac- tional part thereof .04 Note. The act of August 18, 1914, known as the "United States Cotton Futures Act," in effect February 18, 1915, imposes a tax on contracts of sale of cotton for future delivery made on any ex- change, board of trade, or similar institution or place of business, of 2 cents for each pound of cot- ton involved, to be paid by means of stamps to be affixed to the contract or to the memoranda evi- dencing the same. The collection of the tax devolves on the Com- missioner of Internal Revenue under regulation of the Secretary of the Treasury. Rate of Tax after July TAXES IN EFFECT. 1, 1910. Tobacco and Snuff. Tobacco, however prepared, manufactured and sold, or removed for consumption or sale, per pound $0.08 Snuff, however prepared, manufactured and sold, or re- moved for consumption or sale, per pound .08 Rate of Tax per Thou- sand after Cigars and Cigarettes. July 1, 1910. Cigars of all descriptions made of tobacco, or any substi- tute therefor, and weighing more than 3 pounds per thousand $3.00 Cigars of all descriptions made of tobacco, or any substi- tute therefor, and weighing not more than 3 pounds per thousand .75 WAR REVENUE LAW , : Rate of Page Tax Cigarettes weighing not more than 3 pounds per thou- sand _..,.... ., 1.25 Cigarettes weighing more than 3 pounds per thousand., 3.60 Distilled Spirits, Etc. Distilled spirits, per gallon , $1.10 Stamps for distilled' spirits intended for export, each.. .10 Except when affixed to packages containing two or more 5-gallpn cans for export .05 Case stamps for spirits bottled in bond . .10 Wines, liquors, --or compounds known or denominated as wine, and made in imitation of sparkling wine or champagne, but not made from grapes grown in the United States, and liquors not made from grapes, currants, rhubarb, or berries grown in the United States, but produced by being rectified or rhixed with distilled spirits or by infusion of any matter in spir- its, to be sold as wine, or as a substitute for wine, in bottles containing not more than 1 pint per bottle or package .,.-...>. .10 Same, in bottles containing more than 1 pint, and not more than 1 quart, per bottle -or package .20 (And at the same rate for any larger quantity of such merchandise, however put up or whatever riiay be the package.) MISCELLANEOUS TAXES NOT PAYABLE BY STAMP. Circulation issued by .any .bank, etc., or person (ex- cept at national bank taxed under sec. 5214, Rev. Stat.,:and sec. .13, .act of .Mar. 14, 1900), per month . ...... 1/12 of 1 p. c. Circulation (except ^national banks) exceeding 90 per cent of capital, in addition, per month. ..... .1/6 of p. c. Banks, etc., on. -arn-ount of notes of -; any person, State bank, or State-banking -association, used for circulation and paid out .................. 10 per cent. Banks, etc., bankers,; OF -associations, on amount of notes of any .town, city, or municipal corpora- tion paid out by them 10 per cent. Every person, firm; association^, other than na- tional-banking- associations, and every corpora- tion, State bank, or State-banking association, on ". the amount of their own notes used for circula- tion and paid out by them 10 per cent. Every sucfr person, firm, association, corporation, St^fe bMiKj;- or State-banking association, and also^very national-banking^ association, on 'the amount of notes of any; person,- firm, associa- tion, other than a .national-banking association.,, or of -.any- corp6ra"tio.n.^ita"te,bahk,.or.Stat^-bank:- ' ing association, 'or ."oKaiiy .t6ww.,.,"city; or munici- pal corporation; usedt For. 'circulation .and -paid . .. ."."_- Qut^h^ thejra ........ i ..................... r. ... 10 per cent. Special Taxes. Reti}iens ; 6f : less than 500 barrels a year ... $100.00 Rectifier's of 500 barrels or more a year 200.00 Wholesale liquor 'dealers .:.'........!....... . . .......... 100.00 Retail liquor dealers . . ... . . ... . . ... 25.00 Wholesale dealers in malt liquors 50.00 Retail dealers in malt liquors . . . . . . . . 20.00 Manufacturers b-f-'Sttlts i .-- ; . . v , ; ... .-.:... .', ..., } .^. . .~..~. . . .: 50.00 ; And" for stills or worms manufactured, each 1; TREASURY DECISIONS Brewers: Annual manufacture less than 500 barrels Annual manufacture 500 barrels or more Manufacturers of filled cheese Wholesale dealers in filled cheese Retail dealers in filled cheese Manufacturers of oleomargarine Wholesale dealers in oleomargarine artificially colored in imitation of butter Wholesale dealers in oleomargarine free from artificial coloration Retail dealers in oleomargarine artificially colored in imitation of butter Retail dealers in oleomargarine free from artificial color- ation Manufacturers of adulterated butter Wholesale dealers in adulterated butter - Retail dealers in adulterated butter Manufacturers of process of renovated butter Manufacturers, packers, or repackers of mixed flour Oleomargarine. Oleomargarine, domestic, artificially colored to look like butter, of any shade of yellow, per pound.... Oleomargarine, free from coloration that causes it to look like butter, of any shade of yellow, per pound. . Oleomargarine, imported from foreign countries, per pound Adulterated Butter, and Process or Renovated Butter. Adulterated butter, per pound Process or renovated butter, per pound Filled Cheese. Rate of Tax 50.00 100.00 400.00 250.00 12.00 600.00 480.00 200.00 48.00 6.00 600.00 480.00 48.00 50.00 12.00 $0.10 .00^ .15 $0.10 .00^4 $0.01 .08 Page Filled cheese, per pound Same, imported, per pound Mixed Flour. Mixed flour, per barrel of 196 pounds, or more than 98 pounds $0.04 Half barrel of 98 pounds, or more than 49 pounds.. .. .02 Quarter barrel of 49 pounds, or more than 24^2 pounds .01 Eighth barrel of 24 1 /^> pounds or less .00^ (Mixed flour imported from foreign countries, in addi- tion to import duties, must pay internal-revenue tax as above.) Opium. Opium manufactured for smoking purposes, per pound.. $300.00 Playing Cards. Playing cards, per pack, containing not more than 54 cards . White Phosphorus Matches. White phosphorus matches, per hundred (Rate of tax after Jan. 1, 1915.) $0.02 $0.02 CHAPTER II Income Tax Income Tax Law, annotated 43- 63 Questions and Answers 3- 32 Syllabus of Income Tax Law 35- 42 Treasury Department Forms and Certificates. .. .65- 96 Treasury Department Regulations, 1913 99-159 Treasury Decisions, 1914 Page Aliens, individuals Exemption (T. D. 2012) 108 Non-resident (T. D. 2013) 109 Bonds Foreign corporations (T. D. 1992) .... 99 Property of aliens, exempt (T. D. 2017) 117 Tax-free covenant clause (T. D. 1942-1948) 73-79 Certificates Co-operative Dairies, etc., not exempted (T. D. 1996) .... 102 Exemption, firms and organizations . . (T. D. 1998) .... 103 Monthly list, return of (T. D. 1973) 86 .Ownership (T. D. 1974) 87 'Ownership executed by foreign banks(T. D. 1977) .... 93 Ownership Bonds, foreign (T. D. 1988) 97 Ownership, Revised forms (T. D. 1976) 88-93 Substitute, 1059 (T. D. 1986) 95 Waiver of filling in number of bonds . (T. D. 2022) 118 Corporations Annual net income (T. D. 2001) 104 Foreign, Fiscal agents (T. D. 2006) 107 Insurance Commissions on renewal premiums . . (T. D. 2011) .... 108 Dividends on Net Earnings Excluded as income,^ when (T. D. 1945-1947) 77-78 Deductions Corporations, capital stock (T. D. 1960) 56 Expense (T. D. 1993) ..100 Indebtedness (T. D. I960) 82 Interest actually accrued (T. D. I960) Losses (T. D. 1989-2005) 105 Depreciation Buildings, schedule 72 Exemption Not claimed at source, returned on Form 1040 (T. D. 1942) 73 TREASURY DECISIONS Page Fiduciaries- Return to be made on Form 1041 (T. D. 1943) 73 Forms 1044 Revised (T. D. 1973) 86 Partnerships (T. D. 1957) 81 Certificate No. 1065 110 Penalties Compromise of (T. D. 2015) 114 Returns Confidential (T. D. 1962) 84 Extension of time for filing (T. D. 1953) 81 Inspection of (T. D. 2016) 1 14 Monthly lists (T. D. 1997) 102 Penalties (T. D. 1950) 79 Time for filing (T. D. 1950) .... Stamp, indorsement on foreign coupons. . (T. D. 2023) .... . . . .118 State Political subdivision of Special assessment districts (T. D. 1946) . . 77 Tax- Advance payment of withheld by agents, etc (T. D. 1965) . . 77 Constitutionality (T. D. 1983) 94 Organizations (T. D. 1967) 85 Withholding agents (T. D. 1967) WAR REVENUE LAW (T, D. 2026.) Fermented liquors Additional tax on liquors on storage, and increase in rate of tax under act of October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 24, 19(4, To collectors of internal revenue and others concerned: The act approved October 22, 1914, imposes a tax of $1.50 a barrel on fermented liquors, and provides for the assessment and collection of the additional tax at the rate of 50 cents a barrel on all fermented liquors removed from the brewery premises prior to the date when the act took effect and which on that date were stored in warehouse, and to which a stamp denoting the tax at the rate of $1 per barrel had been affixed at the time of removal. This provision for additional tax on beer stored in warehouse is held to apply to all fermented liquors in the possession of brew- ers or their agents, whether contained in ordinary packages or in bottles, when the act took effect. For the purpose of assessing and collecting such additional tax, every brewer or agent of a brewer having stored in warehouse any fermented liquors which had been removed from the brewery where produced prior to October 23, 1914, bearing the proper stamp at the rate of $1 per barrel shall make and render to the collector of the district a return in duplicate, under oath, on Form 417, Revised October 23, 1914, of the quantity thereof so held. Personal investigation will be made in each case by a deputy collector, who will certify to the accuracy of the return, or if he is not satisfied as to its accuracy, he will so state, and indicate the quantity which he believes to be correct. In case of substantial disagreement be- tween the return and the deputy collector's statement the collec- tor will make further investigation to satisfy himself as to the proper quantity and enter the same accordingly on his list, Form 23. Collectors will at once furnish blank Forms 417 to each brewer, or agent of a brewer, in their respective districts, and require the returns to be made in accordance with the printed instructions thereon. The return must show the quantity of fermented liquors on hand on the morning of October 23, 1914, before the com- mencement of business. If any liquors subject to the additional tax have been removed in the interval between that time and the time when the return is actually made, the quantity returned will be the quantity of such liquors on hand when the return is made, together with the quantity of such liquors removed in the in- terval. One copy of the return with the deputy collector's certificate is to be filed in the collector's office, and the other is to be for- warded to the Commissioner of Internal Revenue, and the addi- tional tax found to be due as shown by the return will be entered by the collector on his next list, Form 23. In making up Form 18 for October, 1914, brewers will show separately, by interlineation, the quantities of fermented liquor TREASURY DECISIONS sold or removed for consumption or sale by pipe line (where pipe lines exist) and by the package for the two portions of the month, viz, the portion before the 23d and the portion commencing with the 23d. In the stamp account on Form 18 brewers will also show separately, by interlineation, the number and kind of stamps purchased by them at the old and new rates, and the number and kind of stamps used at the old and new rates on beer transferred by pipe line (where pipe lines exist) and by the package, and also the number and kind of stamps at the old and new rates remain- ing on hand in their possession at the close of the month. Instead of one return, Form 18, for the month of October, the brewer may at his option render two returns, one for the portion of the month prior to the 23d and the other for the remaining portion, care being taken to show in the stamp account the number and kind of stamps, at the rate of $1.50 per barrel, purchased, used, and on hand. Brewers will also make entries in the account of "Stamps purchased" on Record Form 104 in such a way as to distinguish between those at the rate of $1 and those at the rate of $1.50. The attention of collectors is called to the fact that the increase in the rate of tax is likely to make necessary the giving of new bonds by brewers, in increased amounts, in order to satisfy the requirements of section 3336, Revised Statutes. Each new bond given on and after December 1, 1914, will by the terms of the act, while the same is in force, require a documentary stamp of the value of 50 cents. Collectors will supply brewers and their agents with copies of this Circular. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2027.) Domestic and imported wines, liqueurs, cordials, etc. Dealers to keep an account of sales pending receipt of appropriate tax stamps. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 24, 1914. To collectors of internal revenue and others concerned: In view of the fact that the provisions of the revenue law, ap- proved October 22, 1914, relating to the stamp taxes imposed on domestic and imported wines, cordials, etc., went into effect Octo- ber 23, 1914, and that appropriate stamps for the payment of such taxes have not yet been provided, retail dealers in such un- stamped wines, and wholesale dealers selling such wines to persons other than dealers must, until such stamps may be pro- cured, keep a strict account of all such unstamped wines sold by them on and after October 23, 1914; and, upon procuring the necessary stamps, must at once render to the collector of the district a sworn statement of all such sales made by them and must transmit with such statement canceled stamps showing payment of tax on all such wines so sold. The required state- ment should be in the following form : WAR REVENUE LAW Dealers return of sales of unstamped wines taxable under the revenue act, approved October 22, 1914. Special-Tax Stamp No. The undersigned a district of - DISTRICT OF -(2) liquor dealer, doing business at 1914. in the , on oath states that the following is a full and true account of all unstamped domestic and imported wines taxable under the pro- visions of an act of Congress, approved October 22, 1914, sold by him (or them) on and after October 23, 1914, up to and including the day of , 1914; and that the attached canceled stamps cover all taxes due on the unstamped wines so sold. Kinds of wine. Rate of tax per quart. Number of bottles or containers. Amount of tax. Not more than one- fourth p't. Not more than one- half pint. Not more than one pint. Not more than one quart. Gal- lons. Still wines Cents. 2 20 6 | Champagne and other sparkling or artifi- cially carbonated wines Liqueurs, cordials, or other similar com- pounds ' JjT.. J2iu MM In bottles or containers not otherwise here designated. Subscribed and sworn to before me this day of -, 1914. Dealer. [SEAL.] "Wholesale" or "retail." Upon receipt of this circular, collectors will see that a copy thereof is at once furnished to each wholesale and retail liquor dealer in their respective districts; and that on receipt of the dealers' statements herein required, the same, with the canceled stamps (in sealed envelopes) securely attached, should be at once forwarded to the Commissioner of Internal Revenue. W. H. OSBORN, Commissioner of Internal Revenue. References Cited Treasury Decisions T. D. U. S. Attorney-General's Opinions , A. G. Op. U. S. Supreme Court Reports .' U. S. Federal Reporter Fed. Rep. War Revenue Law An Act To increase the internal revenue, and for other purposes. Approved October 22, 1914 Be it enacted by the Senate and House of Representatives of the te? ce and le other United States of America in Congress assembled, That there shall si i ni 1 l ar u ferm ent- be levied, collected, and paid in lieu of the tax of $1 now imposed by law, a tax of $1.50 on all beer, lager beer, ale, porter, and other similar fermented liquor, brewed or manufactured and sold, or stored in warehouse, or removed for consumption or sale, within the United States, by whatever name such liquors may be called, for every barrel containing not more than thirty-one gallons; and at a like rate for any other quantity or for the fractional parts of a barrel authorized and defined by law. And section thirty-three hundred and thirty-nine of the Revised Statutes is hereby amended accordingly : Provided, That the additional tax imposed in this section on all an J e ^cha a n r g e U of fermented liquors stored in warehouse to which a stamp has been old stampTfo be affixed shall be assessed and collected in the manner now provided a te k new l ?ate de " by law for the collection of taxes not paid by stamp : Provided further, That until appropriate stamps are prepared and furnished, the stamps heretofore used to denote the payment of the internal-revenue tax on fermented liquor may be stamped or imprinted with a suitable device to denote the new rate of tax herein imposed, and shall be affixed to all packages containing such liquors on which the tax imposed by this Act is paid. Any person having possession of unaffixed stamps heretofore issued for the payment of the tax on fermented liquors shall present the same to the collector of the district, who shall receive them at the price paid for such stamps by the purchaser and issue in lieu thereof new or imprinted stamps at the rate provided in this Act. The tax is on fermented liquor in the possession of or stored by a brewer and not on that of a wholesale or retail dealer. 22 A. G., Op. 279; 23 Id. 228. SEC. 2. That upon all still wines, domestic and imported, when sold or offered for sale or consumption, there shall be levied and ported, collected taxes as follows: On each bottle containing one-fourth pint or less, one-fourth cent; on each bottle containing more than one-fourth pint and not more than one-half pint, one-half cent; on each bottle containing more than one-half pint and not more than one pint, 1 cent; and on each bottle containing more than one pint and not more than one quart, 2 cents ; and on still wines in all other containers, not herein specifically provided for, the tax shall be at the rate of 8 cents per gallon. WA-R, REVENUE. LAW Champagne, domestic and imported. Each bottle or container must bear stamp. Retail dealer must affix stamp. No stamp tax on still wine used by recti- fier, chemist or druggist. Stamps to be prepared by Commissioner of Internal R e v e- Bottle or con- tainer not bear- ing stamps shall be forfeited to the United States. That upon all domestic and imported champagne and other spar- kling wines, and upon all artificially carbonated wines when sold or offered for sale or consumption, there shall be levied and col- lected taxes as follows : Upon each bottle containing one-half pint or less, 5 cents; on each bottle containing more than one-half pint and not more than one pint, 10 cents ; on each bottle containing more than one pint and not more than one quart, 20 cents ; and on other all containers at the rate of 20 cents per quart; and on all liqueurs, cordials, or similar compounds, domestic and imported, by whatever name sold or offered for sale, there shall be levied and collected a tax on each bottle containing not more than one-half pint, \y 2 cents; more than one-half pint and not more than one pint, 3 cents ; more than one pint and not more than one quart, 6 cents; and on larger containers a tax at the rate of 24 cents per gallon. All of the taxes imposed in the preceding paragraphs of this section shall be paid by stamps to be affixed to each bottle or con- tainer in which such still wines, champagne wines, carbonated wines, liqueurs, or cordials, or similar compounds, are sold or offered for sale: Provided, That when such still wines, champagne wines, car- bonated wines, liqueurs, cordials, or similar compounds, taxable under the provisions of this section, are sold or delivered by the producer, importer, or dealer in wholesale quantities to other dealers, including rectifiers > manufacturing chemists, and druggists, the dealer receiving and selling, or offering the same for sale or con- sumption to any person other than a dealer, shall affix thereto the stamps hereinbefore prescribed : And provided further, That the stamp tax herein imposed shall not be collected on any still wine used by any rectifier, manufactur- ing chemist, or druggist in the manufacture of any liqueur, cordial, or compound subject to any internal-revenue tax imposed by this Act. The Commissioner of Internal Revenue shall cause to be pre- pared suitable and special stamps denoting the tax herein imposed, to be affixed and canceled in such manner as he, with the approval of the Secretary of the Treasury, may prescribe; and in the ab- sence of such stamps from any bottle or container containing wine, liqueur, cordial, or compound taxable under the provisions of this section, sold or offered for sale or consumption, shall be prima facie evidence that the tax thereon has not been paid, and all such wines, liqueurs, cordials, or compounds shall be forfeited to the United States. The existence of a bona fide mortgage on property will not prevent it being forfeited under this section. United States v. 246^ Ibs. of Tobacco 103 Fed Rep., 791. United States v. 231 patent machines, 99 Fed. Rep., 559. The word "compounded" means mixed and does not apply to the chemical union of elements. United States v. Stubbs, 91 Fed Rep 608 L. Ellwood Lee Co. v. McCain, 106 Fed. Rep., 164. There shall be levied and assessed against the maker or producer of all wines fortified under the provisions and conforming to the WAR REVENUE LAW requirements of the sections of the tariff Act of October first eight- een hundred and ninety, relating to the fortification of pure sweet wines, as amended, and as further amended by this Act, a tax of 55 cents on each taxable gallon of grape brandy or wine spirits used by him in the fortification of such wines : Provided, however, That the maker or producer of such fortified wines shall, under regulations and suitable bonds, to be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, have assessed against him monthly the said tax of 55 cents on each taxable gallon of grape brandy or wine spirits used by him during the preceding month, which assessment shall be paid within ninety days from the date of notice thereof : Provided further, That nothing herein contained shall be con- strued as exempting any still wines, cordials, liqueurs, or similar compounds from the payment of any stamp tax provided for in this section. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is hereby authorized to make all necessary regulations to make effective the provisions of this section. That sections forty-two, forty-three, forty-five, forty-six and forty-nine of the Act of October first, eighteen hundred and ninety, as amended by section sixty-eight of an Act approved August twenty-eighth, eighteen hundred and ninety-four, and by an Act ap- proved June seventh, nineteen hundred and six, are further amended to read as follows : "SEC. 42. That any producer of pure sweet wines may use in the preparation of such sweet wines, under such regulations, and after the filing of such notices and bonds, together with the keeping of such records and the rendition of such reports as to materials and products as the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury, may prescribe, wine spirits produced by any duly authorized distiller, and the Commissioner of Internal Revenue in determining the liability of any distiller of wine spirits to assessment under section thirty-three hundred and nine of the Revised Statutes, is authorized to allow such distiller credit in his computations for the wine spirits withdrawn to be used in fortifying sweet wines under this Act: "Provided, That such wine containing after fortification more than twenty-four per centum of alcohol, as defined by section thirty- two hundred and forty-nine of the Revised Statutes, shall be for- feited to the United States. "SEC. 43. That the wine spirits mentioned in section forty-two of this Act is the product resulting from the distillation of fer- mented grape juice, to which water may have been added prior to, during, or after fermentation, for the sole purpose of facilitating the fermentation and economical distillation thereof, and shall be held to include the product from grapes or their residues com- monly known as grape brandy, and shall include commercial grape brandy which may have been colored with burnt sugar or caramel; and the pure sweet wine which may be fortified with wine spirits under the provisions of this Act is fermented or partially fermented Grape, brandy or wine spirits used in fortifi- cation of sweet wines taxed 55 cents per gallon. Fortified still wines not ex- empt from tax provided in Sec- tion 1 of this Act. Commissioner of Internal Rev- enue to make regulation. Wine spirits defined. WAR REVENUE LAW Addition of sugar. Addition of water. grape juice only, with the usual cellar treatment, and shall contaia no other substance whatever introduced before, at the time of, or after fermentation, except as herein expressly provided: "Provided, That the addition of pure boiled or condensed grape must or pure crystallized cane or beet sugar, or pure dextrose sugar or water, or any or all of them, to the pure grape juice before fer- mentation, or to the fermented product of such grape juice, or to both, prior to the fortification provided in this Act, either for the purpose of perfecting sweet wines according to commercial stand- ards or for mechanical purposes, shall not be excluded by the defini- tion of pure sweet wine aforesaid : "Provided, however, That the cane or beet sugar, or pure dext- rose sugar so used shall not be in excess of eleven per centum of the weight of the wine to be fortified under this Act: "And provided further, That the addition of water herein au- thorized shall be under such regulations and limitations as the Commissioner of Internal Revenue, with the approval of the Secre- tary of the Treasury, may from time to time prescribe: "Provided, however, That records kept in accordance with such regulations as to the percentage of saccharine, acid, alcoholic, and added water content of the wine offered for fortification shall be open to inspection by any official of the Department of Agriculture thereto duly authorized by the Secretary of Agriculture; but in no case shall such wines to which water has been added be eligible for fortification under the provisions of this Act, where the same, after fermentation and before fortification, have an alcoholic strength of less than five per centum of their volume, withdrawal of "SEC. 45. That under such regulations and official supervision, wine spirits from , . . - , ~ . . . .. rii i bonded ware- and upon the execution of such entries and the giving of such bonds, iey? e r distl1 bills of lading, and other security as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury shall prescribe, any producer of pure sweet wines as defined by this Act may withdraw wine spirits from any special bonded warehouse in original packages or from any registered distillery in any quan- tity not less than eighty wine gallons, and may use so much of the same as may be required by him under such regulations, and after the filing of such notices and bonds and the keeping of such records and the rendition of such reports as to materials and products and the disposition of the same as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, in fortifying the pure sweet wines made by him, and for no other purpose, in accordance with the foregoing limitations and provisions ; and the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is authorized whenever he shall deem it to be necessary for the prevention of violations of this law to pre- scribe that wine spirits withdrawn under this section shall not be used to fortify wines except at a certain distance prescribed by him from any distillery, rectifying house, winery, or other establishment used for producing or storing distilled spirits, or for making or stor- ing wines other than wines which are so fortified, and that in the building in which such fortification of wines is practiced no wines or 4 WAR REVENUE LAW spirits other than those permitted by this regulation shall be stored in any room or part of the building in which fortification of wines is practiced. The use of wine spirits for the fortification of sweet wines under this Act shall be under the immediate supervision of an officer of internal revenue, who shall make returns describing the *{2J nt su ' kinds and quantities of wine so fortified, and shall affix such stamps and seals to the packages containing such wines as may be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury; and the Commissioner of Internal Revenue shall provide by regulations the time within which wines so fortified with the wine spirits so withdrawn may be subject to in- spection, and for final accounting for the use of such wine spirits and for rewarehousing, or for payment of the tax on any portion of such wine spirits which remain not used in fortifying pure sweet wines. "SEC. 46. That wine spirits may be withdrawn from special wi Sdrawn SP f r i t ? bonded warehouses at the instance of any person desiring to use the exportation ^ex- same to fortify any wines, in accordance with commercial demands e of foreign markets, when such wines are intended for exportation, without the payment of tax on the amount of wine spirits used in such fortification, under such regulations, and after making such entries, and executing and filing with the collector of the district from which the removal is to be made such bonds and bills of lading, and giving such other additional security to prevent the use of such wine spirits free of tax otherwise than in the fortification of wine intended for exportation and for the due exportation of the wine so fortified, as may be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury; and all of the provisions of law governing the exporta- tion of distilled spirits free of tax, so far as applicable, shall apply to the withdrawal and use of wine spirits and the exportation of the same in accordance with this section ; and the Commissioner of Internal Revenue is authorized, subject to the approval of the Sec- retary of the Treasury, to prescribe that wine spirits intended for the fortification of wines under this section shall not be intro- duced into such wines except under the immediate supervision of an officer of internal revenue, who shall make returns describing the kinds and quantities of wine so fortified, and shall affix such stamps and seals to the packages containing such wines as may be prescribed by the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury. Whenever transportation Transportation, of such wine is to be effected by land carriage the Commissioner of Internal Revenue, with the approval of the Secretary of the Treas- ury, shall prescribe such regulations as to sealing packages and vehicles containing the same, and as to the supervision of trans- portation from the point of departure, which point shall be deter- mined as the place where such wine spirits may be introduced into such wines to the point of destination as may be necessary to insure the due exportation of such fortified wines: "Provided, That where, in accordance with regulations of the Commissioner of Internal Revenue, with the approval of the Sec- WAR REVENUE LAW Refund. Recovery of wine spirits. Condition. Allowance or refund. Gaugers and storekeepers. Allowance. Bonds. retary of the Treasury, wines fortified under the provisions of this Act with brandy taxable at 55 cents per proof gallon are exported directly from the winery where fortified, there shall be allowed an abatement or refund of tax equivalent to 55 cents per gallon on each proof gallon of wine spirits contained in such wine at the time of exportation, which amount of wine spirits shall be ascertained by the Commissioner of Internal Revenue under regulations ap- proved by the Secretary of the Treasury : "Provided, That such wine spirits on which abatement or refund of tax is allowed shall not exceed the total amount of alcohol in such wine over and above fourteen per centum thereof. "SEC. 49. That wine spirits used in fortifying wines may be re- covered from such wines only on the premises of a duly authorized grape brandy distiller, and for the purpose of such recovery wine so fortified may be received as material on the premises of such a dis- tiller, on a special permit of the collector of internal revenue in whose district the distillery is located ; and the distiller will be held to pay the tax on the product from such wines as will include both the alcoholic strength therein produced by the fermentation of the grape juice and that obtained from the added distilled wine spirits: "Provided, That when application for such special permit for re- distillation shall be made by the producer of any wines fortified with brandy subject to the tax of 55 cents per proof gallon, before such wine shall have been removed from the premises of the winery where fortified and the redistillation is had under regulations made by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, an abatement or refund of the tax assessed against said producer shall be allowed equivalent to 55 cents per proof gallon of brandy contained in said spirits at the time of redistillation, which amount of brandy shall be ascertained by the Commissioner of Internal Revenue, under regulations approved by the Secretary of the Treasury, and wine spirits so recovered may be used in the manner provided by law for the fortification of other wine: "Provided, That such wine spirits on which abatement or refund of tax is allowed shall not exceed the total amount of alcohol in such wine over and above fourteen per centum thereof." That section three and section six of the Act of June seventh, nineteen hundred and six, amending the laws relating to the fortifica- tion of pure sweet wines, are hereby amended to read as follows : "SEC. 3. That the Commissioner of Internal Revenue is hereby authorized to assign at each winery where wines are to be fortified such number of gaugers or storekeeper gaugers, in the capacity of gaugers, for special duties as may be necessary for the proper super- Vision of the making and fortifying of such wines, and the com- pensation of such officers shall not exceed $5 per diem while so as- signed, together with their actual and necessary traveling expenses, and ajso a reasonable allowance for their board bills, to be fixed by the Commissioner of Internal Revenue, but not to exceed $2 per diem for said board bills. That bonds hereafter given under the provisions of the aforesaid Act of October first, eighteen hun- 6 WAR REVENUE LAW dred and ninety, as amended, shall be conditioned for the payment of the tax on all brandy removed thereunder and not used and ac- counted for within the time and in the manner required by law and regulations, and for the payment of all taxes imposed on the brandy so withdrawn and used for fortifications ; and the said bonds shall contain such other conditions as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may by regulation prescribe. "SEC. 6. That any person who by any process recovers from wines fortified under the provisions of the aforesaid Act approved October first, eighteen hundred and ninety, as amendments thereto, any brandy or wine spirits used in the manufacture or fortification of said wine, otherwise than is provided for in said Act and its amendments, or who shall rectify, mix, or compound with distilled spirits or other materials, except as provided in this Act, such grape brandy, fortified wines or wine spirits unlawfully recovered there- from, shall, on conviction, be punished for each such offense by a fine of not less than $200 nor more than $1,000. But the provisions of this section and the provisions of section thirty-two hundred and forty-four of the Revised Statutes of the United States, as amended, relating to rectification, or other internal revenue laws of the United States, shall not be held to apply to or prohibit the mixing or blend- ing of pure sweet wines fortified under the provisions of this Act with each other or with other wines : "Provided, That the pure sweet wines fortified under the provi- sions of this Act may be used in the manufacture of cordials, liqueurs, and similar compounds on which an internal revenue tax of 24 cents a gallon is imposed, and otherwise the provision of section thirty-two hundred and forty-four of the Revised Statutes of the United States shall remain in full force and effect." Unauthorized Penalty. SPECIAL TAXES SEC. 3. That on and after November first, nineteen hundred and fourteen, special taxes shall be, and hereby are, imposed annually as follows, that is to say: First. Bankers shall pay $1 for each $1,000 of capital used or computation 8 employed, and in estimating capital surplus and undivided profits tax defined, shall be included. The amount of such annual tax shall in all cases be computed on the basis of the capital, surplus, and undivided profits for the preceding fiscal year. Every person, firm or com- pany, and every incorporated or other bank, having a place of busi- ness where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order, or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes are received for discount or sale, shall be a banker under this Act : WAR REVENUE LAW (T. D. 2064.) Emergency revenue law Tax on undivided profits. Method of arriving at undivided profits to be entered into the basis upon which tax on bankers, under the act of October 22, 1914, is to be com- TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 23, 1914. . To collectors of internal revenue, revenue agents, and others: Subdivision 1, section 3, act of October 22, 1914, imposes an annual tax upon bankers of $1 upon each $1,000 of capital, surplus, and undivide< profits used or employed during the preceding fiscal year. Many inquiries have been received from bankers as to the proper meth of arriving at the amount of undivided profits to be used in the basis upon which the tax is computed when such undivided profits have varied or In T. D. 19797, dated July 29, 1898, it was held that the undivided profits should be figured for each business day, and the average thereof taken as the amount of undivided profits to be used in computing the tax due. In many instances it is clear that such a method would be more or less impracticable and involve too lengthy a calculation in arriving at the basis desired. There- fore, while, perhaps, the daily average of undivided profits, as set forth above, is the one absolutely accurate method by which to arrive at the amount to be entered into the total of capital, surplus, and undivided profits, this office will accept a return, under oath, from any banker where the undivided profits are computed in any manner whereby a fair and just amount is arrived at representing the average amount of the undivided profits employed by the bank during the fiscal year preceding the year for which the tex is due. It should be understood, in the event the amount of undivided profits arrived at by the banker is questioned, that the average undivided profits should be computed for each business day, as set forth in T. D. 19797. W. H. OSBORN, Commissioner of Internal Revenue. b a rom Provided, That any postal savings bank, or savings bank having no capital stock, and whose business is confined to receiving de- posits and loaning or investing the same for the benefit of its de- positors, and which does no other business of banking, shall not be subject to this tax. (1) The decision of the Supreme Court in the case of Selden v. Equita- ble Trust Co. (94 U. S., 419) construes section 3407, Revised Statutes, the language of which in defining bankers is identical with section 2. The test question as to the liability of a company or firm as bankers, as laid down in that case is whether or not, having a place of business, a firm or person is embraced in any one of the three following classes : First. Do they have a place of business "where credits are opened (to the general public) by the deposit or collection of money or currency, sub- ject to be paid or remitted upon draft, check, or order"? Second. Do they have a place of business where money is advanced or loaned on collaterals (stocks, bonds, etc.) ? Third. Do they have a place of business where stocks, bonds, bullion, bills of exchange, or promissory notes are received from another person, for sale, or bills of exchange of promissory notes are received for dis- count, belonging to that other person? (Vol. 2, Treas. Dec. (1898), No. 20349.) (2) Bankers, as well as all other special-tax payers, must be included in Record No. 10, kept by collectors for public inspection under section 3240, 8 WAR REVENUE LAW Revised Statutes; but nothing is required to be stated in the record but the name of the special-tax payer, his business, the place of business, and the time of payment of the special tax. (Vol. 2, Treas. Dec. (1898), No. 19969.) (3) Loaning money on the personal notes of the borrowers, without collateral security, is not the business of banking contemplated by the statute. (Vol. 2, Treas. Dec. (1898), No. 20264.) (4) When the charter of a savings bank (or other corporate bank, is sur- rendered, and the same persons who are officers and stockholders thereof carry on a private banking business, a new special tax is required. (Vol. 2, Treas. Dec. (1898), No. 20336.) (5) Certain merchants receiving deposits from grain buyers and not from the general public do not thereby become bankers within the meaning of the statute. (Vol. 2, Treas. Dec. (1898), No. 20341.) (6) City merchants who receive on deposit money from country mer- chants who are their customers, for the convenience of the latter, but not opening such accounts with the public generally, are not regarded as sub- ject to special tax as bankers. (Vol. 2, Treas. Dec. (1898), No. 20342.) (7) The receiving of employees' deposits on interest does not involve a company or firm in special-tax liability as bankers. (Vol. 2, Treas. Dec. (1898), No. 20343.) (8) Merchants do not bring themselves within the definition of bankers by reason of selling their own drafts to their customers; they are not, on this account, required to pay special tax as bankers. (Vol. 2, Treas. Dec. (1898), No. 20365.) (9) In the case of a bank with branches, a special tax is required of each branch, the special tax being due as to each place where the business of banking is carried on. (Sec. 3235, Rev. Stat., 1st clause; Vol. 2, Treas. Dec. (1898), No. 20397.) (10) If tw r o or more bankers, each of whom has paid a special tax, consolidate their business, the consolidated banking firm must pay a new special tax from the date of the consolidation. But in neither case are the capital and surplus of the old (defunct) firm to be considered in reckoning the special tax of the new firm. (Vol. 2, Treas. Dec. (1898), No. 20419.) (11) Bank's special tax Change of name. Where a banking firm (not a corporation, changes its name, without any change in its membership, spe- cial tax is not required to be paid again on account of such change. (Vol. 2, Treas. Dec. (1899), No. 20786.) (12) Private banks having no capital stock are subject to tax as bankers. (13) In estimating the amount of special tax based upon capital and surplus, the amount invested in United States bonds is not to be deducted. (14) The amount invested in a bank building is not to be deducted. (15) A bank in liquidation, doing no business except collecting and dividing assets in closing, is not required to pay special tax. (16) A bank engaged in business in the month of July must pay special tax for the entire year, beginning July 1. (17) A trust company is liable as a banker if it comes within any one of the three clauses of definition in subdivision 1, section 3, act of October 22, 1914. (18) Borrowed capital must be taken into account when estimating amount of special tax. (19) It is not the subscribed capital, but the capital actually employed during the preceding fiscal year, that is to be taken as the basis for estimat- ing the special tax. (Vol. 2, Treas. Dec., No. 19843.) (20) The advancing or loaning of money by brokers on the collateral security of stocks, if these loans or advances are confined by them strictly WAR REVENUE LAW to customers who have given them, as brokers, orders for the purchase of stocks and the collateral is held solely to secure themselves m filling such orders is not regarded as involving them in special-tax liability as bankers within' the meaning of the statute. (Vol. 1, Treas. Dec. (1889), No. 21152.) . Surplus on which bankers are taxed includes all surplus set apart for carrving on the general business of the bank. It also includes undivided profits. 22 A. G., Op, 320; 23 Id. 341. (T. D. 2045.) Emergency revenue law Preparation of bankers' lists. Instructions as to the preparation of special bankers' lists. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 6, 1914. To collectors of internal revenue: In view of the provisions of section 3 of the act approved October 22, 1914, imposing a special tax on bankers (for which special-tax stamps are not provided), each collector will, on or be- fore the 10th of December, 1914, and on or before August 10, 1915, prepare and forward to this office a special bankers' list for the preceding month. This list will be prepared on blanks prescribed for the regular assessment list, Form 23, and will be arranged alphabetically, (first) by names of cities or other places, and (second) by names of bank- ers in each city or other place in which two or more banks are located. If the district comprises two or more States or Territories, the names of the bankers should be arranged as above under the names of the States and Territories, also alphabetically arranged. The heading of column 3 should be changed to read, "Amount of capital," and in this column will be entered the amount of capital, including the surplus and undivided profits, employed in business during the last fiscal year. In column 4 will be entered the period, as "8 months ending June 30, 1915," "6 months ending December 31, 1915." In column 5 of the November list will be entered the amount of tax computed on the basis of eight twelfths of the tax at $1 for each $1,000 of capital reported in column 3 in each case, as provided above. In column 6 will be entered the basis of the assessment as now required by the regulations of this office, and in column 7 will be entered the date of the receipt of Form 457. Bankers whose returns are received after the special bankers' list has been forwarded and those commencing business subsequent to the month of November will be reported on the regular assess- ment lists, Form 23. Collectors will receipt for the amounts assessed on the special bankers' list on a special receipt, Form 23^. W. H. OSBORN, Commissioner of Internal Revenue. WAR REVENUE LAW Second. Brokers shall pay $30. Every person, firm, or company, fin J d roker8 ~" de " whose business it is to negotiate purchases or sales of stocks, bonds, exchange, bullion, coined money, bank notes, promissory notes, or other securities, for themselves or others, shall be regarded as a broker : Provided, That any person having paid the special tax as a Bankers not banker shall not be required to pay the special tax as a broker. brokers? b ' (21) The loaning of money for oneself or for others on commission does not subject the lender to special tax as a broker; but if a person makes it a business to negotiate purchases or sales of stocks, bond, exchange, bullion, coined money, bank notes, promissory notes, or other securities, for himself or 'others, he is required to pay the tax. "It is only when making sales and purchases is his business, his trade, his profession, his means of getting his living, or making his fortune that he becomes a broker within the meaning of the statute." (Warren et al. v. Shook, 91 U. S., 704.) (22) Persons or firms acting as agents for parties loaning money upon promissory notes secured by mortgages are not brokers. (23) A lawyer can make investments for clients without being liable, unless he does it to such an extent that it can be called a "business." (24) Loan and mortgage companies not liable for loaning money on notes or bonds secured by mortgage or trust deed on real estate. If they purchase notes, bonds, or other securities they become liable as brokers. (25) A person engaged in the business of placing loans secured by notes and mortgages upon real estate, acting simply as agent, receiving a commission for his services 'in obtaining the application for the loan and at- tending to the execution of the papers, is not a broker. (26) A person engaged in the business of selling real estate, acting as the agent of the owner in finding purchasers and receiving a commission for his services, is not a broker. (27) When persons negotiate purchases or sales of promissory notes, if these are only occasional acts and do not constitute their regular business, they are not brokers within the meaning of the act. (28) Bucket-shop proprietors giving memorandum of transactions are required to pay special tax as brokers. (29) The principal's special-tax stamp for his place of business in an- other city covers the transactions only at that place of business and can not cover the business done elsewhere at a branch office. (30) Broker's tax is not required to be paid at branch offices where a clerk is employed whose sole duty is to receive orders and transmit them by wire to the head of the office. The mere receipt and transmission by clerks of orders is not regarded as carrying on the business of a broker. (Vol. 2, Treas. Dec., No. 19843.) (31) Special tax must be paid for every branch office where the em- ployee in charge not only receives and transmits orders with the money to the main office, but also receives from the main office moneys for disburse- ment to customers, or keeps accounts with the customers at the branch office, or does other business with relation to the transaction of brokers at such branch office. Separate special tax must be paid and a separate stamp taken out for every "bucket shop," whether such office is called a branch office or a main office. (Vol. 2, Treas. Dec. (1898), No. 20374.) (32) It is the language of the statute, and not the ordinary and usual meaning of the word "broker," which must govern in determining who is a broker required to pay a special tax. (Vol. 1, Treas. Dec. (1899), No. 20549.) WAR REVENUE LAW (33) While a mining syndicate or other association issuing certificates " ! of stock in a company organized by it is not required to pay a special tax as a broker therefor, a manager or other person employed by it to sell such certificates on commission is a broker and required to pay special tax. (Vol. 1, Treas. Dec. (1899), No. 20037.) (34) An express or railway agent doing business for his principals only, not a broker. (Vol. 1, Treas. Dec. (1898), No.^10106.) (35) Bills of exchange, bonds for the payment of'money, and promissory notes are in the popular acceptation of the term "securities" for money. (Jennings v. Davis, 31 Conn., 139.) (36) Securities: "Evidences of indebtedness." "Written assurance for the return or payment of money." (Anderson's Dictionary of Law.) (37) Proprietors of bucket shops who issue memoranda of their trans- actions in stocks and in cotton, grain, etc., even though they sell only "futures," are required to pay special tax both as brokers and as commer- cial brokers. (Vol. 2, Treas. Dec. (1899), No. 21007.) (38) Loan and mortgage companies are not liable for special tax as brokers unless they engage in the sale of the securities on which they make loans. When they engage in such sales they become brokers and are re- quired to pay special tax accordingly. (Vol. 2, Treas. Dec. (1899), No. 21620.) (39) An express company engaged in the business of buying or selling foreign money or bills of exchange is required to pay special tax as a broker. (Vol. 2, Treas. Dec. (1899), No. 21709.) (40) No person or firm liable to special tax for simply buying or selling real estate on commission. (T. D. 19755.) (41) Business of selling land on commission, taking applications for farm loans, and writing insurance, is not the business of a broker, and special tax is not required. (T. D. 19872.) (42) Purchase of State, county, school, or district orders, or warrants, by any person does not subject him to special tax as a broker, if not done to an extent constituting it his business. (T. D. 19885.) (43) Broker's special tax not required for negotiating loans of money. (T. D. 19894.) (44) Occasional transactions in sale of sight draft do not necessitate the payment of special tax as broker. (T. D. 19937.) (45) Only those whose business it is to negotiate purchases or sales of the securities contemplated by paragraph two of section 2, act of June 30, 1898 (subdivision 2, of section 3, act of October 22, 1914), are brokers and liable to tax. (T. D. 19940.) (46) Special tax not required to be paid by a person because of the fact of his holding a seat on the stock exchange, if he transacts no business, directly or indirectly. (T. D. 19943.) (47) Special tax as broker not required for the mere cashing of checks for customers by merchants. (T. D. 20026.) (48) Persons whose practice it is to buy fee bills of witnesses are not brokers. Such paper is not properly described by any of the terms used in the law, to wit, "stocks, bonds, exchange, bullion, coined money, bank notes, promissory notes, or other securities." (T. D. 21647.) An express company which issues money orders and travelers' checks is not taxable as a broker. 23 A. G., Op. 139. -d e Tn n e d" ker8 Third. Pawnbrokers shall pay $50. Every person, firm or com- pany whose business or occupation it is to take or receive, by way of pledge, pawn, or exchange, any goods, wares, or merchandise, or WAR REVENUE LAW any kind of personal property whatever, as security for the repay- ment of money loaned thereon, shall be deemed a pawnbroker. The actual value of securities pledged is immaterial in computing the tax. 22 A. G., Op. 219. (49) A person is not required to pay a special tax as a pawnbroker for rare or occasional acts, which can not be regarded as his business or occupa- tion. (Circular No. 508, Aug. 8, 1898; Vol. 2, Treas. Dec. (1898), No. 19843.) (50) Special tax of pawnbroker not required to be paid for making loans when the chattels are not taken or received by way of pledge, pawn, or exchange. (T. D. 20552.) (51) A person using no tickets in his business, but making a pretense of buying articles which are brought to him, which he holds with a verbal agreement that the articles can be bought back again by the person selling them, upon the payment of a specified bonus, is liable to special tax as pawnbroker. (T. D. 20439.) Fourth. Commercial brokers shall pay $20. Every person, firm, or company whose business it is as a broker to negotiate sales or fined, purchases of goods, wares, produce, or merchandise, or to negotiate freights and other business for the owners of vessels, or for the shippers or consignors or consignees of freight carried by vessels, shall be regarded as a commercial broker under this Act. (52) Commercial brokers are those persons only who, without having in their possession goods, wares, or merchandise, negotiate sales or purchases thereof on commission. (Vol. 2, Treas. Dec. (1898), No. 20416.) (53)' Commission merchants who receive goods in possession to sell for others are not commercial brokers. The difference between a factor or com- mission merchant and a broker is that a factor may buy and sell in his own name and has the goods in his possession, while a broker, as such, can not ordinarily buy or sell in his own name and has no possession of the goods sold. (Slack v. Tucker, 23 Wall., 321.) (54) Cattle brokers, who receive and sell cattle on commission, are not required to pay special tax as commercial brokers. (55) A person who is employed by certain firms to solicit and receive orders on commission for their goods and is bound by his agreement with them to give his entire services to them, to the exclusion of other firms or persons, not a commercial broker. (56) Warehousemen who receive tobacco, cotton, or any other produce or goods on consignment for sale on commission are not liable as commer- cial brokers, but are liable as commission merchants under act of October 22, 1914. (57) Auctioneers who receive and sell goods at their auction rooms or on the premises of the owners on commission are not subject to special tax as commercial brokers. (58) Drug brokers are subject to the special tax. (59) If cotton buyers have possession of cotton which they sell, they are not liable as commercial brokers; if they have not, and sell on commis- sion, they are liable. (Circular No. 508, Vol. 2, Treas. Dec. (1898), No. 19843.) * (60) Persons representing cigar manufacturers who are furnished with samples and send orders to factories, receiving a commission for furnish- ing orders, are liable as commercial brokers. (T. D. 19575.) (61) Warehouse receipts for grain transferred through elevators liable Brokers must pay special tax at branch offices. (T. D. 19615.) 13 WAR REVENUE LAW (62) Definition of commercial broker. Settled ruling modifying prior rulings. (Vol. 2, Treas. Dec. (1898), No. 20417.) Decision of Comptroller Tracewell. (VI Comp. Dec., 545.) (63) Persons whose business it is to obtain orders from those who desire to buy goods, and who purchase, receive, and forward the goods to their customers, are not on this account commercial brokers, nor are they required to pay special tax under the act of June 13, 1898, for such business, though they make a profit therein through discounts allowed them by merchants and commissions paid them by their customers "Installment purchasers," who have running accounts at stores and give orders to their customers, on which orders these customers themselves buy and receive goods, are required to pay special tax as commercial brokers. (T. D. 19884.) (64) A firm negotiating sales of goods not shipped to them nor held in their possession before being sold, but shipped from other points direct to purchasers from the mills, they being liable for all sales and doing their own "billing," making settlements with the mills at the end of each month, retain- ing a stipulated commission, held to be liable to tax as commercial brokers. (T. D. 19938.) (65) Persons representing several houses in the negotiation of sales of goods on commission (the goods not being in their possession), if they are not bound by agreement to act solely for these houses, but are at liberty to engage in the same transactions for other houses, are commercial brokers, and must pay special tax as such. (T. D. 19966.) (66) Special tax is not required to be paid for representing one, two, or three firms to solicit and receive orders, if person is bound by agreement to give his entire service to them. (T. D. 20117.) (67) Leaf tobacco dealers, who are also engaged in the business of negotiating the purchase of tobacco as agents for others, on commission, are commercial brokers under the fourth paragraph of section 2 of the war- revenue act. (T. D. 20592.) Customhouse Fifth. Custom-house brokers shall pay $10. Every person, firm, brokers de- ... \ J e , t_ fined. or company whose occupation it is, as the agent of others, to arrange entries and other custom-house papers, or transact business at any port of entry relating to the importation or exportation of goods, wares, or merchandise, shall be regarded as a custom-house broker. (68) If the complete business of customhouse brokers is transacted by parties at offices at different ports of one district, a separate and distinct special tax must be paid for each of their offices, under the provisions of sec- tion 3235, Revised Statutes, page 114. (Circular No. 508, Aug. 8, 1898; vol. 2, T. D., No. 19843.) (69) Transactions for which customhouse brokers' special tax is not required to be paid. Vol. 2, T. D. (1898), No. 20106.) (70) A special-tax stamp taken out by a person in his own name as a customhouse broker is sufficient to cover the business done by him in his own name, at the place of business stated therein, whether such business is done by him on his own account or as an agent for other persons. (T. D. 20206.) (71) Bills of sale of vessel property are "customhouse papers" in contem- plation of the statute, and a person "whose occupation it is, as the agent of others," to prepare such bills of sale is required to pay special tax as a customhouse broker. (T. D. 20321.) (72) Persons whose occupation it is, as agents for others, to enter and clear vessels at the customhouse, can not be relieved from payment of special ( 14 WAR REVENUE LAW tax as customhouse brokers on the ground that they have paid special tax as commercial brokers, which entitles them "to negotiate freights or other business for the owners of vessels." (T. D. 20725.) Sixth. Proprietors of theaters, museums, and concert halls, where Theatres, ma- ,.,... j 1 , f scums and con- a charge for admission is made, having a seating capacity of not cert hails de- more than two hundred and fifty, shall pay $25 ; having a seating fined * capacity of more than two hundred and fifty and not exceeding five hundred shall pay $50; having a seating capacity of exceeding five hundred and not exceeding eight hundred, shall pay $75 ; having a seating capacity of more than eight hundred, shall pay $100. Every edifice used for the purpose of dramatic or operatic or other repre- sentations, plays, or performances, for admission to which entrance money is received, not including halls or armories rented or used occasionally for concerts or theatrical representations, shall be re- garded as a theater: Provided, That whenever such edifice is under lease at the pas- sage of this Act, the tax shall be paid by the lessee, unless other- wise stipulated between the parties to said lease. (73) Persons are not required to pay special taxes for the mere occa- sional renting of their hall for public performances to dramatic companies or other persons charging entrance money therefor, but the special tax of $10 is required to be paid by such persons or companies if they give dramatic performances or the other exhibitions specifically mentioned in paragraph 8, section 2. (Subdivision 6, Sec. 3, Act Oct. 22, 1914.) (74) Where theaters are entirely closed to performance during the months of July and August, and only open in the month of September, the special tax is to be reckoned from the 1st day of September to the 1st day of July following, at the rate of $100 for the year beginning July 1. (Nov. 1. 1914, to June 30, 1915, current year.) (Circular No. 508, Aug. 8, 1898; Vol. 2, Treas. Dec., No. 19843.) (75) Moving-picture shows taxable as theaters under Section 6. (T. D. 2040.) (76) A special-tax stamp taken out by the lessees of a theater can not, upon their transferring their lease to other persons, be transferred and made to answer for the latter persons in conducting the theater. (T. D. 20396.) (T. D. 2040.) Emergency revenue law Motion-picture theaters. Motion-picture theaters classed as taxable under the sixth paragraph of sec- tion 3, act of October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 3, 1914. SIR : Replying to your communication of the 26th ultimo, you are informed that after careful consideration this office has reached the conclusion that motion-picture theaters come under the sixth paragraph of section 3 of the act of October 22, 1914, and therefore are taxable as theaters. Respectfully, G. E. FLETCHER, Acting Commissioner of Internal Revenue. COLLECTOR, ELEVENTH DISTRICT, Columbus, Ohio. 15 WAR REVENUE LAW Circuses de- fined. Payment of special tax in one state not an exemption in an- other. Exhibitions not enumerated herein. Seventh. The proprietor or proprietors of circuses shall pay $100. Every building, space, tent, or area where feats of horsemanship or acrobatic sports or theatrical performances not otherwise provided for in this Act are exhibited, shall be regarded as a circus: Provided, That no special tax paid in one State, Territory or the District of Columbia shall exempt exhibitions from the tax in another State, Territory, or the District of Columbia, and but one special tax shall be imposed for exhibitions within any one State, Territory, or District. (77) Exhibitions of feats of horsemanship (such'as are seen in circuses), which occur on race tracks, are subject to a special tax of $100; but mere tests of speed of horses in racing are not regarded as "feats of horseman- ship" within the meaning of paragraph 7 of section 2, act of June 13, 1898. (Subdivision 7, sec. 3, act of Oct. 22, 1914.) (78) Variety shows, whether given at summer resorts or elsewhere, which include "acrobatic sports," come within the definition of a circus in the statute which requires special tax therefor. (79) When a circus is exhibiting in any State in the month of July, the special tax of $100 is required to be paid for the year beginning July 1. If in the following month the circus goes into another State, the special tax at the rate of $100 for the year is to be reckoned from the 1st day of August to the 1st day of July following, and a separate special-tax stamp must be taken out accordingly for that State, and so on. (80) The "theatrical performances" contemplated by paragraph 7, sec- tion 2, of the act of June 13, 1898 (subdivision 7, sec. 3, act of Oct. 22, 1914), are only those which are given in connection with a circus. (81) A show under canvas exhibiting, among other things, acrobatic and athletic exercises, but no feats of horsemanship, and having no menagerie, is not subject to special tax as a circus ($100) under paragraph 7 of section 2, act of June 13, 1898, if the acrobatic exercises are so few and simple as to make it unreasonable to hold that they constitute the show a circus. (T. D. 19944.) (82) A small wagon show having no "circus feats," but only "such acts as trapeze, wire walking, trained ponies, singing, and dancing," is not to be regarded as a circus within the meaning and intent of paragraph 7 of section 2, act of June 13, 1898. It is a show coming under the eighth paragraph, for which the special tax of $10 is required to be paid. (T. D. 19975.) Eighth. Proprietors or agents of all other public exhibitions or shows for money not enumerated in this section shall pay $10: Provideti, That a special tax paid in one State, Territory, or the District of Columbia shall exempt exhibitions from the tax in another State, Territory, or the District of Columbia, and but one special tax shall be required for exhibitions within any one State, Territory, or the District of Columbia: Provided further, That this paragraph shall not apply to Chau- tauquas, lecture lyceums, agricultural or industrial fairs, or exhibi- tions held under the auspices of religious or charitable associations. (83) The show of a medicine vender (consisting of various "athletic, humorous, and comic performances," there being given also an exhibition of ropewalking and trapeze performance, the object being merely to attract a crowd), liable to a tax of $10 under paragraph 8, act of June 13/1898, instead of 100 under paragraph 7. (T. D. 19830.) 16 WAR REVENUE LAW (84) The "theatrical performances" contemplated by this paragraph are only those which are given in connection with a circus. (85) Agricultural associations are required to pay a special tax at the rate of $10 for exhibitions, including horse racing. (86) Exhibitions and shows given on fair grounds, but not under man- agement of the fair association, are required to pay special tax. (87) A lecturer using* a stereopticon to illustrate his lectures, and charg- ing an admission fee, is liable to the special tax as giving a public exhibition or show for money. (88) If an exhibition is given in more than one State the>law requires payment of special tax for every such State. (89) Amateur theatrical exhibitions, either in private houses or licensed public halls, for payment of expenses incurred in giving the exhibition and not for pecuniary profit of the performers or the manager, are not such per- formances as are subject to tax. Amateur clubs or local organizations giving exhibitions, even though they charge an admission price, are not required to pay special tax therefor if the proceeds are not for pecuniary profit of the clubs or associations, but are devoted to come charitable or public object and payment of expenses. (Vol. 1, Treas. Dec. (1899), No. 20840.) (90) Concert gardens where no admission fee is charged, but where beer and other drinks are sold and shows or stage entertainments are given, are within the meaning of this paragrapk, and the special tax of $10 must be paid therefor. (Vol. 2, Treas. Dec. No. 19843.) (91) Exhibitions and shows for which special tax is required to be paid. (Vol. 2, Treas. Dec. (1898), Decisions Nos. 19749, traveling shows; 19826- 19830, medicine vender's show ; 19873, horse races ; 19968, exhibition at park or gardens; 19976, exhibition or show in a saloon; 20121, nickel-in-slot ma- chine, liable under certain conditions; 20190, exhibitions by an athletic asso- ciation; 20261, phonograph parlor; 20270, concert hall.) (92) Entertainments for which special tax is not required to be paid. (Vol. 2, Treas. Dec. (1898), Decisions Nos. 19752, amateur theatricals; 19941, halls ; 19977, lecturers or elocutionists ; 20029, circus performances at county fairs; 20115, merry-go-round; 20123, illustrated lectures (educational asso- ciation exclusively) ; 20124, harvest show; 20165, fortune telling; 20228, foot- ball, baseball, etc.; 20242, theatrical entertainment for benefit of fire depart- ment; 20273, bands in city parks; 20314, pianoforte lecture recital; 20319, store show (monkeys) ; 20337, university exhibitions.) (93) Special tax is not required to be paid by proprietors of restaurants or cafes for employing bands of music or orchestras during meal hours for the benefit of their patrons, no admission price being charged and no per- formance or exhibition being given in connection therewith. Former rulings tending to a different conclusion modified. (Vol. 2, Treas. Dec. (1899), No. 21522.) (94) An entertainment given by a railway company, to which no admis- sion price is charged, is not regarded as an exhibition or show for money. (Vol. 2, Treas. Dec. (1899), No. 21559.) (95) Special tax not required for bands of music playing in saloons to which no price of admission is charged, and where persons visiting such places are not under any obligation to buy. (Vol. 2, Treas. Dec. (1899), No. 21636.) Ninth. Proprietors of bowling alleys and billiard rooms shall pay Bowling Alleys, $5 for each alley or table. Every building or place where bowls are -defied: *' thrown or where games of billiards or pool are played, and that are 17 WAR REVENUE LAW open to the public with or without price, shall be regarded as a bowling alley or a billiard room, respectively. (96) Social clubs open only to members are not required to pay special tax on billiard tables. (Circular No. 508, Aug. 8, 1898; vol. 2, Treas. Dec., No. 19843.) (97) Club not required to pay special tax on its billiard tables. (Vol. 2, Treas. Dec. (1898), No. 19743.) (98) A person for the time being in the possession and control of a billiard table in a place or building open to the public is prima facie the proprietor of a billiard room and liable to pay the special tax therefor, even if the general property and ultimate control of the table or place, or either of them, be in some one else. (United States v. Howard, 13 Int. Rev. Rec., 118.) (99) Special-tax stamp to be issued for each bowling alley, pool or billiard table. (Vol. 2, Treas. Dec. (1898), No. 19610.) (100) Bagatelle table not liable to special tax. (Vol. 2, Treas. Dec. (1898), No. 20102.) (101) Tivoli table not liable to special tax. (Vol. 2, Treas. Dec. (1898), No. 20126.) (102) Bowling alley at Sunday-school picnics or at colleges, special tax not required. (Vol. 2, Treas. Dec. (1898), Nos. 19890-20021.) (103) When a person who has taken out a special-tax stamp for a bowl- ing alley closes this alley and thereafter opens another to the public, the stamp may be transferred to the latter bowling alley under the provisions of section 3241, Revised Statutes, if it remains in his ownership and control. (Vol. 2, Treas. Dec. (1899), No. 21495.) (104) In every building or place where bowls are thrown, each division or track is a separate alley, for which the special tax of $5 must be paid. (Vol. 2, Treas. Dec. (1899), No. 21606.) Tenth. Commission merchants shall pay $20. Every person, firm, or company whose business or occupation it is to receive into his or its possession any goods, wares, or merchandise to sell the same on commission shall be regarded as a commission merchant: Provided, That any person having paid the special tax as a com- mercial broker shall not be required to pay the special tax as a com- mission merchant : Provided junther, That this provision shall not apply to commis- sion houses run upon a cooperative plan. Not taxed under act June 30, 1909 ; hence no Treasury Decisions thereon. TOBACCO DEALERS AND MANUFACTURERS SEC. 4. That on and after November first, nineteen hundred and fourteen, special taxes on tobacco dealers and manufacturers shall be and hereby are imposed annually as follows, the amount of such annual taxes to be computed in all cases on the basis of the annual sales for the preceding fiscal year : Leaf Tobacco Dealers in leaf tobacco whose annual sales or transfers do not annual 8 salts X- exceed fifty thousand pounds shall each pay $6. Dealers in leaf ceed 1,000 ibs. tobacco whose annual sales or transfers exceed fifty thousand and 18 WAR REVENUE LAW do not exceed one hundred thousand pounds shall pay $12, and if their annual sales or transfers exceed one hundred thousand pounds shall pay $24: Provided, That dealers in leaf tobacco whose annual sales or transfers do not exceed one thousand pounds shall be exempt from the tax herein imposed on dealers in leaf tobacco. Dealers in tobacco, not specially provided for in this section, whose annual receipts from the sale of tobacco exceed $200, shall each pay $4.80 for each store, shop, or other place in which tobacco in any form is sold. Every person whose business it is to sell, or offer for sale, manu- factured tobacco, snuff, cigars, or cigarettes shall be regarded as a dealer in tobacco : Provided, That no manufacturer of tobacco, snuff, cigars, or cigarettes shall be required to pay a special tax as a dealer in manufactured tobacco, snuff, cigars, or cigarettes for selling his own products at the place of manufacture. Manufacturers of tobacco whose annual sales do not exceed one hundred thousand pounds shall each pay $6. Manufacturers of tobacco whose annual sales exceed one hundred thousand and do not exceed two hundred thousand pounds shall each pay $12. Manufacturers of tobacco whose annual sales exceed two hundred thousand and do not exceed four hundred thousand pounds shall each pay $24. Manufacturers of tobacco whose annual sales exceed four hundred thousand and do not exceed one million pounds shall each pay $60. Manufacturers of tobacco whose annual sales exceed one million and do not exceed five million pounds shall each pay $300. Manufacturers of tobacco whose annual sales exceed five million and do not exceed ten million pounds shall each pay $600. Manufacturers of tobacco whose annual sales exceed ten million and do not exceed twenty million pounds shall each pay $1,200. Manufacturers of tobacco whose annual sales exceed twenty mil- lion pounds shall each pay $2,496. Manufacturers of cigars whose annual sales do not exceed one hundred thousand cigars shall each pay $3. Manufacturers of cigars whose annual sales exceed one hundred thousand and do not exceed two hundred thousand cigars shall each pay $6. Manufacturers of cigars whose annual sales exceed two hundred thousand and do not exceed four hundred thousand cigars shall each pay $12. Manufacturers of cigars whose annual sales exceed four hundred thousand and clo not exceed one million cigars shall each pay $30. Manufacturers of cigars whose annual sales exceed one million and do not exceed five million cigars shall each pay $150. Manufacturers of cigars whose annual sales exceed five million and do not exceed twenty million cigars shall each pay $600. Manufacturers of cigars whose annual sales exceed twenty million and do not exceed forty million cigars shall each pay $1,200. 19 Dealers whose annual sales less than 1,000 Ibs. e x e m pt from tax. Dealers in to- bacco whose an- nual receipts ex- ceed $200. Dealers de- nned. No manufac- turer shall be taxed as a dealer. Manufacturers of tobacco. Manufacturers- of cigars. WAR REVENUE LAW Manufacturers of cigarettes. Manufacturer denned. Penalty failure to tax. for pay Manufacturers of cigars whose annual sales exceed forty million cigars shall each pay $2,496. Manufacturers of cigarettes whose annual sales do not exceed one million cigarettes shall each pay $12. Manufacturers of cigarettes whose annual sales exceed one million and do not exceed two million cigarettes shall each pay $24. Manufacturers of cigarettes whose annual sales exceed two mil- lion and do not exceed five million cigarettes shall each pay $60. Manufacturers of cigarettes whose annual sales exceed five mil- lion and do not exceed ten million cigarettes shall each pay $120. Manufacturers of cigarettes whose annual sales exceed ten million and do not exceed fifty million cigarettes shall each pay $600. Manufacturers of cigarettes whose annual sales exceed fifty mil- lion and do not exceed one hundred million cigarettes shall each pay $1,200. Manufacturers of cigarettes whose annual sales exceed one hun- dred million cigarettes shall each pay $2,496. In arriving at the amount of license tax to be paid hereunder, and in the levy and collection of such tax, each person, firm, or cor- poration engaged in the manufacture of cigars, cigarettes (including little cigars), or tobacco shall be considered and deemed a single manufacturer. And every person who carries on any business or occupation for which special taxes are imposed by this Act, without having paid the special tax herein provided, shall, besides being liable to the payment of such special tax, be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not more than $500, or be imprisoned not more than six months, or both, at the discretion of the court: Provided, That the special taxes imposed by this Act and pay- able during the special tax year ending June thirtieth, nineteen hun- dred and sixteen, shall be collected and paid proportionately for the period during which such taxes shall remain in force during said year. (T. D. 2061.) Emergency revenue lain* Special tax Tobacco dealers and manu- facturers. Regulations and information as to certain requirements of act of October 22, 1914, together with synopsis of decisions made under the act of June 13,' 1898, which will be given weight in determining similar questions arising under the emergency revenue act of October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 10, 1914. In answer to numerous inquiries, the following information as to certain requirements of the act of October 22, 1914, is given: The law provides that each person, firm, or corporation engaged in the manufacture of cigars, cigarettes (including little cigars), or tobacco shall be considered and deemed a single manufacturer Each manufacturer of cigars therefore is required to pay but one special tax at the appropriate rate, no matter how many factories are operated under 20 WAR REVENUE LAW his exclusive ownership and control. Ownership by one corporation manufac- turing cigars, cigarettes, or tobacco of a part or all of the stock of another corporation, also bonded as a manufacturer, is not exclusive ownership or control of the latter, which is a separate legal entity and must pay a separate special tax. A corporation which is engaged in the manufacture of cigars and also of cigarettes or tobacco must pay a separate special tax as manufacturer of cigars and as manufacturer of cigarettes or as manufacturer of tobacco, or both, as the case may be. For the purposes of calculating the rate of tax under this act, all tobacco cigarettes, commonly known as "little cigars," are rated as cigarettes. Where more than one factory or branch is operated by the same manu- facturer, the special tax shall be paid to the collector of the district where the principal factory or place of business is located, and the special tax stamp will be posted at such factory or place of business. The collector issu- ing the special-tax stamp will also issue as many certificates that the tax has been duly paid to him as may be necessary to cover each factory operated by the tax-payer, and one of such certificates must be posted in a conspicuous place at each of such factories. In making return for special tax the man- ufacturer will file a sworn statement of production, including all factories or branches, for the preceding fiscal year. The return should state separately the factory number, district, and State as to each factory operated, the out- put of each factory, and the aggregate output of all factories upon which the special tax is calculated. The law provides that the amount of the annual tax is to be computed in all cases on the basis of the annual sales of the preceding fiscal year, and the basis of computation is the total sales during the year, whether business is conducted during the whole or only a part of the year. Dealers or manufacturers who were not engaged in such business during the preceding fiscal year must procure special-tax stamps before commencing business. The special-tax stamp purchased at the commencement of busi- ness may be of such grade as, in the opinion of the dealer or manufacturer, may be required to cover his business for the fiscal year, but when the limit of sales allowed under such stamp is reached, the dealer or manufacturer must procure a stamp of a higher grade, so that his liability to special tax on the basis of sales as provided by law will at all times be covered. Peddlers of tobacco, whose annual receipts exceed $200, are liable to special tax at the rate of $4.80 per annum. The special-tax stamp in such cases, like special-tax stamps for dining cars, will cover sales made in the United States and should be carried by the peddler on his person, or posted in his wagon, or other conveyance, if he has one. Return for register, Form 277, should be made and certificate of registry should be issued only in the case of dealers in leaf tobacco, including retail dealers in leaf tobacco, whose sales do not exceed 1,000 pounds and who are exempt from special tax. Dealers in tobacco and dealers in leaf tobacco, including retail dealers in leaf tobacco claiming exemption from special tax under the provisions of this act, will be required to establish same under oath. Attached hereto is published for the guidance and information of all concerned a synopsis of decisions made under the act of June 13, 1898, which will be given considerable weight in determining similar questions arising under the present act. W. H. OSBORN, Commissioner of Internal Revenue. Approved. W. G. McAooo, Secretary of the Treasury. (1) A manufacturer of tobacco or cigars can not sell at retail at place of manufacture. (16 Op. Atty. Gen., 89; 24 Int. Rev. Rec., 227; Crisp v. Proud, 24 ibid., 340; Ludlofif v. United States, 108 U. S., 176; 29 Int. Rev. Rec., 125.) (2) Special tax liability of a person buying leaf tobacco exclusively for export by himself. (T. D. 28.) 21 WAR REVENUE LAW (3) Liability to special tax of tobacco dealers and manufacturers under the act of June 13, 1898. (T. D. 138.) (4) As to the penalty for failure to make return on Form 11 of special taxes incurred. (T. D. 19748.) (5) Manufacturers can not pack goods of another factory on goods made at their own factory. Manufacturers selling their own products at place of manufacture not required to pay special tax as dealers in tobacco. Manufacturers are not permitted to pack stamped packages of smoking to- bacco or stamped caddies of plug tobacco between the chime and the head or bottom of such packages. (T. D. 19765.) (6) Dealers in leaf tobacco who improperly qualify as manufacturers of cigars for the purpose of dealing in cigar cuttings, and who made no cigars last year, are not liable to special tax as manufacturers of cigars, but such persons will be required to close their business as cigar manufacturers and may qualify as manufacturers of tobacco. (T. D. 19801.) (7) Dealers in leaf tobacco, and manufacturers of tobacco or cigars, who were not engaged in business last fiscal year, required on commencing business to pay minimum rate of special tax, and when sales during the year reach an amount requiring payment of higher rate, will make return and pay tax at the higher rate. (T. D. 19822.) (8) Persons who have qualified as manufacturers of tobacco for the sole purpose of handling and dealing in stems, refuse scraps, cuttings, clip- pings, and sweeping of tobacco are required to register and pay the minimum rate of special tax imposed on manufacturers of tobacco. (T. D. 19844.) (9) Manufacturers of tobacco, snuff, or cigars may, under special per- mit, * * * sell stemmed or unstemmed leaf tobacco to other qualified manufacturers of tobacco, snuff, _ or cigars without being required to register and pay special tax as dealers in (leaf) tobacco. Special permits are only granted when it is ascertained that the manufacturer has material on hand which he finds not suitable for his business. (T. D. 19876.) (10) A farmer who sells and delivers leaf tobacco of his own raising is not required to make return or pay special tax as dealer in leaf tobacco. (T. D. 19962.) (11) Auction sales of tobacco in warehouses, or at "tobacco breaks," subject to tax same as upon sales of "any products or merchandise at any exchange or board of trade, or other similar place." (T. D. 19972.) (12) No provision of law by which a special-tax stamp issued to one person can be transferred to and made use of by any other person, except in the single instance of the death of the special-tax payer, expressly pro- vided for by section 3241. Revised Statutes. (T. D. 20153.) (13) Where farmer or producer brings product to market and sells it in his own name through an auctioneer, the sales will come within the scope of a sale made at an auction house, and stamp tax and memorandum of sale is not required. (T. D. 20236.) (14) Under existing law the farmer or grower of tobacco has the right to sell tobacco of his own growth and raising to any person and in any quan- tity which may be desired, provided its condition has not been changed in any manner. This is a personal privilege and can not be delegated by him to another person. The farmer can not employ another person to travel from place to place to sell and deliver tobacco to consumers, nor has he the right to place the tobacco in the hands of another person to be sold for him to consumers, but he may place it in the hands of a qualified dealer in leaf to- - bacco to be sold on commission to other qualified dealers, or to manufac- turers of tobacco or cigars, or to persons who buy leaf tobacco in nackae'es for export. (T. D. 20482.) (15) Warehousemen who sell leaf tobacco on commission are required to pay special tax as leaf tobacco dealers; and if they neither acquire posses- sion of, nor right or title to, leaf tobacco, which they sell on commission as for others, they must also pay special tax as commercial brokers. . ) (16) A manufacturer purchasing large quantities of' leaf tobacco, ex- ceeding the demands of his factory, for the purpose of reselling his surplus to other manufacturers, must be regarded as engaged in and carrying on WAR REVENUE LAW the business of a dealer in leaf tobacco, and will be required to make return and pay special tax as dealer in leaf tobacco at some place not connected with the factory. (T. D. 20605.) (17) Dealers in leaf tobacco who have several warehouses at which they receive tobacco, and from which the same is delivered to the purchaser, required to pay special tax at each place. (T. D. 20638.) The imposing an additional tax on tobacco on which the tax had already been paid is constitutional. Patton v. Brady, 184 U. S., 616. ADHESIVE STAMPS SEC. 5. That on and after the first day of December, nineteen Tax on bonds, hundred and fourteen, there shall be levied, collected, and paid, for cates? ^tc. 06 ' and in respect of the several bonds, debentures, or certificates of stock and of indebtedness, and other documents, instruments, mat- ters, and things mentioned and described in Schedule A of this Act, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, shall be written or printed by any person or persons, or party who shall make, sign, . By whom paid, or issue the same, or for whose use or benefit the same shall be made, signed, or issued, the several taxes or sums of money set down in figures against the same, respectively, or otherwise specified or set forth in the said schedule. REGULATIONS. Section 5 of the act of October 22, 1914, provides under the title of ad- hesive stamps, for the collection, on and after December 1, 1914, of certain taxes on documents, instruments, and things mentioned and described in Schedule A of said act, as follows : STAMP DUTIES ON AND AFTER DECEMBER 1, 1914. Schedule A. Documentary. 1. Bonds, debentures, or certificates of indebtedness of any associa- tion, company, or corporation, on each $100 of face value or fraction thereof $0.05 2. On each original issue of certificates of stock, whether on organi- zation or reorganization, on each $100 of face value or frac- tion thereof ^ 05 On all sales, agreements to sell, memoranda of sales, deliveries or transfers of shares, or certificates of stock of any association or corporation, on each $100 of face value or fraction thereof 02 3. Upon each sale, agreement to sell, or agreement of sale of any products or merchandise at any exchange or board of trade, for future delivery, for each $100 in value of said sale 01 And for each $100 or fractional part thereof in excess of $100. . . .01 4. Promissory notes (except bank notes issued for circulation), and for each renewal of same, for a sum not exceeding $100 02 And for each additional $100, or fractional part thereof, in excess of $100 02 5. Bills of lading, manifests, etc., issued by express companies, or public carriers, etc., where a charge exceeding 5 cents is made, a stamp to each of the value of 01 6. Bond, indemnifying, etc. (except those required in legal proceed- ings), not otherwise provided for 50 7. Certificates of profits, or certificates or memoranda showing interest in the property or accumulations of any association, company, or corporation, and all transfers thereof, on each $100 of face value or fraction thereof 02 23 WAR REVENUE LAW 8 Certificates of damage, or otherwise, and all other certificates or documents issued by port warden or marine surveyor. ....... .~o 9. Certificates of any description required by law, not otherwis< specified / ' ' '1 ' ' ' r J 10 Contract, broker's note, or memorandum of sale ot goods, o chandise, stock, bonds, exchange, notes of hand, real estate, or property of any kind, issued by brokers, etc., for each note or memorandum of sale not otherwise provided for 10 11 Conveyance deed, instrument, or writing conveying lands, tene- ments or other realty, etc., value over $100 and not exceeding $500 50 For each additional $500 or fraction thereof 50 12. Entry of goods, wares, and merchandise in customhouse, not ex- ceeding $100 in value 25 Exceeding $100 and not exceeding $500 50 Exceeding $500 in value l- 13. Entry for withdrawal of goods or merchandise from customs bonded warehouse 50 14. Insurance, marine, inland and fire or lightning (except purely co-operative or mutual), on each policy, or renewal, on amount of premium charged on each $1 or fractional part 00^ 15. Insurance, casualty, fidelity, and guarantee, on each policy, on each $1 or fractional part thereof of premium charged 00 V 2 16. Passage ticket, for each passenger sold in the United States for passage by any vessel to a foreign port or place, cost not ex- ceeding $30 1-00 More than $30 and not exceeding $60 3.00 More than $60 5.00 Cost not exceeding $10 exempt. 17. Power of attorney or proxy for voting at an election for officers of any incorporated company or association, except religious, charitable, literary societies, or public cemeteries 10 18. Power of attorney to sell or convey real estate or to rent or lease the same, to collect or receive rent, to sell or transfer stock, bonds, etc 25 (Papers used in the collection of pension, back pay, 'or bounty claims, or claims for property lost in military or naval service are exempt.) 19. Protest: Upon the protest of every note, bill of exchange, accept- ance, check, or draft, or any marine protest 25 20. Telegraph and telephone messages : Every person, firm, or cor- poration operating any telephone line or lines is required to - make, within 30 days after the expiration of each month, a sworn statement to the collector of the number of messages or con- versations transmitted over their lines during preceding month for which a charge of 15 cents or more was imposed, and for each of such messages or conversations a tax shall be paid of.. 0.01 21. Every seat sold in a palace or parlor car and every berth sold in a sleeping car, to be paid by the company selling the same 01 Under authority conferred upon the Commissioner of Internal Revenue in section 22 of said act, the following adhesive stamps have been prepared: Documentary stamps, Schedule A. */ 2 cent, 1 cent, 2 cents, 3 cents, 4 cents, 5 cents, 10 cents, 25 cents, 40 cents, 50 cents, 80 cents, $1, $2, $3, $5, $10, $30, $50, $100, $500, $1,000. Procurement of Adhesive Stamps. All of the above stamps may be purchased from collectors and deputy collectors of internal revenue. In addition,_ provision has been made in the act for the delivery of stamps by collectors _ without prepayment to any Assistant Treasurer of the United States, depository of the United States, or postmaster, who may be required to give bond for the value of stamps deposited with him. It is not manda- tory upon the persons named to make the required bond and secure the 24 WAR REVENUE LAW stamps. When stamps are so furnished without prepayment, the post- master or other officer is not entitled to any discount, but discount of 1 per cent will be allowed to those who purchase to the amount of $100 of face value at one time, paying cash therefor at the time of purchase or receipt, either from the collector or the persons with whom stamps have been de- posited without prepayment as noted in the foregoing. Stamps to be affixed to articles manufactured in a foreign country and imported into the United States may be purchased and forwarded to the place of manufacture and there affixed to the articles before the same are packed for importation. And there shall also be levied, collected, and paid, for and in On perfumes, respect to the preparations, matters, and things mentioned and c lcs> etc> described in Schedule B of this Act, manufactured, sold, or removed for sale, the several taxes or sums of money set down in words or figures against the same, respectively, or otherwise specified or set forth in Schedule B of this Act. SEC. 6. That if any person or persons shall make, sign, or issue, or fa u e r n ^7tamp! cause to be made, signed, or issued, any instrument, document, or paper of any kind or description whatsoever, without the same being duly stamped for denoting the tax hereby imposed thereon, or with- out having thereupon an adhesive stamp to denote said tax, such person or persons shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not more than $100, at the discretion of the court. SEC. 7. That if any person shall forge or counterfeit, or cause or penalty for procure to be forged or counterfeited, any stamp, die, plate, or terfeftmg^tamps other instrument, or any part of any stamp, die, plate, or other in- and d * es - etc - strument which shall have been provided, or may hereafter be pro- vided, made, or used in pursuance of this Act, or shall forge, coun- terfeit, or resemble, or cause or procure to be forged, counterfeited, or resembled, the impression, or any part of the impression, of any such stamp, die, plate, or other instrument, as aforesaid, upon any vellum, parchment, or paper, or shall stamp or mark, or cause or procure to be stamped or marked, any vellum, parchment, or paper with any such forged or counterfeited stamp, die, plate, or other instrument, or part of any stamp, die, plate, or other instrument, as aforesaid, with intent to defraud the United States of any of the taxes hereby imposed, or any part thereof; or if any person shall utter, or sell, or expose for sale, any vellum, parchment, paper, article, or thing having thereupon the impression of any such coun- terfeited stamp, die, plate, or other instrument, or any part of impressions of any stamp, die, plate, or other instrument, or any such forged, stam P s or dies - counterfeited, or resembled impression, or part of impression, as aforesaid, knowing the same to be forged, counterfeited, or resem- bled; or if any person shall knowingly use or permit the use of any stamp, die, plate, or other instrument, which shall have been so provided, made, or used as aforesaid, with intent to defraud the United States ; or if any person shall fraudulently cut, tear, or re- Sale of p. a P. er > , j . etc., containing move, or cause or procure to be cut, torn, or removed, the impres- forged stamps or sion of any stamp, die, plate, or other instrument which shall have been provided, made, or used in pursuance of this Act from any vellum, parchment, or, paper, or any instrument or writing charged or 25 WAR REVENUE LAW Removing im- pressions etc. Use of washed or restored stamps. Possession of washed or re- stored stamps. Punishment. Cancellation of stamps by user. Penalty failure. for chargeable with any of the taxes imposed by law ; or if any person shall fraudulently use, join, fix, or place, or cause to be used, joined, fixed, or placed, to, with, or upon any vellum, parchment, paper, or any instrument or writing charged or chargeable with any of the taxes hereby imposed, any adhesive stamp, or the impression of any stamp, die, plate, or other instrument, which shall have been pro- vided,' made, or used in pursuance of law, and which shall have been cut, torn, or removed from any other vellum, parchment, or paper, or any instrument or writing charged or chargeable with any of the taxes imposed by law; or if any person shall willfully remove or cause to be removed, alter or cause to be altered, the canceling or defacing marks of any adhesive stamp with intent to use the same, or to cause the use of the same, after it shall have been once used, or shall knowingly or willfully sell or buy such washed or restored stamp, or offer the same for sale, or give or expose the same to any person for use, or knowingly use the same, or prepare the same with intent for the further use thereof ; or if any person shall knowingly and without lawful excuse (the proof whereof shall lie on the per- son accused) have in his possession any washed, restored, or altered stamp which has been removed from any vellum, parchment, paper, instrument, or writing, then, and in every such case, every person so offending, and every person knowingly and willfully aiding, abet- ting, or assisting in. committing any such offenses as aforesaid shall be deemed guilty of a misdemeanor, and, upon conviction thereof, shall forfeit the said counterfeit stamps and the articles upon which they are placed, and shall be punished by fine not exceeding $1,000, or by imprisonment and confinement at hard labor not exceeding five years, or both, at the discretion of the court. SEC. 8. That in any and all cases where an adhesive stamp shall be used for denoting any tax imposed by this Act, except as herein- after provided, the person using or affixing the same shall write or stamp thereupon the initials of his name and the date upon which the same shall be attached or used, so that the same may not again be used. And if any person shall fraudulently make use of an adhe- sive stamp to denote any tax imposed by this Act without so effect- ually canceling and obliterating such stamp, except as before men- tioned, he, she, or they shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not exceeding $500, or be imprisoned not more than six months, or both, at the discre- tion of the court : Cancellation of Documentary Stamps. In any and all cases where an adhesive stamp shall be used for denoting any tax imposed by Schedule A of the act of October 22, 1914, the person using or affixing the same shall write or stamp thereon, with ink, the initials of his name and the date (year, month, and day) in which the same shall be attached or used; or shall, by cutting and canceling said stamp with a ma- chine or punch, which will affix the initials and date as aforesaid, so deface the stamp as to render it unfit for reuse. The cancellation by either method should not so deface the stamp as to prevent its denomination and genuine- ness from being readily determined. In addition to the foregoing, stamps of the value of 10 cents or more 26 WAR REVENUE LAW shall have three parallel incisions made by some sharp instrument length- wise through the stamp after the stamp has been attached to the document : Provided, This will not be required where stamps are canceled by per- foration. , Documentary Stamps. 1. Documentary revenue stamps issued prior to October 22, 1914, under former revenue laws can not be used for the payment of taxes required by existing law, and the redemption or exchange of such old stamps is prohibited by statute. 2. Ordinary postage stamps can not be used for the payment of any internal-revenue taxes. As adhesive stamps may be sold by any person and readily pass at their face value in the market, provision has not been made for their exchange or redemption by the Government. Where, however, such stamps are rendered useless by gumming or sticking together in transit or otherwise without the fault of the purchaser, they may be exchanged by a collector for other stamps of exactly the same quantity and denomination. 4. Documentary and proprietary stamps can not be used interchange- ably. Documentary stamps only must be used upon papers, documents, and instruments subject to tax as provided in Schedule A. 5. Where a stamp of the proper denomination to pay the tax due on an article or document can not be procured, two or more stamps may be used. In such case as few stamps as possible should be attached, and each stamp used should be canceled in the manner provided by regulation. W. H. OSBORN, Commissioner of Internal Revenue. Approved : BYRON R. NEWTON, Acting Secretary of the Treasury. Provided, That instead of cancellation by initials and date, the stamps on the articles enumerated in Schedule B shall be so affixed on the box, bottle, or package that in opening the same, or using the contents thereof, the said stamp shall be effectually destroyed; and in default thereof the party making default shall be liable to the same penalty imposed for neglect to affix said stamp. as hereinbefore prescribed in this Act. Affixing Stamps. Section 8 provides that instead of cancellation by initials and date, the stamps on the articles enumerated in Schedule B shall be so affixed on the box, bottle, or package that in opening the same or using the contents thereof the said stamp shall be effectually destroyed, but section 22 author- izes the Commissioner of Internal Revenue to prescribe such method of cancelling stamps as he may deem expedient in lieu of the method provided in the act. In pursuance of this requirement, where articles are sold to the public in boxes, bottles, tins, or other similar packages without any other covering, the stamp shall be so affixed to the box. bottle, tin, or other package of such character that in opening the same the stamp will be destroyed. Wliere the boxes, bottles, tins or other containers are usually offered to the public in wrappers or cartons, the stamp shall be affixed in such manner as to seal the wrapper or carton. In case of double-end cartons, the stamps shall be affixed to the top end lapping over on the side. There are some articles not usually offered to the public in cartons, containing patent stoppers, etc., which make it impossible to affix a stamp in the manner provided by law. Where it is clearly impracticable to affix the stamp so that it will be destroyed in using the contents, the stamp may be affixed upon one side or the bottom of the bottle. Where articles subject to tax are usually displayed for sale in fancy or expensive outer cases or containers to which it is impossible, without marring 27 WAR REVENUE LAW Promissory note or bill of exchange, giving and acceptance of, prohibited unless stamped. Penalty. Sale of stamps by postmaster, etc. Furnished without prepay- ment of costs. Regulations. Register, sale and transfer of unstamped in- struments, etc., forbidden. Penalty. the container, to affix the stamp in such manner as to break it on opening, the stamp may be affixed in such place as will not mar the appearance of the Where articles are usually offered for sale in small containers mounted on cards, the stamp covering all articles affixed may be attached to the Where several articles, all taxable or some taxable and some untaxable, are packed together for sale as entireties, the stamp covering the tax on the taxable contents may be placed on the container. In all cases where the stamps are not so affixed as to be broken when the container is opened, the stamp shall be canceled with the initials of the manufacturer and the month and year. SEC. 9. That if any person or persons shall make, sign, or issue, or cause to be made, signed, or issued, or shall accept or pay, or cause to be accepted or paid, with design to evade the payment of any stamp tax, any promissory note liable to any of the taxes imposed by this Act, without the same being duly stamped, or having there- upon an adhesive stamp for denoting the tax hereby charged there- on, he, she, or they shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished by a fine not exceeding $200, at the discretion of the court. SEC. 10. That the collectors of the several districts are hereby authorized and required to furnish to any assistant treasurer of the United States or designated depositary thereof, or any postmaster located in their collection districts, respectively, a suitable quantity of adhesive stamps, without prepayment therefor, and may in ad- vance require of any designated depositary, assistant treasurer of the United States, or postmaster a bond, with sufficient sureties, to an amount equal to the value of the adhesive stamps which may be placed in his hands and remain unaccounted for, conditioned for the faithful return, whenever so required, of all quantifies or amounts undisposed of, and for the payment monthly of all quantities or amounts sold or not remaining on hand. And it shall be the duty of such collectors to supply their deputies with, or sell to other parties within their respective districts who may make application therefor, adhesive stamps, upon the same terms allowed by law or under the regulations of the Commissioner of Internal Revenue, who is hereby authorized to make such other regulations, not inconsistent herewith, for the security of the United States and the better accommodation of the public, in relation to the matters hereinbefore mentioned, as he may judge necessary and expedient. And the Secretary of the Treasury may from time to time make such regulations as he may find necessary to insure the safe-keeping or prevent the illegal use of all such adhesive stamps. SEC. 11. That any person or persons who shall register, issue, sell, or transfer, or who shall cause to be issued, registered, sold, or transferred, any instrument, document, or paper of any kind or description whatsoever mentioned in Schedule A of this Act, with- out the same being duly stamped, or having thereupon an adhesive stamp for denoting the tax chargeable thereon, and canceled in the manner required by law, with intent to evade the provisions of this Act, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished by a fine not exceeding $50, or by im- 28 WAR REVENUE LAW prisonment not exceeding six months, or both, in the discretion of the court: Provided, That hereafter, in all cases where the party has not affixed to any instrument the stamp required by law thereon at the time of issuing, selling, or transferring the said bonds, debentures, instruments - or certificates of stock or of indebtedness, and he or they, or any party having an interest therein, shall be subsequently desirous of affixing such stamp to said instrument, or, if said instrument be lost, to a copy thereof, he or they shall appear before the collector of internal revenue of the proper district, who shall, upon the payment of the price of the proper stamp required by law, and of a penalty of $10, and, where the whole amount of the tax denoted by the Tax penalty, stamp required shall exceed the sum of $50, on payment also of in- terest, at the rate of six per centum, on said tax from the day on which such stamp ought to have been affixed, affix the proper stamp to such bond, debenture, certificate of stock or of indebtedness or copy, and note upon the margin thereof the date of his so doing, and the fact that such penalty has been .paid ; and the same shall thereupon be deemed and held to be as valid, to all intents and pur- poses, as if stamped when made or issued : And provided further, That where it shall appear to said collec- instruments , J ^ '. . J _. ,. , . , . not stamped by tor, upon oath or otherwise, to his satisfaction, that any such mstru- mistake or acci- ment has not been duly stamped, at the time of making or issuing dent< the same, by reason of accident, mistake, inadvertence, or urgent necessity, and without any willful design to defraud the United States of the stamp, or to evade or delay the payment thereof, then and in such case, if such instrument, or, if the original be lost, a copy thereof, duly certified by the officer having charge of any records in which such original is required to be recorded, or otherwise duly proven to the satisfaction of the collector, shall, within twelve cal- endar months after the making or issuing thereof, be brought to the said collector of internal revenue to be stamped, and the stamp tax o{ a chargeable thereon shall be paid, it shall be lawful for the said may?? re'mtte collector to remit the penalty aforesaid and to cause such instrument to be duly stamped. And when the original instrument, or a certified or duly proven copy thereof, as aforesaid, duly stamped so as to enti- tle the same to be recorded, shall be presented to the clerk, register, recorder, or other officer having charge of the original record, it shall be lawful for such officer, upon the payment of the fee legally chargeable for the recording thereof, to make a new record thereof, New record or to note upon the original record the fact that the error or omis- ? T paym< sion in the stamping of said original instrument has been corrected pursuant to law; and the original instrument or such certified copy, or the record thereof, may be used in all courts and places in the same manner and with like effect as if the instrument had been originally stamped : And provided further, That in all cases where the party has not ^StaSfUin. affixed the stamp required by law upon any such instrument issued, there is no coi- registered, sold, or transferred at a time when and at a place where no collection district was established, it shall be lawful for him or 29 WAR REVENUE LAW not affected. them, or any party having an interest therein, to affix the proper stamp thereto, or, if the original be lost, to a copy thereof. But no right acquired in good faith before the stamping of such instru- ment, or copy thereof, as herein provided, if such record be required Accrued rights bv law, shall in any manner be affected by such stamping as ^*- nf*.s*4-**A * I aforesaid. A mortgage may be registered, although unstamped, provided the bond or note which is given to secure has been stamped. 22 A. G., Op. 533. Unstamped instruments are not invalid for lack of stamp, unless the failure to attach the stamp was intentionally done with intent to evade payment of the tax. Weinkert v. Ziegler, 91 Md., 318; Bryan v. First National Bank, 205 Pa., St. 7; Rowe v. Bowman, 183 Mass., 488; T. D. (1902) 474. An unstamped forged instrument is admissible in a criminal action for forgery. State v. Shields (la.) 83, N. W., 807; Bottorff v. Lewis (la.) 95 N. W., 262. SEC. 12. That hereafter no instrument, paper, or document re- quired by law to be stamped, which has been signed or issued with- out being duly stamped, or with a deficient stamp, nor any copy thereof, shall be recorded until a legal stamp or stamps, denoting the amount of tax, shall have been affixed thereto, as prescribed by law; Provided, That any bond, debenture, certificate of stock, or cer- tificate of indebtedness issued in any foreign country shall pay the same tax as is required by law on similar instruments when issued, sold, or transferred in the United States ; and the party to whom the same is issued, or by whom it is sold or transferred, shall, before selling or transferring the same, affix thereon the stamp or stamps indicating the tax required. SEC. 13. That it shall not be lawful to record or register any in- strument, paper, or document required by law to be stamped unless a stamp or stamps of the proper amount shall have been affixed and canceled in the manner prescribed by law. SEC. 14. That no instrument, paper, or document required by law to be stamped shall be deemed or held invalid and of no effect for the want of a particular kind or description of stamp designated for and denoting the tax charged on any such instrument, paper, or document, provided a legal documentary stamp or stamps denoting a tax of equal amount shall have been duly affixed and used thereon. SEC. 15. That all bonds, debentures, or certificates of indebtedness issued by the officers of the United States Government, or by the officers of any State, county, town, municipal corporation, or other corporation exercising the taxing power, shall be, and hereby are, exempt from the stamp taxes required by this Act : Provided, That it is the intent hereby to 'exempt from the stamp taxes imposed by this Act such State, county, town, or other munici- pal corporations in the exercise only of functions strictly belonging to them in their ordinary governmental, taxing, or municipal capacity : 30 Recording _ of unstamped i n- struments f o r- bidden. Bonds, stock certificates is- sued in foreign countries sub- ject to tax. Unlawful to re- cord instrument unless stamps of proper amount are affixed and cancelled. Instrument not invalid for want of particular kind of stamp. State, munici- pal corporations, etc., exercising governmental function, etc. WAR REVENUE LAW Provided further, That stock and bonds issued by cooperative ^ of k b * ^ building and loan associations, mutual ditch or irrigating companies, ing. and loan as- and building and loan associations or companies that make loans only to their shareholders, shall be exempt from the tax herein provided. (T. D. 2044.) Emergency revenue law Building and loan associations. The exemption of co-operative building and loan associations extends only to stocks and bonds issued by such associations or companies. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 9, 1914. SIR: This office is in receipt of your letter of the 26th ultimo in reference to liability of building and loan associations or compa- nies under the internal-revenue act of October 22, 1914. In reply, you are informed that the exemption extended by the revenue act of October 22, 1914, to cooperative building and loan associations, etc., extends only to stocks and bonds issued by such associations or companies. The law appears clear on this subject in that it specifies "stocks and bonds issued by," etc., and thereby excludes from such exemp- tion all other taxable instruments which may be executed or deliv- ered by the associations or companies contained in the provision. Respectfully, W. H. OSBORN, Mr. - . Commissioner of Internal Revenue. SEC. 16. That all the provisions of this Act relating to dies, stamps, adhesive stamps, and stamp taxes shall extend to and include (except where manifestly inapplicable) all the articles or objects enumerated in Schedule B, subject to stamp taxes, and apply to the provisions in relation thereto. SEC. 17. That on and after December first, nineteen hundred and fourteen, any person, firm, company, or corporation that shall make, prepare, and sell, or remove for consumption or sale, perfumery, cosmetics, preparations, compositions, articles, or things upon which a tax is imposed by this Act, as provided for in Schedule B, without affixing thereto an adhesive stamp or label denoting the tax before mentioned shall be deemed guilty of a misdemeanor, and upon con- viction thereof shall pay a fine of not more than $500, or be impris- . Penalty for , r / . , . I , f failure to affix oned not more than six months, or both, at the discretion of the stamps to per- t fumery prepara- ll - tions, etc. SEC. 18. That any manufacturer or maker of any of the articles for sale mentioned in Schedule B, after the same shall have been so made and the particulars hereinbefore required as to stamps have been complied with, or any other person who shall take off, remove, or detach, or cause, or permit, or suffer to be taken off, or removed or detached, any stamp, or who shall use any stamp, or any wrapper Removal or or cover to which any stamp is affixed, to cover any other article 81 * 31 WAR REVENUE LAW Penalty. Sale 'er re- moval or con- cealment of ar- ticles before pay- ment of tax. Penalty. Articles for exportation ex- empted. Monthly state- ment of manu- facturer of com- p 1 i a n c e with stamp tax. Penalty. or commodity than that originally contained in such wrapper or cover, with such stamp when first used, with the intent to evade the stamp duties, shall for every such article, respectively, in respect of which any such offense shall be committed, be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not more than $500, or be imprisoned not more than six months, or both, at the discretion of the court, and every such article or -com- modity as aforesaid shall also be forfeited. SEC. 19. That any maker or manufacturer of any of the articles or commodities mentioned in Schedule B, as aforesaid, or any other person who shall sell, send out, remove, or deliver any article or commodity, manufactured as aforesaid, before the tax thereon shall have been fully paid by affixing thereon the proper stamp, as in this Act provided, or who shall hide or conceal, or cause to be hidden or concealed, or who shall remove or convey away, or deposit, or cause to be removed or conveyed away from or deposited in any place, any such article or commodity, to evade the tax chargeable thereon, or any part thereof, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not more than $500, or be imprisoned not more than six months, or both, at the discretion of the court, together with the forfeiture of any such article or com- modity ; Provided, That articles upon which stamp taxes are required by this Act may, when intended for exportation, be manufactured and sold or removed without having stamps affixed thereto, and without being charged with tax as aforesaid; and every manufacturer or maker of any article as aforesaid* intended for exportation, shall give such bonds and be subject to such rules and regulations to protect the revenue against fraud as may be from time to time pre- scribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury. SEC. 20. That every manufacturer or maker of any of the articles or commodities provided for in Schedule B, or his foreman, agent, or superintendent shall at the end of each and every month make, sign, and file with the collector of internal revenue for the district in which he resides a declaration in writing that no such article or commodity has, during such preceding month or time when the last declaration was made, been removed, or carried, or sent, or caused or suffered or known to have been removed, carried, or sent from the premises of such manufacturer or maker other than such as have been duly taken account of and charged with the stamp tax, on pain of such manufacturer or maker forfeiting for every refusal or neglect to make such declaration $100; and if any such manufac- turer or maker, or his foreman, agent, or superintendent, shall make any false or untrue declaration, such manufacturer or maker, or foreman, agent, or superintendent making the same shall be deemed guilty of a misdemeanor, and upon conviction shall pay a fine of not more than $500, or be imprisoned not more than six months, or both, at the discretion of the court. SEC. 21. That the stamp taxes prescribed in this Act on the 32 WAR REVENUE LAW articles provided for in Schedule B shall attach to all such articles and things sold or removed for sale thirty days after the approval of this Act. Every person, except as otherwise provided in this Act, who offers or exposes for sale any article or thing provided for in said Schedule B, whether the article so offered or exposed is of for- eign manufacture and imported or of domestic manufacture, shall be deemed the manufacturer thereof, and shall be subject to all the taxes, liabilities, and penalties imposed by law for the sale of articles without the use of the proper stamp denoting the tax paid thereon; and all such articles of foreign manufacture shall, in addition to the import duty imposed on the same, be subject to the stamp tax pre- scribed in this Act : Provided further, That internal revenue stamps required by ex- isting law on imported merchandise shall be affixed thereto and canceled at the expense of the owner or importer before the with- drawal of such merchandise for consumption, and the Secretary of the Treasury is authorized to make such rules and regulations as may be necessary for the affixing and canceling of such stamps, not inconsistent herewith. SEC. 22. That the Commissioner of Internal Revenue shall cause to be prepared and distributed for the payment of the taxes pre- scribed in this Act suitable stamps denoting the tax on the docu- ment, article, or thing to which the same may be affixed, and he is authorized to prescribe such method for the cancellation of said stamps, as substitute for or in addition to the method provided in this Act, as he may deem expedient. The Commissioner of Internal Revenue, with the approval of the Secertary of the Treasury, is authorized to procure any of the stamps provided for in this Act by contract whenever such stamps can not be speedily prepared by the Bureau of Engraving and Printing; but this authority shall expire on the first day of November, nineteen hundred and fifteen, except as to imprinted stamps furnished under contract, authorized by the Commissioner of Internal Revenue. That the adhesive stamps used in the payment of the tax levied in Schedules A and B of this Act shall be furnished for sale by the several collectors of internal reve- nue, who shall sell and deliver them at their face value to all persons applying for the same, except officers or employees of the Internal Revenue Service : Provided, That such collectors may sell and deliver such stamps in quantities of not less than $100 of face value, with a discount of one per centum, except as otherwise provided in this Act. Schedule B Tax operative 30 days after ap- proval of Act. Stamps to be prepared. Contracts for. Stamps for sale by collect- ors. One per cent- um discount on purchase of stamps. SCHEDULE A STAMP TAXES Bonds, debentures, or certificates of indebtedness issued on and tur ^ n o r ' cer after the first day of December, nineteen hundred and fourteen, by oat* of imiebt- any association, company, or corporation, on each $100 of face value edness or fraction thereof, 5 cents, and on each original issue, whether on organization or reorganization, of certificates of stock by any such association, company, or corporation, on each $100 of face value or su e 33 WAR REVENUE LAW fraction thereof, 5 cents, and on all sales, or agreements to sell, or Shares or cer- memoranda of sales or deliveries or transfers of shares or cer- tificates of stock. tificates stoc k- j n anv association, company, or corporation, whether made upon or shown by the books of the association, com- pany, or corporation, or by any assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale, whether entitling the holder in any manner to the benefit of such stock, or to secure the future payment of money or for the future transfer of any stock, on each $100 of face value or fraction thereof, 2 cents : Sales of Transfer of Stock. (13) In reckoning the stamp tax on transfer or certificates of stock, the tax is reckqned on the face value. In reckoning this tax, the fact that only part of the face value of shares subscribed for and issued has been paid by the shareholders is not to be taken into consideration. (14) Where stock is sold at the par value of $100, and upon which it appears that only $25 have been paid, the tax is to be reckoned upon the face value of $100, and not upon the $25. (15) W T here one certificate represents several shares, the tax of 2 cents on each $100 or fraction thereof is to be reckoned on the face value of the certificate, and not on the face value of each separate share. (16) On transfer of one certificate representing 500 shares, $5 par value, the stamp tax required is 50 cents. (17) When stock is transferred for which no certificate has been issued, and the evidence of transfer is shown only by books of the company, the stamps should be placed upon such books. Where the change of owner- ship is by the transfer of a certificate, and the certificate contains a blank form of assignment on the back, which is filled in by the insertion of the name of the person to whom the stock is transferred, the stamp should be placed upon the certificate. (18) In case of an agreement to sell, or where the transfer is, by the de- livery of the certificate, signed in blank, the name of the transferee or ven- dee to be filled in afterwards, there should be made and delivered by the seller to the buyer a bill or memorandum of sale, to which the stamp should be affixed. (19) Where certificates of shares were sold and delivered before July 1, 1898, entry of transfer on corporate books after June 30 does not require stamp. (20) New certificates of stock issued to holder in lieu of original cer- tificate, and remaining in his ownership, do not require stamps. (21) When certificate of stock is sold and stamp tax is paid on memoran- dum thereof, upon transfer of this certificate to purchaser's name no ad- ditional tax for such transfer is required. Where one certificate represents several shares of stock (however large the number of shares), on transfer of this certificate the stamp tax is to be reckoned on its face value and not on the face value of each separate share of stock which it represents. (22) Transfers of stock from parties occupying fiduciary relationships to those for whom they held the stock are transfers subject to taxation. (23) A owes a certificate of 100 shares of stock; he transfers 50 shares to B ; there are two certificates of 50 shares each issued in lieu of the 100- share certificate, 50 shares going to A and 50 shares to B. The tax imposed is on the transfer to B ; there is no tax on A's transfer to himself. po^nTstock^s Provided, That it is not intended by this Act to impose a tax upon coital ex- an agreement evidencing a deposit of stock certificates as collateral security for money loaned thereon, which stock certificates are not actually sold, nor upon such stock certificates so deposited : Where written instruments or securities deposited in a bank are to 34 WAR REVENUE LAW Transfer of ownership by de- be held as collateral for a loan or indebtedness of the owner it is not taxable under this paragraph. 23 A. G., Op. 219. 23 A. G., Op. 54. Stock hypothecated by delivery of certificates without a written agree- ment accompanying it is not taxable under this paragraph. 22 A. G., Op. 54. Pledging of stock under a written agreement which contains a power of sale on default of condition is- taxable. 23 A. G., 616. A tax on sales is constitutional. U. S. v. Thomas, 115 Fed. Rep., 207. Bonds provided for in a mortgage , are not taxable until issued. 22 A. G., Op. 532. Provided further, That in case of sale where the evidence of sta ^ p e k d s . to be transfer is shown only by the books of the company the stamp shall be placed upon such books ; and where the change of ownership is by transfer certificate the stamp shall be placed upon the certificate ; and in cases of an agreement to sell or where the transfer is by delivery of the certificate assigned in blank there shall be made and iivery, method of delivered by the seller to the buyer a bill or memorandum of such stam P in &- sale, to which the stamp shall be affixed; and every bill or memo- randum of sale or agreement to sell before mentioned shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers. And any person or persons liable to pay the tax as herein provided, or anyone who acts in the matter as agent or broker for such person or persons, who shall make any such sale, or who shall in pursuance of any such sale deliver any such stock, or evidence or the sale of any such stock or bill or memorandum thereof, as herein required, without having the proper stamps affixed thereto, with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon con- viction thereof shall pay a fine of not exceeding $1,000, or be im- Penalty, prisoned not more than six months, or both, at the discretion of the court. (1) When a bond is said to be issued. Whenever a corporation issues a bond, and there accrues to the corporation a benefit or consideration for issuing the same, the bond is subject to taxation. (Vol. 2, Treas. Dec. (1898), No. 20156.) (2) Stamp tax; certificates of stock; sales and transfers of certificates of stock. (Vol. 2, Treas. Dec. (1898), No. 19607). (3) In reckoning the stamp tax on transfers of certificates of shares, the tax is reckoned on the face value. (Vol. 2, Treas. Dec. (1898), No. 19710.) (4) Transfers of shares or certificates of stock; how stamps are to be attached; stamp tax to be reckoned on face value of certificate. (Vol. 2, Treas. Dec. (1898), No. 19888.) (5) Transfers of stock from guardian to ward subject to taxation. (Vol. 2, Treas. Dec. (1898), No. 20070.) (6) Preferred stock issued in lieu of common stock not taxable when there is no change of ownership. (Vol. 1, Treas. Dec. (1898), No. 20694.) (7) Where brokers acting in behalf of their principals buy stock and receive stamped bills of sale in their own name, they may transfer such stock on the books of the corporation to the names of their principals with- out additional stamp tax. (Vol. 1, Treas. Dec. (1899), No. 20727.) (8) Certificates of stock of a foreign corporation when sold or delivered within the United States are liable to the same tax as certificates of stock of any domestic corporation. (Vol. 1, Treas. Dec. (1899), No. 20793.) (9) "Puts" and "calls." The Attorney General decided that the former are not subject to tax, but that the latter, being agreements to sell, are tax- able. (Vol. 1, Treas. Dec. (1899), No. 21151.) 35 WAR REVENUE LAW Sales or agree- ments to sell products at ex- changes or boards of trade. Memorandum of sale to be stamped. Form of. Penalty. (10) When a certificate of stock is presented for transfer and the power of attorney on the back thereof is dated prior to July 1, 1898, although the name of the transferee is not filled in until after that date, both the power of attorney and the certificate are required to be stamped. (Vol. 1, Treas. Dec. (1899), No. 21277.) (11) No tax on the closing of a stock transaction caused by margin be- ing exhausted because of market going against speculator. (Vol. 2, Treas. Dec. (1899), No. 21707.) (12) The circumstances under which the memoranda issued by brokers evidencing the sale or purchase of stock need or need not be stamped. (Vol. 2, Treas. Dec. (1899), No. 21711.) Upon each sale, agreement of sale, or agreement to sell, any prod- ucts or merchandise at any exchange, or board of trade, or other similar place, either for present or future delivery, for each $100 in value of said sale or agreement or sale or agreemnt to sell, 1 cent, and for each additional $100 or fractional part thereof in excess of $100, 1 cent. Provided, That on every sale or agreement of sale or agreement to sell as aforesaid there shall be made and delivered by the seller to the buyer a bill, memorandum, agreement, or other evidence of such sale, agreement of sale, or agreement to sell, to which there shall be affixed a lawful stamp or stamps in value equal to the amount of the tax on such sale. And every such bill, memorandum, or other After an agreement to sell stock on future delivery, no delivery is made but a settlement is had, such settlement not involving a re-sale does not require new memorandum and stamps. McClain v. Fleshman, 106 Fed. Rep., 880. Unless a memorandum or instrument required by this paragraph is made a stamp tax can not be collected and the remedy of the govern- ment is on the penalty. McClain v. Fleshman, 106 Fed. Rep., 880. A "call," being agreement to sell, is taxable. Treat v. White, 181 U. S., 265. ^ The tax imposed by this paragraph is constitutional. Nichol v. Ames, 173 U. S., 510. Sales of live stock at stockyards are included. evidence of sale or agreement to sell shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers ; and any person or persons liable to pay the tax as herein provided, or anyone who acts in the matter as agent or broker for such person or persons, who shall make any such sale or agreement of sale, or agreement to sell, or who shall, in pursuance of any such sale, agreement of sale, or agreement to sell, deliver any such products or merchandise without a bill, memorandum, or other evidence thereof as herein required, or who shall deliver such bill, memorandum, or other evidence of sale, or agreement to sell, without having the proper stamps affixed thereto, with intent to evade the foregoing provisions, shall be deemed guilty of a misde- meanor, and upon conviction thereof shall pay a fine of not exceeding $1,000, or be imprisoned not more than six months, or both, at the discretion of the court. That no bill, memorandum, agreement, or other evidence of such sale, or agreement of sale, or agreement to sell, in case of products or merchandise actually delivered at the time of sale or while in vessel, boat, or car, and actually in course of transportation, shall be 36 WAR REVENUE LAW subject to this tax, provided such bill, memorandum, agreement, or other evidence of such sale, or agreement or sale, or agreement to sell shall be accompanied by bills of lading or vouchers showing that the said products are actually in course of transportation as afore- said. SAI,E OF PRODUCTS OR MERCHANDISE ON EXCHANGE, ETC. (24) The provision relative to sales, or agreements to sell, of products or merchandise at any exchange or board of trade, or other similar place, and requiring the seller to give a bill or memorandum which shall be stamped, declared constitutional. (25) Sales of live stock at stock yards come within the law, the same being a similar place to an exchange or board of trade. (26) The tax is not a direct tax, nor a tax upon the business itself which is so transacted, but is a duty upon the facilities made use of and actually employed in the transaction of the business, separate and apart from the business itself. (Nicol v. Ames, 173 U. S., 509; vol. 1, Theas, Dec. (1899), No. 20984.) (27) Transactions of live-stock exchanges Duty of exchanges, when sale is made, or an agreement of sale, or an agreement to sell entered into, to give to buyer a bill, memorandum, or other evidence of such sale, and to place thereon the required stamp. (Vol. 2, Treas. Dec. (188), No. 19739.) (28) Tax on sales "at any exchange, or board of trade, or other similar place;" live stock comes within the classification of "any products or mer- chandise;" similar place" defined in reference to the selling of live stock; sales of live stock at such places as those defined subject to taxation. (Vol. 2, Treas. Dec. (1898), No. 20031.) (29) To constitute an exchange, board of trade, or other similar place, so as to subject the evidence of sale to tax, there must be more than one person, company, or partnership authorized to negotiate sales thereat. (Vol. 1, Treas. Dec. (1899), No. 21148.) (30) Bucket shops defined; tax on agreements to sell shares of stock or merchandise at such places. (Vol. 1, Treas. Dec. (1899), No. -21279.) (31) Sales of grain made at an exchange and sales of grain made by brokers in their own offices, held taxable. (Vol. 2, Treas. Dec. (1899), No. 21396.) (32) Transactions of live-stock exchanges Duty of exchanges, when sale is made, or an agreement of sale, or an agreement to sell entered into, to give to buyer a bill, memorandum, or other evidence of such sale, and to place thereon the required stamp. (T. D. 19739.) Promissory notes, except bank notes issued for circulation, and for each renewal of the same, for a sum not exceeding $100, 2 cents ; and for each additional $100 or fractional part thereof in excess of $100, 2 cents. PROMISSORY NOTES. Promissory notes, except bank notes issued for circulation, and for each renewal of the same, for a sum not exceeding $100, 2 cents; and for each additional $100 or fractional part thereof in excess of $100, 2 cents. (33) A judgment note is a promissory note and is required to be stamped as such. (T. D. 19652.) (34) Receipts accepted in lieu of promissory note, as evidence of money loaned, must be stamped as promissory notes. (T. D. 20985.) (35) Promissory notes under seal taxable same as other promissory notes, and not as bonds. T. D. 21691 revoked. (T. D. 21815.) (36) Checks used in lieu of promissory notes must be stamped at the rate of 2 cents per $100. (Vol. 2, Treas. Dec. (1898), No. 20463.) Following rulings are taken from Supplement to Internal Revenue Cir- cular No. 503, dated August 16, 1898: (37) Where a note or notes with detached interest-coupon notes are 37 WAR REVENUE LAW given, each coupon note requires a stamp in addition to the stamp placed on the principal note. (38) Interest coupons attached to bonds and surrendered as receipts for interest paid do not require a stamp. (39) Nd stamp is required upon the transfer by indorsement . issory notes. (40) Where notes secured by a deed of trust are used as collateral, the deed of trust and the notes are required to be stamped not on the basis of their face value, but on the amount for which they are pledged (that is to say, the memorandum of their pledge must be so stamped). This pledge of notes and deed trust does not require to be stamped again because of re- newals of the notes held as collateral if the pledge itself is not renewed. (Pledges not taxable under act of Oct. 22, 1914.) (41) Promissory notes which have matured and have been allowed to run without suit are held not to be renewed by the payment of interest. This is looked upon as a "forbearance" and not a renewal, the holder not relinquishing his right of action for any stated period. Bills .of lading Express and freight: It shall be the duty of every railroad or steamboat company, carrier, express company, or corporation or per- son whose occupation is to act as such, to issue to the shipper or consignor, or his agent, or person from whom any goods are accepted for transportation where a charge exceeding 5 cents is made a bill of lading, manifest, or other evidence of receipt and forwarding for each shipment received for carriage and transportation, whether in bulk or in boxes, bales, packages, bundles, or not so inclosed or h> cluded; and such shipper, consignor, agent, or person shall duly attach and cancel, as is in this Act provided, to each of said bills of lading, manifests, or other memorandum, a stamp of the value of 1 cent: EXPRESS AND FREIGHT BILLS OF LADING, ETC. United States v. Wells, Fargo & Co. Express (96 Fed., 835). Crawford v. Hubbell (89 Fed., 961). (42) The common carrier shall issue bills of lading, manifest, or other evidence of receipt and forwarding. "Shipment" defined! On a through bill of lading it is one shipment, though several modes of conveyance are em- ployed. Every separate shipment requires evidence that it has been made, and to the evidence the stamp is affixed. (Vol. 2, Treas. Dec. (1898), No. 19829.) (43) Opinion of the Attorney General, August 17, 1898, on the ques- tion whether the word "goods" includes money : Where an express com- pany receives money for transportation, it is regarded as "goods" under Schedule A, and a bill of lading must be issued therefor and a stamp affixed. (Vol. 2, Treas. Dec. (1898), No. 19970.) (44) Receipts, bills of lading, or manifests issued by express companies in cases of shipment of money and securities of the United States Govern- ment under contract for transportation of same are subject to stamp tax under act of 1898. (Vol. 2, Treas. Dec. (1898), No. 19996.) (45) The Attorney General holds that the law which makes it the duty of the carrier to issue a bill of lading or a receipt to a person from whom any goods are accepted for transportation, and to stamp the same, does not apply to baggage received by railroad companies and carried upon the same train with the owner, whether such baggage be the quantity allowed or- dinarily by the rules of the railroad company or is in excess of such amount. (Vol. 2. Treas. Dec. (1898), No. 20169.) (46) Exemption from tax of express matter carried for railroad com- pany free under contract with express company. (Vol. 2, Treas. Dec. (1898). No. 20240.) (47) Memorandum receipts for freight, afterwards exchanged for bills of lading, must be stamped when issued. (Vol. 2, Treas. Dec. (1899) No. 21688.) 38 WAR REVENUE LAW (48) Concerning the business of local expressmen and common car- riers. (Vol. 2, Treas. Dec. (1899), No. 21692.) (49) No tax on receipts issued for special-delivery baggage. T. D. 21668 revoked. (T. D. 13.) (50) When tax is paid on general bundle of newspapers, each pack- age in the general bundle which is taken therefrom and delivered at in- termediate points does not require a stamp. (T. D. 19846.) (51) Dray tickets or shipping receipts not surrendered for a stamped bill of lading must be themselves stamped. (T. D. 19887.) (52) Tax on bills of lading or receipts for goods accepted for trans- portation by express and freight companies Definition of "express business" within the meaning of the law. (T. D. 19965.) (53) Bills of lading or receipts from transportation companies may include more than one shipment therein, provided that a stamp or stamps amounting in value to 1 cent for each shipment shall be affixed thereto and canceled. (T. D. 20194.) (T. D. 2059.) Emergency revenue law Bills of lading. It is the duty of the carrier to see that the stamp is duly affixed and canceled when the bill of lading is issued and delivered to the shipper. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 18, 1914. SIR: This office is in receipt of your letter of the 14th instant, calling attention to the provision of the internal-revenue act of October 22, 1914, relative to bills of lading. You inquire whether the whole duty of the railroad company is performed when it issues such bill of lading, or whether it is the duty of the railroad company not only to issue the bill of lading but to refuse to accept the ship- ment until the shipper affixes the necessary internal-revenue stamp and can- cels it as required by law. In reply, you are informed that this matter has received consideration, and it is the opinion of this office that it is the duty of the railroad company to see that the stamp is duly affixed and canceled when the bill of lading is issued and delivered to the shipper. In reply to your other inquiries in regard to messages sent over the lines on the railroad, you are informed that messages or dispatches of the officers or employees concerning the affairs and service of the company sent over the wires on their respective railroads are exempt. If they do not relate to the business of the company, the exemption does not apply. Respectfully, ROBT. WILLIAMS, JR., Actinq Commissioner of Internal Revenue. Mr. . (T. D. 2065) Emergency revenue laze Bills of lading. The law requiring bills of lading to be stamped does not apply to local operators for the delivery of packages, baggage, and such like, within the limits of the same town or city. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 23, 1914. SIR: In reply to your letter of the 13th instant, you are informed that mere local operators for the delivery of packages, baggage, and such like, within the limits of the same town or city, are not required to give bills of lading. Although such operators may give a receipt for articles to be deliv- ered, such receipt is not required to be stamped. A mere carrier, as, for in- stance, a person with a horse and wagon, who does a local delivery business 39 WAR REVENUE LAW in a city or town, is not included within the above requirement. The car- riers which were intended to be included within the terms of Schedule A, under the head of "Express and freight," are such as are engaged in the transportation of express matter and freight from one place to another in the ordinary course of commerce and trade. Respectfully, ROBT. WILLIAMS, JR., Acting Commissioner of Internal Revenue. Mr. . The* tax on foreign bills of lading is unconstitutional as a tax on exports. Fairbanks v. United States, 181 U. S., 284. Goods shipped from the United States to Canada or Mexico by rail are not taxable under this paragraph. 24 A. G., Op. 44. The word "goods" includes money. 22 A. G., Op. 178. This applies to money and goods transported for the government under a contract. An excess baggage receipt issued by a railroad company does not re- quire a stamp. 22 A. G., Op. 246. Goods carried by an express company for a railroad company over the lines of the latter, free of charge, are not subject to this paragraph. 22 A. G., 252. The tax on the manifest of a ship for clearance for a foreign port is void as a tax on exports. New York & Cuba Mail S. S. Co. v. United States, 125 Fed. Rep., 320. No liability is imposed on a carrier for refusal to accept goods. Wil- kins v. United States, 96 Fed. Rep., 835. The carrier is not required to pay the tax itself. American Express Co. v. Michigan, 177 U. S., 404. Reversing Attorney General v. American Express Co., 77 N. W., 317. But this paragraph does not prevent a state commission from fixing rates in such a manner that the carrier must pay the tax itself. Trammel! v. Dinsmore, 102 Fed. Rep. 794, reversing Dinsmore v. Southern Express Co., 92 Fed. Rep., 714; also 183 U. S., 116. Freight and Express Receipts. Paragraph 5 of Schedule A requires every railroad or steamboat com- pany, carrier, express company, or corporation or person whose occupation is to act as such, to issue to the shipper or consignor, or his agent, or person from whom any goods are accepted for transportation when a charge ex- ceeding 5 cents is made a bill of lading, manifest, or other evidence of receipt and forwarding for each shipment received. A literal compliance with this requirement is in some cases impracticable or impossible. It is, therefore, provided that where freight is accepted at nonagency stations, it must be receipted for by conductors accepting it. He must see to it that an internal-revenue stamp of 1 cent denomination is attached to each of such receipts and canceled as required by these regulations before such shipments are accepted for transportation: Provided, however, That in the event shipments, so offered are of a perishable nature, or are likely to deteriorate by delay, or to obstruct sidings or other facilities by being refused for lack of a compliance with the provisions of the act, or if snippers or their representatives are not at such nonagency stations to receive or to stamp such receipts, conductors may accept and transport such nonagency shipments to destination in advance of the affixing of the stamp. In such cases, receipts issued by the conductors must not be surrendered to the shipper, but must be delivered with the freight to the destination agent, who, in such cases, must present the consignor's receipt to the consignee and demand that it be stamped and the stamp canceled by him as agent for the shipper before delivery of the shipment. If a nonagency shipment be destined to another nonagency station, and the tax is not paid by the shipper, the conductor's receipt therefor must be indorsed "Stamp tax not paid," and it must be delivered with the freight to the agent at the nearest agency station to the destination of the shipment for execution and delivery of the receipt by and to the consignee. If a nonagency shipment, upon which the tax is not paid \ WAR REVENUE LAW by the shipper, be destined to a point on another railway, the agent at the junction point at which the shipment is delivered to the connecting line must indorse on the delivery slip or manifest for such shipment "Stamp tax not paid," which delivery slip shall follow to the delivery station, the agent at which shall collect the tax before delivery of the freight. Shipments of milk or cream, consisting of one or more cans, shipped by one shipper to one consignee on the same date and train to which milk or cream tickets are attached, will be regarded as one shipment, and to one of the milk tickets a stamp must be affixed, unless other evidence of receipt is issued, in which case the other evidence shall be properly stamped. Switching tickets covering local switching orders for which a charge is made, covered by no bill of lading, will be regarded and stamped as evi- dences of receipt. Dray tickets, or shippers tickets, will be regarded and stamped as evi- dences of receipt, unless surrendered for a bill of lading. Baggage checks for the transportation of bicycles, dogs, baby carriages, etc., will be regarded as evidences of receipt and should be properly stamped. No stamp is required upon Federal and State Government shipments of Government or State property, for which, if a stamp were issued, the Federal Government or State government would be required to pay. Passage Tickets. . A tax is imposed on tickets sold in the United States for passage by any vessel to a foreign port where the amount charged is in excess of $10, and whether the vessel for which the ticket is sold sails from a port of the United States or not. It is the duty of the person selling the ticket to affix and cancel the stamp to the ticket or paper which evidences the sales, namely, the coupon or order, at the time same is sold. Where a single ticket is issued for transportation of more than one passenger, the ticket, coupon, or prepaid order must be stamped at the proper rate for each passenger based upon the number of passengers and the total amount paid for the transportation. Where proxies are sent out by corporations to be executed and returned to the corporation or to the person named in proxy, such proxies may be stamped after execution and delivery by the person receiving same as the agent of the person executing the proxy. Provided, That a consignment of newspapers to any one point ?ut one re- 1 . rr . , .. . i i 1 quired on bun- or to different points by the same tram or conveyance when inclosed dies of news- in one general bundle at the point of shipment shall be considered as papers - one shipment, an, in lieu of a bill of lading therefor, the publisher of such newspaper shall file on or before the fifteenth day of each month with the collector of internal revenue for the district in which such newspaper is published a report under oath showing the number of such shipments during the preceding month, to which report such publisher shall affix and cancel stamps equal in value to 1 cent for each shipment so reported : Provided further, That the report herein required shall not include shipments of newspapers delivered to points within the county in which the same are published. Any failure to issue such bill of lading, manifest, or other memorandum, as herein provided, shall subject such railroad or steamboat company, carrier, express com- pany, or corporation or person to a penalty of $50 for each offense. Telegraph and telephone messages : It shall be the duty of every Telephone person, firm, or corporation owning or operating any telegraph or r telephone line or lines to make within thirty days after the expiration of each month a sworn statement to the collector of internal revenue in each of their respective districts, stating the number of dispatches, 41 WAR REVENUE LAW Monthly state- ment. One cent tax. But one tax to be imposed. Messages of of- ficers and em- ployes exempt. messages, or conversations originated at each of their respective exchanges, toll stations, or offices, and transmitted thence over their lines during the preceding month for which a charge of 15 cents or more was imposed, and for each of such messages or conversations the said person, firm, or corporation shall collect from the person paying for the message or conversation a tax of 1 cent in addition to the regular charges for the message or conversation, which tax the said person, firm, or corporation shall in turn pay to the said collector of internal revenue of their respective districts : Provided, That only one payment of said tax shall be required, notwithstanding the lines of one or more persons, firms, or corpora- tions shall be used for the transmission of each of said messages or conversations : Provided further, That the messages or dispatches of the officers and employees of any telegraph or telephone company concerning the affairs and service of the company, and like messages or dis- patches of the officials and employees of railroad companies sent over the wires on their respective railroads shall be exempt from this requirement: And provided -further, That messages of officers and employees of the Government on official business shall be exempt from the taxes herein imposed upon telegraphic and telephonic messages. (T. D. 2058.) Emergency revenue law Telegraph and telephone messages. Law and instructions relative to the tax imposed on telegraph and telephone messages by the act of October 22, 1914, effective December 1, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, on, D. (,., November 13, Instructions. 1. A company shall make one report and one return for the company as a whole and not for each of its exchanges and toll stations separately. Such report and return shall be made to the collector of internal revenue of the district in which the company's principal office is located. 2. Every company shall include in its report all taxable messages orig- inated by it without regard to the ownership of toll lines used in transmitting those messages. Telephone companies receiving messages to be retransmitted over the lines of a telegraph company, or telegraph companies receiving mes- sages to be retransmitted over the line of a telephone company, will be re- garded as the point where such messages originate. In such cases the com- pany retransmitting such messages will not be required to include the same in its monthly return. Where, however, a message sent over a telephone line is received directly from the sender, the company receiving and transmitting the same will, in such case, be regarded as the point of origin, and will in- clude all such taxable messages in its 'monthly return. A reversed message shall be considered as originating at the point of collection. 3. Reports and returns may be made by a company for its fiscal month or billing period to be filed within 30 days after expiration of fiscal month, provided full return is made for the period during which the tax is to be collected. 4. Additions may be made any month for errors on the previous month's reports and returns. Reductions covering items reported in excess in previous months not allowable. In such cases amended returns may be filed before assessment is made, otherwise claim for abatement or refund, as the case may be, should be filed. 5. Messages originating at automatic telephone stations, for each of 42 WAR REVENUE LAW which a charge of 15 cents or more was made, are subject to tax, and com- panies owning or operating such stations must include all such messages in their monthly returns. The method of collecting the tax from the senders of such messages is a matter wholly within the province of the companies receiving and transmitting the messages. 6. All overtime telephone messages, where the initial rate is less than 15 cents, but the total charge, on account of the overtime, brings the charge to 15 cents or more, are subject to tax. 7. Messages transmitted over private leased circuits and relating ex- clusively to the business for which the circuit was leased are held to be exempt from tax. Where, however, any such leased circuit is used for the transmission of messages other than above stated, return for all such mes- sages for which a charge of 15 cents or more would ordinarily be made must be rendered monthly by tne lessee. 8. Messages or dispatches of officers and employees 'of the company concerning the affairs and service of the company, and like messages or dis- patches of officials and employees of railroad companies sent over the wires on their respective railroads, are exempt from tax. Franked messages, if of a private character, for which a charge of 15 cents or more would other- wise be charged, do not come within the exemption above referred to, and should be included in the return made. 9. Messages of officers and employees of the United States Government on official business and like messages of State officials are exempt from tax. ROBT. WILUAMS, JR., Acting Commissioner of Internal Revenue. Approved. W. G. McAooo, Secretary of the Treasury. Regulations. 1. A company shall make one report and one return for the company as a whole and not for each of its exchanges and toll stations separately; such report and return shall be made to the collector of internal revenue of the district in which the company's principal office is located. 2. Every company shall include in its report all taxable messages origi- nated by it without regard to the ownership* of toll lines used in transmit- ting those messages. Telephone companies receiving messages to be re- transmitted over the lines of a telegraph company, or telegraph companies receiving messages to be retransmitted over the line of a telephone company, will be regarded as the point where such messages originate. In such cases the company retransmitting such messages will not be required to include the same in its monthly return. Where, however, a message sent over a telephone line is received directly from the sender, the company receiving and transmitting the same will, in such case, be regarded as the point of origin, and will include all such taxable messages in its monthly return. A reversed message shall be considered as originating at the point of collection. 3. Reports and returns may be made by a company for its fiscal month or billing period to be filed within 30 days after expiration of fiscal month, provided full return is made for the period during which the tax is to be collected. 4. Additions may be made any month for errors on the previous month's reports and returns. Reductions covering items reported in excess in previous months not allowable. In such cases amended returns may be filed before assessment is made, otherwise claim for abatement or refund, as the case may be, should be filed. 5. Messages originating at automatic telephone stations for each of which a charge of 15 cents or more was made are subject to tax, and com- panies owning and operating such stations must include all such messages in their monthly returns. The method of collecting the tax from the senders of such messages is a matter wholly within the province of the companies receiving and transmitting the messages. 6. All overtime telephone messages where the initial rate is less than 15 cents, but the total charge, on account of the overtime, brings the charge to 15 cents or more, are subject to tax. 43 WAR REVENUE LAW 7. Messages transmitted over private leased circuits and relating exclu- sively to the business for which the circuit was leased are held to be exempt from tax. Where, however, any such leased circuit is used for the trans- mission of messages other than above stated, return for all such messages for which a charge of 15 cents or more would ordinarily be made must be rendered monthly by the lessee. 8. Messages or dispatches of officers and employees of the company concerning the affairs and service of the company, and like messages or dis- patches of officials and employees of railroad companies sent over the wires on their respective railroads, are exempt from tax. Franked messages, if of a private character, for which a charge of 15 cents or more would otherwise be charged, do not come within the exemption above referred to, and should be included in the return made. 9. Messages of officers and employees of the United States Government on official business, and like messages of State officials, are exempt from tax. Messages or dispatches of officials and employees of railroad companies sent over wires not on their respective roads, for which a charge of 15 cents or more is made (including pro rata charges on messages sent in excess of free messages allowed under contracts with such railroads), are subject to tax. A telegraph company is not required to send a message on which the sender has not affixed the stamp. Kirk v. Western Union Tel. Co., 90 Fed. Rep., 809. Western Union Tel. Co. v. Henley (1901), 157 Ind. 50. TELEGRAPH AND TELEPHONE MESSAGES. (54) Exemption in favor of dispatches sent by State officers in dis- charge of their official duties. (T. D. 19704.) (55) Telegraphic messages of railroad companies concerning the affairs and service of the companies, when exempt. (T. D. 19794.) (56) Exemption from stamp tax of telegrams of foreign diplomatic officers residing in this country. (T. D. 20060.) (57) Telegraph messages of associated steamship lines, or fast freight lines operating over railroads, not entitled to exemption from stamp tax under section 18, act of June 13, 1898. (T. D. 20066.) (58) The fact that an individual holds a telegraph frank has no bear- ing upon the question of liability or nonliability to stamp tax of the mes- sage sent by such frank holder. (T. D. 20066.) Bonds. Bond : For indemnifying any person or persons, firm, or corpora- tion who shall have become bound or engaged as surety for the pay- ment of any sum of money, or for the due execution or performance of the duties of any office or position, and to account for money received by virtue thereof, and all other bonds of any description except such as may be required in legal proceedings, not otherwise provided for in this schedule, 50 cents. INDEMNITY OR OTHER BONDS. (59) Bonds of municipal officers required to be stamped. (Vol. 2, Treas. Dec. (1898), No. 19686.) (60) Tax on renewal of bonds of fidelity companies taking effect on or after July 1, 1898. (Vol. 2, Treas. Dec. (1898), No. 19845.) (61) Tax on bonds required before a person can enter on the duties of a State office not a tax on the functions of a State government. (Vol. 1, Treas. Dec. (1899), No. 20510.) (62) Bonds of notaries public are subject to a tax. (Vol. 1, Treas. Dec. (1899), No. 20547.) (63) Dramshop bonds. (United States v. Ambrosini, vol. 3, Treas. Dec. (1900), Int. Rev. No. 40.) (64) Bonds required in legal proceedings. Bonds of administrators, executors, guardians, and receivers appointed by the courts not taxable. (Vol. 1, Treas. Dec. (1899), No. 20756.) (65) Opinion of the Attorney General that bonds given by private in- 44 WAR REVENUE LAW clividuals secured by mortgages are taxable as bonds of any description not otherwise provided for, and not as promissory notes. (Vol. 1, Treas. Dec. (1899), No. 20788.) (66) Bonds given under section 3297, Revised ^Statutes, by officers of State institutions for alchohol to be used for scientific purposes not subject to stamp tax. (Vol. 1, Treas. Dec. (1899), No. 20876.) (67) Stamps required on bonds of distillers, brewers, and other manu- facturers, when given in duplicate or triplicate, only the original to be stamped. Modification of Treasury ruling No. 19707, of July 18, 1898. (Vol. 1, Treas. Dec. (1899), No. 21312.) (68) Guaranties accompanying proposals taxable the same as bonds. (Vol. 2, Treas. Dec. (1899), No. 21609.) (69) Bonds of industry, and fidelity and guaranty insurance. (Vol. 3, Treas. Dec. (1900), Int. Rev. No. 15.) (70) Warehousing bonds taxable under Schedule A, act of June 13, 1898. (T. D. 19609.) (71) Instructions in regard to stamping bonds of brewers, manufacturers of tobacco, manufacturers of cigars, distillers, etc. (T. D. 19707.) (72) Bonds issued by guaranty companies in Canada guaranteeing the fidelity of employees, individuals, or corporations in the United States. (T. D. 19738.) (73) When a bond is said to be issued Whenever a corporation issues a bond and there accrues to the corporation a benefit or consideration for issuing the same the bond is subject to taxation. (T. D. 20156.) (74) Bond or private person secured by mortgage considered in rela- tion to opinion of the Attorney General and amendment to Schedule A, approved February 28, 1899. (T. D. 20796.) (75) Where fidelity or guaranty companies become sureties on bonds", tax is due and payable whenever the premiums are paid. Method of paying tax. Tax on renewal of bonds. (T. D. 21666.) (76) The conveyance used under the statutes of the State of Georgia in cases where the payment of a debt is secured by pledging of real estate is taxable under the paragraph in Schedule A relating to mortgage or pledge. The "bond to reconvey" is subject to a tax of 50 cents. (T. D. 21667.) (77) A bond filed by order of court to obtain a decree or order for the sale of real estate is a bond given in a legal proceeding and is exempt from tax. (78) Bonds given by public officers, such as sheriffs, clerks, registers or recorders of deeds treasurers of counties, cities, or towns, or other public officers of like character are required to be stamped. (79) Mere agreements to build houses are not taxable, but if bonds are included for the faithful performance of work or contracts, they are held to be subject to tax as bonds. (80) Bonds issued by guaranty companies in Canada guaranteeing the fidelity of employees, of individuals, or corporations in the United States, executed and delivered in Canada, are not taxable, but if they are not valid until countersigned or delivered by the agent in the United States, they should be stamped. (81) Marriage bond requires a stamp of 50 cents. (82) Bonds "required in legal proceedings" are exempt from stamp tax. Bonds required by the City of Chicago or State of Illinois as a con- dition precedent to granting a liquor license are not taxable. Ambrosini v. United States, 187 U. S., 1; United States y. Owens, 100 Fed. Rep., 70. A bond required by a notary as qualification for office is exempt. Warwick v. Bettman, 102 Fed. Rep., 127, affirmed 108 Fed. Rep., 46. Certificate of profits, or any certificate or memorandum showing r o| t r s tifi e t a c te of an interest in the property or accumulations of any association, com- pany, or corporation, and on all transfers thereof, on each $100 of face value or fraction thereof, 2 cents. 45 WAR REVENUE LAW Certificate of Certificate : Any certificate of damage, or otherwise, and all other certificates or documents issued by any port warden, marine sur- veyor, or other person acting as such, 25 cents. Certificates Certificate of any description required by law not otherwise speci- not enumerated. 1Q CERTIFICATES. (83) Liability for recording or registering documents required by law to be stamped, unless stamps are affixed and canceled. (T. D. 19681.) (84) Certain certificates made by national banking associations not liable. (T. D. 19698. (85) Stamping certificates of damage to vessels, 25-cent stamp required on originals but none on copies. (T. D. 19706.) (86) Letters of administration and other probate papers, certificates of sale for unpaid taxes, and certificates of redemption, no stamp required. (T. D. 19837.) (87) Teachers' certificates issued by State or county officers do not re- quire a stamp Certificates required by law, issued by State officers at re- quest of private persons, solely for private use, require a stamp. (T. D. 19883.) (88) Certificates of inspection of steam vessels and all copies thereof are exempt from taxation. (T. D. 20387.) (89) Certificates of authority issued to insurance agents by State of- ficers are subject to taxation, and the rate imposed is 10 cents on each certifi- cate. (T. D. 20551.) (90) Certificates as to use of alcohol withdrawn from bond for scien- tificate purposes under section 3297, Revised Statutes, held to be not subject to ;gtamp tax under act of June 13, 1898. (T. D. 20980.) (91) Certificates attached to depositions to be used in legal proceedings not taxable. (T. D. 9.) Following rulings are taken from supplement to Internal Revenue Cir- cular No. 503, dated August 16, 1898: (92) Certificates required by law issued by any department or officer of the Government at the request of private persons, solely for private use, should be stamped. The stamp should be furnished by the person applying for the instrument and for whose use and benefit the same is issued, and should be affixed before the document is delivered. (93) Certificates of officers of the United States given in the discharge of official functions necessary in carrying on the machinery of the Gov- ernment are exempt. (94) Certificates issued by an officer of the State, in the interest of the State, are not liable to tax. (95) Any documents, the stamping of which would make it necessary that the State should furnish and affix the stamp, are held to be exempt from the stamp tax. (96) Return of birth, certificate of death, and certificates of the regis- trar as to the facts declared concerning birth, marriage, and death are none of them held to be subject to the stamp tax imposed upon certificates, in view of the fact that these certificates are given in pursuance of State laws for public purposes. (97) Certificates issued by the health officer of New York, under State statute, relative to the employment of children, are exempt, being issued in the discharge of a duty connected with the operations of the Govern- ment. (98) A marriage certificate, to be returned to any officer of a State, county, city, or town, to constitute part of a public record, requires no stamp. A marriage certificate issued by the officiating clergyman or magistrate and given to the parties, if required by law, must be stamped at the rate of 10 cents. (99) A teacher's certificate issued by a county superintendent of public instruction or other officer of State, county, or municipality comes within the exemption provided by section 17 of the act, and does not require a stamp. 46 WAR REVENUE LAW These certificates, given under regulations adopted in connection with public schools, are held to be for governmental purposes rather than for private use. (100) A mercantile license or liquor dealer's license, being a certificate required by the law of a State or ordinance of a city in the exercise of the functions governmental, taxing, or municipal of the State or corporation, comes within the exemption. (101) Inspectors and weighers of grain who give certificates under State laws are not required to stamp such certificates. They are exempt under section 17. (102) No stamp is required upon certificates of the sufficiency of sure- ties upon bonds. (103) A stamp is required on a certificate of incorporation. (104) The certificate of a clerk of court to the qualifications of a notary public, or justice of the peace, is held to be a certificate requiring a stamp. (105) An architect's certificate requires no stamp, unless, by an in- dorsement, it becomes an order for the payment of money. (106) A certificate of acknowledgment to a deed where the con- sideration of the deed is $100 or less, or to a mortgage where the con- sideration is $1,000 or less, does not require a stamp. (See also No. 119.) (107) Certificates issued at tax sale or certificates of redemption from tax sale do not require stamps. (108) Certificate of "proof of loss" for use of an insurance company, being a statement made as to the facts and circumstances attending a fire, is not a certificate requiring a stamp. (109) Certificates required by law, which are made by court officers unnder the direction and authority of the court, and which are necessary to give proper effect to the court proceedings, are exempt. (110) Court processes, such as summonses, writs of attachment, sub- poenas, warrants, orders of court, etc., are not required to be stamped. (111) Certificates of protest of every note, bill of exchange, etc., whether protested by a notary public or by any officer duly authorized by law, must be stamped. Rulings from Circular No. 503, revised November 14, 1898 : (112) "Certificates of any description required by law not otherwise specified in this act, 10 cents." The first requirement necessary to sub- ject any given certificate thus generally described to tax is that it shall be one which is required to be given by law, national, State, or municipal. All such are taxable those coming within the exemption of section 17 that is to say, those which are given strictly in the exercise of the func- tions govermental, taxing, or municipal of the State or corporation. (113) Certificates given by an officer, not for a public or governmental purpose, but for private interests and use, are liable to the tax if they are given in obediance to any law which requires them to be given when called for. (114) A certificate of search showing that the dockets or records of a court have been searched, and show either that lines exist or do not exist as to property, or that judgments are recorded or are not recorded, and also certificates of search to ascertain whether or not titles are good, whether taxes have been paid, and other certificates of this character are not such as are required in the general discharge of governmental func- tions on the part of the officers giving them, but are such as are needed for private use and private interests, and are, therefore, subject to the tax, as being required by law to be given when called for. (115) If the act performed, or the certificate issued by the officer is in the discharge of an official function necessary in operating the general machinery of the Government, it is exempt. (116) Certificates of acknowledgment of deeds and mortgages are not required to be stamped. The memorandum on the back of a deed or mort- gage, made by the register or recorder, that the instrument has been placed upon record, is not subject to taxation. It is not a certificate such as is contemplated by the law. It is a brief note on the back of the deed or mortgage citing date of filing and date and place of record. 47 Brokers' tract. * WAR REVENUE LAW (117) Certificates of birth, marriage, and death, given in pursuance of the laws of the State requiring the collection and registration of vital statistics as a basis for the administration of public health laws, come within the exemption of section 17. Such certificates, however, when is- sued to private persons for private use, are subject to the 10-cent stamp tax. Contract : Broker's note, or memorandum of sale of any goods or merchandise, stocks, bonds, exchange, notes of hand, real estate, or property of any kind or description issued by brokers or persons acting as such, for each note or memorandum of sale, not otherwise provided for in this Act, 10 cents. Conveyance. CONTRACTS. (118) The original note or memorandum of sale is alone subject to the tax of 10 cents when made by a broker or one acting as such, and the tax in payable by said broker or one acting as such; the duplicate or the copy of the original memorandum of sale is not taxed. (119) A mere memorandum accompanying an offer to purchase is subject to the tax only provided the offer is accepted, and should be stamped by the broker on the acceptance of the offer. (120) A statement of account showing the receipts and disbursements in connection with a sale, and not being the contract of sale, does not require a stamp. (121) A broker's memorandum of a sale of promissory notes ("notes of hand") requires the 10-cent stamp. Conveyance : Deed, instrument, or writing, whereby any lands, tenements, or other realty sold shall be granted, assigned, trans- ferred, or otherwise conveyed to, or vested in, the purchaser or pur- chasers, or any other person or persons, by his, her, or their direc- tion, when the consideration or value of the interest or property conveyed, exclusive of the value of any lien or encumbrance thereon, exceeds $100 and does not exceed $500, 50 cents; and for each addi- tional $500 or fractional part thereof in excess of $500, 50 cents: (T. D. 2042.) Emergency revenue law Stamp tax on deeds. Deeds delivered on and after December 1, 1914, must be stamped. Registers and recorders are required to take ^notice that instruments are stamped before accepting for record. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 31, 1914. SIR: This office is in receipt of your letter of the 27th instant, in which you request to be informed if it would be necessary, under the internal- revenue act of October 22, 1914, to attach stamps to a deed of real property dated, executed, and acknowledged prior to December 1, 1914, and also delivered prior to that date to a third party for account of the grantee named in the deed, the delivery, however, from such third party to the grantee named in the deed taking place subsequent to December 1, 1914. In reply, you are informed that the deed should be stamped before de- livery, which takes place after the law goes into effect. You also request to be informed if a deed delivered to the grantee 48 WAR REVENUE LAW named therein subsequent to December 1, 1914, could be recorded without the recording officer being required to see that stamps were attached. In reply to this inquiry you are informed that section 13 of the act reads as follows : That it shall not be lawful to record or register any instrument, paper, or document required by law to be stamped unless a stamp or stamps of the proper amount shall have been affixed and canceled in the manner pre- scribed by law. As this section of the law will become effective December 1, 1914, reg- isters and recorders will be required on and after that date to take notice that all instruments required to be stamped are stamped before accepting same for record. Respectfully, ROBT. WILUAMS, JR., Acting Commissioner of Internal Revenue. Mr. . Provided, That nothing contained in this paragraph shall be so construed as to impose a tax upon any instrument or writing given to secure a debt. CONVEYANCES. (122) Referee's deed. Decision of New York Supreme Court. (Lor- ing v. Chase, Vol. 1, Treas. Dec. (1899), No. 2079*4.) (123) A conveyance of realty by a master commissioner must have necessary stamps to be receivable for record. (Farmers' Loan and Trust Co. v. Council Bluffs Gas and Electric Light Co. (1898,) 90 Fed., 806. Vol. 1, Treas. Dec. (1899), No. 20952.) (124) Taxation of conveyances of realty sold subject to mortgage. Decision of Judge Taft in United States Circuit Court for Southern Dis- trict of Ohio considered. (Vol. 1, Treas. Dec. (1899), No. 21314.) (125) Escrow deeds are not subject to taxation until final delivery. (Vol. 2, Treas. Dec. (1898), No. 20096.) (126) A contract for deed used in selling real estate is not subject to stamp tax. (Vol. 2, Treas. Dec. (1898), No. 20065.) (127) Releases of mortgages and deeds of trust operating as mort- gages are not subject to taxation, no matter in what form they are executed. (Vol. 2, Treas. Dec. (1898), No. 20440.) (128) Deeds of masters in chancery are required to be stamped. (Vol. 2, Treas. Dec. (1898), No. 20311.) (129) Warranty deed with vendor's lien taxed as a conveyance of land. No mortgage tax imposed thereon. (Vol. 2, Treas. Dec. (1898), No. 20320.) (130) When a partition deed is operative in defining boundary lines or in showing by location each tenant in common's interest, no tax accrues. (Vol. 1, Treas. Dec. (1899), No. 20792.) (131) A deed or mortgage executed and delivered prior to July 1, 1898, is subject to stamp tax when offered for registration after that date in States where, by State law, registration is necessary to pass title or establish valid lien. (Vol. 1, Treas. Dec. (1899), No. 20838.) (132) Conveyance of a mine located on unpatented land is subject to taxation. (Vol. 1, Treas. Dec. (1899), No. 20986.) (133) Decision construing the clause in Schedule A relative to stamps on conveyances. United States Circuit Court, Western District of Missouri. (Vol. 3, Treas. Dec. (1900), Int. Rev. No. 51.) (134) Deeds of conveyance executed by and between tenants in com- 49 WAR REVENUE LAW Entry of goods at Custom House. Withdrawal. mon not taxable. Deeds of conveyance executed by and between joint tenants taxable. (Vol. 1, Treas. Dec. (1899), No. 21283.) (135) Conveyance of realty to trustees or other persons without a valu- able consideration not taxable. (Vol. 3, Treas. Dec. (1900), Int. Rev. No. 52; Circular 555, Mar. 9, 1900.) (136) A deed of conveyance conveying real estate that lies in countries that are not United States territory is not subject to taxation, though the frantor and grantee may both be citizens and residents of the United tates. (Vol. 2, Treas. Dec. (1899), No. 21562.) (137) Deeds that are simply confirmatory and do not vest title not already vested are exempt from tax; same as to deeds of partition. (Cir- cular No. 503, 2d revision. Compilation of decision for year 1899, p. 293.) (138) If a deed does not grant, assign transfer, or convey to the pur- chaser any lands, tenements, or other realty, but only the right to burial, to erect monuments, etc., it does not require a stamp. (T. D. 19838.) (139) The words of purchase in the paragraph of the law relating to stamps on conveyances include all changes of title except those occurring by descent or operation of law. (T. D. 20195.) Modified by circular 555 of March 9, 1900. Only those where a valu- able consideration, capable of estimation in money value, passes. (140) Quitclaim deed taxable according to value of the property in- terest conveyed. (T. D. 20232.) (141) Contracts for sale of land taxable if they vest title; if pro- vision is made for future delivery of deed, they are not taxable. (T. D. 20310.) (142) Ground-rent deed incorporated in the following ruling taxable as a conveyance and not as a lease. (T. D. 21537.) (T. D. 2060.) Emergency revenue law Stamp tax on deeds and mortgages. Stamp required on bond accompanying a mortgage ; stamp not required on certificate of officer taking acknowledgment of deeds and mortgages. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 20, 1914. SIR: This office has received letters from parties in your district making inquiries in regard to stamp tax on deeds and mortgages under the internal- revenue act of October 22, 1914. You are informed that a stamp is required upon the bond accompanying a mortgage. It comes under the provision for stamp tax of 50 cents on all bonds of any description, except such as may be required in legal proceed- ings. A stamp is not required upon the certificate of the officer taking ac- knowledgment of deeds and mortgages. Respectfully, ROBT. WILUAMS, JR., Acting Commissioner of Internal Revenue. Mr. . NOTE. The act of June 13, 1898, taxed conveyances upon the whole value of the consideration, while the act of October 22, 1914, taxes such instruments on the value exclusive of the value of any lien or incumbrance thereon. Entry of any goods, wares, or merchandise at any customhouse, either for consumption or warehousing, not exceeding $100 in value, 25 cents ; exceeding $100 and not exceeding $500 in value 50 cents; exceeding $500 in value, $1. Entry for the withdrawal of any goods or merchandise from cus- toms bonded warehouse, 50 cents. CUSTOMHOUSE ENTRIES. 143) btamps on customhouse entries, bonds, etc. (T. D. 19605 ) 50 WAR REVENUE LAW Insurance : Each policy of insurance or other instrument, by what- j c ? surance po1 " ever name the same shall be called, by which insurance shall be made or renewed upon property of any description (including rents or profits), whether against peril by sea or on inland waters, or by fire or lightning, or other peril, made by any person, association, or corporation, upon the amount of premium charged, one-half of 1 cent on each dollar or fractional part thereof : (T. D. 2043.) Emergency revenue lazv Policies of fire insurance. Stamp tax on policies of fire insurance under act of October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 6, 1914. SIR: This office is in receipt of your letter of the 6th instant in regard to stamp tax on policies of fire insurance under the act of October 22, 1914. You desire a ruling on policies made, signed, and issued by brokers and agents prior to December 1, 3914, on renewals of business expiring after December 1, 1914. A policy does not require a stamp until it is issued. If the policy is issued in due course of business, delivered and accepted in such a way as to be legally binding upon the parties before December 1, 1914, it would not be subject to the tax imposed by the recent act. Respectfully, W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2062.) Emergency revenue law Stamp taxes. Stamp tax on bonds and policies of insurance. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 20, 1914. SIR: This office is in receipt of your letter of the 19th inst., in regard to the stamp tax on bonds and policies of insurance under Schedule A, act of October 22, 1914, effective December 1. The ruling of this office is as follows : Had Congress made no other provision for the taxation of bonds except in the language here quoted, every bond, in its broadest term, would have been subject to but one tax fixed specifically at 50 cents. Following this, however, and under the head of "Insurance," the law says : . "Each policy of insurance, or bond, or obligation of the nature of indem- nity for loss, damage, or liability issued, or executed, or renewed by any person, association, company, or corporation, transacting the business of fidelity, employer's liability, * * * or other branch of insurance, * * * and each bond undertaking or recognizance, conditioned for the performance of the duties of any office or position, or for the doing or not doing of any- thing therein specified, or other obligation of the nature of indemnity, * * * upon the amount of premium charged, one-half of 1 cent on each dollar or fractional part thereof." There appears to be no ambiguity or difficulty of interpretation or recon- ciliation of the two provisions of this act. First. Every bond of every description and kind, in its broadest sense WAR REVENUE LAW panics exempted. and meaning, without regard to its form, where sureties are added, for in- demnifying any person or corporation, government or otherwise, is subjqc to the 50 cent tax if the sureties consist of any person, corporation, or other entity, except "persons, companies or corporations transacting the business of fidelity, etc., insurance." Second. If the sole surety or sureties upon any bond undertaking, recognizance" of any character, kind or description, "conditioned for the performance of the duties of any office or position, or for the doing or not doing of anything therein specified, or other obligation of the nature of in- demnity," is executed or guaranteed by any liability, fidelity, or guaranty or surety company, the tax upon the amount of premium charged is one-half of 1 cent on each dollar or fractional Dart thereof, and no other tax of any character or kind is required to be paid upon such bond, undertaking,^ agree- ment, or clause made for the purpose of indemnifying any person, Govern- ment, or any other thing. This office will not be governed by any interpretation, regulation, or ruling of construction on this subject made under the similar provisions of the war revenue act of 1898 inconsistent with the above. Respectfully, ROBT. WILLIAMS, JR., Acting Commissioner of Internal Revenue. Mr. -- . Co - operative Provided, That purely cooperative or mutual fire insurance com- panics or associations carried on by the members thereof solely for ^ p ro t e ction of their own property and not for profit shall be exempted from the tax herein provided : And provided further, That policies of reinsurance shall be ex- empt from the tax herein imposed by this paragraph. INSURANCE MARINE, FIRE, UGHTNING, ETC. (144) Tax on insurance policies issued by foreign insurance com- panies having agencies in the United States. (Vol. 2, Treas. Dec. (1898), No. 20034.) (145) Fire insurance policy, when assigned or transferred, taxed in proportion to the unearned premium. (Vol. 2, Treas. Dec. (1898), No. 20068.) (146) Policies of insurance (marine) issued by foreign companies having no established agencies in the United States are nevertheless sub- ject to the stamp tax when obtained by or through insurance brokers re- siding in this country. (Vol. 2, Treas. Dec. (1898), No. 20259.) (147) Stamps must be affixed to premium notes as well as to policies. (T. D. 19620.) (148) Ruling as to mutual insurance companies In what cases ex- emption applies. (T. D. 19651.) (149) Policies of mutual insurance companies, when taxable and when exempt When the receipts of the company are invested and profit accrues the policies are subject to taxation. (T." D. 20020.) Re-insurance* policies need not be stamped. 22 A. G., Op. 318; 376. The tax is on the policies and not applications therefor. 23 A. G., Op. 211. Each policy of insurance, or bond or obligation of the nature of indemnity for loss, damage, or liability issued, or executed, or re- newed by any person, association, company, or corporation, trans- acting the business of fidelity, employer's liability, plate glass, steam boiler, burglary, elevator, automatic sprinkler, or other branch of insurance (except life, personal accident, and health insurance, and insurance described and taxed or exempted in the preceding para- graph and excepting also workmen's compensation insurance carried 52 Casualty, fidei- tee insurance?"" WAR REVENUE LAW on by the members thereof solely for their own protection and not for profit), and each bond undertaking or recognizance, conditioned Bond under- for the performance of the duties of any office or position, or for n1zance. r the doing or not doing of anything therein specified, or other obliga- tion of the nature of indemnity, and each contract or obligation guaranteeing the validity or legality of bonds or other obligations Contract of issued by any State, county, municipal, or other public body or udi a ty an of e 'bonds] organization, or guaranteeing titles to real estate or mercantile etc - credits executed or guaranteed by any liability, fidelity, guarantee, or surety company upon the amount of premium charged, one-half of 1 cent on each dollar or fractional part thereof. Provided, That policies of reinsurance shall be exempt from the tax herein imposed by this paragraph. INSURANCE CASUALTY, FIDELITY, AND GUARANTEE. (150) When the policies should be stamped as policies of insurance and not as bonds. (T. D. 20781.) (151) Bonds of indemnity, and fidelity and guaranty insurance. (Vol. 3, Treas. Dec. (1900), Int. Rev. No. 15.) Passage ticket, for each passenger, sold in the United States Passage, ticket e , , ( .. ,...to foreign ports. for passage by any vessel to a foreign port or place, if costing not exceeding $30, $1 ; costing more than $30 and not exceeding $60, $3 ; costing more than $60, $5 : Provided, That such passage tickets, costing $10 or less, shall be exempt from taxation. (152) Revocation of ruling that tickets issued in Canada for passage on a vessel sailing from a United States port are not subject to stamp tax. (Vol. 2, Treas. Dec. (1898), No. 20004.) (153) Members of foreign diplomatic corps are not required to pay tax on passage tickets by vessel from a port in the United States to a foreign port. (Vol. 2, Treas. Dec. (1898), No. 20196.) (154) If one ticket only is issued, though it contains several names, only one stamp tax required. Circular 503, revised November 14, 1898. No stamp on rebate checks given to passengers who pay their fare on the train is required. 22 A. G., Op. 248. Power of attorney or proxy for voting- at any election for . Power of At- /v. - i torney, proxy to officers or any incorporated company or association, except re- vote, ligious, charitable, or literary societies, or public cemeteries, 10 cents. Power of attorney to sell and convey real estate, or to rent or Power of At- lease the same, to receive or collect rent, to sell or transfer any ney t( stock, bonds, scrip, or for the collection of any dividends or in- terest thereon, or to perform any and all other acts not herein- before specified, 25 cents : Where securities are pledged with power to sell in case of default such instrument is not taxable as a power of attorney. 22 A. G., Op. 218. A certificate authenticating the official acts of a Notary Public engaged in taking depositions to be used in evidence before a judicial tribunal is not taxable. Stirneman v. Smith, 100 Fed. Rep., 435. A warrant or clause attached to or printed in a promissory note authorizing an attorney to confess judgment for the maker is not taxable as a power of attorney under this paragraph. Treat v. Tolman, 113 Fed. Rep., 892. 53 WAR REVENUE LAW Provided, That no stamps shall be required upon any papers nec- essary to be used for the collection of claims from the United States for pensions, back pay, bounty, or for property lost in the military or naval service. POWER OF ATTORNEY OR PROXY. (155) An instrument authorizing the secretary to transfer stock on the books of the company held not to be taxable as a power of attorney. (Vol. 2, Treas. Dec. (1899), No. 21467.) (156) An instrument appointing an attorney in fact to transfer stock on the books of the company requires to be stamped as a power of attorney, but an instrument authorizing the secretary to make the transfer is held not to be a power of attorney. (Vol. 2, Treas. Dec. (1899), No. 21563.) (157) Proxies Contracts Receipts Sales of certificates of stock Powers of attorney, etc. (T. D. 19700.) (158) Where judgment notes, so called, contain a clause authorizing any attorney at law to confess judgment in favor of the holder of the note, such authorization is held to be a power of attorney, and taxable as such, in addition to the tax required on the judgment note as promissory note. (Cir. No. 503, revised November 14, 1898.) (159) Powers of attorney to sell or transfer Government bonds are taxable. (Cir. No. 503, revised November 14, 1898.) Protest: Upon the protest of every note, bill of exchange, acceptance, check or draft, or any marine protest, whether pro- tested by a notary public or by any other officer who may be authorized by the law of any State or States to make such protest, 25 cents. PROTESTS. No Rulings Found. BERTHS AND SEATS IN SLEEPING OR PARLOR CARS. e car Every seat sold in a palace or parlor car and every berth ' sold in a sleeping car, 1 cent, to be paid by the company selling the same. Tax on Sales of Seats or Berths in Palace, Parlor, or Sleeping Cars. Until otherwise provided, every railroad company or other company owning or operating any palace or parlor car or sleeping car will, after January 1, 1915, and not later than the 20th day of each month, render to the collector of internal revenue of the district in which its principal office is located a sworn return of the number of seats or berths in any such car sold by it during the preceding month, and will pav to said collector the tax imposed by the revenue act of October 22, ,1914, of 1 cent on each seat or berth so sold. Protest. 54 WAR REVENUE LAW The return to be rendered in such cases will be in the following form: (Form 674.) UNITED STATES INTERNAL REVENUE. Return of sales of seats and berths in palace, parlor, or sleeping cars taxable under act of October 22, 1914. District of , , 191... The undersigned, , of the (President or chief officer.) (Here give name of company.) having its principal office at , State of , hereby certifies that the said company owns or controls certain palace, parlor, and sleeping cars in use on its or other railroad lines, and that during the month of 191. . ., the total number of seats or berths in said cars sold by or on account of this said company was as follows : Total number of seats sold Total number of berths sold , Total of seats and berths sold Amount of tax due (Title.) Subscribed and sworn to before me this ... .day of , 191. . [SEAL.] SCHEDULE B Perfumery and cosmetics and other similar articles : For and Perfumes and upon every packet, box, bottle, pot, phial, or other inclosure sfmSar^ai-ticks containing any essence, extract, toilet water, cosmetic, vaseline, t' ns prepara ~ petrolatum, hair oil, pomade, hair dressing, hair restorative, hair dye, tooth wash, dentifrice, tooth paste, aromatic cachous, or any similar substance or article, by whatsoever name the same heretofore have been, now are, or may hereafter be called, known, or distinguished, used, or applied as perfumes or as cosmetics, and sold or removed for consumption and sale in the United States, where such packet, box, bottle, pot, phial, or other in- closure, with its contents, shall not exceed at the retail price Costing not , r i- 1 , 1 r 1 more tnan five or value the sum of 5 cents, one-eighth of I cent. cents. Where such packet, box, bottle, pot, phial, or other inclosure, Costing not with its contents, shall exceed the retail price or value of 5 cents, SSL*** and shall not exceed the retail price or value of 10 cents, two- eighths of I cent. Where such packet, box, bottle, pot, phial, or other inclosure, Fifteen cents. with its contents, shall exceed the retail price or value of 10 cents and shall not exceed the retail price or value of 15 cents, three-eighths of 1 cent. Where such packet, box, bottle, pot, phial, or other inclosure, Twenty-five with its contents, shall exceed the retail price or value of 15 cents and shall not exceed the retail price or value of 25 cents, five-eighths of 1 cent. And for each additional 25 cents of retail price or value or fractional part thereof in excess of 25 cents, five-eighths of 1 cent. 55 WAR REVENUE LAW Chewing gum. Chewing gum or substitutes therefor : For and upon each box, carton, jar, or other package containing chewing gum of not more than $1 of actual retail value, 4 cents; if exceeding $1 of retail value, for each additional dollar or fractional part thereof, 4 cents; under such regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may prescribe. Chewing Gum. On and after December 1, 1914, stamps must be affixed by the maker or manufacturer to packages of chewing gum or substitutes therefor before the same are removed from the factory for consumption or sale. Stamps of the denomination of 4 cents have been provided for the pay- ment of this tax. When packages exceed $1 of retail value the manufacturer shall affix additional stamp or stamps to cover the amount of tax due on such packages. There shall be affixed to each and every box, carton, jar, or other pack- age, containing chewing gum, before its removal from the factory, a label, on which shall be printed in plain, legible letters, the number of small tablets, one-cent packages, or other small packages of chewing gum contained therein, and the retail price of each such tablet or small package of gum, in form as follows : 100 1-cent packages, retail value $1.00 20 packages, 2 for 5 cents, retail price \ 50 60 packages, 3 for 5 cents, retail price 1.00 12 packages, 5 cents each 60 There shall also be affixed to each package a label, upon which shall be printed in plain and legible letters the manufacturer's name, with town or city address, and the number of district and the State in which the factory is located, for example: "John Doe, Manufacturer, Philadelphia, First Dis- trict of Pennsylvania." These labels may be printed on the boxes or car- tons if preferred. Samples for salesmen, or for mailing, or for free distribution, shall be taken only from packages which have been duly stamped and shall be marked as provided elsewhere in these regulations. The stamps on emptied packages will be destroyed. When chewing gum and cachous are to be sold through automatic vend- , ing or selling machines, the same are to be kept in the regularly stamped boxes, packages, or containers until placed in the machines, when the stamps shall be destroyed. The chewing gum and cachous shall be securely locked in the machine and shall not be removed therefrom except through the regular aperture controlled by the mechanism. Imported Articles. All perfumeries, cosmetics, chewing gum, etc., imported from foreign countries are liable to the stamp tax as similar articles of domestic manu- facture, in addition to the import duty on the same, and the stamps must be affixed by the owner or importer before the same are sold or offered for sale, and affixed in the same manner, upon every packet, box, bottle, phial, or other inclosure containing the same. No exception is made in this respect for articles sold in original and unbroken packages in which the bottles or other inclosures were packed by the manufacturer before the importation. All such must be unpacked for the purpose of stamping the primary package. Importers may, however, supply manufacturers abroad with internal-revenue stamps to be there affixed to the respective articles before shipment. Collectors to Make Examinations. Collectors and revenue agents will make examinations of the retail drug stores, pharmacies, and other places in their districts to ascertain if the 56 WAR REVENUE LAW medicinal articles. and other articles mentioned in Schedule B, contained in stock and offered for sale, are stamped according to law wherever liable under the foregoing instructions. In cases where the officer is not able to determine liability to tax, or where there is reasonable doubt, samples should be sent to this office marked "Law Division" for decision. Samples sent for this purpose should include all wrappings, circulars, advertisements, etc., pertaining to the sampla in question, and should be accompaned by a letter of transmission giving full information concerning the same. W. H. OSBORN, Commissioner of Internal Revenue. Approved. BYRON R. NEWTON, Acting Secretary of the Treasury. (T. D. 2052.) Emergency revenue law Stamp tax Chewing gum. The tax on chewing gum is based on the retail value, whether sold in small packages or in bulk, on and after December 1, 1914. The article must be retailed from stamped packages, whether sold over the counter or by means of a slot machine. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 5, 1914. GENTLEMEN: Your letter dated the 2d instant, in which you make several inquiries relative to the stamp tax imposed on chewing gum as provided in the act of October 22, 1914, has been received. You state that you manufacture your products in several forms, and generally sell in bulk, in all manner of quantities, and at prices which vary considerably, such prices being based largely on the quantity sold, and that your goods are retailed over the counter and by means of slot machines. Also, that one form of gum produced and put out by you can be soM by the dealer from two to four pieces for a penny. This particular form of gum you state is sold generally in barrel lots. In reply, you are informed that the act of October 22, 1914, im- poses on you as manufacturer the duty of stamping your product, on and after December 1, 1914, in whatever manner it may be put up, at the rate of 4 cents for each $1 of its actual retail value. If the contents of a package should exceed $1 and be less than $2 in value, it should be stamped 8 cents, and similarly larger quantities in multi- ples of the initial tax. The law does not provide for stamping chew- ing gum valued at retail at less than $1 at any other rate than 4 cents. Chewing gum may be sold at retail in small packages either over the counter or by means of a slot machine without the same being stamped, provided it is sold from the original stamped packages. The law requires the manufacturer to stamp his product on a basis of its actual retail value. You state you can not control this price. Nevertheless, it is believed that no one is so competent as the manufacturer to determine the retail price or value of his products, and he will be held strictly responsible for due compliance with the statute. This retail price or value is a price such as a single package or other small quantity would be sold at to consumers at the place of manufacture. 57 WAR REVENUE LAW In reply to your inquiry as to the meaning of section 21 of the act, you are informed that the provision that "every person, except as otherwise provided in this act, who offers or exposes for sale any article or thing provided for in said Schedule B * * * shall be deemed the manufacturer thereof, and shall be subject to all the taxes, liabilities, and penalties, etc.," refers to wholesalers and re- tailers who may have taxable goods on hand December 1, when the several articles enumerated in Schedule B must be stamped as pro- vided therein. On and after December 1, the manufacturer is re- quired to stamp his products before delivery on a sale ; and such goods, if in possession of any other person, firm, or corporation on said date, must be stamped by such person, firm, or corporation, or, failing so to do, they will incur the liabilities and penalties denounced by the act. Respectfully, W. H. OSBORN, Commissioner of Internal Revenue. Messrs. Articles on That all articles and preparations provided for in this sched- hand Dec. i, ^ ^^ are j n t j ie hands of manufacturers or of wholesale or retail dealers on and after December first, nineteen hundred and fourteen, shall be subject to the .payment of the stamp taxes herein provided for, but it shall be deemed a compliance with this Act as to such articles on hand in the hands of whole- sale or retail dealers as aforesaid who are not the manufacturers May be thereof to affix the proper adhesive tax stamp at the time the retaii. n packet, box, bottle, pot, or phial, or other inclosure with its contents is sold at retail. Articles on Hand, December 1, 1914. Under this provision it is held that articles liable to tax in the hands of a retail dealer who is not the manufacturer thereof, December 1, 1914, must be stamped by such retail dealer when he sells them at retail. Articles liable to tax in the hands of wholesale dealers who are not the manufacturers thereof on and after December 1, 1914, may be sold by such wholesale dealer to other wholesale dealers or to retail dealers without stamping the same, the obligation to stamp being limited to sales at retail. All articles in the hands of manufacturers on said date liable to tax must be stamped before removal from the place of manufacture. Retail Price. Dealers, in stamping articles on hand December 1, 1914, when sold at retail, must adhere to the normal retail price and stamp the article accord- ingly, and not according to some "cut price." Where a price is printed or stamped on the article or container, that will be considered as the normal retail price. The manufacturer or importer shall pay the tax upon the normal retail price or value of the taxable articles under Schedule B manufactured or imported by him, and affix the corresponding adhesive stamps to the same before removal from the place of manufacture or importation. This duty is imposed on the manufacturer or importer by law, and he will be held strictly responsible for a due compliance with the statute. This retail price or value is a price such as a single package or other small quantity would be normally sold at to consumers at the place of man- 58 WAR REVENUE LAW ufacture or importation. If the manufacturer pays the tax upon the retail price in good faith according to this rule, he need apprehend no complaint if at different times and in different places the article is retailed for a greater or less sum than denoted by the stamps affixed thereto. Five cents being the lowest retail price mentioned in Schedule fi, taxable articles retailing for a less sum may be packed together under one wrapper, band, or other inclosure, when the retail price of said package shall not in the aggregate exceed 5 cents, and a stamp of the value of one-eighth of one cent shall be affixed to the outside band or wrapper, or other inclosure, in such a manner that the stamp shall be wholly destroyed in opening it. In such cases each subpackage shall have printed thereon the words : "Sold from a duly stamped package." (T. D. 2066.) Emergency revenue law Talcum powders, etc. Relative to tax on tacum powders, bay rum, witch-hazel, and vaseline, under the act of Congress approved October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 23, 1914. SIR: Replying to your letter of the 19th instant, you are informed that it is held that talcum powders of all kinds, although not specifically named in Schedule B of the act of Congress approved October 22, 1914, are clearly such similar substances or articles to those enumerated therein as to be sub- ject to the tax. Talcum powder must, therefore, as a class, be stamped. Witch-hazel, bay rum, white vaseline, perfumed vaseline, and so-called blue-label vaseline are subject to the tax. Respectfully, W. H. OSBORN, Commissioner of Internal Revenue. Mr. . There shall be an allowance of drawback on articles mentioned Drawbacks on in Schedule B of this Act on which any internal-revenue tax | n whicl^Ster- shall have been paid, equal in amount to the stamp tax paid , p s al p afd venue tax thereon, and no more when exported, to be paid by the warrant of the Secretary of the Treasury on the Treasurer, of the United States, out of any money arising from internal taxes not otherwise appropriated : Provided, That no allowance of drawback shall be made for any NO allowance such articles exported prior to the date this Act becomes effec- ber r i, tive. The evidence that any such tax has been paid as afore- said shall be furnished to the satisfaction of the Commissioner of Internal Revenue by the person claiming the allowance of drawback, and the amount shall be ascertained under such regulations as shall be prescribed from time to time by said commissioner with the approval of the Secretary of the Treas- ury. REGULATIONS. These include all perfumeries, eau de cologne, and all other scented waters ; pastilles and all scented powders, papers, medallions, aromatic cachous, or other materials used to impart their odor to the breath, the air, or other substances ; all cosmetics, lotions, and powders for beautifying, restoring, improving, or preserving the skin, hair, mouth, teeth, nails, or other parts of the body. Articles under the head of perfumes and cosmetics are taxable under 59 WAR REVENUE LAW the statute, regardless of the style or manner in which they are put up and sold. It is immaterial how they are labeled, recommended, or advertised, or whether they are labeled at all, so long as they are known to come within the provisions of the law. Bulk Packages. Articles subject to stamp tax under Schedule B are equally liable to stamp tax when sold in what are termed bulk packages as when sold in retail packages, and the value of the stamp or stamps to be affixed must correspond with and be proportionate to the price of a single retail package. Dealers may retail directly to the consumer from such bulk packages as have been properly stamped by the manufacturer or importer, drawing from the same in quantities to suit their customers without any additional stamp- ing, but the stamps attached to such bulk packages will only protect the original contents. If bulk packages are broken up by the dealer drawing off the contents into smaller vessels to be put upon his shelves, or otherwise kept for future sales, the contents so drawn off thereby ceases to be identified with the stamped package in which they were originally put up by the manufacturer or sold by the importer, and such contents so put up become liable to seizure if stamps are not affixed to them. The contents of bulk packages, liable to tax under Schedule B, which were in the hands of retailers on the 1st day of December, 1914, and there- fore unstamped, must be stamped when sold at retail from said packages proportionately to the retail price of the whole package. Unclarified Petrolatum and Other Incomplete Manufactures Shipped in Bulk. While the act specifically provides that the stamp taxes shall apply to petrolatum, it is held to be the intent of the statute to impose the tax mainly upon the clarified product. The unclarified is an unfinished product requir- ing to be treated with heat and otherwise manipulated before it will be accepted by manufacturing druggists as a basis for various ointments, or drawn off into small packages and sold as vaseline, and may be shipped in bulk without stamps. If, however, the unclarified, unfinished petrolatum is sold for use by consumers, either at wholesale or retail, it is liable to the stamp tax at the same rate as the finished product: Many articles which ultimately become taxable are not so when they are first removed from the manufacturing chemist's laboratory, but are in- complete manufactures, the process of manufacture not being completed until they are bottled, labeled, or otherwise placed in a salable condition. This regulation particularly applies to articles manufactured for dealers, to be bottled, packed, and labeled by them, and sold under their own names, when it becomes the duty of the dealers who pack and sell the goods under their own names and not the manufacturers, to affix the tax stamps due. Soaps. Soaps are ordinarily either laundry or toilet articles. They may, how- ever, and do become cosmetic articles, whenever the manufacturer or vendor holds them out and recommends them to the public for the softening and beautifying effects produced by their use upon the hair, mouth, skin, or com- plexion. In other words, whenever the manufacturer or vendor takes them out of the category of laundry or toilet articles and places them in the' category of cosmetic articles, he must stamp them according to the pro- visions of Schedule B. Samples. Samples of perfumery and cosmetics, taxable under Schedule B, may be removed from the place of manufacture for free distribution, without stamps or payment of tax. 60 WAR REVENUE LAW Every sample so removed, however, must have legibly printed thereon the following notice: "This is a free sample removed from the factory for gratuitous distri- bution. Any person selling or exposing for sale this sample, unstamped, at any time will be liable to all the pains and penalties of the law denounced against persons selling, or exposing for sale, unstamped articles taxable under Schedule B." But where, owing to the minute size of the sample, the above prescribed cautionary notice can not be legibly and neatly printed and affixed thereto, the following may be substituted : ^ "Free sample. Penalty for safe, $500." Where several small free samples are packed together in a box, the whole being given as an entirety, it will be sufficient if the free sample label is placed upon the box. Manufacturer's Statements. At the end of each and every month, the manufacturer or maker or packer for distribution of any of the articles or commodities provided for in Schedule B must make a declaration as provided in- section 20 of the act as follows : "That every manufacturer or maker of any of the articles or commodi- ties provided for in Schedule B, or his foreman, agent, or superintendent shall at the end of each and every month make, sign, and file with the col- lector of internal revenue for the district in which he resides a declaration in writing that no such article or commodity has, during such preceding month or time when the last declaration was made, been removed or car- ried, or sent, or caused or suffered or known to have been removed, carried, or sent from the premises of such manufacturer or maker other than such as have been duly taken account of and charged with the stamp tax, on pain of such manufacturer or maker forfeiting for every refusal or neglect to make such declaration $100 ; and if any such manufacturer or maker, or his fore- man, agent or superintendent, shall make any false or untrue declaration, such manufacturer, or maker, or foreman, agent, or superintendent making the same shall be deemed guilty of a misdemeanor, and upon conviction shall pay a fine of not more than $500, or be imprisoned not more than six months, or both, at the discretion of the court." Articles Exported Without Stamping and Drawback on Stamped Articles Exported. Articles liable to tax under Schedule B, when intended for exportation, may be manufactured and sold or removed without having the stamps affixed thereto and without being charged with tax as aforesaid, by giving bond and complying with regulations tq be provided by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury. See sec- tion 19, act of October 22, 1914. An allowance of drawback on articles men- tioned in Schedule B, which have already been stamped and afterwards ex- ported, is allowed by the last paragraph of Schedule B. SEC. 23. That all administrative, special, or stamp provisions of ke?t ec as r< ieciuire! law, including the law relating to the assessment of taxes, so b y regulation, far as applicable, are hereby extended to and made a part of this Act, and every person, firm, company, corporation, or asso- ciation liable to any tax imposed by this Act, or for the collec- tion thereof, shall keep such records and render, under oath, such statements and returns, and shall comply with such regu- lations as the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury, may from time to time prescribe, and every such person, firm, company, corporation, 61 WAR REVENUE LAW or association who evades or attempts to evade any of the Penalty. taxes imposed by this Act, or shall fail to truly account for and pay all taxes collected by them under this Act, or any regulations issued thereunder, shall be subject to a penalty of double the amount of the taxes evaded or attempted to be evaded or unlawfully withheld, to be assessed and collected as other penalties incurred under internal-revenue laws are as- sessed and collected ; and for the expense connected with the assessment and collection of the taxes provided by this Act Appropriation, there is hereby appropriated $200,000, or so much thereof as may be required, out of any money in the Treasury not otherwise ap- propriated; $170,000 to be added to and made a part of the appropriations for "salaries and expenses of collections of in- ternal-revenue, nineteen hundred and fifteen; and $30,000 to the appropriation for paper for internal-revenue stamps, nineteen hundred and fifteen." The fact that a fermented or distilled liquor tax has already been paid does not exempt it from this section. United States v. J. D. Her Brewing Co., 121 Fed., 41. iitn1t C ati e on pir De- by SEC * 24 ' That the provisions of this Act shall take effect on the cember si, 1915. day next succeeding the date of its passage, except where other- wise expressly provided: Provided, That on the day after the thirty-first day of December, nineteen hundred and fifteen, the taxes levied under this Act shall no longer be levied and collected, but all taxes arising or accruing before said date shall continue to be collectible under the terms of this Act: Provided, however, That on and after the first day of January, nineteen hundred and sixteen, the provisions of section thirty- three hundred and thirty-nine of the Revised Statutes, as amended by an Act approved April twelfth, nineteen hundred and two, imposing a tax on fermented liquors shall not be af- fected by any limitation as to the levying or collecting of the additional tax imposed by this Act on such fermented liquors, but shall then be in full force and effect on and after the said first day of January, nineteen hundred and sixteen. All stamps provided for in this Act unused after the aforesaid date shall be redeemed from the holder thereof, under such rules as the Secretary -of the Treasury may prescribe. 62 Treasury Decisions (T. D. 2036.) Consignment of newspapers under Schedule A, act of October 22, 1914. Reports of shipments of newspapers to be made monthly to collectors in lieu of bills of lading TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 28, 1914. SIR: This office is in receipt of your letter of the 23d instant, relative to that portion of the internal-revenue act of October 22, 1914, relating to the consignment of newspapers. In reply, you are informed that in lieu of a bill of lading, the publisher of the newspaper must file on or before the 15th day of each month with the collector of the district a report, under oath, showing the number of shipments during the preceding month, to which report a stamp shall be affixed equal in value to one cent for each shipment so reported. The portion of the act relating to this subject goes into effect December 1. The first report to be made, therefore, will be on or before January 15, 1915, for the number of bundles shipped during the month of December. * * * Respectfully, W. H. OSBORN, Commissioner of Internal Revenue. Mr. (T. D. 2037.) Supplemental instructions relative to paying taxes imposed upon wines by the act of October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 30, 1914. To collectors of internal revenue: In office telegram of October 23, 1914, collectors were in- structed to require dealers who sell wine to consumers to keep ac- count of sales on and after that date and to delay collection of tax until further advised. T. D. 2027 of October 24 prescribes method of procedure and form of report. Collectors should collect no tax on wines sold by dealers on and after October 23 until they receive from this office the special wine stamps which they will require all dealers in wines who sell to consumers to purchase in quantities sufficient for their needs. 63 WAR REVENUE LAW So many of these stamps as will be necessary to represent the tax on wines sold up to the date of making the report required in T. D. 2027 will be canceled by each dealer and disposed of in the manner provided in said Treasury decision. fhe special wine stamps that will be forwarded to collectors about the 15th proximo must be used exclusively to indicate the pay- ment of the wine tax, and under no circumstances shall documentary or proprietary stamps be used to indicate the payment of tax on sale of wines or cordials, and it must be borne in mind by every collector that no discount can be allowed on the sale of wine stamps. Collectors may allow a discount of 1 per cent on the sale of ad- hesive stamps used in the payment of the tax levied in Schedules A and B of the act in quantities of not less than $100 face value cov- ered in one sale, except to officers and employees of the Internal Revenue Service. ROBT. WILLIAMS, JR., Acting Commissioner of Internal Revenue. (T. D. 2038.) , Emergency revenue law. Taxes imposed under Schedule B effective on and after December 1, 1914 TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 3, 1914. To collectors of internal revenue: Referring to the discrepancy in the act of October 22, 1914, as to the date when Schedule B goes into effect, the act providing in section 21 that the said schedule shall go into effect 30 days after the passage of the act and in the schedule itself that it shall go into effect December 1, you are advised that as originally drafted the act provided in both places that Schedule B was to go into effect 30 days after passage. This was later amended by paragraph 6 of Schedule B to December 1, 1914, and it is therefore held by this office that the schedule in question is effective on and after Decem- ber 1, 1914. GEO. E. FLETCHER, Acting Commissioner of Internal Revenue. (T. D. 2049.) Emergency revenue law Income-tax certificates. Income-tax certificates which are not required by specific statute, but by regulations only, are not subject to tax as "certificates required by law" under act of October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 12, 1914. SIR: In reply to your verbal inquiry as to whether certificates 6 4 TREASURY DIVISIONS of ownership, certificates, of exemption, and other certificates re- quired by the income-tax regulations, but not by specific statute, are subject to tax as certificates required under the internal-revenue act of October 22, 1914, I beg to advise you that they are not. While regulations made pursuant to and under authority of law as a rule have the force and effect of law, it is held by this office that it was not the intent of Congress to tax certificates which are re- quired by regulations of the department for its own purposes and not by any express provision of law. Respectfully, W. H. OSBORN, Commissioner of Internal Revenue. Mr. (T. D. 2050.) Emergency revenue law. Relative to classification of liqueurs, cordials, and similar compounds. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 13, 1914. SIR : Replying to your letter of the 7th instant, you are in- formed that the words "liqueurs, cordials, and similar compounds," as used in the act of Congress approved October 22, 1914, are not held to include alcohol, whiskies, rums, brandies, and gins, except when so compounded as to be known to the trade as cordials and liqueurs. Compounds classed by this office as medicines are also excepted. The word "liqueur," as defined by Webster, is an alco- holic aromatic cordial, and obviously a cordial is practically the same. It would appear, therefore, that the words "liqueurs, cor- dials, or similar compounds," under whatever name sold or offered for sale, would include those beverages commonly known to the trade as liqueurs and cordials. Further, the term "similar com- pounds" would appear to include vermuths and like wine com- pounds, bitters used as beverages, cocktails, maraschino, cordialized liquors, fortified fruit juices, and all other compounds the formulas of which, methods of preparation, or use, make them sufficiently like liqueurs and cordials to place them in the class with liqueurs and cordials. Respectfully, G. E. FLETCHER, Acting Commissioner of Internal Revenue. Mr. (T. D. 2053.) Emergency revenue law Wines, etc. Relative to affixing and canceling stamps on containers of wines, cordials, liqueurs, and similar compounds. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November jj, 1914. SIR : Replying to your letter of the 9th instant, you are informed 65 WAR REVENUE LAW that the act of Congress approved October 22, 1914, imposing taxes upon wines, liqueurs, and cordials, is silent as to where such stamps must be affixed to the bottles or other containers. It is held, there- fore, that these stamps must be affixed conspicuously to the bottles or other actual containers of the wines and cordials and must be canceled by the person affixmg same, and that the initials of the person, as well as the date when affixed, must be written or stamped indelibly upon the adhesive stamp. When the bottle or other con- tainer to which the stamp is affixed is empty, the person emptying same must completely efface and obliterate the adhesive stamp or stamps, as the case may be. In reply to your second inquiry, this office is unable to state how bottles or other containers from which sales are made may be kept constantly filled and at the same time be stamped and the stamps be duly canceled in conformity with the law. Bottles from which wines and cordials are sold to consumers for immediate consumption must be stamped with properly canceled stamps, and when empty the stamps should be, as above stated, completely effaced and obliter- ated and new ones substituted therefor upon each refilling. It would seem, therefore, to be necessary to completely empty the bottles in order to comply with the law. Respectfully, ROBT. WILLIAMS, JR V Acting Commissioner of Internal Revenue. Mr. . (T. D. 2054.) Emergency revenue lazv Certificates of deposits. Certificates of deposit issued by banks not taxable under the act of October 22, 1914. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 14, SIR: In reply to your letter of the 9th instant, you are informed that under the internal-revenue act of October 22, 1914, stamps are not required to be affixed to certificates of deposits issued by banks. Respectfully, ROBT. WILLIAMS, JR., Acting Commissioner of Internal Revenue. Mr. --- . (T. D. 2055.) Emergency revenue law Discount on purchases of documentary stamps. Postmasters and others authorized to be furnished stamps without prepay- 66 TREASURY DIVISIONS ment not allowed discount unless stamps are paid for by them at the time. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 16, To collectors of internal revenue: You are informed that postmasters who buy from you and pay for the stamps issued under the internal-revenue act of October 22, 1914, are allowed a discount of 1 per cent on purchases amounting to $100 or more. If they are furnished with the stamps under bond without prepayment therefor they are not allowed the 1 per cent discount. ROBT. WILLIAMS, JR., Acting Commissioner of Internal Revenue. (T. D. 2056.) Emergency revenue law Poivcr of attorney to transfer stock. An instrument appointing an attorney in fact to transfer stock on the books of the company requires it to be stamped as a power of attorney, but an instrument authorizing the secretary to make the transfer is held not to be a power of attorney. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 14, 1914. SIR: This office is in receipt of your letter of the 9th instant, asking for a ruling under Schedule A of the act of October 22, 1914. You make the following inquiry : 1. Does the tax of 25 cents imposed in Schedule A on powers of at- torney to sell or transfer stock apply to the ordinary formal power of at- torney to transfer on the books? In other words, is the sale and the transfer of the stock itself taxed separately? If this so-called power of attorney on the back of the certificate simply authorizes the secretary of the company to transfer the same on the books of the company, it is held not to be a power of attor- ney within the meaning of the internal-revenue law. In that case the secretary of the corporation can not be said to be the agent or attorney for the transfer of stock, as the effect of the instrument is only to give the secretary authority to do an act which he is re- quired to do by the by-laws of the organization when properly au- thorized, just as a cashier of a bank is required to pay a check when the check is properly signed and presented for payment. In that case, therefore, this instrument would only be taxable as a transfer of stock. An instrument appointing an attorney in fact to transfer stock on the books of the company will require stamp as a power of attorney. Respectfully, ROBT. WILLIAMS, JR., Acting Commissioner of Internal Revenue. Mr. . 67 WAR REVENUE LAW (T. D. 2057.) Annual inventories. Annual inventories to be made by cigar and tobacco manufacturers and verified by collectors and their deputies. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November if, 1914. To collectors of internal revenue: Every manufacturer of tobacco or snuff and every manufac- turer of cigars or cigarettes shall make a true inventory of the stock of tobacco materials, stamped and unstamped manufactured tobacco and snuff, or cigars and cigarettes, and attached and unattached in- ternal-revenue stamps on hand in the factory on the 1st day of Jan- uary of each year, and shall verify the same by his own oath, as provided in sections 3358 and 3390 of the Revised Statutes, respect- ively. These statutes also require that the collector (or his deputy) shall make personal examination of the stock sufficient to satisfy himself as to the correctness of the inventory, and shall verify the fact of such examination by oath to be indorsed on the inventory. These inventories are important elements in settlement of manu- facturers' accounts for the year or period. It is absolutely essential that the accuracy of an inventory shall not be questioned by a manu- facturer when his accounts show deficiencies and he is, in conse- quence, called upon to show cause against assessment for omitted tax. Each manufacturer shall see to it tJiat a proper inventory of his factory is made, for the reason that such inventory having been sworn to by the manufacturer and verified under oath by a deputy collector, no claim of failure to include certain tobacco, ,made in response to a deficiency notice, will be entertained. Therefore the following instructions in regard to making the required inventory must be observed : (a) All tobacco material within the metes and bounds of the bonded factory premises, as described on Form 41 J^ posted in cigar factory and on Form 36 of tobacco factory shall be segregated into classes corresponding strictly with the headings provided therefor in Form 70a and Form 70b. (b) Each class of tobacco shall be weighed separately. (c) Tobacco dust, sif tings, sweepings, and waste which has ac- cumulated in manufacturing shall not be included under any class of tobacco except under the head of "Waste," which is provided for in inventory Form 70b. The quantity of each of these by-products may there be shown separately. (d) Inventory must include all unstemmed leaf tobacco debited on manufacturers' books and returns which is stored off the bonded factory premises for which outside storage permission has been granted. (e) To enable the deputy collector to verify the inventory, a list should be made of each unopened hogshead, case, or bale, or other package of tobacco, with sufficient description for identifica- tion by the deputy, of all broken packages or loose tobacco within 68 TREASURY DIVISIONS the factory, and of all unstemmed tobacco stored off the bonded premises, shall be made on the back of the inventory form or pre- served on separate sheets of the same size and attached thereto. (/) An accurate record should also be kept of the quantity of each class of tobacco (as inventoried) used in production between the time inventory is taken and the time the deputy calls to verify the same. Collectors will instruct their deputies so to arrange their routes as to make these verifications at the earliest practicable date after January 1 next. In verifying an inventory each deputy collector 1. Will see that each class of tobacco has been properly inven- toried and instructions above observed. 2. Will determine from the quantities of each different kind of tobacco purchased, sold, and used between the date inventory was taken and the time of his verification as to the correctness of the inventory, and will require any necessary amendments before the manufacturer makes oath to same before him. "Deficiencies found by examining officers" should be immedi- ately reported to the collector, and shall be treated in accordance with the instructions under that head on page 60 of Regulations No. 8, revised July 1, 1910. Upon receipt of these inventories, properly verified, collectors will prepare their abstracts on loose leaves Record 11 and Form 146 of the accounts of cigar and tobacco manufacturers in their districts for the year or period ending December 31, 1914, observing in such preparation instructions in T. D. 1726 and T-Mim-980, as modified by T-Mim-1006, and Treasury Decision No. 1479 and T-Mim-993, respectively, and will forward said accounts to this office as fast as they are completed, not later than 90 days from the 1st day of Jan- uary, 1915. An account showing a deficiency should not be held until the tax on same is collected, but forwarded at once, after hav- ing made sure it is correctly stated. Formal notice to show cause will then be forwarded for service on the manufacturer. Collectors are hereby instructed to cause a copy of this circular, together with the necessary inventory blank, to be delivered to each manufacturer of tobacco, snuff, cigars, or cigarettes registered within their respective districts, not later than the 15th day of December next, for the taking of the required inventories on January 1, 1915. ROBT. WILLIAMS, JR., Acting Commissioner of Internal Revenue. Income Tax CHAPTER II RETURNS FOR THE YEAR, 1914. Statement by Secretary McAdoo: The following table shows the total number of income tax re- turns filed during the fiscal year, 1914, classified according to the amount of net income shown on the returns: These returns for the first year of the operation of the new income tax law cover income for the ten months from March 1 to December 31, 1913: CLASSIFICATION. No RETURNS. $ 2,500.00 to $ 3,333.00 79,426 3,333.33 to 5,000.00 114,484 5,000.00 to 10,000.00 101,718 10,000.00 to 15,000.00 26,818 15,000.00 to 20,000.00 11,977 20,000.00 to 25,000.00 6,817 25,000.00 to 30,000.00 4,164 30,000.00 to 40,000.00 4,553 40,000.00 to 50,000.00 2,427 50,000.00 to 75,000.00 2,618 75,000.00 to 100,000.00 998 100,000.00 to 150,000.00 785 150,000.00 to 200,000.00 311 200,000.00 to 250,000.00 145 250,000.00 to 300,000.00 94 300,000.00 to 400,000.00 84 400,000.00 to 500,000.00 44 500,000.00 to 1,000,000.00 91 1,000,000.00 to and over 44 Total ..357,598 Married 278,835 Single Men 55,212 Women. . 23.551 357.598 Married women rendering separate returns in- cluded above . 6,682 INCOME TAX DEPRECIATION SCHEDULE. The following percentages have been adopted as a guide by the Chicago Real Estate Board -for the computation of depreciation of buildings in the absence of a Treasury Department ruling on the subject. Each building must be considered in its individual detail, reasonable depreciation is deducted: Fire-proof Steel Buildings Reinforced Concrete Buildings. Depreciation One (1%) Per Cent, on buildings five years old or less; Two (2%) Per Cent, on buildings more than five years old. Mill Constructed Buildings and Fire-proof Apartment Buildings. Depreciation Two (2%) Per Cent, on buildings five years old or less; Three (3%) Per Cent, on buildings more than five years old. Brick and Lath Buildings, Including Ordinary Flat Buildings. Depreciation Three (3%) Per Cent, to Four (4%) Per Cent. Old Frame and Nearly Obsolete Buildings. Depreciation Five (5%) Per Cent, and upward. Note. Where the value of the power plant and machinery, in- cluding elevators, can be separated from the total value of the building, compute depreciation at Ten (10%) Per Cent, on it; the remainder being figured at the percentages heretofore named. The estimated value of buildings, power plants, etc., as of March 1, 1915, to be taken as a basis on which deductions are to be made. 72 TREASURY DECISIONS, 1914 (T. D. 1942.) Income tax ruling as to income derived from bonds containing "tax-free covenant clause," and how same may be returned on Form 1040 when. exemption is not claimed at the source. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., February 3, 1914. To collectors of internal revenue: This office is in receipt of numerous letters asking whether in- come paid at the source, although not withheld at the source, can be placed in column A, page 2, of Form 1040, and in reply to this inquiry you will advise as follows : The stipulation in bonds whereby the tax which may be assessed against them or the income therefrom is guaranteed is a contract wholly between the corporation and the bondholder, and in so far as the income tax law applies the Government will not differentiate between coupons from bonds of this character and those from bonds carrying no such guarantee. The debtor corporation, or its duly authorized withholding agent, will be held responsible for the nor- mal tax due on the coupons on which no tax has been withheld in cases wherein no exemption is claimed. Income paid by "debtors" from March 1 to November 1, 1913, shall be included in the return of the individual (under column B, page 2, of Form 1040) as income upon which the normal tax of 1 per cent has not been withheld and paid at the source. Income received by individuals between November 1 and Decem- ber 31, 1913, upon which the normal tax has been withheld at the source shall be included in their annual return (under column A, page 2, of Form 1040) as income upon which the tax has been paid. W. H. OSBORN, .Commissioner of Internal Revenue. (T. D. 1943.) Instructions to collectors relative to fiduciaries and returns to be made by them on Form 1041. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., February 4, 1914. To collectors of internal revenue: T. D. 1908 provides that all fiduciaries shall on or before March 1 of each year, when the annual interest of any beneficiary in the in- come of the estate or trust is in excess of $3,000 ($2,500 for the year 1913), make and render a return of the income of the person or persons (the beneficiaries) for whom they act to the collector of internal revenue of the district in which the fiduciary resides. 73 INCOME TAX Where a decedent died after March 1 in the year 1913, and from March 1 up to the date of his death had a net income of $2,500 or more, the fiduciary (i. e., the executor or administrator) should make a return for the decedent on Form 1040, and the income tax, both normal and additional, shown to be due thereon will be a debt against the estate of the decedent. The same principle will apply * to subsequent years if the net income of the decedent from January 1 to the date of his death amounts to $3,000 or more. No other return is required to be made by the fiduciary until the settlement of the estate has reached the stage when the beneficiaries thereof and their respective interests in the income derived from the estate are determinable, and then the fiduciary is required to file a return on or before March 1 of each year, as prescribed by the regula- tions. The fiduciary will enter on page 2 of Form 1041, under the ap- propriate heads, all income accruing to the beneficiaries of the trust or estate from March 1 to December 31, 1913, inclusive; but the interest derived from the obligations of a State or any political subdivision thereof and the obligations of the United States or its possessions is not to be included. The fiduciary will enter on page 3 of Form 1041 for the year 1913 five-sixths of the deductions allowable under paragraph B of the law, and on line 1 it will be proper for the fiduciary to enter all legitimate expenses incurred in administering the estate or trust. If the fiduciary holds and rents business or residential property and pays insurance, water rents, commissions for the col- lection of rents, or any other necessary expenses in managing the estate or trust, it will be proper to enter same on line 1 as an allowable deduction. The amount to be shown on page 1, line 3, will represent the total amount of income accruing through the fiduciary to the bene- ficiaries of the estate or trust which is subject to the normal tax, and when the interest of any one beneficiary in this amount from November 1 to December 31, 1913, inclusive, was in excess of $3,000, whether distributed or not, the fiduciary was required to withhold and pay the normal tax on the whole $3,000 and excess thereof, unless the beneficiary filed with the fiduciary Form 1007, as prescribed by the regulations, claiming exemption under para- graph C, and in that event the fiduciary was only required to with- hold and pay the normal tax on the amount in excess of the exemp- tion claimed. T. D. 1906 prescribes that when fiduciaries make their annual return they shall give the name and full address of each beneficiary and the share of income to which each may be entitled, which information shall be given on page 1 of Form 1041. In the column "Amount of income paid or accrued to beneficiaries" should be entered the respective interest of the beneficiary in the amount of income as shown on page 1, line 3. When the interest of any beneficiary in the amount of income subject to the normal tax, as shown on Form 1041, page 1, line 3, 74 TREASURY DECISIONS is in excess of $3,000, and the same was paid to the beneficiary within the period from November 1 to December 31, 1913, both dates inclusive, the fiduciary was required to withhold and pay the normal tax as prescribed by the regulations, and the information required should be given on Form 1041, page 1, giving the name and full address of each beneficiary, the amount of income paid or payable to each beneficiary (this amount would be the beneficiary's interest in the amount of income subject to the normal tax as shown on line 3), the amount of exemption claimed under paragraph C (if any), the amount of income on which normal tax should be withheld, and the amount of tax withheld, all to be given in the respective columns in the order named. A fiduciary acting for a minor or insane person who had a net income of $2,500 or more for the year 1913 will make the return for his ward on Form 1040 and will not be required to file a re- turn on Form 1041, unless he has more than one ward by reason of the same estate or trust; then in that event a -return will be required on Form 1041, and a separate return on Form 1040 for each ward having a net income of $2,500 or more for the year 1913. The income accruing or paid to a beneficiary through a fiduciary may be composed in part of dividends, or income upon which the normal tax has been withheld and paid or to be paid at the source, or income derived from the obligations of a State or any political subdivision thereof or from the obligations of the United States or its possessions (income from obligations of a State or any political subdivision thereof and from the obligations of the United States or its possessions is not subject to the tax and should not be in- cluded). If a beneficiary has other income which, added to the in- come accruing to him through his fiduciary, gives him a net income of $2,500 or more for the period from March 1 to December 31, 1913, inclusive, he should make a return of his gross income on Form 1040, as required by the regulations. To illustrate: If a fiduciary's gross income was $10,000, derived from the following sources: 1. Interest upon the obligations of the United States $1,000 2. Dividends on stock or net earnings of corporations 2,000 3. Interest from bonds containing "tax-free covenant clause," upon which the fiduciary did not claim any exemption at source and which he entered on Form 1041, on page 2, column A, as income on which normal tax was withheld 2,000 4. Income from rents, etc 5,000 10,000 the fiduciary's return on Form 1041 would show as follows: Page 2. Line 3, column B, amount of rents $5,000 Line 5, interest from bonds, "tax-free clause," column A 2,000 Line 10, dividends 2,000 Aggregate total of gross income 9,000 75 INCOME TAX (No entry of interest on United States bonds, $1,000.) Page 3. Line 1, Accessary expenses actually paid in carrying on busi- ness, including compensation of fiduciary, water rents, insur- ance, etc 450 Line 3, taxes paid 400 Line 6, actual repairs made on building, or amount allowed for wear and tear 150 Line 7, dividends not subject to normal tax 2,000 Line 8, amount of income on which normal tax has been de- ducted and withheld at source, bonds with "tax-free clause". 2,000 Total deductions 5,000 Page 1. Line 1, gross' income 9,000 Line 2, total deductions 5,000 Line 3, amount of income due beneficiary, which -is subject to normal tax 4,000 The beneficiary has filed with the fiduciary as a withholding agent a claim for exemption under paragraph C for $2,500 (exemption of single person for 1913), and the return on Form 1041 would show on page 1, in addition to the foregoing entries, the following: John Doe, 76 B- Street, New York City. In third column, amount of income paid or accrued to beneficiary $4,000 In fourth column, amount of exemption claimed 2,500 In fifth column, amount of income on which fiduciary is liable to tax. . 1,500 In sixth column, amount of normal tax withheld 15 In the foregoing illustration the beneficiary, in his return on Form 1040, would make no return of item 1, interest on United States bonds. Item 2, dividends, would be entered on page 2, line 11, and for the purpose of calculating the normal tax would be an allowable deduction on page 1, line 4. Item 3, interest on bonds, would be entered on page 2, line 7, column A, and for the purpose of calculating the normal tax would be an allowable deduction on page 1, line 5. Item 4, rents, would be entered on page 2, line 7; $1,500 in column A, and $2,500 in column B (exemption of $2,500 claimed and no tax withheld on this amount). This would show- Income received from fiduciary subject to be returned on Form 1040. . $8,000 Deductions and exemption allowable in calculating normal tax 8,000 No normal tax due, it having been paid at the source by the fiduciary as shown by his return on Form 1041. In making the foregoing entry on Form 1040, on line 11, there should be written just above the printed heading, " Amount received from fiduciary," and the amount should be entered in the appro- priate column. No illustration is given of income accruing to the beneficiary from other sources, an illustration of this not being deemed neces- sary, as such income is entered in the usual way. W. H. OSBORN, Commissioner of Internal Revenue. 76 TREASURY DECISIONS (T. D. 1945.) Regulation relative to exclusion of income derived from dividends or net earnings of corporations, joint-stock companies or associations, and in- surance companies by persons subject to the normal tax only in computing their net income for the taxable year. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington D. C., February J, 1914. To collectors of internal revenue: Referring to that portion of the income-tax law which reads as follows : Provided further, That persons liable for the normal income tax only, on their own account or in behalf of another, shall not be required to make return of the income derived from dividends on the capital stock or from the net earnings of corporations, joint-stock companies or associations, and insur- ance companies taxable upon their net income as hereinafter proyided you are informed that returns of individuals, when such individuals are subject to the normal tax only, need not include the income derived from the dividends or net earnings referred to above. When individuals are subject to the additional tax, such income derived from said dividends or net earnings must be shown on the return. Persons having an annual net income of $3,000 or more, includ- ing the income derived from dividends or net earnings of corpora- tions, etc., but whose total net income is less than $20,000 and whose net income, exclusive of the income derived from dividends or net earnings of such corporations, etc., is less than $3,000 for the taxable year ($2,500 for the year 1913), shall not be required to make a return of annual net income. Returns which have been or may be received from persons sub- ject to the normal tax only, in which such dividends are included and deducted, need not be changed to meet the provisions of this regulation. All previous rulings of the department, including the general regulations No. 33, are amended accordingly. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1946.) Special assessment districts created under the laws of the several States for public purposes, such as the improvement of streets and public highways, the provision for sewerage, gas, and light, and the reclamation, drainage, or irrigation of bodies of land, and levee and school districts are held to be political subdivisions of a State. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., February 10, 1914. To collectors of internal revenue: Referring to paragraph B, section 2, of the income-tax law, which reads as follows: 77 INCOME TAX That in computing net income there shall be excluded interest upon the obligations of a State or any political subdivision thereof you are informed that under date of January 30, 1914, the honor- able the Attorney General held that special assessment districts created under the laws of the several States for public purposes, such as the improvement of streets and public highways, the provi- sion for sewerage, gas, and light, and the reclamation, drainage, or irrigation of bodies of land within such special assessment dis- tricts when such districts are for public use, are political subdivi- sions of the State within the meaning of the above proviso. It is held that the term "political subdivision" includes special assessment districts or divisions of a State created by the proper authority of the State acting within its constitutional powers and under its general laws, for the purpose of carrying out a portion of those functions of the State which by long usage and inherent necessities of government have always been regarded as public. Levee and school districts when lawfully created under the au- thority of the State and which are authorized by the laws of the State to levy a tax to meet the obligations of such districts are also held to be political subdivisions of a State within the meaning of the income-tax law. The income derived from interest upon the obligations of all such public districts shall therefore be excluded in computing net income for the income tax. This decision supersedes T. D. 191CX W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1947.) Extending T. D. 1945 to cover returns made by fiduciaries in their fiduciary capacity. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., February 12, 1914. To collectors of internal revenue: You are advised that the provisions of T. D. 1945 in matter of exclusion of dividends or net earnings of corporations, joint- stock companies or associations, and insurance companies, by per- sons subject to the normal tax only, in computing their net income for the taxable year are extended to cover such returns by fidu- ciaries. To make clear any doubt on the subject, the provisions of T. D. 1945 are hereby specifically extended to include returns made by fiduciaries as such. W. H. OSBORN, Commissioner of Internal Revenue, TREASURY DECISIONS (T. D. 1948.) Amendment of T. D. 1942. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., February 12, 1914. To collectors of internal revenue: T. D. 1942 is hereby amended as follows : In the first paragraph, after the word "income," insert tax on which is, and after the word "paid" insert or to be paid. In the second paragraph, for words "on the coupons on which," substitute in such cases when, and for words "in cases wherein," substitute the word and. In the third paragraph, for the word "paid," sub- stitute the word withheld. So that the decision as amended will read: "This office is in receipt of numerous letters asking whether in- come, tax on which is paid or to be paid at the source, although not withheld at the source, can be placed in column A, page 2, of Form 1040, and in reply to this inquiry you will advise as follows : "The stipulation in bonds whereby the tax which may be assessed against them or the income therefrom is guaranteed, is a contract wholly between the corporation and the bondholder, and in so far as the income-tax law applies, the Government will not differen- tiate between coupons from bonds of this character and those from bonds carrying no such guaranty. The debtor corporation, or its duly authorized withholding agent, will be held responsible for the normal tax due in such cases when no tax has been with- held and no exemption claimed. "Income paid by 'debtors' from March 1 to November 1, 1913, shall be included in the return of the individual (under column B, page 2, of Form 1040) as income upon which the normal tax of 1 per cent has not been withheld and paid at the source. Income received by individuals between November 1 and December 31, 1913, upon which the normal tax has been withheld at the source shall be included in their annual return (under column A, page 2, of Form 1040) as income upon which the tax has been withheld." W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1950.) Time for filing returns of income, and penalties in connection therewith. Washington, D. C., February 19, 1914. OFFICE OF COMMISSIONER OF INTERNAL REVENUE, TREASURY DEPARTMENT, To collectors of internal revenue: You are advised, and will so announce from your respective offices, that the law and regulations require returns of income for the taxable period, March 1 to December 31, 1913, to be made and 79 INCOME TAX filed on or before March 1, 1914. The law is mandatory and allows no discretion to be exercised by any officer. Section 3176, Revised Statutes of the United States, as amended and made part of the income-tax law, gives to collectors of internal revenue (they being satisfied as to the merits of the claim, and in the rea- sonable exercise of their judgment and discretion) authority to grant extension of time not to .exceed 30 days from the time pre- scribed by law in which to file a return of net income, and then only in cases where such failure, neglect, or refusal is the result of "sickness or absence." You are also advised, and will so announce, that there will be no change in income-tax regulations as they now exist prior to March 1, 1914, and that all persons and corporations required to make a return which have not as yet done so should make and file their returns at the earliest opportunity and on or before March 1. Collectors will forward to this office immediately a report show- ing the number of returns filed in their respective offices as of February 20, 1914. Penalties and additional tax, in connection with refusal or neglect to file return of income within the prescribed time. As to corporations. For neglect or refusal to make a return within the prescribed time, corporations are liable to a penalty not to exceed $10,000; and in case of neglect or refusal to make, or for a false or fraudulent return made, 100 per cent is to be added to the tax ; and in the case of neglect or refusal to make and verify a return within the prescribed time (except in case of sickness or absence) 50 per cent is to be added to the tax; and in case of an officer of a corporation or like institution charged with the duty and responsibility of making and verifying a return who makes a false or fraudulent return with the intent to defeat or evade any assessment or tax, he shall be guilty of a misdemeanor, and be sub- ject to a fine not to exceed $2,000, or to imprisonment not to ex- ceed one year, or both, at the discretion of the court, together with costs. As to individuals. For neglect or refusal to make a return within the prescribed time, the penalty is not less than $20 nor more than $1,000; and in case of intentional neglect or refusal to make, or for a false or fraudulent return made, there shall be added 100 per cent to the tax; and in case of neglect or refusal to make a return within the prescribed time (except in case of sickness or absence) there shall be added 50 per cent to the tax. W. H. OSBORN, Commissioner of Internal Revenue. 80 TREASURY DECISIONS (T. D. 1953.) Extension of time for filing returns under income-tax law by citizens of the United States living abroad. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 2, 1914. To collectors of internal revenue: Referring to that portion of section 3176, as incorporated in the income-tax law, which provides that In case of neglect occasioned by sickness or absence as -aforesaid, the col- lector may allow such further time for making and delivering such list or return as he may deem necessary, not exceeding thirty days you are infprmed as follows: Various citizens of the United States living abroad were unable through such absence from this country to inform themselves as to the requirements of the law, and were also unable to obtain the necessary blank forms on which to make their returns of annual net income for the income tax. You are therefore authorized to mark the returns received from foreign countries after March 2, and up to and including March 31 as having the time extended to cover the period of filing such return. The State Department has cabled the consular service and others residing in foreign countries that they shall forward a letter, in which their income shall be stated, and that such letter will be re- ceived in lieu of the return so far as the date of filing is con- cerned. Such letters are now coming to this office, and they are being for- warded to the various collection districts to be held as tentative returns until the returns on Form 1040 shall be received. The regular returns on Form 1040 when received should be attached to the tentative returns and both should be forwarded to this office with the assessment lists on which the same shall be listed. The date of filing the returns should be considered that on which such tentative returns were filed. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1957 ) Partnerships are not subject to income tax, but are required to file certificates of ownership of bonds, etc., in connection with coupon and registered in- terest payments to prevent withholding of their income at the source. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 12, 1914. To collectors of internal revenue: Referring to the following provision in paragraph D of the in- tome-tax law 81 INCOME TAX That any persons carrying on business in partnership shall be liable for in- come tax only in their individual capacity, and the share of the profits of a partnership to which any taxable partner would be entitled if the same were divided, whether divided or otherwise, shall be returned for taxation and the tax paid, under the provisions of this section, and any such firm, when re- quested by the Commissioner of Internal Revenue, or any district collector, shall forward to him a correct statement of such profits and the names of the individuals who would be entitled to the same, if distributed it is held that the income of partnerships per se is not subject to the income tax. The provisions of the law "relating to the de- duction and payment of the tax at the source of income" do not apply to the income of partnerships as such. Taxable members of partnerships will be required to account, in their individual re- turns, for their respective shares or interest in the partnership profits, whether the same are divided and distributed or not. Partnerships owning "bonds and mortgages, or deeds of trust, and other similar obligations of corporations, joint stock companies or associations, and insurance companies," shall file certificates of ownership, in Form 1001, evidencing the fact of partnership owner- ship when presenting for collection or payment coupons or interest orders for interest upon said obligations; and when such certifi- cates are filed, the tax on such interest payments to partnerships shall not be withheld. The last sentence in article 14, page 35, and article 47 of Income Tax Regulations No. 33, providing for claim by partnerships for deduction for legitimate expense incurred in conducting the busi- ness of a partnership, are hereby superseded and repealed. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1960.) Corporations are allowed by law to deduct interest actually accrued and paid within the year on an amount not in excess of paid-up capital stock out- standing at the close of the year, plus one-half the interest-bearing indebt- edness then also outstanding. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 18, 1914. To collectors of internal revenue: Your attention is called to that provision of the income-tax law designated as the third deduction, subdivision (b), paragraph G, reading as follows: The amount of interest accrued and paid within the year on its indebtedness to an amount of such indebtedness not exceeding one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, and if no paid-up capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year. It is held that in the case of a corporation having capital stock this deductible interest is interest actually accrued and paid within the year on an amount of indebtedness not exceeding the paid-up 82 TREASURY DECISIONS capital stock outstanding at the close of the year, increased by the addition thereto of one-half the interest-bearing indebtedness out- standing at the close of the year. The qualifying phrase, "outstanding at the close of the year," appearing in the foregoing quotation, is held to apply to both paid-up capital stock and indebtedness, and "one-half the sum of" qualifies only the indebtedness, which indebtedness, like the paid-up capital stock, is required, by the law to be reported, in making re- turn of annual net income, as outstanding at the close of the year. If no indebtedness is outstanding at the close of the year, the maximum deduction allowable on account of interest paid will be the amount of interest actually accrued and paid on an amount of indebtedness not exceeding at any time within the year the entire paid-up capital stock outstanding at the close of the taxable year; that is, in such case, the paid-up capital stock outstanding at the close of the year measures the highest amount of indebtedness upon which deductible interest can be computed. For the purpose of an allowable deduction, interest on the maxi- mum amount of indebtedness, determined in the manner above indi- cated, can be computed upon such amount only for the time during which such amount of indebtedness is not in excess of the paid-up capital stock, increased by one-half the sum of the interest-bear- ing indebtedness outstanding at the close of the year. In any event, the amount of interest, in order to constitute an allowable deduction, must not only be within the limit of the law as herein defined, but must have actually accrued and been paid within the year for which the return is made. In cases where no capital stock exists, the limitation as to deduc- tion is confined to interest actually paid on an amount of indebted- ness not exceeding at any time during the year the capital employed in the business at the close of the year. Any provision in the regulations heretofore issued inconsistent with the foregoing is hereby revoked. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1961.) Fiduciaries. Forms^ 1015 and 1019 may be adapted so that but one certificate will be re- quired to be filed with coupons from the same issue of bonds, the property of different estates or trusts. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 19, 1914. To collectors of internal revenue: Under income-tax regulations No. 33, article 39 and 70, fidu- ciaries are required to file certificates on Form 1015 or Form 1019, INCOME TAX according to the nature of the claim to be made by the fiduciary, for each issue of bonds and for each trust. It is therefore provided that where fiduciaries have the custody and control of more than one estate or trust, and said estates or trusts have as assets bonds of corporations, etc., of the same issue, said fiduciaries may adapt certificates Form 1015 or Form 1019 by changing the words "estate or trust" in lines 2 and 3 of said forms to the plural, and inserting in the blank space provided in line 3 of said forms for the description of the estate or trust the words "As noted on the back hereof." In such cases the notation on the back of the certificate should show for each estate or trust (a) the name of the estate or trust, (b) the amount of the bond, (c) the amount of the interest. In all other respects the certificates should be filled out as indicated thereon. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1962.) Information contained in income-tax returns to be treated as inviolably confidential. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 20, 1914. To collectors of internal revenue, internal-revenue agents, and others concerned: The attention of collectors of internal revenue, internal- revenue agents, and other officers concerned is invited to section 3167 of the United States Revenue Statutes, which prohibits the disclosure of information contained in income and other returns of internal- revenue taxpayers. All internal-revenue officers will preserve as inviolably confiden- tial all income-tax returns, as the slightest infraction of law upon this subject will be severely punished. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1963.) Acceptance of certified checks in payment of internal-revenue taxes. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 18, 1914. SIR: This office is in receipt of your letter of the 16th instant in reference to certified checks offered in payment of internal-revenue taxes and to the refusal of your depository to accept such checks where you indorse the same "ivithout recourse." 8 4 TREASURY DECISIONS In reply you are informed that such qualified indorsement is un- necessary, and that any instructions on Forms 17, 21, and 647 con- trary to this view are hereby rescinded. In this connection attention is called to the act of March 2, 1911 (p. 108, Comp., 1911), respecting such checks not duly paid by the bank certifying to the same. Respectfully, W. H. OSBORN, Commissioner of Internal Revenue. COLLECTOR FIRST DISTRICT, Brooklyn, N. Y. (T. D. 1965.) Advance payment of tax withheld by withholding agents not to be made prior to 30 days preceding the date on which the annual return is required to be filed. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 23, 1914. To collectors of internal revenue: Attention is directed to note A appearing on the bottom of Forms 1012, 1012c, 1043, and 1044, providing that- Withholding agents may, if they so desire, pay at the time this list is filed, to the collector of internal revenue with whom the list is filed, the amount of tax withheld during the month for which the list is made, And to note A, Form 1042, providing that The amount of the tax withheld during the year for which the list is made, may be paid to the collector at the time the list is filed. In order that persons whose income tax is deducted and withheld and is to be paid at the source, may have an opportunity to file with the source which is required to withhold and pay tax for them certificates claiming the benefit of deductions and exemptions pro- vided for in paragraph B and allowed in paragraph C of the law, withholding agents will not pay to collectors of internal revenue the tax withheld by them under the law until after the time for filing claims for deductions and exemptions has expired. See Regula- tions No. 33, art. 33, (a) and (b). W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1967.) Organizations, etc., exempted by the first proviso of paragraph G of section 2 of the act of October 3, 1913, from payment of the income tax, are not subject to the provisions of the income-tax law as withholding agents. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., March 25, 1914. To collectors of internal revenue: This office is in receipt of several communications relative to the duty as withholding agents of religious corporations and other or- 85 INCOME TAX ganizations which are specifically enumerated in the first proviso of paragraph G of section 2 of the act of October 3, 1913. The language of said proviso is as follows : That nothing in this section shall apply to labor, agricultural, or horticul- tural organizations, or to mutual savings banks not having a capital stock represented by shares, or to fraternal beneficiary societies, orders, or associa- tions operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and providing for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or associations and dependents of such members; nor to domestic building and loan associations ; nor to cemetery companies, organ- ized and operated exclusively for the mutual benefit of their members ; nor to any corporation or association organized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of the net in- come of which inures to the benefit of any private stockholder or individual ; nor to business leagues ; nor to chambers of commerce or boards of trade, not organized for profit or no part of the net income of which inures to the benefit of the private stockholder or individual ; nor to any civic league or organiza- tion not organized for profit but operated exclusively for the promotion of social welfare. You are therefore advised that the words "this section" are held to refer to and mean the whole of section 2 of the act of October 3, 1913, which section comprises the income-tax law, and that the words "nothing in this section shall apply to" were intended to relieve such organizations, etc., as properly come within the classi- fications referred to in the proviso quoted, not only from the pay- ment of an income tax but from every obligation or requirement imposed by any or all of the provisions of said section upon with- holding agents. ROBT. WILLIAMS, JR., Acting Cmmissioner of Internal Revenue. (T. D. 1973.) Revision of Form 1044, monthly list return of amount of normal income tax withheld by first bank or collecting agency. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., April 21, 1914. To collectors of internal revenue: Collectors are hereby advised that Form 1044, for monthly list return of amount of normal tax withheld by first bank or collecting agency, has been revised in the following particulars, so that the tax withheld from interest on bonds of different classes or of more than one organization can be reported thereon : In the section of reading matter beginning, "To be made in dupli- cate," in the fourth line thereof, change "coupon" to "coupons," and strike out "and interest orders." In the last line, next above the tabular list, strike out the blank lines and the words thereunder, "Describe the particular issue of bonds," and "State name and address of debtor organization." Strike out the headings in the tabular list and substitute therefor, 86 TREASURY DECISIONS in separate columns, "Party presenting coupons/' and immediately thereunder, in separate columns, "Name" and "Address," "Name of debtor corporation," "Name of particular issue of bonds," "Amount of income subject to tax," and "Amount of tax with- held." Immediately after and under the line of totals of the tabular list there shall be a double rule line. Strike out the words now appear- ing below the total line of the tabular list on Form 1044, viz, "Amount of tax remitted herewith (if any) to collector," and strike out the dotted line following these words, and also the dollar mark on the same line, and strike out the double rule line appear- ing immediately thereunder. Strike out all of Note A appearing at the bottom of the form. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1974.) Change of regulations as to certificates of ownership in connection with inter- est orders or checks for interest on registered bonds. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, 'Washington, D. C., April 21, 1914. To collectors of internal revenue: Articles 41 to 46 of the regulations are hereby amended so as to require, in the case of interest payments on bonds registered as to both principal and interest, that debtors in such cases shall deduct the normal tax of 1 per cent from accruing interest on all such bonds before sending out orders or checks for said interest to regis- tered owners, unless there shall be filed with said debtors, at least five days before the due date of said interest, the prescribed certifi- cates claiming exemption. Where such certificates are so filed the said debtors shall stamp or write on the interest orders or checks, as the case may be, "Ex- emption claimed by certificate filed with debtor." Where prescribed certificates are not so filed, said debtor shall deduct and withhold the normal tax of 1 per cent from the amount of such payment, and shall stamp or write on the interest order or check, as the case may be, "Income iax withheld by debtor/' Responsible banks, bankers, or collecting agents receiving for collection interest orders or checks bearing the aforesaid indorse- ments may present said interest orders or checks for collection without requiring that certificates of ownership be filed therewith. Certificates of ownership are not required to accompany interest orders or checks in payment of interest on fully registered bonds, as information as to ownership of bonds will be furnished by debtor organizations on monthly list returns, Form 1012; but claim for exemption must be filed with debtors, or the tax must be withheld ; and the form of certificate provided for use of owners of coupon 7 INCOME TAX bonds may be used by owners of registered bonds for the purpose of claiming this exemption. Where, because of failure to file certificates claiming exemption, in compliance with above regulations, a part of the income from interest on registered bonds has been withheld for the payment of the normal income tax, debtors may, upon the filing of the proper certificates as providedsin article 42, Income Tax Regulations/ to the extent of exemption claimed, release and pay to the persons entitled thereto the amount of such income so withheld. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1976.) Supplemental regulations prescribing revised forms of certificates of owner- ship, exemption, and substitute certificates in lieu of such certificates now in use. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., May 2, 1914. The following certificates are prescribed in lieu of certificates now in use, and are to be used in complying with the income-tax regulations requiring the filing of certificates when presenting cou- pons or interest orders for collection : Revised Form 1000, Ownership Certificate Individual EXEMPTION NOT CLAIMED, shall be in the following form and shall be printed on white paper : Form 1000. KYled. Ownership Certlflcate-Indlvidual-EXEMPTION NOT CLAIMED. (To be furnished with coupons or interest < . . . , 191 . Amount of coupon or registered interest, $ (Dale of* maturity of in tires I do solemnly declare that I am a citizen or resident of the United States and am the owner of the above-described bonds from which were detached the accompanying coupons, or from which I am entitled to the above-described registered interest, and that all of the information as given in this certificate is true and correct. I do not now claim exemption from having the normal tax of 1 per cent withheld from said income by the debtor at the source. Date, ,191 """ ~(Usu'J busiiltsi 'si,;oalur'e of owner of bonda.) NOTE 1. To he filled in inly when duly authorized agent executes this certificate for ouTter, in which case the name ami address of owner must be t evil nost-oflice address of owner ) given, and collecting aseat first receiving certificate must stamp across face "Satisfied as to identity and responsibility of agent" (giving name and address ot collecting agent). NOTE 2. It securities arc owned jointly by severs! persons one may sifjn, and the names, addresses, and proportion of ownership of each, indorsed on the back hereof. NOTE 3. When numbers of bonds are required to lie given, same are to (Full post-offio* address of agent.) be entered on back hereof. By Agent (Usual business ignature of agent authorized to sign for owner.) 88 TREASURY DECISIONS On the back of said certificate there shall be printed, for the use of joint owners of bonds, the following form, to wit: JOINT OWNERS. If securities described on other side are owned jointly, tbo names and addresses of owners and the proportion of ownership of each should be given. . : ?:M NAMES. FULL Posi-OrncE ADDEESSES. PBOPOKTIOX OWNED. Revised Form 1000 B, Ownership Certificate Individual EXEMPTION CLAIMED, shall be in the following form, and shall be printed on yellow paper Form 1000 B Ownership Certificate Individual EXEMPTION CLAIMED. (Full description of bonds, giving name of issue nd Interest rate.) 191 Amount at coupon or registered interest, $ . (Date of maturity of Interest.) Total exemption allowed under paragraph C, $ ............... ..... Amount of exemption now claimed, $ ............... I do solemnly declare that I am a citizen or resident of the United States and am the owner of the above-described bonds from which were detached the accompanying coupons, or from which I am entitled to the above-described registered interest, and that all of the information aa given in this certificate is true and correct. Date 191 (Usual business signature of o NESS zfuff arowned jointly by several persons one may and the names, addresses, and proportion of ownership of each. Indorsed o the back hereof. NOTE 3. When numbers of bonds are required to be given, same are to be entered on back hereof. (SIGNATURES MUST BE CLEARLY AND LEGIBLY WRITTEN.) and -^ejBv Agent sign, 6^ '*& slgLamrVoV agint amho'riz'ed'* aign foYowner.) (Full post-Kjfflce address of agent.) On the back of said certificate there shall be printed, for the use of joint owners of bonds, the following form, to wit : JOINT OWNERS. If -I-' ' '. "=; described on other side are cTmcd jointly, the narnea nd addresses of owners and the proportion of ownership of each 6h'j*i;u '(.- gi/cu. FULL POST-OT7ICE Ar BBOPOKTlOlT OWHZD. 89 INCOME TAX ' Revised Form 1001, Ownership Certificate FIRMS AND ORGANIZATIONS, shall be in the following form, and shall be printed on yellow paper Form 1001. KeYised. Ownership Certificate FIRMS OR ORGANIZATIONS. (Showing ownership of bond*, which la to be furnished by flrma or organizations not subject tp withholding of I '{>uU description of iwndsYtfvuig naoie'of" issue ai>d~interest ratio "*" ,191 Amount of coupon or registered interest, $. . (Dale of maturity of Interest.) I do solemnly declare that -the firm or organization named below, and of which I am a member or an officer, is the owner ol the above-described bonds from which were detached the accompanying coupons, or upon which there is due the above-described registered interest, and that under the provisions of the Income Tax Law and Regulations said interest is exempt from having the tax withheld at the source, and that all the information given herein is true and correct. Date, ,.,..., s ..,,-lW Addre*:..., (Qlve full pos^offlce address of firm or organliation.) Jtafe-Vfett Bombers ot bond* art required tt be gf /, M me are to be entered on back hereof. Revised Form 1002, CERTIFICATE FOR USE OF FIRST BANK OR COLLECTING AGENCY, shall be in the following form, and shall be printed on green paper : Form 1002. Certificate of BANK OB COLLECTING AGENCT. <t. b* arewaM wllb ctmpons or Interest order, whm Ml aec.mpa.kd bj certlflcat* '**,) (Give name of debtor.) (Full deacriptlon of bonds, giving name of issue and Interest rate.) ,191 . Amount of coupon or registered interest, $.. (Date of maturity of Interest.) I (we) do solemnly declare that the bank or collecting agency named below has purchased or accepted for collection the accompanying coupons or interest orders from , of (Name of party from whom received.) (Full posU>fflce addreu of said party.) and that no certificate of ownership accompanied said coupons or interest orders, and that I (we) have no knowledge as to who is the owner or owners of the bonds (except as noted on back hereof ) upon which the above-described interest is due, and the bank or collecting agency hereby acknowledges responsibility of withholding therefrom the normal income tax of 1 per cent, in accordance with the regulations of the Treasury Department. (Bank or collecting agency.) By (Signature of officer authorized to sign and official position.) (Full 'address of "bank'cV withhoioUng 'agency'.) Nora. If the ownership of bonds Is known to person signing this certificate, he must give the name and address of the owner on the back hereof. (SIGNATURES MUST BE CLEARLY AND LEGIBLY WRITTEN.) Revised Form 1004, Ownership Certificate NONRESIDENT ALIENS, shall be in the following form, and shall be printed on yellow paper Ownership Certificate NONRESIDENT ALIENS. (To be hralsbed with coupons detached from bonds or other obligations owned bj citizens or subjects, firms, corporations, or < countries and who are not residents of the United Slates.) , , 191 Amount of coupon or registered interest, $ (Data of maturity of Interest.) 1 do solemnly declare that the owner of the bonds from which were detached the accompanying coupons, or upon which there matured the aforesaid registered interest, is a nonresident alien in respect to the United States, and is exempt from the income tax imposed on such income by the United States Government under the law enacted October 3, 1913; that no citizen of the United States wherever residing, or foreigner residing in the United States or in any of its possessions, has any interest in said bonds; and that all of the information as given in this certificate is true and correct. Date, (Signature of owner or, if organization, name.) ' ' ' "(If organtea't Ion ,~ signature' of "official" authortted" to "sign", "and" official" position.) (FuU post-office address i [.-When numbers of bonds an required to be given, same are to be entered on back hereof. (SIGNATURES MUST BE CLEARLY AND LEOIBLY WRITTEN.) TREASURY DECISIONS Revised Form 1007, CERTIFICATE CLAIMING EXEMPTION, allowed citizens and resident aliens* under paragraph C, shall be in the following form, and shall be printed on yellow paper: EXEMPTION CEBTIFICATI : as provided In p.r.rtph C o > Tu Law of October J, 1I3.) eut withholding agent. (FuU post-office address.) I hereby serve you wltli notice tnat I am single married, with my (wife husband) living with me, and that I now claim the benefit of the exemption of $ , as allowed In paragraph C of the Federal Income Tax Law of October 3, 1913 (my .total exemption under said paragraph being 8 ). Date, ,191 Signed: .... Address: ... ( Full post-olnce address.) the debtor or withholding agent at any time, not less than 30 days prior to March first next ng the year for which exemption Is claimed. AND LEQIBLY WRITTEN.) shall Form 1015. ttorliMl. Revised Form 1015, Ownership Certificate FIDUCIARY, THE SOURCE, be in the following form, and shall be printed on yellow paper Ownership Certificate FIDUCIARY, THE SOURCE, (To be Hied with debtor or withholding agents by fiduciaries claiming exemption from withholding at the source.) (Give uarae of debtor.) (FuU description of bonds, giving i .., , 191 Amount of coupon or registered interest, $ (Date -of maturity ol Interest.) I (we) do solemnly declare that the estate or trust named below is the owner of the above-described bonds from which were detached the accompanying coupon*, or upon which there is due the above-described registered interest, and acting for the estate or trust in the capacity herein stated, I (we) hereby declare that I (we) do now. claim exemption from having the normal tax of 1 per cent withheld from said income by the debtor at the source. I (we) hereby assume the duty and responsibility , imposed upon withholding agents under the law, of withholding and paying the income tax due, for which I (we) may be liable. Date, (Xame of fiduciary.) for ... (Nam. of estate ort (Full post-oincc address.) s of bonds arc required to be Riven, same are to be entered on the back hereof. (SIGNATURES MUST BE CLEARLY AND LEQIBLY WRITTEN.) Revised Form 1019, Certificate of Ownership FIDUCIARY, NOT SOURCE, shall be in the following form, and shall be printed on white paper Form 1019. g PS* S 5 i Ownership Certificate FIDUCIARY, NOT SOURCE. (To be Bled with debtor or withholding agent, by fldodariea when not claiming any eiemptlon. as an alternative to the I (Full description at bonds, giving name of issuo and interest rule.) (i>ate'of'inatJr"itVofinwrt) W1 ' Amount of coupon or registered interest, ?.... I (we) do solemnly declare that the estate or trust named below is the owner of the above-described bonds from detached the accompanying coupon*, or upon which there is due the above-described n-sj istercd interest,, and actiii" f. or trust in the capacity herein stated, I (we) hereby declare that I (we) do not now claim exemption from having tax of 1 per cent withheld from said income by the debtor at the source. which wore >rthecsl:ilu the normal (1'upucity In xv Inch unto of csljteoi trust.) numbers of bonds are required to be given, same are to bo entered on the b.ick !,. (SIGNATURES MUST bE CLEARLY AND LEGIBLY WRITTEN,) INCOME TAX Form 1058, Substitute Certificate EXEMPTION CLAIMED, shall be in the following form, and shall be printed on yellow paper Form 1058. I K P f K Si' Substitute Certificate-EXEMPTION CLAIMED. Ibe collecting agent's certificate ta substituted for the certificate of owner in which < (Full description of bonds, giv s ,191 iV of 'issue and'i'riterest rate!) ' Amount of coupon < registered interest, ij (Date of maturity of Interest.) Total exemption allowed under paragraph C, $ Amount of exemption claimed, $ I (we) do solemnly declare that the owner of the above-described bonds from which were detached the accompanying interest coupons has filed with me (us) a certificate of ownership, Form No. duly executed and filled in according to Treasury Regulations, which certificate has been indorsed by me (us) as required by Treasury Regulations, aiid that under the provisions of the income tax law and regulations, said interest is exempt from the withholding and payment of the income tax at the source, or that exemption was claimed as stated herein; and I (we) do hereby promise and pledge myself (ourselves) to forward the said certificate to the Commissioner of Internal Revenue at Washington, D. C., not later than the 20th day of next month, in accordance with Treasury Regulations. 101 By.., (Name of bank or collecting agenc-y.) '(signature of person 'authorized to sign" aud'l'its official' position.V (Full post-uffico address of collecting t Form 1059, Substitute Certificate EXEMPTION NOT CLAIMED, shall be in the following form, and shall be printed on white paper I II. i' Substitute Certlfleate-EXEMPTIOy NOT CLAIMED. m when collecting agent's certificate Is substituted for ccrtidcmte of owner I:; hlch < (Full description of bonds, giving name 01 Issue ami Interest rate ) ,191 Amount of coupon or registered interest, $ (Da; a of m&tci Ity of Interest.) I (we) do solemnly declare that the owner cf the above-described bonds from which were detached the accompanying coupons has filed with me (us) a certificate of ownership, Form No duly executed and fillc;! ia according to Treasury e haa been indorsed by me (us) as required bv Treasury ReguiVuona, and which < .T! 'In viti- did not claim any exemption from having the normal tax of 1 per cent withheld by the debtor at the source; and I (we) do hereby promise and pledge myself (ourselves) to forward the said certificate to the Comraisaioner of Internal Revenue at Washington, D. C., aoc later than tuo 20ti day of nxt month, in accordance with Treasury Regulations. Date, By >[ bank or collecting agency.) (8igiiature ), JICTSOII authorized to sign, end his offl'cial position.) (Full post-office address of collecting agency.) All certificates shall be, in size, 8 by 3^ inches, and shall be printed to read from left to right along the 8-inch dimension. All certificates claiming exemption shall be printed on yellow paper; all certificates not claiming exemption shall be printed on white paper; and certificate Form 1002, for use by the first bank or collecting agency, shall be printed on green paper. All paper upon which certificates shall be printed shall correspond in weight and texture to white writing paper 21 by 32, about 40 pounds to the ream of 500 sheets. Certificates heretofore authorized, when properly executed, will be accepted up to October 1, 1914. The revised certificates hereby provided will be printed by the Government and furnished without cost for the use of bond owners. 92 TREASURY DECISIONS All existing regulations which may be in conflict with the pre- scriptions of this regulation are hereby superseded. Individuals or organizations desiring to print their own certifi- cates may do so, but certificates so printed must conform in size and be printed in similar type, upon the same color, shade, and weight of paper as used by the Government.* W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1977.) Ownership certificate to be executed by foreign banks, bankers, etc., claiming exemption of nonresident alien from income tax on interest on bonds owned by said nonresident alien, viz: Citizens or subjects, firms, corpora- tions, or organizations of foreign countries who are not residents of the United States. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C. } May 2, 1914. For the purpose of complying with income-tax regulations re- quiring the filing of certificates of ownership of bonds when pre- senting coupons or interest orders for collection of interest on bonds of domestic corporations of the United States owned by non- resident aliens as to the United States, a certificate in the form following is provided, which may be executed by responsible banks or bankers in foreign countries for and in behalf of nonresident alien owners of bonds of United States corporations : Form 1060. I (For use by forelsn banks or bankers, to accompany coupons detacltod from bonds or other obligations owned by citizens or (objects, firms, corporations, r organizations of foreign countries and who are not residents of the United Wales.) 2' I gl Ownership Certlflcate-NONRESIDENT ALIEN-TO BE EXECUTED BY BANES, BANKERS, ETC. (Full description of bonds, giving name of issue and 191 Amount of coupon (uaio 01 maturity 01 interest.) I (we) do solemnly docbro tha'. the owners of the bo oglstercd interest are nonresident aliens as to the t nment under the law enacted October 3. 1913; that n any time within three years from the date of this oertiflcat Internal J*eve^ue, C wSta g toV^^ further agree thai whenever in the Judgment of the Commissioner of Internal Revenue It shall be necessary in or to the administration of the Income tax law, f th bo d U? fresaJd UeSt ^ Comml3sloaer ' I"" 31 Revenue, dfccloso and furnish to him the names and addresses of the owners and the BmounU by tot Unltod Stetta, opon preSntatlorTof p?S5o th? TfSf to m^usfbyTfroS, th?o$* Tf I (we) will pay and remit to the United State Government the amount of tax claimed to be doe; Date, (Name of bonk or banker.) By (Signature of official authorized to sign.) When foreign banks or bankers shall use the foregoing certifi- cate, they may include in one certificate all the coupons from bonds of the same class and same issue, and may include in one certifi- cate all the interest orders or checks for interest on registered bonds of the same class and same issue. The above certificate shall* be in size 8 by 3 l /2 inches, and shall be printed to read from left to right along the 8-inch dimension. *Sample certificates showing size of type and color of paper can be secured from collectors of internal revenue in their several districts or from the Com- missioner of Internal Revenue at Washington, D. C. 93 INCOME TAX The certificate shall be printed on yellow paper and such paper shall correspond in weight and texture to white writing paper 21 by 32, about 40 pounds to the ream of 500 sheets. The revised certificate hereby authorized will be printed by the Government and furnished without cost. Individuals or organizations desiring to furnish their own certifi- cates may do so, but certificates so printed must conform in size to that prescribed above and be printed in similar type upon the same color, shade, and weight of paper as used by the Government. Sample certificates showing size of type and color of paper can be secured from collectors of internal revenue in their several dis- tricts, or from the Commissioner of Internal Revenue, Washing- ton, D. C. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1983.) Decision of Court. 1. CONSTITUTIONALITY. The income tax law is not unconstitutional. 2. INJUNCTION. As the taxes, if collected illegally, may be recovered back, there is no occasion for interference of a court of equity by injunction. 3. DISMISSAL OF BILL. The motion for injunction was overruled and the bill of complaint dis- missed with costs. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., May 28, 1914. The appended decision of the Supreme Court of the District of Columbia in the case of John F. Dodge and Horace E. Dodge, v. William H. Osborn, Commissioner of Internal Revenue, is pub- lished for the information of internal-revenue officers and others concerned. W. H. OSBORN, Commissioner of Internal Revenue. SUPREME COURT OF THE DISTRICT OF COLUMBIA HOLDING EQUITY COURT. No. 32515. John F. Dodge and Horace E. Dodge, plaintiffs, v. William H. Osborn, Com- missioner of Internal Revenue, defendant. [Decided May 14, 1914.] STAFFORD, Judge: * * * In my best opinion that act is not unconstitu- tional in either respect in which it is challenged by the plaintiffs. I think the contentions are satisfactorily met and answered in the brief filed in behalf of the Government, so that I will not take the trouble to write an opinion in the case or go into it fully at this time. ******* The plaintiffs are amply able to pay the tax, and I think the act provides a proper and reasonable method for the recovery of any taxes illegally exacted 94 TREASURY DECISIONS under the act. The defendant is proceeding in accordance with the explicit directions of the statute, and there is a provision that if the taxes are collected illegally they may be recovered back ; and inasmuch as no irreparable damage will be inflicted upon the plaintiffs by the payment of such taxes, even if ille- gal, and subsequent recovery of them is provided for by the statute, I think there is no occasion for the interference of a court of equity by injunction. I make this statement because the same question may arise in some future case with reference to the scope and effect of section 3224 of the Revised Statutes. So that this bill will be dismissed with costs. NOTE. Counsel for the plaintiffs noted an appeal to the Court of Appeals of the District of Columbia. (T. D. 198.V) Extension to October 31, 1914, of waiver of regulations providing for the fill- ing in on certificates used in connection with the income tax of the num- bers of bonds of corporations, etc. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., May 28, 1914. Notice is hereby given that T. D.' 1955, issued May 10, 1914, waiving until June 30, 1914, the requirement that the numbers of bonds or other like obligations of corporations, etc., from which interest coupons are detached or upon which registered interest is to be paid, shall be rilled in on the certificates to be used in con- nection with the income tax is hereby extended to October 31, 1914. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1986.) Execution of income tax substitute- certificates 1058 and 1059 by banks or collection agents. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., May 29, 1914. To collectors of internal revenue: You are advised that as a convenience to banks and collecting agents who desire to substitute their certificates, Forms 1058 and 1059, for the owner's certificate accompanying the coupons de- posited for collection, it is hereby provided that the name of the bank or collecting agent may be printed or stamped, and that a fac- simile of the signature of the person authorized to sign the sub- stitute certificate for the bank or collecting agent may also be printed or stamped on the certificate : Provided, That in all cases the bank shall first file with the Com- missioner of Internal Revenue a certificate of its authorization in substantially the form following: INCOME TAX '"(City.)" "(Date'.)" The COMMISSIONER OF INTERNAL REVENUE, Washington, D. C. The undersigned hereby authorizes the use of the facsimile signature shown below upon all substitute income tax certificates issued in its name until this authorization is revoked by written notice to you. (Name of bank or collecting agent.) By (Signature of person authorized to sign.) (Facsimile signature of person (Official position.) authorized to sign.) W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1987.) Fiduciaries. Forms 1015 and 1019, revised, may be adapted so that but one certificate will be required to be filed with coupons from the same issue of bonds the property of different estates or trusts. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., May 29, 1914. To collectors of internal revenue: Under Income Tax Regulations No. 33, articles 39 and 70, fidu- ciaries are required to file certificates on Forms 1015 or 1019 (now 1015 and 1019 revised), according to the nature of the claim to be made by the fiduciary, for each issue of bonds and for each trust. -It is therefore provided that where fiduciaries have the custody and control of more than one estate or trust, and said estates or trusts have as assets bonds of corporations, etc., of the same issue, said fiduciaries may adapt certificates, Forms 1015 or 1019, revised, by changing the words "estate or trust" in lines 1, 2, and 3 of said forms to the plural, and writing on blank line provided for (the name of the estate or trust) the words, "As noted on the back hereof." In such cases the notation on the back of the certificate should show for each estate or trust (a) The name of the estate or trust. (fr) The amount of the bonds. (c) The amount of the interest. In all other respects the certificates should be filled out as indi- cated thereon. W. H. OSBORN, Commissioner of Internal Revenue. 96 TREASURY DECISIONS (T. D. 1988.) Certificate of ownership of bonds nonresident alien (Form 1060) provided to be executed by foreign banks or bankers may be used by domestic banks or bankers. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., June 2, 1914. To collectors of internal revenue: The provisions of T. D. 1977 permitting responsible banks or bankers of foreign countries to execute certificates of ownership (Form 1060) for nonresident alien owners of bonds of domestic corporations are hereby extended to and for the use of responsible banks or bankers in the United States for and in behalf of non- resident alien owners of bonds of United States corporations. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1989.) Designation of losses which are deductible from gross income within a tax- able year. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., June 2, 1914. To collectors of internal revenue: Several letters have been received in which inquiry has been made as to whether losses resulting from the sale of real estate by individuals are properly deductible from gross income in the re- turns of annual net income of individuals for the income tax. Under paragraph B of the income tax law it is provided that among the deductions to be allowed shall be "losses actually sus- tained during the year incurred in trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otherwise." Losses arising from 'fires, storms, or shipwreck and not compen- sated for by insurance or otherwise are easily ascertained and there would not appear to be any chance of an erroneous construc- tion as to these. Losses actually sustained during the year in- curred in trade are limited by the language of the act itself. "In trade" is synonymous with business. "Business" has been defined as That which occupies and engages the time, attention, and labor of any one for the purpose of livelihood, profit, or improvement ; that which is his per- sonal concern or interest employment, regular occupation, but it is not neces- sary that it should be his sole occupation or employment. The doing of a single act incidentally or of necessity not per- taining to the particular business of the person doing the same will not be considered engaging in or carrying on the business. It is therefore held that no losses are deductible in a return of 97 INCOME TAX income save and only those losses permitted and provided for by the statute, viz., those actually sustained during the year Which are "incurred in trade," Or which arise from "fires, storms, or shipwreck and not com- pensated for by insurance or otherwise." W. H. OSBORN, Commissioner of Internal Revenue. Approved : CHARLES S. HAMLIN, - Acting Secretary of the Treasury. (T. D. 1990.) Use of certified checks and other forms of commercial exchange in payment of internal-revenue taxes. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., June i, 1914. SIR : Your letter of the 28th ultimo has been received, in which you quote a letter of the 27th idem, addressed to you by the presi- dent of the First National Bank of Abingdon, calling attention to the fact that you are receiving from taxpayers in payment of income tax certified checks from various points in your district. The bank requests you to require the income tax to be paid in New York, Washington, Baltimore, or Philadelphia funds which can be used in New York at par, for the reason that they are re- quired to remit every day in New York funds. You call attention to the instructions on Form 647, "Notice of assessment of special excise and income tax," which you state instruct taxpayers that they may remit by certified check and that most of them are doing so. You ask what steps shall be taken by you in case the bank declines to accept certified checks for deposit. In reply to your request as to what action should be taken in case the bank declines to accept certified checks, your careful attention is invited to the regulations published as Department Circular No. 11, dated March 27, 1913, copy inclosed. You will note that you are required to accept in payment of all internal-revenue taxes certified checks drawn in your favor on national and State banks and trust companies located in the city of Abingdon, and in addi- tion such "out of town" certified checks as you can cash without cost to the Government. In the event that the depositary will not accept for deposit "out of town" certified checks, you are not re- quired by law or regulations to accept such checks in payment of internal-revenue taxes. The law does not specifically authorize the acceptance of any form of exchange in payment of internal-revenue taxes other than currency and such certified checks as are specifically described in Department Circular No. 11, reference to which is made above. 98 TREASURY DECISIONS If, however, the collector elects to accept drafts or other mediums of exchange not specifically authorized by law, he does so at his own risk, but it may be said that, if the depositary bank will accept such forms of exchange indorsed by the collector without recourse and issue therefor regular certificates of deposit, the monetary responsibility would appear to be shifted from the collector to the depositary, inasmuch as the collector would be entitled to credit in his accounts by reason of the issuance of such certificates of deposit (see sec. 3211, Rev. Stat, and notation found on page 108 of Com- pilation of Internal Revenue Laws, 1911). Respectfully, W. H. OSBORN, Commissioner of Internal Revenue. COLLECTOR OF INTERNAL REVENUE, Sixth District, Abingdon, Va. (T. D. 1992.) Bonds of foreign corporations payable, as to interest, wholly within the United States, or within or without the United States, at the option of the owner of the bonds, to be treated for income-tax purposes as domestic bonds when accompanied by certificates of ownership properly executed. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C. } June 4, 1914. To collectors of internal revenue:" Where foreign corporations have an issue of bonds, the interest upon which is payable wholly within the United States, or within or without the United States, at the option of the owner of the bonds, in all cases where said foreign corporations have fiscal agents within the United States and the said bonds are owned by citizens of the United States or aliens resident within the United States, the collection of interest on said bonds shall be considered to be and treated as a domestic transaction upon the filing with said coupons certificates of ownership properly executed: Provided, That whenever coupons from foreign bonds not ac- companied by certificates of ownership are presented for collection they shall be treated as foreign items, and the first bank or collect- ing agency receiving or accepting the same for collection or other- wise shall deduct, withhold, and pay the tax as provided by in- come-tax regulations for the collection of foreign income. Where a foreign corporation has an issue of registered bonds, the interest on which is payable through a fiscal agent in the United States, certificates of exemption may be filed with said fiscal agent in manner and form as prescribed by T. D. 1974 and payment by said fiscal agent shall be made in accordance with the provisions of T. D. 1974. W. H. OSBORN, Commissioner of Internal Revenue. 99 INCOME TAX (T. D. 1993.) Income Ta.r. Interest paid on indebtedness wholly secured by collateral the subject of sale in the ordinary business of a corporation may be deducted as a part of its expense of doing business. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., June 5, 1914. To collectors of internal revenue: This office is in receipt of numerous letters asking a ruling of this office as to the application of the following proviso quoted from subdivision (b) of subsection G of section 2, act of Congress approved October 3, 1913, to-wit: Provided, That in the case of indebtedness wholly secured by collateral the subject of sale in the ordinary business of such corporation, joint-stock com- pany or association, the total interest secured and paid by such company, corporation, or association, within the year on any such indebtedness may be deducted as a part of its expense of doing business. Many of these inquiries come from corporations engaged in buy- ing and selling real estate, which real estate is pledged for the payment of indebtedness, and the question submitted is whether or not such real estate is "collateral" within the meaning of the proviso quoted and whether or not corporations paying interest on indebtedness wholly secured by such collateral may deduct from gross income as "an expense of doing business" the amount of in- terest paid on such indebtedness^ Relative to this you are informed that "collateral," as used in this proviso, comprehends and includes real estate or any form of physical or tangible property bound for the performance of certain covenants, the payment of certain obligations, and if such real estate or other physical or tangible property is the "subject of sale in the ordinary business of the corporation" owning the same, that is, if such corporation is, as a matter of its ordinary business, en- gaged in buying and selling, or dealing in such property, the in- terest actually paid within the year on indebtedness wholly secured by such collateral (a mortgage on such property) may be allowably deducted from gross income under item 4 (a) of the return form as an expense of doing business, without regard to the limit of deductible interest as set out in subdivision "Third," paragraph (b), subsection G of the Federal income tax law hereinbefore cited. This construction of the proviso quoted is not intended to and does not authorize the deduction as "an expense of doing business" of any interest paid or indebtedness secured by property, real or personal, which is not the "subject of sale in the ordinary business of the corporation," but which is held by it for the purpose of, or as an instrument in carrying on, its ordinary business such as the rights of way and other property of public utility companies, per- manent office buildings and property of like character held or occu- pied for their own particular use or purpose in the furtherance of the objects of the corporation, but which property is not the sub- 100 TREASURY DECISIONS- - J ject of sale in their ordinary business, and -which is simply occupied or used as an instrument or means of, or essential to, the carrying on of the ordinary business for the transaction of which they" are organized. The fact that such property may be subject to sale under extraordinary or peculiar conditions does not qualify, but father disqualifies, it as "collateral" such as is contemplated by this provision of the act cited. The only corporations, joint-stock companies, or associations which will be allowed under this proviso as herein interpreted to deduct as "an expense of doing business" interest paid on indebted- ness wholly secured by mortgage on real estate, or other physical and tangible property, are those corporations, joint-stock com- panies, or associations which are organized and operated for the exclusive purpose of buying, selling, and dealing in the particular kind of property upon which the mortgage is given, and the par- ticular property pledged for the debt upon which the interest is paid must be the "subject of sale in the ordinary business of the corporation." Any corporation whose indebtedness is secured by a trust, mort- gage, or by any form of indenture which covers and includes in the lien any property which is not the subject of sale in the ordinary business of such corporation, will be and is excluded from the benefit of this proviso, as hereinbefore construed, and its interest deduction will be limited to the amount authorized in subdivision "third" above referred to that is, the interest actually paid within the year at the contract rate on an amount of bonded or other in- debtedness at no time within the year in excess of a sum ascertained by adding to the paid-up capital stock outstanding at the close of the year one-half of the total amount of the interest-bearing in- debtedness also then outstanding. Corporations which under this ruling are entitled to deduct as "an expense of doing business" the total amount of interest paid within the year on "indebtedness wholly secured by collateral the subject of sale in the ordinary business of such corporations," are required to state separately in their returns the amount of indebt- edness upon which such interest is paid, segregating it from the indebtedness not so secured and upon which the interest paid is taken credit for or deducted under item 6 (a) of the return form. The interest-bearing indebtedness stated under item 2 of the return form as one of the bases for determining the amount of interest which may be allowably deducted under item 6 (a) must not in- clude any "indebtedness wholly secured by collateral the subject of sale in the ordinary business of the corporation." Failure to seg- regate the two forms of indebtedness will render the interest de- duction under item 6 (a) subject to suspension and disallowance. W. H. OSBORN, Commissioner of Internal Revenue. INCOME TAX (T. D. 1996.) Cooperative dairies and like organizations do not fall within the classes of organizations enumerated in subsection G, section 2, act of October 3, 1913, as exempt, and are required to make returns of annual net income. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., June 15, 1914* To collectors of internal revenue: Attention is called to article 92 of Regulations No. 33, approved January 5, 1914, in which it is provided that cooperative dairies not issuing stock and allowing patrons dividends based on the percent- age of butter fat in milk furnished are not liable to the require- ments of section 2, act of October 3, 1913. This* article is amended to the effect that cooperative dairy asso- ciations, whether issuing capital stock or not, are required to make returns of annual net income pursuant to the requirements of this act. The only corporations, joint-stock companies or associations, or insurance companies, exempt from the requirements of this act are those which fall within one or another of the classes specifically enumerated in the first proviso of subsection G of the act cited as exempt. Cooperative dairies, no matter how organized, do not appear to fall within any of these exempted classes, and will, therefore, be required to make returns. In the preparation of their returns, cooperative dairies may in- clude in their deductions from gross income the amount actually paid to members and patrons for milk, but any amount retained at the end of the year over and above expenditures will be returned as net income, upon which the tax will be computed and assessed. In so far as article 92, hereinbefore referred to, is in conflict with this ruling, it is hereby revoked, and collectors will require all organizations of this character to make returns of annual net in- come and in other respects comply with the requirements of the Federal income tax law as it applies to corporations, joint-stock companies or associations, and insurance companies. In so far as applicable, this ruling also applies to mutual or co- operative telephone companies, farmers' insurance companies, and like organizations. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 1997.) Monthly list returns not to be made under oath. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C. } June 16, 1914. To collectors of internal revenue: The requirement that monthly list returns be made under oath 102 TREASURY DECISIONS (as provided by articles 35, 50, 53, and 59, Income Tax Regula- tions No. 33, when filed by withholding agents on or before the 20th of the month following that in which withholding occurred) is hereby waived. In all cases the annual list return required of withholding agents (of which the monthly list returns will form a part as required by regulations) will be made, sworn to, and filed as now required by existing regulations, and the jurat for the annual list return will cover the entire return as thus made up. W. H. OSBORN, Commissioner of Internal Revenue. (T .D. 1998.) Exemption certificate provided for use of firms, organizations, and fiduciaries claiming exemption from withholding of tax at source on income other than interest on bonds. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., June 16, 1914. To collectors of internal revenue: The following certificate is hereby provided for use of firms, organizations, and fiduciaries for the purpose of establishing their identity and nonliability to withholding at the source of income (other than interest on bonds) payable to them. Said certificates shall be of the size and be printed on yellow paper of the weight and texture all as provided by T. D. 1976, the requirements of which are hereby made applicable to the certificate hereby pro- vided. Form 1063. Exemption Certificate FIRMS, ORGANIZATIONS, OR FIDUCIARIES. withholding < Uie source.) (Character of Income, otber than Interest on bonds, as, rent, dividend] trom foreign corporations, etc. ) I do solemnly declare that the firm, organization, or person named below is, entitled to receive the above-described Income, and that under the provisions of the income tax law and regulations aaid income is exempt from having the tax Mrithheld at the source, and that all the information given herein is true and correct. Date, 191 r (Name of firm, organHatloo, or Cdoctary.) (Give full post-office address of firm or organisation or fiduciary.) The exemption certificate provided for the use of individuals is Form 1007, w 1 'ch will be use by individuals in all cases except for interest on bonds, for which forms 1000 and 1000B are pro- vided. W. H. OSBORN, Commissioner of Internal Revenue. 103 (T. D. 2001.) Corporations desiring to make returns of annual net income on the basis of a fiscal year must give notice in writing to the collector not less than 30 days prior to March 1, designating in such notice the last day of some month as the close of the fiscal year. Failure to give such notice at least 30 days prior to March 1, or to make return for the preceding calendar year on or before March 1, renders corporations liable to additional tax and penalty. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., June 22, 1914 To collectors of internal revenue: Your attention is called to the following provision quoted from paragraph O, subsection G of section 2, act of October 3, 1913 : The tax herein imposed .shall be computed upon its entire net income ac- crued within each preceding calendar year ending December thirty-first ; * * * Provided further, That any corporation, etc., subject to this tax may designate the last day of any month in th'e year as the day of closing of its fiscal year arid shall be entitled to have the tax payable by it computed upon the basis of the net income ascertained as herein provided for the year ending on the day so designated * * * and it shall give notice of the day it has thus designated as the closing of the fiscal year to the collector of the district in which its principal business office is located at any time not less than thirty days prior to the date upon which its annual return shall be filed. Except as provided in the act, all corporations are required to make their returns of annual net income on the basis of the calendar year and to file such returns on or before the 1st day of March next following. March 1 is, therefore, the primary due date for the returns of all corporations. This due date can be postponed only in accordance with some legal or authorized action. Unless such action is taken within the prescribed time, or the returns filed on or before March 1, all corporations in existence at the preceding December 31 and failing to take such action, or so file their returns for the period ended December 3.1, will be held to be delinquent, and will be subject to 50 per cent additional tax and the penalty of the law. The filing of returns at any date other than on or before March 1 and on a basis other than the calendar year can be authorized only in cases wherein corporations, not less than 30 days prior to March 1, give notice in writing to the collector of the district in which are located their principal places of business, designat- ing in such notice the last day of some month as the close of their fiscal year. In this case the corporations will make their returns for the year so established, and will file their returns on or before the last day of the 60-day period next following the date desig- nated as the close of the fiscal year. For the purpose of the income tax law, a fiscal year, when designated, must be so designated that the return made on this basis will not comprehend a period greater than 12 consecutive months. If the required notice is delayed until it can not be given at least 30 days prior to March 1, or if the date designated as the close of the fiscal year comprehends a period greater than 104 TREASURY DECISIONS 12 months from the close of the period for which the last prior return was made, the returns must be made as of the calendar year and must be filed on or before March 1 until such time as a fiscal year for this purpose can be legally established. If a corporation which shall have filed, on or before March 1, its return for the preceding period ended December 31, desires to estabish, as a basis for making future returns, a fiscal year ended at some date prior to the next December 31, it may do so by filing, at least 30 days prior to the date when its returns, on a fiscal year basis, will be due, a notice with the collector desig- nating the last day of some month as the close of its fiscal year. It will then, on or before the last day of the 60-day period next following the date so designated, file a return covering the period from January 1 to the date so designated in the same year, and thereafter its returns will be made for each 12-month period next following such date. The above rulings will apply to corporations which began busi- ness within the year, as well as to those which were in existence and transacted business throughout the year. Any ruling or Treasury decision heretofore issued and in con- flict with this decision is hereby recalled and revoked. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2005.) Instructions and rules for determining what amount is to be allowed as a de- duction for loss in a return of income. Depreciation allowed by law does not include shrinkage in value of stocks, bonds, etc. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., July 8, 1914. To collectors of internal revenue and revenue agents: For the purpose of checking up returns and ascertaining the amount of taxable income of individuals and corporations you are given the following instructions and rules for use in determining the amount of deductible loss allowable to individuals and corpo- rations under the fourth deduction (par. B, p. 5), Regulations No. 33, and second deduction, for domestic corporations (par. G, p. 14), and second deduction, for foreign corporations (par. G, p. 15), Regulations No. 33. The loss considered here has in it no element of "depreciation," or "allowance for wear and tear," or "compensation from insurance or otherwise." It is to be such loss as is absolute and complete and which has been actually sustained. Depreciation as an allowable deduction in ascertaining annual net income for the income tax is separately provided for and is not to be confused with loss. The depreciation provided to be taken as a deduction in a return of income is the value assigned to the deterioration of physical improvements or assets, such as are sus- 105 INCOME TAX ceptible of having their value lessened through wear and tear, use or obsolescence. The depreciation referred to in the income-tax law does not re- late to evidence of a right or interest in property, and hence any shrinkage in the value of bonds, stocks, and like securities due to fluctuations in their market value is not deductible in a return of income as depreciation or loss. Losses may be sustained by individuals or corporations on per- sonal or real property. Only those losses are deductible which are sustained during the tax year "in trade" that is, the business which engages the time, attention, and labor of anyone for the purpose of livelihood, profit, or improvement. Loss to be deductible must be an absolute loss, not a speculative or fluctuating valuation of con- tinuing investment, but must be an actual loss, actually sustained and ascertained during the tax year for which the deduction is sought to be made ; it must be incurred in trade and be determined and ascertained upon an actual, a completed, a closed transaction. Losses sustained by individuals or corporations from the sale of or dealings in personal or real- property growing out of owner- ship or use of or interest in such property will not be deductible at all unless they are an incident of, connected with, and grow out of the business of the individual or corporation sustaining the loss, and are ascertained, determined, and fixed as absolute in the above sense within the taxable year in which the deduction is sought to be made. When loss under this heading is ascertained to be de- ductible, the entire amount of the loss will be deductible except where the property in connection with which the loss occurred was acquired prior to March 1, 1913, in the case of individuals, and prior to January 1, 1909, in the case of corporations, and then and in such event the loss ascertained will be prorated over the whole time the property was held, and that part of the whole loss apportioned to the taxable period will be taken into account in annual returns of income. In prorating, fractional parts of years will not be con- sidered. Loss is the difference between selling price and cost where the selling price is less than cost. Cost of property purchased prior to the incidence of the special excise tax (Jan. 1, 1909), or the incidence of the income tax (Mar. 1, 1913), will be the actual price paid for the property, in- cluding the expense incident to the procurement of the property in the first instance and its sale thereafter, together with carrying charges of interest, insurance and taxes actually paid prior to the incidence of tax (special assessments, if any, "actually paid" as "local benefits" in connection with real estate) ; provided that where, up to the incidence of the tax, the expense of carrying prop- erty has exceeded the income from it, the difference between the expense of carrying ?.nd the income from the property shall be added to the purchase price and the sum thus ascertained shall be the cost of the property; and provided further, that in the case of property purchased prior to the incidence of the tax and sale 106 TREASURY DECISIONS thereof subsequent to the incidence of the tax there shall be ex- cluded from consideration in ascertaining cost any items of income, expense, interest, and taxes previously taken into account in pre- paring a return of annual net income. The cost of property acquired subsequent to the incidence of the tax will be the actual price paid for it, together with the ex- pense incident to the procurement of the property in the first instance and its sale thereafter and the cost of improvement or development, if any. All existing rulings and regulations in conflict herewith are hereby annulled and superseded. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2006.) Definition of "foreign corporation" and "fiscal agent" as used in T. D. 1992, and further explanation of method of handling collection _of income from bonds of such foreign corporations and foreign countries having fiscal agents in the United States. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., July 16, 1914. To collectors of internal revenue: Doubt having arisen as to the comprehensiveness of the term "foreign corporation," and the duties under the income-tax law of "fiscal agents," as provided in T. D. 1992, you are advised that "foreign corporations" as used in said decision was intended to include municipal and private corporations holding charters under laws of countries foreign to the United States, and "fiscal agents" refers to financial agents in the ordinary sense, upon whom the law casts the same duties with reference to with- holding and paying the tax as are imposed upon withholding and paying agents of domestic corporations by appointment. Where a foreign government has a fiscal agent in the United States for the purpose of paying the interest on its obligations, such fiscal agent will be charged with the duty of withholding and paying the tax on such interest payments, except to the ex- tent of exemption claimed. Where such foreign countries or corporations have an issue of bonds payable wholly within the United States or within or without the United States, at the option of the owner of the bonds, and where the coupons from such bonds are presented for payment to the fiscal agent in the United States of such foreign countries or corporations, or for collection to a bank or collecting agency whether licensed or not, with ownership certificate at- tached, then and in all such cases said coupons shall be treated as domestic items and the aforesaid fiscal agents will be charged with the duties and responsibilities of withholding and paying agents, and will make return on Form 1012, as provided by in- come tax regulations. 107 INCOME TAX Where, however, such coupons are not presented with such ownership certificates attached, they shall be received only by a licensed bank or collecting agency, and when so received shall be considered to be and be treated as foreign items, in accordance with the regulations for the collection of foreign income. This ruling is made in explanation and amendment of T. D. 1992 and other applicable regulations. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2011.) Taxability of commissions on renewal premiums on insurance. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., July 28, 19/4. To collectors of internal revenue: Commissions on renewal premiums for insurance are income when received and income for the period in which received. Therefore, commissions on renewal premiums received between March 1 and December 31, 1913, are taxable income for that period and should be included in returns of income for 1913. Where commissions on renewal premiums received by indi- viduals between March 1 and December 31, 1913 (including com- missions on renewal premiums on business written prior to March 1, 1913, and payable and paid subsequent to that date) were not included in returns of income of such individuals for 1913, they should file amended returns and include in such amended returns the amount of said commissions on renewal premiums. Where returns of annual net income were not made by indi- viduals in receipt of commissions on renewal premiums because of insufficient income to require a return of income, and such showing of insufficient income was caused by the exclusion from the return of said commissions on renewal premiums, such indi- viduals should make and file returns of income and include there- in the commissions received by them on renewal premiums within the period from March 1 to December 31, 1913. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2012.) Extending exemption certificate No. 1063, as prescribed in T. D. 1998, to non- resident alien individuals. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., July 50, 1914. To collectors of internal revenue: Exemption certificate 1063, as provided in T. D. 1998, is hereby extended to and made applicable to the use of persons who are 108 TREASURY DECISIONS non-resident aliens in claiming exemption from income tax on dividends payable in the United States from stock of foreign corporations, W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2013.) Nonresident aliens Amendment of article 8 of Regulations 33, providing for the collection of tax on income of nonresident aliens derived from trades or professions in the United States. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 12, 1914. To collectors of internal revenue: Article 8, Income Tax Regulations 33, is hereby amended by adding thereto the following : The person, firm, company, copartnership, corporation, joint-stock company or association, and insurance company in the United States citizen or resi- dent alien in whatever capacity acting, having the control, receipt, disposal, or payment of fixed or determinable annual or periodical gains, profits, and income, of whatever kind, to a nonresident alien, under any contract or other- wise, and which payment shall represent income of a nonresident alien from the exercise of any trade or profession within the United States, shall make return for such nonresident alien on Form 1040 and shall pay any and all tax normal and additional tax chargeable upon the said income of such non- resident alien. So that article 8 as amended shall read : ART. 8. The income of nonresident aliens subject to the normal tax of 1 per cent shall consist of the total gains, profits, and income derived from all property owned and from every business, trade, or profession carried on within the United States (to be designated as gross income), less deductions (1 to 8, inclusive) specifically enumerated in paragraph B of the act (see art. 6), in so far as said deductions relate to said gains, profits, etc. The specific exemption in paragraph C of the act can not be allowed as a deduction in computing the normal tax of nonresident aliens. Nonresident aliens are subject to additional or surtax the same as pre- scribed in the case of citizens of the United States or persons residing in the United States. The responsible heads, agents, or representatives of said nonresident aliens who are in charge of the property owned or business carried on shall make full and complete return of said income and shall pay the tax as provided herein. The person, firm, company, copartnership, corporation, joint- stock company or association, and insurance company in the United States citizen or resi- dent alien in whatever capacity acting, having the control, receipt, disposal, or payment of fixed or determinable annual or periodical gains, profits, and income, of whatever kind, to a nonresident alien, under any contract or other- wise, and which payment shall represent income of a nonresident alien from the exercise of any trade or profession within the United States, shall make return for such nonresident alien on Form 1040 and shall pay any and all tax normal and additional tax chargeable upon the said income of such non- resident alien. W. H. OSBORN, Commissioner of Internal Revenue. 109 .Form 1065. Ed . 200,<x-Aug.,i-i4. District of .- UNITED STATES INTERNAL REVENUE. RETURN OF ANNUAL NET INCOME. (Paragraph D, Section 2, Act of Congress -approved October 3, 1913, and Article 12, Regulations No. PARTNERSHIPS. RETURN OF NET INCOME of ....: .' !. (Name of partnership.) whose principal place of business is located at , .. (Street and number.) city or town of . . , in the State of ( calendar ) for the j > year ended . , 191 . 1 . GROSS INCOME (see Note A, page 4) $ . .2. DEDUCTIONS: (a) Total amount of all ordinary and necessary expenses paid within the year for the maintenance and operation of the business and properties of the partnership, exclusive of interest payments (see Note B, page 4): . $ (&) Total amount of losses sustained during tb-3 year not com- pensated by insurance or otherwise (eoo Note 1, page 2)._ $ (<) Total amount of depreciation for the year (see Note 2, page 2)...' '.." $. (d) .Total amount of interest paid on indebtedness $. (e) Total amount of interest received upon obligations of a State or political subdivision thereof, and upon the obligations of the United States or its possessions $ . (/) Total taxes paid during the year _ _ $ _ TOTAL DEDUCTION'S. - . . $ . 3. Net income on which the individual members are subject to tax on their distributive interest, whether distributed or not., ; $ NOTE. The above blank spaces for figures should show the amount of each respective item: If -there is nothing to return under any item, the word "none" must be written in such blank space. 1 10 2 If deductions are claimed on page 1, state here, in detail: , . NOTE 1 . If loss, of what the loss consisted, when it was actually sustained, and how it was deter- mined to be a loss; and if bad debts, of what they consisted, when they were created, when and how they were ascertained to be worthless. NOTE 2. If depreciation, the character of the property on which depreciation is claimed; if buildings, the character of the buildings, the material of which constructed, when erected, the cost, and the basis on which deduction claimed was made; if property other titan buildings, the character of the property, its cost, when purchased, and the basis on which depreciation was claimed. 4. Members of partnership: PosT-Omc* ADDBBM. Amount of distributive iotereot ia net incom*. 5. Persons who are citizens or residents of the United States employed by your firm, either as mem* here of the partnership or in any capacity whatever, to each of whom a salary or compensation in any form whatever was paid to the amount of $3,000 or over for services rendered during the calendar year. For the year 1913 the report should show amounts received of SfySOO or over for services rendered from March 1 to December SI, 1913, inclusive. NAME POST-OFFICE ADDRESS. Amount of salary or compensation. It* County of. .................... ,.., to wit: . ..... . .., Member of the firm of .. ...................... ,-, a partnership, whose return of annual net income is set forth hereto, being duly sworn, deposes and says that the foregoing report and the several items therein act forth are, to his beat knowledge and belief and from such information as he has been able to obtain, true and correct in each and every particular; that the amount of gross income therein set forth is the full amount of gross income, without any deduction whatsoever, received from all sources by the said partnership during the year stated; that the expenses claimed as deductions were actually incurred and paid during the year; that the amount claimed for losses and depreciation are believed to be proper and allowable deductions under the law, and that the net income therein set forth is the full amount of the distributive interest on which the individual members are subject to income tax. For ,., ,., Partnership. Sworn and subscribed to before me this day of 191 NOTARIAL SEAL. NOTE A. Gross income shall consist of the total of the gross revenues derived from the operation and management of its business and properties, together with all amounts of income from other sources, including dividends received on stock of organizations, and interest received upon obligations of a State or political subdivision thereof, and upon the obligations of the United States or its possessions. NOTE B. Amounts expended in making permanent improvements or betterments, etc., or in any way transferred from earnings to capital account, are not proper deductions in ascertaining annual net income. NOTE C. This return of net income is desired for immediate use and should be given prompt atten- tion and, when properly filled in and executed, should be forwarded, not later than 30 days from the date of receipt of notice, direct to the Commissioner of Internal Revenue, Washington, D. C. NOTE D. The word "year" as herein used means the calendar or fiscal year, as the case may be, and this return is to show the net earnings for the year as of the date on which the books were closed or the net earnings were ascertained. INCOME TAX (T. D. 2015.) Compromises Minimum amounts which will be accepted. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 13, 1914. To collectors of internal revenue: The fact has been developed that a great number of individuals and corporations failed to make returns of annual net income for the income tax, either through ignorance of the requirements of the law or through a misunderstanding of its requirements, and it has been determined by the Treasury Department to accept offers in compromise of the specific penalty for failure to file re- turns within the period prescribed by law in a minimum sum, as follows: $5 from individuals, $10 from corporations which are organized for profit. In the cases of all corporations not organized for profit, the specific penalty will not be asserted this year, provided the re- quired return has been or shall be filed before December 31, 1914. The United States district attorney should be requested not to institute proceedings in such cases. The foregoing applies only to those cases where there was no intent to evade the law or escape taxation. In all cases, however, wherein a return is not made until the liability to make a return is discovered by investigation of col- lectors of internal revenue or revenue agents, the above schedule will not necessarily apply, but each individual case will be de- cided upon its own merits and the amount of the offer in com- promise which may be favorably considered will be determined accordingly. ROBERT WILLIAMS, JR., Acting Commissioner of Internal Revenue. (T. D. 2016.) Inspection of income-tax returns Executive order Regulations. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 18, To internal-revenue officers and others concerned: The following Executive order, together with regulations signed by the Secretary and approved by the President, relative to the publicity feature of section 2 of the act of October 3, 1913, impos- ing an income tax, is hereby published for your information. W. H. OSBORN, Commissioner of Internal Revenue. EXECUTIVE ORDER. Pursuant to the provisions of Section 2 of the Tariff Act of October 3, 1913, said section providing for an income tax, and which contains in para- graph G, sub-paragraph (d) the following provision, J 14 TREASURY DECISIONS When the: assessment shall be made, as provided in this section, the returns, together with any corrections thereof which may have been made by the Commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such : Provided, That any and all such returns shall be open to inspection only upon the order of the President, under rules and regulations to be prescribed by the Secretary of the Treasury and approved by the President : Provided fur- ther, That the proper officers of any State imposing a general income tax may, upon the request of the governor thereof, have access to said returns or to any abstract thereof, showing the name and income of each such cor- poration, joint stock company, association or insurance company, at such times and in such manner as the Secretary of the Treasury may prescribe, it is hereby ordered, that all such returns shall be subject to inspection in accordance and upon compliance with rules and regulations prescribed by the Secretary of the Treasury and approved by the President, bearing even date herewith. WOODROW WILSON THE WHITE HOUSE, July 28, 1914. [No. 1999.] REGULATIONS GOVERNING THE INSPECTION OF RETURNS OF CORPORATIONS, JOINT- STOCK COMPANIES., ASSOCIATIONS, OR INSURANCE COMPANIES, MADE IN COMPLI- ANCE WITH THE REQUIREMENTS OF SECTION 2 OF THE ACT OF OCTOBER 3, 1913. RETURNS OF INDIVIDUALS ARE NOT OPEN TO THE INSPECTION OF ANYONE EXCEPT THE PROPER OFFICERS AND EMPLOYEES OF THE TREASURY DEPARTMENT. TREASURY DEPARTMENT, Washington, D. C., July 28, 1914. Inspection of returns. By section 2 of the act of October 3, 1913, Congress imposed a tax upon the entire net income arising or accruing from all sources to every citizen of the United States, whether residing at home or abroad, and to every person residing in the United States, though not a citizen thereof, and upon the entire net income from all property owned and of every business, trade, or profession carried on in the United States by persons residing elsewhere, arid upon every corporation, joint-stock company or association, and every insur- ance company, with certain exceptions, engaged in business in the United States, and prescribed the method of handling the returns of annual net income filed in compliance with said law, as follows: (d) When the assessment shall be made, as provided in this section, the returns, together with any corrections thereof which may have been made by the Commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such : Provided, That any and all such returns shall be open to inspection only upon the order of the President, under rules and regulations to be prescribed by the Secretary of the Treasury and approved by the President: Provided further, That the proper officers of any State imposing a general income tax may, upon the request of the governor thereof, have access to said returns or to an abstract thereof, showing the name and income of each such corpo- ration, joint-stock company or association or insurance company, . at such times and in such manner as the Secretary of the Treasury may prescribe. For the purpose of making effective the legislative intent thus expressed, the President has ordered that such returns shall be open to inspection under the following rules and regulations. The word "corporation," when used alone herein, shall be construed to refer to corporations, joint-stock com- panies or associations, and insurance companies. 1. The return of every individual, and of every corporation, joint-stock company or association, and every insurance company, whether foreign or domestic, shall be open to the inspection of the proper officers and employees ufth.e Treasury Department. Returns of individuals shall not be subject to "5 INCOME TAX inspection by anyone except the proper officers and employees of the Treasury Department. 2. Where access to any return of any corporation is desired by an officer or employee of any other department of the Government, an application for permission to inspect such return, setting out the reasons therefor, shall be made in writing, signed by the head of the executive department or other Government establishment in which such officer or employee is employed, and transmitted to the Secretary of the Treasury. If the return of a corporation is desired to be used in any legal proceedings other than those to which the United States is a party, or to be used in any manner by which any informa- tion contained in the return could be made public, the application for per- mission to inspect such return or to furnish a certified copy thereof shall be referred to the Attorney General, and if recommended by him transmitted to the Secretary of the Treasury. 3. All returns, whether of persons or of corporations, joint-stock companies or associations, or insurance companies, may be furnished, upon approval of the Secretary of the Treasury, for use, either in the original or by certified copies thereof, in any legal proceedings before any United States grand jury or in the trial of any cause to which both the United States and the person or corporation or association rendering the return are parties either as plain- tiff or defendant, and in the prosecution or defense or trial of which action, or proceeding before a grand jury, such return would constitute material evidence, but in any case arising in the collection of the income tax, the Commissioner of Internal Revenue may furnish for use to the proper officer either the original or certified copies of returns without the approval of the Secretary of the Treasury. In all cases where the use of the original return is necessary, it shall be placed in evidence by the Commissioner of Internal Revenue or by some officer of the Bureau of Internal Revenue designated by him for that purpose, and after such original return has been placed in evi- dence it shall be returned to the files in the office of the Commissioner of Internal Revenue at Washington, D. C. 4. The Secretary of the Treasury, at his discretion, upon application to him made, setting forth what constitutes a proper showing of cause, may permit inspection of the return of any corporation, by any bona fide stockholder in such corporation. The person desiring to inspect such return shall make application, in writing, to the Secretary of the Treasury, setting forth the reasons why he should be permitted to make such inspection, and shall attach to his application a certificate, signed by the President, or other principal officer of such corporation, countersigned by the Secretary, under the corpo- rate seal of the company, that he is a bona fide stockholder in said company. (Where this certificate can not be secured, other evidence will be considered by the Secretary of the Treasury to determine the fact whether or not the applicant is a bona fide stockholder and, therefore, entitled to inspect the return made by such company.) Upon receipt of such application the corpo- ration whose return it is desired to inspect shall be notified of the facts and shall be given opportunity to state whether any legitimate reason exists for refusing permission to inspect its returns of annual net income by the stock- holder applying for permission to make such inspection. The privilege of inspecting the return of any corporation is personal to the stockholders, and the permission granted by the Secretary to a stockholder to make such inspec- tion can not be delegated to any other person. 5. The returns of the following corporations shall be open to the inspection of any person upon written application to the Secretary of the Treasury, which application shall set forth briefly and succinctly all facts necessary to enable the Secretary to act upon the request : (a) The returns of all companies whose stock is listed upon any duly organized and recognized stock exchange within the United States, for the purpose of having its shares dealt in by the public generally. (b) All corporations whose stock is advertised in the press or offered to the public by the corporation itself for sale. In case of doubt as to whether any company falls within the classification above, the person desiring to see such return should make application, supported by advertisements, prospec- 1x6 TREASURY DECISIONS tus, or such other evidence as he may deem proper to establish the fact that the stock of such corporation is offered for general public sale. Returns can be inspected only in the office of the Commissoner of Internal Revenue, in Washington, D. C. In no case shall any collector, or any other internal revenue officer outside of the Treasury Department in Washington, permit to be inspected any return or furnish any information whatsoever relative to any return or any information secured by him in his official capa- city relating to such return, except in answer to a proper subpcena, in a case to which the United States is a party. 6. Returns of individuals shall not be open to the inspection of any person other than the proper officers and employees of the Treasury Department or person rendering the same, and are under no conditions to be made public, except where such publicity shall result through the use of such returns in any legal proceedings in which the United States is a party. 7. Upon request of the governor of a State imposing a general income tax, the proper officer of such State, to be designated by name and official position by the governor of such State in his application to the Secretary of the Treasury, may have access to the returns or to abstracts thereof showing the name and income of each corporation, joint stock company or association, or insurance company, at such times and in such manner as the Secretary of the Treasury may prescribe. Such application shall be made in writing, addressed to the Secretary of the Treasury and shall show (first) that the State whose governor makes the request, imposes a general income tax; (sec- ond) the name and address of each corporation, etc., to which access is desired; (third) why permission to inspect the returns of the corporations, etc., named in the request is desired, and (fourth) what officer or officers are designated to make the desired inspection, giving their names and official des- ignations. Such request must be signed by the governor of the State and sealed with the seal thereof, and shall be transmitted to the Secretary of the Treasury for his consideration and action thereon. No provision is made in the law for furnishing a copy of any return to any person or corporation, and no copy of any return will be furnished to any other than the person or corporation making the return, or their duly con- stituted attorney, except as hereinbefore authorized. The provisions herein contained shall be effective on and after the 1st day of September, 1914. W. G. MCADOO, Secretary of the Treasury. Approved : WOODROW WILSON, The White House, July 28, 1914. (T. D. 2017.) Nontaxability of interest from bonds and dividends on stock of domestic corporations owned by nonresident aliens. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 25, 1914. To collectors of internal revenue: Interest on bonds of domestic corporations and dividends on stock of domestic corporations owned by nonresident aliens, and whether such bonds and stock be physically located within or without the United States, are not subject to the income tax. W. H. OSBORN, Commissioner of Internal Revenue. 117 INCOME TAX it (T. D. 2022.) Waiver until further notice of regulation requiring the filling in on certificates of numbers of bonds. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 3, 1914. Notice is hereby given that regulation requiring the filling in on certificates of numbers of bonds or other like obligations of cor- porations, etc., from which interest coupons are detached or upon which registered interest is to be paid which was extended to October 31, 1914, by T. D. 1985, issued May 28, 1914 is hereby waived until further notice. ROBT. WILLIAMS, JR. Acting Commissioner of Internal Revenue. (T. D. 2023.) Amending article 58, Income Tax Regulations 33, requiring indorsement or stamp on foreign coupons, checks, bills of exchange, etc. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 12, 1914. To collectors of internal revenue: Article 58, Income Tax Regulations 33, is hereby amended to read as follows : ARTICLE 58. The licensed person, firm, or corporation first receiving such foreign items for collection, or otherwise, shall withhold therefrom the nor- mal tax of 1 per cent, and will be held responsible therefor. If the foreign item is in. the form of a check or bill of exchange, the words "Income tax withheld by " (giving name, address, and date) shall be indorsed or stamped thereon by such licensee; but if the item is represented by a coupon or coupons from bonds, the licensee shall attach thereto a statement identify- ing the same, and the indorsement or stamp showing the tax withheld shall, be placed on the statement instead of the coupon or coupons. Said indorsement or stamp shall be sufficient evidence of tax withheld to relieve subsequent holders or purchasers from the obligations of withholding. ROBT. WILLIAMS, JR. Acting Commissioner of Internal Revenue. (T. D. 2028.) Income tax Five per cent penalty and interest on delayed payments. The 5 per cent penalty and interest on delayed payment of assessed income taxes in the case of persons absent in foreign countries held to be due unless payment is forwarded within ten days after notice and demand, Form 17, should have been received in the ordinary course of the mails. T. D. 1659 modified. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 24, 1914. To collectors of internal revenue: In the last sentence of paragraph E of section 2 of the act of October 3, 1913, it is provided: 118 TREASURY DECISIONS * * * And to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector there shall be added the sum of 5 per centum on the amount of tax unpaid, and interest at the rate of 1 per centum per month upon said tax from the time the same becomes due, except from the estates of insane, deceased, or insolvent persons. By reason of absence in foreign countries or on account of traveling abroad, it is impossible for many individuals to receive notice and demand on Form 17 and make payment of the taxes assessed thereon so the same can be received by the collector within the 10-day period following June 30 or within the 10-day period following the service of the notice. You are requested, therefore, to enter on Form 17, as the date on which such assessed tax becomes due and payable as near as possible, a date 10 days subsequent to the time that said notice should be received in the ordinary course of the mails by the taxpayer, and where it ap- pears that the full amount of tax assessed was placed in the mails within the 10-day period after the receipt of Form 17, or in case notice so sent is not delivered in due time by reason of delay in the mail and satisfactory evidence of that fact is fur- nished the penalty and interest in such cases will not be collected. In the latter cases the envelope inclosing the notice and bearing the postmark of the receiving office should be forwarded to .the collector and by him transmitted to this office with Form 325 as evidence of delay in the delivery of notice so sent. This ruling applies solely to the collection of income tax from individuals and includes Government officers. T. D. 1659 is modified accordingly. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2029.) Corporations desiring to make returns of annual net income on the basis of a fiscal year must, not less than 30 days prior to the first day of March, give notice in writing to the collector, designating in such notice the last day of some month as the close of the fiscal year, in which case the fiscal year return will cover a 12-months period. The return for that portion of the calendar year preceding the beginning of the fiscal year will be filed on or before March next following. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 24, 1914. To collectors of internal revenue: Reference is made to T. D. 2001, relative to the designation by corporations of a fiscal year other than a calendar year as a basis for making returns of annual net income. You are informed that every corporation amenable to the in- come-tax law in existence at the close of a calendar year is required to file a return covering all or any part of the preceding 119 INCOME TAX calendar year during which it may have been in existence on or before March 1, provided such corporation has not established or does not establish a fiscal year. In order to establish a fiscal year it is necessary for the corpo- ration to give notice to you in writing designating the last day of some month as the close of its fiscal year. This notice must be filed not less than 30 days prior to March 1 of the year in which the fiscal-year period of 12 months closes. A return for that portion of the calendar year preceding the commencement of the fiscal period of 12* months is required to be filed on or before March 1 of the year next following the calendar year of which it is a part, and the return for the first full fiscal year is required to be filed on or before the last day of the 60-day period following the close of the fiscal year. Example: A corporation desiring to establish its fiscal year as ending on June 30, 1915, must file notice not less than thirty (30) days prior to March 1, 1915, on or before January 29, 1915. A return for the period January 1 to June 30, 1914, must then be filed on or before March 1, 1915, and a return for the first fiscal year period (July 1, 1914, to June 30, 1915) must be filed on or before August 29, 1915. That portion of the year preceding the beginning of an estab- lished fiscal year is held to be a fractional part of the calendar year, and as the return of a calendar year is not required to be filed until on or before the first day of March next following, there is no provision of law whereby the return covering a frac- tion of a calendar year is required to be filed earlier than "on or before" the next March 1st, though it is preferred that the return for this fraction shall be filed as early as possible after the close of the period. The above instructions are supplemental to T. D. 2001, and rulings or decisions heretofore issued in conflict with the fore T going are hereby revoked. W. H. OSBORNE, Commissioner of Internal Revenue. (T. D. 2030.) Exemption certificate provided for use of banks and bankers, either foreign or domestic, claiming exemption from income tax on dividends from stock of foreign corporations owned by nonresident aliens. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., October 13, 1914. To collectors of internal revenue: The following certificate is hereby provided, which may be executed by responsible banks or bankers, either foreign or do- mestic, for and on behalf of nonresident owners of stock of cor- 120 TREASURY DECISIONS porations of foreign countries, for the purpose of claiming exemption from the income tax on dividends from such stock : Form . EXEMPTION CERTIFICATE BANKS OR BANKERS, EITHER FOREIGN OR DOMESTIC. (For the use of responsible banks or bankers, either foreign or domestic, for and on behalf of nonresident owners of stock of corporations of foreign countries.) (Give name of foreign corporation.) (Full description of stock, stating whether common or preferred, or both.) Amount of dividends, $ I (we) do solemnly declare that the owners of the stock of for- eign corporations upon which the aforesaid dividends were declared are nonresident aliens as to the United States and are exempt from the income tax imposed on such income by the United States Govern- ment under the law enacted October 3, 1913; that no citizen of the United States, wherever residing, or foreigner residing in the United States, or in any of its possessions, has any interest in said stock; and that all of the information as given in this certificate is true and correct. I (we) hereby agree that if at any time it shall appear that the income or any part thereof represented or covered by this certificate was, or is, subject to the normal tax imposed by the United States, upon presentation of proof of that fact to me (us) by, from, or through the Commissioner of Internal Revenue, Wash- ington, D. C, I (we) will pay and remit to the United States Gov- ernment the amount of tax claimed to be due; and I (we) hereby further agree that whenever in the judgment of the Commissioner of Internal Revenue it shall be necessary in or to the administration of the income-tax law, I (we) will, upon request of said Commis- sioner of Internal Revenue, disclose and furnish to him the names and addresses of the owners and the amount of the stock aforesaid. Date , 191 (Name of bank or banker.) By (Signature of official authorized to sign.) (Official position.) (Full post-office address of bank or banker. ) (SIGNATURES MUST BE CLEARLY AND LEGIBLY WRITTEN.) INCOME TAX The above certificate shall be in size 8 by Z l /2 inches, and shall be printed to read from left to right along the 8-inch dimen- sion. The certificate shall be printed on yellow paper, and such paper shall correspond in weight and texture to white writing paper, 21 by 32, about 40 pounds to the ream of 500 sheets. The certificate hereby authorized will be printed by the Gov- ernment and furnished without cost. - Banks or bankers desiring to furnish their own certificates may do so, but the certificate so printed must conform in size to that prescribed above and be printed in similar type upon the same color, shade, and weight of paper as used by the Government. Sample certificates showing size of type and color of paper can be secured from collectors of internal revenue in their several districts or from the Commissioner of Internal Revenue, Wash- ington, D. C. W. H. OSBORN, Approved: Commissioner of Internal Revenue. W. G/McADOO, Secretary of the Treasury. (T. D. 2048.) Income tax. Taxable status of dividends paid on the capital stock from the current net earnings or established surplus created from the net earnings of cor- porations, joint-stock companies or associations, and insurance companies taxable upon their net income. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., November 12, 1914. To collectors of internal revenue : Dividends from the net earnings or established surplus created from the net earnings of any corporation, joint-stock cdmpany or association, and insurance company are vested in the stockholder on the date on which such dividends are declared, whether distributed or not, regardless of the time when the surplus or undivided profits from which such dividends are declared were earned and entered on the books of the corporation as such. Dividends so declared should be accounted for in full in the returns of income of indi- viduals for the year in which they became due and payable, when- ever the amount of income is sufficient to require the inclusion of dividends, as provided in paragraph D of the income-tax law and T. D. 1945, and should be included in the gross income of corpora- tions, etc., regardless of the amount of income. All decisions and regulations which are in conflict herewith are hereby revoked. W. H. OSBORN, Approved: Commissioner of Internal Revenue. W. G. McAixx), Secretary of the Treasury. United States Income Tax Ques tions and Answers Question No. 1. Q. From whom can I get the prescribed form upon which to make return? A. At the office of the Collector of Internal Revenue for your District. Question No. 8. Q. Must I call on the Collector of Internal Revenue to furnish me with blanks on which to make my income return or will it be safe for me to wait until he or his deputies send me the blanks? A. You should call on the Collector and obtain blanks. If you wait until the Collector calls on you you will probably in- cur the penalties provided in the Act. Question No. 3. Q. What period must my first return cover? A. From March 1st, 1913, to December 31st, 1913. Question No. 4. Q. Who must make a return? A. Every person of lawful age having an annual net income of $3,000 or over (for the year 1913 those having a net income of $2,500 or over from March 1st, 1913, to December 31st, 1913) must make a return to the Collector of Internal Rev- enue for the District in which such person resides or has his principal place of business. If the normal one per cent tax has been deducted at the source on all the income of an individual such individual need not make a return unless his income exceeds $20,000, in which case he would be liable for the additional tax. (T. D. 1934.) Individuals whose net income from March 1 to December 31, 1913, both dates inclusive, is $2,500 or more must make returns of annual net income for 1913. Section 2, Act of October 3, 1913, provides that on or before the first day of March, 1914, and the first day of March in each year thereafter, a true and accurate return, under oath or affirma- tion, shall be made to the Collector of Internal Revenue by each person of lawful age, who may be subject to the tax imposed by this section, who has a net income of $3,000 or over for the tax- able year. It is further provided that for the year ending December 31, 1913, the tax shall be computed on the net income accruing from March 1 to December 31, 1913, both dates inclusive, after de- ducting five-sixths only of the specific exemption and deductions allowable for an entire taxable year. Since the return of annual net income for the year 1913, as applied to individuals, is for but five-sixths of the calendar year, and as the law provides that return shall be made on the basis of five-sixths of the year, it is held that individuals whose net income is $2,500 or more for the ten months constituting the taxable period of 1913, shall make returns of annual net income, in accordance with the general provisions of the law covering the 1913 taxable period. Question No. 5. Q. If my annual net income from all sources is less than $3,000 must I make return? A. Unless your net income for the ten months' period, March 1st to December 31st, 1913, is $2,500 or over (exclusive of dividends and amounts on which the tax has been withheld at the source) no return is required. Question No. 6. Q. Who can make a return for a minor having a taxable in- come? A. The father of the minor should make return, including such income with his own, otherwise the legal guardian or trus- tee should make return for the minor. Question No. 7. Q. What income must be included in an individual's return? 4 A. "Gains, profits and income derived from salaries, wages or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, busi- nesses, trade, commerce or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property; also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profit and income derived from any source whatever, in- cluding the income from, but not the value of, property acquired by gift, bequest, devise or descent." The statute exempts the proceeds of life insurance policies, salaries of certain public officers, and all interest upon obli- gations of the United States Government or the government of any state, city, county, town or village or political sub- division thereof. Exempted items need not be included in the return. (See Form 1040, page 71.) Question No. 8. Q. If my net income exclusive of dividends on stock of corpora- tions does not exceed $2,500, March 1 to December 31, 1913, must I make a return for the purpose of the normal tax? A. Persons having an annual income of $3,000 or more, includ- ing income derived from- dividends or net earnings of cor- porations, etc., but whose total net income is less than $20,000, and whose net income exclusive of the income derived from dividends or net earnings of such corporation, etc., is less than $3,000 for the taxable year ($2,500 for the year 1913) shall not be required to make a return of annual net income. Question No. 9. Q. If my gross annual income is $3,700, and after the payment of taxes and interest on mortgages aggregating $800 my net income is $2,900, must I make a return? A. No, because five-sixths of your net income for 1913 is less than $2,500. Question No. 10. Q. If the income of a civil war veteran exceeds his exemption is his pension from the United States Government subject to tax? A. All compensation paid by the United States Government, as salaries, pensions, etc., subject to the exemptions and de- ductions specifically set forth in the statute, are taxable. Question No. 11. Q. I purchased 100 shares of stdck in December, 1912, at $120 per share, and sold the same in September, 1913, at $140 per share. Must I include the profit as income? A. The profit constitutes income as it was realized during the taxable period by the sale of the stock. Question No. 12. Q. I purchased a house in 1908 for $10,000 and sold it in De- cember, 1913, for $13,000. Must I include in my return for the ten months' period of 1913 the total profit made? A. Where the profit is made upon the sale of property pur- chased prior to March 1st, 1913, such profit should be appor- tioned according to the number of years the property was held, unless it can be established what profit, if any, accrued subsequent to March 1st, 1913. Where property is pur- chased after March 1st, 1913, and sold subsequently, the profit made would be considered income for the year in which the property is sold, unless an annual estimated in- crease shall have been included in the return for each year, as required by the Treasury Department Regulations. Question No. 13. Q. My salary is $1,500; my income from bonds about $1,500. I also earn $700 to $800 annually by tutonng, but I have never kept any accurate account of the amount thus earned, as it is an uncertain sum. Must I report that as part of my income, and if so, on what part of my income shall I be taxed? A. You are subject to the normal tax of one per cent on your net income in excess of $3,000. The fact that you have never before kept an account will not excuse you from your obligation to make a return to the Collector of Inter- nal Revenue. Question No. 14. Q. Am I required to find out what is my share of the undivided portion of a corporation's profits and pay the tax thereon, or 6 do I have to pay only on my salary and dividends actually received? A. You are not required to pay a tax on the undivided portion of the corporation's profits unless the Secretary of the Treas- ury shall certify that the accumulated earnings of the cor- poration are unreasonable for the needs of the business, or unless such accumulation is for the fraudulent purpose of evading- the payment of the tax, you need only make a return of your salary and dividends. Question No. 15. Q. If I have stock in a company is it necessary for me to notify the company that my income is not above $3,000, and must I claim exemption each time a dividend is declared? A. The act specifically exempts dividends of a corporation from operation of the normal tax. Where the corporation is sub- ject to the normal tax of one per cent upon its net earnings no notice to the corporation is necessary. Question No. 16. Q. I own my residence. Must I include in my gross income the fair rental value of the residence? A. No. Question No. 17. Q. My property is mostly vacant lands, bringing no income. The land will sell at an advance of what it cost me years ago. Must I make a return of the increased value of my land? A. Unless the increased value of personal property or land is credited on your books and carried as an asset it is not tax- able as income until the property or land is sold, and where the increase in value extends over a number of years only a portion of such profit is income for the year 1913. Question No. 18. Q. Does an individual have to pay the tax on annual bonuses given to him as a reward for meritorious service by his em- ployer? A. The bonuses, being gifts, are not taxable. Question No. 19. Q. Can I lawfully be taxed on interest earned in the last two or three years, or interest accrued prior to March 1st, 1913? A. According to the ruling of the Treasury Department you are taxable on all amounts received or accruing to you sub- sequent to March 1st, 1913. Accrued means due and payable. Accruing means having arrived at an accrued state during the year and not the process of accruing, and an individual who re- ceives the interest payment, whether upon coupon, registered in- terest or demand notes, and the interest falls upon March 1, 1913, or any date thereafter within the year, the income received from such securities shall be returned as income for the taxable year of 1913, because the amount received by the individual became due and payable within the taxable period. On the payment of interest on coupons from bonds, notes or mortgages of individuals no tax is to be withheld unless the pay- ment exceeds $3,000, and if the specific exemption is claimed as allowed under paragraph "C" of the Act, only on the amount in excess of the exemption thus claimed. Question No. 20. Q. When must I pay the tax on the amount of my return which I am required to make on or before March 1st? A. The tax will be calculated on income from March 1st to December 31st for the year 1913. In computing the tax for this period the income for the ten months stated will be taken and the deductions shall be five-sixths only of the subsequent deductions and exemptions allowed in Paragraphs B and C of the statute. The amount of the tax assessed will be made after March 1st and taxable persons will be notified of the amount of the tax for which they are responsible on or before the first day of June. The tax assessed must be paid on or before the 30th day of June. If taxes due and payable on or before June 30th are not paid at that time the Collector will serve a ten-day notice and demand for the same, and if not paid before the expiration of ten days there will be added to the tax 5 per cent of the amount of the taxes unpaid and interest at the rate of 1 per cent per month until paid. Question No. 21. Q. My income exceeds $30,000 per year, being derived in part from salary, interest and rents, but principally from dividends on bank, railroad and industrial stocks ; must I make a return 8 of the dividends received, and am I liable' for the additional tax of 1 per cent on the amount in excess of $20,000? A. You are required to make a return of dividends received and you are subject to the additional tax of 1 per cent on the amount in excess of $20,000 without any exemption what- ever. The exemptions in Paragraph C apply only to the computation of the normal tax. (See Form 1040, page 71.) Question No. 22. Q. How can an extension of time be obtained to file the return subsequent to March 1st? A. In cases of sickness or absence the time for filing- the return may be extended thirty days upon application to the Col- lector of Internal Revenue for the district in which you live, providing such application is made in writing within the period for which the extension is desired. Question No. 23. Q. What deductions are allowed an individual? A. (1) Necessary expenses actually paid in carrying on any business, not including personal living, or family or partnership expenses. (2) Interest on indebtedness paid within the taxable year. (3) All taxes, not including assessments for local benefits, unless such assessments for local benefits are assessed against everyone within the political subdivision of the state, county, city or village. (4) Losses actually sustained in trade or from fires, storms or shipwreck not compensated for by insurance or oth- erwise. (5) Debts due to taxpayer actually ascertained to be worth- less and charged off during the year. (6) A reasonable allowance for depreciation. (7) Dividends upon the stock of any corporation or asso- ciation taxable upon its net income. (Not deductible in determining additional tax.) (8) Amount of income upon which a tax has been deducted or paid at source. (9) $3,000 of income for a single person, and in case of husband and wife, when living together, $4,000 from the aggregate income of both husband and wife. Question No. 24. Q. When and how must married persons living together make return ? A. Every single person, and every married person not living with husband or wife in the sense below defined, who has a net income exceeding $3,000 per annum, is liable to pay the normal income tax under this law, but in making return for such tax may claim an exemption of $3,000 from their total net income. Husband and wife living together are entitled to an exemp- tion of $4,000 only from the aggregate net income of both, which may be deducted in making the return of such aggregate income for taxation. However, when the husband and wife are sepa- rated, and living permanently apart from each other, each shall be entitled to the exemption of $3,000. If the husband and wife not living apart have separate es- tates, the income from both may be made on one return, but the amount of income of each, and the full name and address of both, must be shown in such return. The husband, as the head and legal representative of the household and general custodian of its income, should make and render the return of the aggregate income of himself and wife, and for the purpose of levying the income tax it is assumed that he can ascertain the total amount of said income. If a wife has a separate estate managed by herself as her own separate property, and receives an income of more than $3,000, she may make return of her own income, and if the husband has other net income, making the aggregate of both incomes more than $4,000, the wife's return should be attached to the return of her husband, or his income should be included in her return, in order that a deduction of $4,000 may be made from the ag- gregate of both incomes. The tax in such case, however, will be imposed only upon so much of the aggregate income of both as shall exceed $4,000. If either husband or wife separately has an income equal to or in excess of $3,000, a return of annual net income is required under the law, and such return must include the income of both, and in such case the return must be made even though the com- bined income of both be less than $4,000. If the aggregate net income of both exceeds $4,000, an annual return of their combined incomes must be made in the manner stated, although neither one separately has an income of $3,000 per annum. They are jointly and separately liable for such re- turn and for the payment of the tax. The single or married status of the person claiming the spe- cific exemption shall be determined as of the time of claiming such exemption, if such claim be made within the year for which 10 return is made, otherwise the status at the close of the year. These regulations hereby supersede the regulations relative to Paragraph "C" of the Income Tax Law, as prescribed on page 4 of Regulations, part 2, issued under date of October 31, 1913. Question No. 25. Q. Who may claim exemption of $4,000 the husband or the wife? A. If husband and wife, when living together, file separate re- turns the $4,000 exemption may be deducted by either one or may be apportioned between them. Question No. 26. Q. When must widowers or widows make return? A. When the annual net income amounts to $3,000 or over ($2,500 or over for the period from March 1st, 1913, to December 31st, 1913) the exemption allowed in this in- stance from the annual net income is $3,000. (For the ten months' period of 1913, $2,500.) Question No. 27. Q. Mr. C. is chief clerk in a large office and has an income of $300 per month, or $3,600 annually. Out of this he sup- ports his widowed mother. Is he allowed an exemption of $3,000 or $4,000? A. C. being unmarried, is entitled to an exemption of only $3,000. Question No. 28. Q. If an unmarried person's income or salary is $5,000 per year, but it costs him $2,000 to live, will this not make his net income $3,000, and therefore, not taxable? A. An unmarried person's exemption is $3,000. Living ex- penses are not deductible. Question No. 29. Q. Can a doctor deduct his automobile expenses, including chauffeur and upkeep of an automobile, from his gross in- come? Can a banker or real estate man who uses his auto- 11 mobile largely in going to and from his business and in looking after his loans and real estate business, deduct his automobile expenses? A. The actual upkeep in the conduct of his business or profes- sion is deductible. Question No. 30. Q. Regarding the Income Tax, what should be included in the "Expense Account" of a physician and surgeon to arrive at his net income? Aside from general running expenses, in- terest on outstanding obligations, bad accounts to be charged off, can he include cost of instruments, medical books and journals he buys and subscribes for, the study of which enables him to perfect himself in his practice? A. Yes. Question No. 31. Q. I, own my residence, which is mortgaged for $5,000. Can I deduct interest on the mortgage, repairs, fire insurance premiums and taxes? A. You may deduct interest and taxes paid, but you cannot de- duct cost of repairs or fire insurance premiums. Question No. 32. Q. A has property valued at $40,000. The property at the end of the year is worth only $39,000. Will the $1,000 deprecia- tion be allowed as a deduction from A.'s gross income? A. A reasonable depreciation is deductible. The percentage depends entirely upon the nature of the property and the use to which it is put. In the case of flat buildings three per cent is a reasonable depreciation, while in the case of a factory building wherein heavy machinery is being operated ten per cent might be a reasonable annual depreciation. The depreciation is in direct .ratio to the life of the building. Question No. 33. Q. I own a building worth $3,000. Repairs for the past year have cost $500. Can I deduct this item as expense? A. Under rulings of the Treasury Department the deduction for expense in any one year must not exceed the average annual cost of repairs for five years previous thereto. 12 Q. If an individual owns stock in a corporation and has bor- rowed the money with which to buy the stock, has he the right to deduct the interest on that borrowed money in mak- ing a return? A. Yes. Question No. 34. Q. My salary is $1,500 a year and I have $1,000 worth of stock, dividend payable at New York; $1,000 bond, interest pay- able at New York, and $1,000 bond, interest payable at Chi- cago the total from all three not being quite $150 a year. Will you please advise me as to a practical method to pur- sue to avoid paying income tax on my investments, as I am well within the $3,000 exemption? A. You should fill in and sign Certificate 1000, claiming therein your exemption under Paragraph C of the Statute, and at- tach the same to your coupons when presenting them for payment. 'Question No. 35. Q. Are amounts paid on life insurance premiums deductible under the item of expense? A. Where the insurance is carried as a protection to business or for the benefit of business the premiums paid on the life insurance are deductible under the item of expense. Tl;e test would be whether or not such insurance is payable to a corporation or firm of which the insured is a member or whether or not it can be clearly shown that such insurance is carried for the purpose of protecting one's business or as a business venture. Question No. 36. Q. I purchased 100 shares of stock in April, 1913, at $100 per share, and on December 31st, 1913, the market value of the stock is found to have increased to $150 per share. Must I include the increase in value as income? A. No, because no income has accrued or been realized thereon until sold. Question No. 37. Q. If the profits in sale of real estate are liable to the income tax, how do you get at the profit on a *4 section of land purchased about thirty-five years ago for $1,600 and sold 13 March 1st, 1913, for $16,000; $6,000 received in cash and a mortgage taken back for $10,000? You should include in your return 1/35 of the net income derived from the sale of your land. From the $16,000 re- ceived you may deduct the cost price, taxes, interest and other expenses during the 35 years that you have held the land, and pro-rating the profit from the number of years you have held the property, 1/35 of the net profit is taxable as income for the year 1913. Question No. 38. Q. I am a bachelor traveling salesman and have no permanent residence. My salary is $2,400 per year and commissions about .$1,000 per year. Must I furnish a certificate claiming exemption and is my employer entitled to deduct a tax of one per cent on the $400 in excess of the exemption allowed me? A. Your employer can not require you to furnish a certificate claiming exemption as your fixed annual income does not exceed $2,400 a year. The tax on income which is not definite and fixed is not deductible at the source. You should make your own return and include therein your in- come from all sources. (T. D. 1890). Income derived from the following professions and vocations come under this head: Farmers, merchants, agents compensated on the commission basis, lawyers, doctors, authors, inventors, and other professional persons whose income is irregular and indefinite. Such persons shall make personal return of all their income, provided their total income from all sources exceeds $3,000. For example ; when a lawyer receives a retainer of $5,000 as a special fee, a deduction therefrom shall not be made by the payer, but when a lawyer receives a retainer of $5,000 per annum, and the exemption claimed is $3,000, $2,000 of such income would be taxed and the tax retained at the source, or if his exemption claimed should be $4,000, $1,000 of such income would be taxed and the tax thereon withheld at the source. Question No. 39. Q. What is the penalty for refusing or neglecting to file a return on or before March 1st, 1913. A. The penalty for refusal or failure to file a return is not less than $20 nor more than $1,000. In addition to fine, the tax 14 which may be subsequently assessed by the Collector must also be paid. Question No. 40. What is the penalty for false or fraudulent return? A person making a false or fraudulent return shall be guilty of a misdemeanor and shall be fined not exceeding $2,000 or imprisonment not exceeding one^ year or both at the dis- cretion of the court with the costs of the prosecution. Question No. 41. Q. When a person is traveling for a year or two and is not at home to make return of his income, will he be fined if he collects all his bond coupons at the end of, say, three years? A. If the coupons are not presented for payment no return need be made until they are paid Question No. 42. I am the owner of railroad and other corporation bonds which contain a clause agreeing to pay any tax assessed upon them. Do I have to make any report or return to the Collector of Internal Revenue relating to the income from such bonds? When presenting the coupons for payment you should sign certificate form No. 1000 and disclaim exemption therein. You must include the proceeds in your return as taxes de- ducted at the source, although the corporation pays the coupons in full, and you may in such return deduct any amount on which the tax has been paid at the source in ascertaining your net income although the tax on the par- ticular amount was paid by the corporation. Question No. 43. Are Chicago improvement bonds exempt from the income tax? Bonds issued under the authority of State laws for the purposes of street improvement, reclamation or drainage of a district are exempt from deduction or payment of the Federal Income Tax. This ruling reverses the Treasury Decision No. 1910 dated September 4th, 1913, to the effect that the interest on such bonds is taxable. 15 Muncipal Bonds. Such bonds as are an obligation of the municipality are payable both principal and interest out of the general funds of the muni- cipality or out of the funds derived from the general assessment of all property in such municipality. The interest on bonds which are issued for special improve- ment and where the principal and interest are both payable out of a special fund derived from assessment against the abutting and benefited property, is, in the opinion of this office, exempt from the tax imposed by the Act cited. Question No. 44. Q. I conduct a mercantile business. By what method shall I ascertain my gross' annual income ? A. To the amount of your inventory of January 1st, 1913 add the amount of your sales during the year 1913 and deduct from the total, amount of stock purchased, the result is your gross income for the year. To arrive at your taxable income you may make the de- ductions allowed in Paragraph. B of the Act and to such exemption or part thereof as you may be entitled to as pro- vided in Paragraph C. Question No. 45. Q. Must a foreigner pay an income tax on dividends received from stock of a corporation doing business in the United States? A. Payment of the normal tax of one per cent by a corpora- tion on its net earnings exempts its dividends from further taxation unless the aggregate of such dividends paid dur- ing the year to the foreigner shall exceed $20,000, in which case the foreigner is subject to the additional tax. Question No. 46. Q. Must I include as income a stock dividend of a corporation at the par value of the stock or the market value? A. Stock dividends are exempt and are deductible. They should be included at their par value when such stock is finally disposed of, the difference in the sale price and the par value should either be computed as income or loss. 1 Question No. 47. Q. I am in the real estate business and care for a large number of improved properties in Chicago belonging to resident and foreign owners. Suppose the net rental accruing from a certain building is $800 per month. A. Where the annual rental paid by a tenant is in excess of $3,000 the tenant is required to deduct the one per cent normal tax on the entire amount unless the owner or his agent serves the tenant with notice to the effect that the rent is exempt, as provided in Paragraphs B, C and D of the Act. Question No. 48. Q. If I collect rents and interest on mortgages amounting annually to $12,000 which I remit to a non-resident foreigner (1) Must I obtain a license? (2) Must I pay the normal tax on $12,000? A. No license is required for the collection of domestic items within the United States. A non-resident foreigner is entitled to the same deduc- tions as citizens of the United States. A foreigner is not entitled to an exemption of $3,000 if single and $4,000 if married. For the purpose of claiming such exemption when collect- ing coupons of corporate obligations, the foreigner should execute Certificate Form No. 1.004 ; or if you are the foreign- er's sole agent in this country you may sign the certificate for him claiming such exemption. Question No. 49. Q. Does the law require that the tax shall be withheld from monthly rental payable to a trust company acting as agent for the landlord? Must the tenant withhold the normal tax of one per cent from the amount of the payments? A. When the amount payable during the year is fixed and certain, the normal tax of one per cent should be withheld when the aggregate amount paid exceeds $3,000, unless the landlord or his agent shall claim exemption under Para- graph C of the Income Tax Statute which he may do at any time prior to January 29th of the succeeding year by filing the prescribed Certificate Form No. 1007 with the person withholding the tax. If the deduction is claimed on account of expense or other items allowed under Para- 17 graph B of the Statute, the landlord or his agent must claim deduction by riling with the tenant Certificate Form No. 1008, Question No. 50. Q. I collect rentals from various properties in Chicago, the aggregate of which exceeds $3,000 per year. Must I deduct one per cent on the excess before remitting to the owner? A. No. The one per cent deduction is required to be made only at the source; the source being defined by the Treasury Department as the place where the income originates. Question No. 51. Q. What return must guardians, trustees and fiduciaries make? A. Guardians, trustees, and others acting in any fiduciary capacity must make an annual return if the annual interest of any beneficiary exceeds $3,000 in which case a list return must also be made containing the name and address of each beneficiary and the amount to which each is entitled. ( T. D. 1929. ) Collecting Agent's certificate to be substituted for certificate of owners when said owners are fiduciaries, not claiming exemp- tion at the source. Subject to the provisions of the Regulations in Treasury De- cision 1903, (page 6) dated November 28, 1913, collecting agents may substitute Form 1019a, properly filled in and numbered, for the certificate of the owner on Form 1019 (page 80). When collecting agents substitute their own certificate in lieu of owner's certificate on Form 1019, said substitute certifi- cate shall be Form 1019a. Question No. 52. Q. Will the executor of an estate have to pay a tax on the in- come of said estate over $13,000? The income is divided among several beneficiaries none of whom receives over $1,000. A. Where no one of the beneficiaries receives in excess of $3,000 the tax is not deductible at the source by the execu- tor, notwithstanding the fact that the aggregate amount paid to all the beneficiaries exceeds $3,000. Executor may obtain exemption from deduction of the tax at the source by filing certificate 1015 (see page 68). II Question No. 98. Q. As Trustee under a former Will I am paying each year to a beneficiary $10,000. Is this subject to tax? A. Money or value of property acquired by gift, bequest, de- vise or descent is exempt from taxation under the Federal Income Tax Law. Question No. 54. Q. I received during the year a legacy of $5,000 under the Will of my aunt and an annuity of $2,000 from my father's estate. Must I include this amount in my return? A. Gifts are not taxable under the statute and you will not have to include the $7,000 therein, but the income from the said $7,000 must be included in your return. Unless the sum of the annuity from your father's estate and your income from other sources exceeds $3,000 vou need make no return. Question No. 55. Q. The Income Tax Law was enacted October 3rd, 1913 and took effect as of March 1st, 1913. Why is this law not ex post facto? A. As the Sixteenth Amendment was ratified by the required majority of the legislatures of the several States on March 1st, 1913, the power to tax under this Amendment according to statutory construction dates from the ratifying of the Amendment. The limitations of the taxing power of the Government are limitless. A retroactive law is not neces- sarily ex post facto. An ex post facto law relates to penal- ties for crime. An ex post facto law is one which makes criminal an act committed prior to the enactment of the law or which increases the punishment subsequent to the commission of the crime, or one which requires less or dif- ferent testimony for conviction of an offense than that re- quired at the time of its commission. Question No. 56. Q. When must a corporation file a return? A. Every corporation, except certain trade, civic and charitable associations must file a return of income, irrespective of the amount. 19 (T. D. 1933). Mutual Telephone Companies and Mutual Insurance Companies. You are informed that under the provisions of the act above cited, every corporation, joint stock company, any and every insurance company, no matter how created or organized, is sub- ject to the income tax and will be required to make returns of annual net income, except such as are specifically enumerated in the act as exempt from its provisions. In the list of those so enumerated as exempt do not appear mutual telephone com- panies or similar organizations. Since under this act no exemption is provided, either express or implied, for mutual telephone and like companies, and liability is not dependent upon whether or not the corporation is organ- ized for profit, it is held that all corporations not specifically enumerated as exempt will be required to make returns of the net income returned. This ruling will comprehend all telephone companies, local insurance companies, and like corporations whether or not they are organized primarily for the mutual benefit of their members. Question No. 57. Q. What period must a corporation's return cover? A. A corporation's return ordinarily covers the period from March 1st, 1913, to December 31st, .1913, unless the corpora- tion shall thirty days before March 1st, 1914 give notice to the Collector of Internal Revenue that its return shall be made for a fiscal year and designate the termination of such fiscal year. Ordinarily corporate returns must be made on or before March 1st, 1913, but when a fiscal year has been designated the corporation must make its return within sixty days after the day designated as the close of the fiscal year and pay the tax assessed thereon within one hundred and eighty days after the close of such designated fiscal year. Question No. 58. Q. I am the bookkeeper for a firm that donates quite a sum to its employes as Christmas presents. The proprietor also has an arrangement with several of the employes to pay them a certain perecentage of the profits. Can the pro- prietor enter these amounts thus paid as expenses of the business and thereby pay only the income tax on the net amount actually realized in his business. The proprietor is the sole owner. 20 A. The gifts which the proprietor makes to the employes at Christmas or other times are not deductible as they are not an expense of the business. The amount which the pro- prietor has agreed and does actually pay to the employes is equivalent to wages. The fact that it is computed on a certain perecentage of the profits does not alter the fact that it is an actual expense of the business and is, therefore, deductible as such. Commissions paid to salesman in stock may be deducted as expense if so charged on books at the actual value of such stock. Donations made for purposes connected with the opera- tion of the property when limited to charitable institutions, hospitals or educational institutions conducted for the bene- fit of its employees or their dependents shall be a proper deduction for ordinary and necessary expenses. Question No. 59. Q. If a corporation shows only a profit of $1,000 in all its transactions will it be obliged to pay the one per cent nor- mal tax on such net earnings? A. Yes. Question No. 60. Q. What is the rate on net income of corporations? Must a corporation pay the additional tax if it makes over $20,000? A. No. The additional tax does not apply to corporations. Question No. 61. Q. Has a corporation an exemption of $3,000 or $4,000 the same as an individual? A. A corporation is allowed no exemption whatever under the Income Tax Statute. Question No. 62. Q. I have an income of about $2,500 and own four bonds of $1,500 each. When I present the coupons to the bank for payment, must I make a statement? Where do such Cer- tificates go? Are such Certificates sent to the Revenue Officials or to the corporation who is obligated to pay the coupons ? 21 When presenting your coupons for payment you must either claim or disclaim exemption by filling in and signing form 1000. The bank then fills out form 1000A and attaches it to your coupons and sends it to the corporation or its paying agent, which, in turn, sends Certificate 1000A to the Col- lector of Internal Revenue with its returns. The bank re- tains your original Certificate 1000 and sends it together with its return to the Collector of Internal Revenue for the district in which the bank has its principal place of business. Question No. 63. Q. An outlying bank makes mortgages and sells them to cus- tomers, the bank collecting trie interest. Some of these loans are made in the form of real estate bonds. Is it neces- sary for the bank or the mortgagor, who is an individual, to withhold the normal tax of one per cent where the annual interest on separate mortgages is less than $3,000? The aggregate amount collected by the bank is approximately $18,000. A. No tax is deductible in the above case. The provision for deduction of the tax at the source on amounts less than $3,000 applies only to corporations. In this case the mort- gagor being an individual, the mortgagee is entitled to pay- ment without deduction. The bank is not authorized to with- hold the tax on the aggregate amount of such interest pay- ments as the bank is not "the place where the income originates." Question No. 64. Q. How must a corporation proceed in the selection of a fiscal year for making this return? When must notice be given to the Collector of Internal Revenue of the termination of such fiscal year? (T. D. 1897.) A. The Federal income tax law (sec. 2, act of Oct. 3, 1913) authorizes corporations, joint stock companies, etc., under certain conditions to make their returns on the basis of an established "fiscal year," or consecutive 12-months' period, which may be other than the calendar year. Pursuant to this provision, the following instructions are .issued for the guidance of collectors and other interested parties : 22 Any corporation, joint stock company or association, or any insurance company, subject to the tax imposed by this act, may, at its option, have the tax payable by it computed upon the basis of. the net income received (accrued) from all sources during its fiscal year, provided that it shall desig- nate the last day of the month selected as the month in which its fiscal year shall close as the day of the closing of its fiscal year, and shall, not less than thirty days prior to the date upon which its annual return is to be filed, give notice, in writing, to the collector of internal revenue of the day it has thus designated as the closing of such fiscal year. In pursuance of this provision, a corporation or like organ- ization subject to this tax may, for example, designate the 30th day of September as the day for the closing of its fiscal year, whereupon its return of annual net income shall be filed with the Collector of internal revenue of the district in which its principal place of business is located not later than 60 days after the close of its said proposed fiscal year: that is to say on or before the 29th day of November next succeeding. The date of the closing of the fiscal year having been desig- nated, notice thereof must be given to the collector not less than thirty days prior to the last day of such sixty-day period. In the case just instanced, the notice must be given not later than October 31. If such designation (Sept. 30, 1913,) had been made and notice given, as hereinbefore indicated, as to the closing of the fiscal year 1913, the corporation would be authorized to make its return and have the tax payable by it computed upon the basis of the net income received (accrued) by it during the period from January 1 to September 30, both dates inclusive. In the absence of such designation and notice of the clos- ing of the fiscal year corporations and like organizations subject to this tax will be required to make their returns and have the tax computed upon the basis of the net income for the calendar year. Collectors of internal revenue receiving notices of the selection and designation of the "fiscal years," as above in- dicated, will make a record of the same, recording (a) the name of the corporation, or like organization, (b) the date when the notice was given, (c) the day designated for the closing of the fiscal year, and (d) the date when the return under such designation must be filed, which must be, as above stated, not later than the last day of the 60-day period next following the day designated as the close of the fiscal year. If it shall appear that for the current year the notice was given within the prescribed time that is, within 30 days of 23 the last day of the 60-day period the 1913 return may be made as of the fiscal year so established: otherwise it will be m ade on the basis of the calendar year until such time as the designation shall be duly made and notice thereof proper- ly given. The designation and notice can not be retroactive: that is to say, if a corporation now designates April 30, 1914, as the date of the closing of its fiscal year and gives notice of such designation, it would not be authorized to make a return for the 4 months ended April 30, 1913, and then for the fbcal.year ended April 30, 1914, nor would it be author- ized to make one return covering the entire 16 months ended April 30, 1914. In the case of such corporation the return for the current year must be made for the calendar year ended December 31, 1913, and then, assuming that designa- tion and notice had been properly made and given, it may make a return for the 4 months ended April 30, 1914, and thereafter the return will be made on the basis of the fiscal year so established. In all cases where a fiscal year is not established as above prescribed returns must be made on the basis of the calen- dar year, in which case such returns must be filed on or before the 1st day of March next succeeding such calendar year. Such returns, for the period covered, must be true and accurate, definite and complete, and, in as far as consistent with the provisions of the law, must conform to the showing made by the books of the company, and must be verified under oath of affirmation of its president or other principal officers, and its treasurer or assistant treasurer: that is to say, by two different persons acting in the official capacity indicated. If it shall appear in any case that returns have been made to the collector on the basis of a fiscal year not designated as above indicated, the corporations making such returns will be advised that such returns can not be accepted, but must be made to cover the business of the calendar year. . . Returns made under this act pursuant to these instructions must be made on the new forms prescribed by this depart- ment. Question No. 65. Q. Is a bank or collection agency which holds for collection notes reporting annual interest on farm mortgages in amount less than $3,000 required to deduct one per cent of the tax from the face of the coupons if the owner does not claim exemption thereon? A. Deductions of the tax at the source on bonds, mortgages and trust deeds only applies to the obligations of corpora- 24 tion. joint-stock companies or associations, unless the amount of such payment is in excess of $3,000. Question No. 66. Q. If a corporation leases a building for $10,000 per annum and re-lets a portion of said premises to another corporation at $6,000 per annum, is the second corporation bound to deduct one per cent from its rental? A. No. The provision requiring deduction of the tax at the source applies only to individuals and not to corporations. Question No. 67. Q. The bank with which I am connected owns some bonds of corporations which provide that no part of the principal or interest shall be deducted for any tax or taxes imposed thereon by the United States, State, County or Municipality. If these corporations pay the tax, must we return the in- terest and claim deduction thereon under the head of amount on which tax has been deducted at the source? A. By disclaiming exemption in your Certificate 1000 when pre- senting the coupons for payment, you can return the amount of such coupons under the head of income on which the tax has been deducted at the source, although the corporation pays the tax and interest in full* Question No. 68. Q. Are dividends received from the X corporation by the Y corporation holding stock therein, taxable as part of the net earnings of the Y corporation to whom such dividends are paid? A. The Y corporation receiving dividends from the X corpora- tion must pay the normal tax of one per cent thereon as part of its net earnings. In case of holding companies this will amount to double taxation. Dividends are exempt from the normal tax only when received by an individual. Question No. 69. Q. We are incorporated with three stockholders, all officers of the company. One is paid a salary of $3,000 a year, and two $5,000 and $10,000, respectively, on preferred stock. If our business should show a paper profit of $10,000, which is, in book accounts, merchandise, and, say, $1,000 in bank, would this company have to pay a tax on the $10,000, we declaring no dividends? 25 A. The salaries of the officers when taken in lieu of dividends, are exempt. After your corporation pays the normal tax of one per cent on its net earnings the amounts paid as divi- dends are exempt from further tax unless the amount of such dividends received by a person exceeds $20,000, then it is subject to the additional tax as provided in Subdivision 2 of Paragraph A of the Statute. Question No. 70. Q. Are corporations allowed exemption of that portion of their income derived from bonds of the United States, counties, cities or any political subdivision thereof? A. Bonds of the United States or any political subdivision thereof are wholly exempt. Question No. 71. Q. Are partnerships allowed to deduct the expense of doing business ? A. A partnership may claim exemption from deduction of the tax at the source and for that purpose should attach to coupons of corporate obligations when presenting them for payment, certificate form No. 1003. (T. D. 1905.) Inasmuch as individual members of a partnership are liable for income tax upon their respective interest in the net earnings of said partnership and are required to include said net earnings in their personal returns, the partnership may file with the debtor corporation, or with a withholding agent, a notice, signed in the name of the partnership, by a member thereof, claiming a deduc- tion of a specific amount on account of legitimate expenses (not including the personal or living expenses of the partners) in- curred in conducting the business of said partnership, and, upon receipt of said notice, said withholding agent shall not withhold, and shall not be held liable for, the normal tax on the amount of income equal to the amount of deduction claimed in said notice, but in no event shall the total of the amounts claimed, as provided herein, be in excess of the total amount of the actual legitimate annual expenses incurred by said partnership in the conduct of its business. Application for such deduction shall be made on Form 1011. Partnerships are not subject as partnerships to the income tax and are required to make statement of their income and earnings as partnerships only when requested to do so by the Commissioner of Internal Revenue or the collector of internal 26 revenue for the district in which said partnership has its prin- cipal place of business, and when such a statement is required, as aforesaid, the said statement shall give a complete and cor- rect report of the gross income of the said partnership and also a complete account of the actual legitimate annual expenses of conducting the business of said partnership (not including living and personal expense of the partners) and the net profits and the name and address of each of the members of said partner- ship and their respective interest in the net profits thus re- ported. The net annual income of a partnership, when apportioned and paid to the members thereof, shall be returned by each indi- vidual partner receiving same, in his annual return of net income, and the tax shall be paid thereon by said individual partner, as required by law. When the annual income of a partnership is not distributed and paid to the members thereof, the respective interest of each member in said profits shall be ascertained, and the individuals entitled thereto shall include the said amount in their annual return as part of their gross income, the same as if said profits had been distributed and paid to them. Undivided annual net income of partnerships thus returned by the individual members thereof, upon which the tax shall have been paid, shall not, when said profits are actually dis- tributed and paid to the partners, be again included in their annual return as a part of their gross income. Foreign partnerships or firms, all the members of which are both citizens or subjects and residents of a foreign country, which are the owners of bonds and mortgages or deeds of trust or other similar obligations, including equipment trust agree- ments, receivers' certificates, and stocks, of corporations, joint- stock companies or associations and insurance companies, or- ganized or doing business in the United States, may file with the debtor or withholding agent, with their coupons or orders for registered interest, or orders for other income derived from property or investments in the United States, certificate and notice of ownership, setting forth the facts as to non-residence and alienship, and the debtor or withholding agent shall not withhold any part of their said income. Where a foreign partnership or firm is composed of both non- resident foreigners and citizens of the United States, or for- eigners resident in the United States or its possessions, the certificate of ownership shall show this fact, and the name and legal address of each member of said partnership, who is a citizen of the United States or who is a foreigner residing in the United States or its possessions shall be given on the said certificate, and no part of said income shall be withheld by the paying agent. 27 Question No. 72. Q. Ten years ago I bought a lot for $500 cash. I paid 2*/2 per cent commission to obtain the money and have ever since paid 6 per cent interest on the loan, also taxes. Three months ago I sold the lot for $1,000. In computing my profit may I deduct 6 per cent interest compounded for the ten years? A. Yes. Question No. 73. Q. If I had paid cash for a lot ten years ago, would I be per- mitted to deduct 6 per cent compounded interest for that period in computing my profit? A. Six per cent may be deducted as you are entitled to a rea- sonable earning" on the money invested during the period. The net profit from the sale should be apportioned over the number of years and 1/10 of the amount report as income for the year 1913. Question No. 74. Q. Will the penalties on the income tax law be enforced against persons who make erroneous return by reason of the fact that they do not properly understand the law? A. If a person makes a true statement of what he believes the Government desires, without any intention of evading the law no penalty will be incurred. Question No. 75. Q. I sold a piece of property under contract (not recorded) seven years ago and deeded the same to the buyer July 1, 1913, when he paid the balance due me in cash. My total profit was $400. Must I include this amount in my return for the year 1913? A. My personal opinion is that this amount is not taxable as income as it was due and payable under the terms of the contract prior to the enactment of the Federal Income Tax Law, but according to the ruling of the Treasury Depart- ment all profits accruing to a person during- the taxable 28 period are taxable, and the Internal Revenue Officials have defined "accruing" to mean not the process of accruing, but "having arrived at an accrued state" being due and pay- able within the taxable year, therefore until this question is passed on by a court of competent jurisdiction, you will have to include 1/7 of the $400 profit as income for the year 1913. Question No. 76. Q. Some years ago I bought a certain number of shares of Chicago & Eastern Illinois preferred at 120. About June 1st, of this year dividend payments were discontinued and the road went into the hands of a receiver. My stock is deposited with a committee who are trying to save what- ever possible out of the wreck, but is not salable at pres- ent. I am sure to make quite a loss on this stock. Under the most favorable circumstances it certainly could not pay out more than par and the chances are that not that much will be finally realized. In figuring my income tax should I make a deduction from my income for the last ten months of 1913 on account of the loss on this stock, and if so, how should I arrive at the proper amount? Would it be better to wait until the matter is finally closed up and I either sell rny shares or receive other shares in place of them and then figure the actual loss and take it out of the year's income in which the final transaction occurs? A. If this stock was worthless or depreciated on March 1, 1913. you are not entitled to deduct the purchase price as a loss. The only amount you can deduct as a loss is the difference between the value of the stock on March 1, 1913, and the value on December 31, 1913. Of course if you receive other stock at a future time, the value of the stock will be income for the year in which you receive the same. Question No. 77. Q. If a person buys lots at a tax sale, is the interest or income from said certificate subject to the U. S. Income Tax? A. Tax certificates are exempt from taxation in the State of Illinois. As the property is sold because of the failure to pay an obligation due to a state, therefore the certificate and interest accruing thereunder is exempt from taxation by the Federal Government. 29 Question No. 78. Q. I have six tenants in one building whose monthly rents ar $175, $200, $300, $350, $400 and $450 each. Are they re- quired under the law to deduct and withhold hereafter from me each month 1 per cent of these amounts which their leases require them to pay me in full, monthly, in advance, first of each month? If they fail to account to the govern- ment for this 1 per cent, does it not release me, and why should I be required to schedule these rents when the tax is paid by them? A. Unless the aggregate amount of money paid to you by a tenant is in excess of $3,000 he has no right to withhold the 1 per cent tax at the source. But if the amount paid is in excess of $3,000 you may give any one of them notice of your individual exemption and they will then withhold the tax only on the amount in excess of such exemption. Al- though the tax may be withheld at the source you must in- clude the amount in the report of your net income and de- duct the amount on which the tax has been paid at the source. Take for example: Suppose Charles Smith, a mar- ried man, whose wife lives with him, expends the follow- ing sums during the year : Living expenses (not deductible) $10,000 Interest on personal notes and obligations 3,000 Interest on mortgages owing by Mr. Smith 2,000 Taxes on property owned by Mr. Smith ' 1,000 Suppose one building, worth $5,000, burns down, cov- ered by $3,000 insurance, the loss, which is de- ductible, amounts to 2,000 Depreciation on properties owned by Mr. Smith. .... 6,000 Repairs and maintenance expenses 10,000 Totals $34,000 Mr. Charles Smith would ascertain his net income and make his return as follows : Gross Income. Salary as president and treasurer of the Smith Manu- facturing Company $25,000 Rents from buildings owned by Charles Smith 20,000 Dividends from Smith Manufacturing Company... 12.000 Interest on Cook county bonds 5,000 Total gross income $62,000 30 Deductions from Grosa Income. Interest on personal notes and obligations. .$ 3,000 Interest on mortgages owing by Mr. Smith. . 2,000 Taxes on property owned by Mr. Smith. . . . 1,000 Loss by fire 2,000 Depreciation on properties owned by Mr. Smith 6,000 Repairs and maintenance expense 10,000 Dividends of Smith Manufacturing Com- pany, on which tax of 1 per cent was paid on net earnings of corporation. . . . 12,000 Salary of Charles Smith as president and treasurer of Smith Manufacturing Com- pany, on which tax was deducted at source 10,000 Interest on Cook county bond 5,000 Total $51,000 Personal exemption of Mr. Smith 4,000 Total ' $55,000 $55,000 Total net income of Mr. Smith, on which he would pay tax $ 7,000 Therefore, the normal tax of 1 per cent, $70, is the amount Mr. Smith will have to pay to the collector of internal rev- enue. Question No. 79. Q. Is money made by horse racing or gambling taxable as income? A. In the State of Illinois money made or won by horse rac- ing or gambling is illegal. Where the State Law prohibits certain acts, money earned by such illegal practices is not subject to the Federal Income Tax Law, but in States where horse racing and gambling is a legitimate practice money derived from such source is taxable as Income under the provisions of the Federal Income Tax Statute. Question No. 80. Q. I have given corporation bonds aggregating $100,000, to a Church. The Trustees of the Church have placed the bonds in Trust with the understanding that the interest on them 31 shall be paid to me during my life time and upon my death the bonds are to become the property of the Church. As property of a religious institution is exempt under the In- come Tax Law, do I have to pay tax on the earnings of such property paid to me during my life time? A. Gifts are not taxable under the Income Tax Law, but the earnings, or income from a gift is taxable, as the interest accruing from the bonds constitutes part of your income it is taxable. Question No. 81. Q. Are limited partnerships subject to Income Tax? A. Limited partnerships are considered under the same head as corporations and must make the same return and are subject to the same provisions of the law as applied to corporations. 32 DEDUCTION OF THE TAX AT THE SOURCE BY BANKING INSTITUTIONS, TRUST COMPANIES AND CORPORATIONS. Paragraph E (E-19) of the Income Tax Law imposes an ob- ligation upon Corporations, Banks, Trust Companies and As- sociations to deduct the Normal Tax of 1 per cent and imposes a liability for the payment of such tax to the Government. It is the duty of every Corporation or its paying agent to with- hold 1 per cent of the amount of the interest paid by it on bonds, trust deeds, receiver's certificates, equipment certificates or sim- ilar obligations of corporations, umess the person or corpora- tion presenting the coupon or note for payment files with the corporatios or its paying agent the form of certificate prescribed by the Treasury Department. An individual owner presenting a coupon to a corporation or bank either for payment or collection should file with it prop- erly executed certificate Form 1000 (page 65) claiming or dis- claiming exemption therein. A non-resident alien or his authorized agent when presenting coupons should attach certificate Form 1004 (page 66). A corporation when presenting coupons should execute and attach certificate Form 1001 (page 65). A partnership should execute and attach certificate Form 1011 (page 67). A member of partnership certificate Form 1003 (page 65). Executors, Trustees, Conservators, Guardians and others act- ing in a fiduciary capacity for the purpose of claiming exemption should execute certificate Form 1015. .For the purpose of dis- claiming exemption from deduction of the tax at the source, the fiduciary should execute certificate Form 1019. Upon receipt of a certificate duly executed the corporation is relieved of the duty of withholding the tax. Where a bank takes a coupon for collection it should see that a certificate of proper form is attached. In case a bank received coupons for collection unaccompanied by the required certificate, the bank should execute and attach certificate Form 1002 (page 66). The foregoing certificates may be signed by the owner or a duly authorized agent. SUBSTITUTION CERTIFICATES. The Treasury Department has prescribed a form of substi- tution certificates bearing the same form number as the orig- 33 inal ownership certificates with the letter "a" appended, which are to be executed and attached to coupons by a bank when the coupons are transmitted to the debtor corporation or its paying agent. All substitution certificates should contain the same num- ber as the original ownership certificate. The original certificate should be endorsed with the name of the bank or collecting agent and the date of the substitution certificate together with the following: "The duplicate of the within certificate bearing the same num- ber was attached to the coupons within mentioned and deliv- ered to the debtor or its agent by whom said coupons are pay- able." The original certificates of ownership must be forwarded to the Commissioner of Internal Revenue at Washington not later than the 20th of each month succeeding the date on which said coupons are received for collection. The bank making the sub- stitution certificates must keep a record by months, showing the serial number, the date and name of the owner or his agent, showing from whom the coupons were received with the ad- dress of such persons or corporation, and the name of the cor- poration whose obligation it is together with the name and se- rial number of the bond issue, the principal amount of the cou- pons, and amount of interest collected. Any bank, banker in the United States, or its collecting agent in a foreign country, may execute substitution certificates. The corporation or paying agent shall deliver all certificates to the Collector of Internal Revenue. A corporation or its paying agent must file a list of the individuals or firm from whom the tax has been withheld, but no list is required of certificates where exemption has been claimed and the amount of the interest or coupon paid, but a debtor corporation must include in its list certificates in which the exemption or deductions claimed is less than the amount of the interest paid by corporations. The corporation or its pay- ing agent must make separate lists for each bond issued. All certificates must be sent by registered mail to the Commissioner of Internal Revenue, accompanied with a list (Form 1012) which the corporation is required to file. FOREIGN ITEMS. The Regulations require that the tax on foreign items must be withheld by the first bank or trust company in the United States to which such foreign items are given for collection or payment. Every person, bank or trust company accepting cou- pons, checks, and bills of exchange for collection must obtain license for that purpose from the Commissioner of Internal Rev- enue. There is no fee for this license but a bond may be re- quired. 34 SYLLABUS OF INCOME TAX LAW 1. AMOUNT. Marginal Refer- ence to Statute. Pages 43-63. NORMAL TAX 1 Per Cent. Net income of individuals exceeding $3,000. ($2,500 for 10 months March 1 to December 31 of the year 1913.) Net income of all taxable corporations, domestic or foreign, accruing during the calendar year January 1 to December 31, 1913. (Unless a "fiscal" year has been designated.) NOTE. Paragraph "S" of the Income Tax Law modifies and repeals the Corporation Excise Law of 1909. 2. AGAINST WHAT LEVIED. ENTIRE TAXABLE NET INCOME OF Citizens of the United States residing at home or abroad. Aliens residing in the United States. Domestic corporations. NET INCOME DERIVED FROM BUSINESS TRANS- ACTED OR CAPITAL INVESTED IN THE UNITED STATES BY Aliens residing outside of the United States. A-5 Foreign corporations. G-2 Exceptions : A non-resident alien need pay no tax on Treasury income from bonds, mortgages and similar obliga- Decision tions of corporations. 1887 A-4 D-3 Treasury Decision 1934 G-l Treasury Decision 1897 S-l-2-3 ' Treasury Decision 1937 A-2 A-3 G-l ADDITIONAL TAX (Gross Incomes of Individuals Only.) 1% on the amount by which income exceeds $20,000. 2% on the amount by which income exceeds $50,000, but does not exceed $75,000. 35 A-9 3% on the amount by which income exceeds $75,000, but does not exceed $100,000. A-10 4% on the amount by which income exceeds $100,000, but do:s not exceed $250,000. A-ll 5% on the amount by which income exceeds $250,000, but does not exceed $500,000. A-12 6% on the amount by which income exceeds $500,000. DEDUCTIONS FOR THE NORMAL TAX. B-8 1 Necessary expenses actually paid in carrying on business : Exception : family living or expenses are not deductible. personal B-9 2. All interest paid on indebtedness. B-10 3. Taxes : State, County, School and Municipal. _ XOTE. National, State, County, School and Municipal Special assess- 13-10 ments for local benefits such as street paving, sewer drainage, etc., are not deductible. B-ll 4. Losses actually sustained during the year. (a) Incurred in trad? or business. (b) From fire, storm or shipwreck, and not compensated by insurance or otherwise. B-12 5. Debts due and found worthless and charged off. B-13 h. Reasonable allowance for wear and tear of property. B-14 NOTE. No deductions for new buildings, permanent improvements, etc., which tend to increase the value of property. XOTE. The foregoing deductions 1, 2, 3, 4, 5 and 6 only are allowed in calculating net income for the additional tax. B-15 7. Dividends received from a corporation, joint-stock com- pany or association which are taxable on their net income at the source. B-16 8. Amount of income on which tax is paid or withheld at source : Treasury (a) Interest on obligations of the United States, a State, Decision County, or a political subdivision of a State, in- cluding interest paid on public improvements, reclamation, drainage or special assessment bonds issued for local improvements. (b) Salaries of 1. Present President of the United States. 2. Judges of the Federal Courts. 3. Officers and employees of a State or a political subdivision of a State, except when such salary is pard by the United States 'Government. 36 9. Exemptions from the tax : (a) $3,000 per annum for a single person. ($2,500 for the year 1913.) (b) $4,000 per annum for a married couple living to- g ther. ($3,333.33 for the year 1913 for a married couple living together.) NOTE. Exemptions 7, 8 and 9 are not allowed in calculating the net income for the additional tax. C-l Treasury Decision C-2 Treasury Decision Form 1040 THE RETURN ANNUAL RETURN MUST BE FILED BY 1. Persons having an annual net income exceeding $3,000. 2. Trustees, executors, administrators and conservators having the receipt, custody or payment of annual net income of another person exceeding $3,000. NOTE. Excluding from the computation of such net income dividends re- ceived from corporations and amounts on which the normal tax has been withhe'd at the source. ($2,500 for ten months of the year 1913, March 1 to Dec;mb:r 31.) 3. Corporations total annual net income. (No specific exemption allowed.) 4. Persons or corporations withholding the tax at the source. (a) A separate return for each payee. (b) Certificate Form No. 1042, page 94. (c) A return by one of two or more joint trustees is sufficient. D-8 E-8 Treasury Decision 1945 Treasury Decision 1934 G-7 D-6 D-5 RETURN MUST CONTAIN : 1. The gross amount of income from all separate sources, and from the total, deducting the aggregate deductions of authorized expenses and allowances. Return to be under oath or affirmation. (a) Personal return Forms Nos. 1040, 1041, pages 71-76. (b) Corporations' returns, Forms Nos. 1030, 1031, 1032, 1033, 1034, 1035, pages 80-90. WHEN RETURN MUST BE FILED 1. Individuals: (a) On or before March 1. 2. Corporations : (a) On or before March 1, or (b) Within 60 days after the close of the designated fiscal vear. B-l G-l D-3 G-35 37 WHERE RETURN MUST BE FILED : G-35 1. Individuals: (a) Where the person or corporation resides or has his or its principal place of business. G-35 2. Foreign corporations and non-residents: (a) Where the principal place of business in the United States is located. D-5 3. Trustees, etc. : (a) Where such trustees reside, or (b) Where will or instrument under which he acts is recorded. WHEN THE TAX MUST BE PAID: E-l 1 . Individual : (a) Between June 1 and June 30. G-60 2. Corporation : (a) Between June 1 and June 30, or G-61. (b) Where corporation uses "fiscal year," tax must be paid within 180 days after the close of such "fiscal year." DEDUCTION AND PAYMENT OF TAX AT THE SOURCE. DEDUCTION AT THE SOURCE REQUIRES: E-8 1. Persons to withhold the normal tax of one per cent on all funds payable to another person when the aggregate amount exceeds $3,000, and is fixed and certain. E-22 2. Corporations to withhold the normal tax of one per cent on all interest paid by them or their agent on bonds, mortgages, trust deeds or similar obligations of cor- porations regardless of amount. E-12 3. The person required to deduct the tax is personally liable for the same. A-14 4. The additional tax is not deducted at the source at any time. D-10 5. No tax is deducted on dividends of corporations which pay the income tax on their net earnings. WHEN THE TAX IS TO BE DEDUCTED AT THE SOURCE: E-19 1. Whenever the aggregate amount paid is fixed and certain. NOTE. Not including dividends on stock of corporations. Treasury 2. The tax of one per cent is deducted "at the place where Decision the income originates." 38 (a) Interest on bonds, mortgages or deeds of trust of corporations, domestic or foreign. (b) Interest on foreign bonds. (c) Dividends of corporations or insurance companies doing business in foreign countries. HOW EXEMPTIONS MAY BE CLAIMED AGAINST DEDUCTION OF THE.TAX AT THE SOURCE: 1. The $3,000 personal exemption. To obtain exemption, the payee must file with the person withholding the tax Certificate Form No. 1007, page 67, at any time 30 days before the annual return of the withholding agent is required to be made. 2. Deductions for expense : (a) The payee must file with the withholding agent a true return of his income from all sources and the deduction claimed therein Certificate Form No. 1008, page 70. 3. If the payee is a minor, or insane, or absent from the United States, or unable by illness to make such return, the father, conservator or other authorized person may make the return for such person under oath. An ex- tension of 30 days for filing the return may be obtained upon application to the collector, made within the period forsuchextention is desired. NOTE. Deduction and payment of the tax at the source applies only to amounts payable to individuals, not to corporations. GROSS INCOME. GROSS INCOME INCLUDES: Salaries Wages Gains and profits Compensation for personal service Professions Vocations Businesses derived Trade Commerce or \ Sales or accrued from Dealings i or Property, Real Growing out of and Ownership Personal. or use of 2. Income received from or accruing from also Interest Rent Dividends Securities Transactions of any lawful business carried on for gain or profit Gains, profits or income accruing from- any source whatever. 39 E-18 E-30 B-l B-2 B-3 B-4 Net income for the purpose of the income tax is the amount of the gross income less the deductions 1, 2, 3, 4, 5 and 6. NOTE. See deductions for the normal tax. GROSS INCOME EXCLUDES: B-5 1. Money or value of property acquired by Gift Bequest Devise Descent But the income from thest is taxable. 2. Proceeds of Life Insurance Policies : (a) Paid on death of the insured ; (b) Credited to the insured on surrender of contract, as 1. Endowments. 2. Annuity contracts. CORPORATIONS' INCOME TAX. AMOUNT OF TAX: The normal tax of one per cent only. ON WHAT THE TAX IS ASSESSED: G-l 1. Domestic corporations : (a) Entire net income. C-2 2. Foreign corporations : (a) Net income accruing from business transacted and capital invested in the United States. WHAT IS NET INCOME: Gross Income less G-8 1. Expenses of maintenance and operation, including rentals. G-9 2. All losses not compensated by insurance or otherwise. G-9 3. Reasonable wear and tear. G-15 4. Amount of interest paid on its indebtedness. G-l 9 5. Sums paid for taxes. WHAT RETURN^MUST CONTAIN: (See Forms 1030 to 1035, inclusive, pages 80-90.) 1. Total amount of capital stock outstanding. 2. Total amount of bonded or other indebtedness. 3. Gross income. 40 4. Deductions as above specified. 5. Net income after making these deductions. BY WHOM REPORT MUST BE SIGNED: (See Instructions.) 1. By presid nt, vice-president or other principal officer, and 2. By treasurer or assistant treasurer. 3. Return to be under oath or affirmation. PENALTIES. FOR NEGLECT OR REFUSAL TO MAKE RETURN ON TIME: 1. Individual: F-l (a) Fine not less than $20.00 or over $1,000.00. E-4 (b) There shall be added to the tax 5% of the amount thereof, and 1% per month from tim.2 it became due. 2. Corporations : (a) Fine not exceeding $10,000.00 G-66 (b) Th-re shall b added to the tax 5% of the amount E-4 thereof, and 1% per month from time it became due. FOR MAKING A FALSE OR FRAUDULENT RETURN : 1. Individual or officer of a corporation: p_2 (a) Fine not exceeding $2,000.00, imprisonment for -^ g 3176 one year, or both. 2. Corporation : (a) Fine not exceeding $10,000.00. G-66 FOR FILING "AT SOURCE" A FALSE STATEMENT E-14 RESPECTING THE $3,000 ALLOWANCE (OR R. S. 3176 $4,000 FOR MARRIED COUPLE): (a) Fine of $300.00. ALL PERSONS UNDERTAKING AS A MATTER OF E-28 BUSINESS, THE COLLECTION OF FOREIGN PAYMENTS OF INTEREST OR DIVIDENDS MUST TAKE OUT A LICENSE UNDER PENALTY OF FINE NOT EXCEEDING $5,000.00, OR ONE YEAR'S IMPRISONMENT, OR BOTH. THE DISTRICT COURTS OF THE UNITED STATES K - ARE GIVEN JURISDICTION (IN CASES WHERE 41 PERSONS ARE SUMMONED BY A COLLECTOR TO APPEAR AND TESTIFY REGARDING THEIR RETURNS) TO COMPEL SUCH ATTENDANCE, PRODUCTION- OF ROOKS AND TESTIMONY. U. S. INCOME TAX STATUTE BEING SECTION IT OF THE ACT OF OCTOBER 3, 1913, ENTITLED "AN ACT TO REDUCE TARIFF DUTIES AND TO PROVIDE REVENUE FOR THE GOVERNMENT AND FOR OTHER PURPOSES/' A. Subdivision 1. That there shall be levied, assessed, collected Paragraph A and paid annually upon the entire net income arising or accruing A-l from all sources in the preceding calendar year to every citizen of the United States, whether residing at home A-2 or abroad, and to every person residing in the United States, though not a A-3 citizen thereof, a tax of 1 per centum per annum upon such income, except as A-4 hereinafter provided; and a like tax shall be assessed, levied, collected, and paid annually A-5 upon the entire net income from all property owned and of every business, trade, or profession carried on in the United States by persons residing elsewhere. Subdivision 2. In addition to the income tax provided under this A-6 section (herein referred to as the normal income tax) there shall be levied, assessed, and collected upon the net income of every individual an additional income tax (herein referred to as the additional tax) of 1 per centum per annum upon the amount by which the total A-7 net income exceeds $20,000 and does not exceed $50,000, and 2 per centum per annum upon the amount by which the total A-8 net income exceeds $50,000 and does not exceed $75,000, 3 per centum per annum upon the amount by which the total A-9 net income exceeds $75,000 and does not exceed $100,000, 4 per centum per annum upon the amount by which the total A-10 net income exceeds $100,000 and does not exceed $250,000, 5 per centum per annum upon the amount by which the total A-l 1 net income exceeds $250,000 and does not exceed $500,000, and 6 per centum per annum upon the amount by which the total A-l 2 net income exceeds $500,000. All the provisions of this section relating to individuals who are A-l 3 to be chargeable with the normal income tax, so far as they are applicable and are not inconsistent with this subdivision of para- graph A, shall apply to the levy, assessment, and collection of the additional tax imposed under this section. Every person subject to this additional tax shall, for the purpose A-l 4 of its assessment and collection, make a personal return of his 43 total net income from all sources, corporate or otherwise, for the preceding calendar year, under rules and regulations to be pre- scribed by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury. A-15 For the purpose of this additional tax the taxable income of any individual shall embrace the share to which he would be entitled of the gains and profits, if divided or distributed, whether divided or distributed or not, of all corporations, joint-stock companies, or associations however created or organized, formed or fraudu- lently availed of for the purpose of preventing the imposition of such tax through the medium of permitting such gains and profits to accumulate instead of being divided or distributed ; A-16 and the fact that any such corporation, joint-stock company, or association, is a mere holding company, or that the gains and profits are permitted to accumulate beyond the reasonable needs of the business shall be prima facie evidence of a fraudulent pur- pose to escape such tax ; A-17 but the fact that the gains and profits are in any case permitted to accumulate and become surplus shall not be construed as evi- dence of a purpose to escape the said tax in such case unless the Secretary of the Treasury shall certify that in his opinion such accumulation is unreasonable for the purposes of the business. A-18 When requested by the Commissioner of Internal Revenue, or any district collector of internal revenue, such corporation, joint- stock company, or association shall forward to him a correct' state- ment of such profits and the names of the individuals who would be entitled to the same if distributed. Paragraph B B. That, subject only to such exemptions and deductions as are B-l hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from B-2 salaries, wages, or compensation for personal service of what- ever kind and in whatever form paid, B-3 or from professions, vocations, business, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, B-4 also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit. B-5 r gains or profits and income derived from any source what- ever, including the income from but not the value of property acquired by gift, bequest, devise, or descent: Provided, That the proceeds of life insurance polices paid upon the death of the person insured or payments made by or credited. to the insured, on life insurance, endowment, or annuity contracts, upon the return thereof tP the insured at the maturity of the, term mentioned in the conttatt, or upon surrender of contract, shall not tfe- inducted as 44 That in computing net income for the purpose of the normal tax B-7 there shall be allowed as deductions: First, the necessary expenses actually paid in carrying on any g.g business, not including personal, living, or family expenses ; second, all interest paid within the year by a taxable person 3.9 on indebtedness; third, all national, State, county, school, and municipal taxes B-10 paid within the year, not including those assessed against local benefits ; fourth, losses actually sustained during the year, incurred in B-l 1 trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otherwise ; fifth, debts due to the taxpayer actually ascertained to be B-l 2 worthless and charged off within the year; sixth, a reasonable allowance for the exhaustion, wear and B-l 3 tear of property arising out of its use or employment in the business, not to exceed, in the case of mines, 5 per centum of the gross value at the mine of the output for the year for which the computation is made, but no deduction shall be made for any amount of expense of restoring property or making good the exhaustion thereof for which an allowance is or has been made: Provided, That no deduction shall be allowed for any amount paid out B-l 4 for new buildings, permanent improvement, or betterments, made to increase the value of any property or estate ; seventh, the amount received as dividends upon the stock or B-l 5 from the net earnings of any corporation, joint-stock company, association, or insurance company, which is taxable upon its net income as hereinafter provided ; eighth, the amount of income, the tax upon which has been B-l 6 paid or withheld for payment at the source of the income, under the provisions of this section. Provided, That whenever the tax upon the income of a person is B-l 7 required to be withheld and paid at the source as hereinafter required, if such annual income does not exceed the sum of $3,000 or is not fixed or certain, or is indefinite, or irregular as to amount or time of accrual the same shall not be deducted in the personal return of such person. The net income from property owned and business carried on in B-l 8 the United States by persons residing elsewhere shall be computed upon the basis prescribed in this paragraph and that part of para- graph G of this section relating to the computation of the net income of corporations, joint-stock and insurance companies, organized, created or existing under the laws of foreign countries, in so far as applicable. 45 B-19 That in computing nt income mnder this section there shall be excluded B-20 the interest upon the obligations of a State or any political subdivision thereof, and upon the obligations of the United States or its possessions; B-21 also the compensation of the present President of the United States during the term for which -he has been elected, B-22 and of the judges of the supreme and inferior courts of the United States now in office, B-23 and the compensation of all officers and employees of a State or any political subdivision thereof except when such compen- Paragraph C C. That there shall be deducted from the amount of the net C-l income of each of said persons, ascertained as provided herein, the sum of $3,000, C-2 plus $1,000 additional if the person making the return be a married man with a wife living with him, C-3 or plus the sum of $1,000 additional if the person making the return be a married woman with a husband living with her ; C-4 but in no event shall this additional exemption of $1,000 be deducted by both a husband and a wife: C-5 Provided, That only one deduction of $4,000 shall be made from the aggregate income of both husband and wife when living together. Paragraph D D. The said tax shall be computed upon the remainder of said )_! net income of each person subject thereto, accruing during each preceding calendar year ending December thirty-first: D-2 Provided, However, That for the year ending December thirty-first, nineteen hundred and thirteen, said tax shall be computed on the net income accruing from March first to December thirty-first, nineteen hundred and thirteen, both dates inclusive, after deducting five-sixths only of the specific exemptions and deductions herein provided for. D-3 On or before the first day of March, nineteen hundred and four- teen, and the first day of March in each year thereafter, a true and accurate return, under oath or affirmation, shall be made by each person of lawful age, except as hereinafter provided, subject to the tax imposed by this section, and having a net income of $3,000 or over for the taxable year, to the collector of internal revenue for the district in which such person resides or has his principal place of business, or, in the case of a person residing in a foreign country, in the place where his principal business is carried on within the United States, in 'such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, setting forth specifically the. gross amount of income from all separate sources and from the total thereof, deducting the aggre- gate items or expenses and allowance herein authorized ; ( 46 guardians, trustees, executors, administrators, agents, receivers, D-4 conservators, and all persons, corporations, or associations acting in any fiduciary capacity, shall make and fender a return of the net income of the person for whom they act, subject to this tax, coming into their custody or control and management, and be subject to all the provisions of this section which apply to individuals : Provided, That a return made by one of two or more joint guardians, trustees, executors, administrators, agents, receivers, and conservators, or other persons acting in a fiduciary capacity, filed in the district where such person resides, or in. the district where the will or other instrument under which he acts is recorded, under such regulations as the Secretary of the Treasury may prescribe, shall be a sufficient com- pliance with the requirements of this paragraph ; and also all persons, firms, companies, copartnerships, corpora- D-6 tions, joint-stock companies or associations, and insurance com- panies, except as hereinafter provided, in whatever capacity acting, having the control, receipt, disposal, or payment of fixed or determinable annual or periodical gains, profits, and income of another person subject to tax, shall in behalf of such person deduct and withhold from the payment an amount equivalent to the normal income tax upon the same and make and render a return, as aforesaid, but separate and distinct, of the portion of the income of each person from which the nor- mal tax has been thus withheld, and containing also the name and address of such person, or stating that the name and address or the address, as the case may be, are unknown: Provided, That the provision requiring the normal tax of individuals Q.7 to be withheld at the source of the income, shall not be construed to require any of s^uch tax to be withheld prior to the first day of Novem- ber, nineteen hundred and thirteen : Provided, Further, That in either case above mentioned no return of ).g . income not exceeding $3,000 shall be required : Provided, Further, That any persons carrying on business in partner- )_9 ship shall be liable for income tax only in their individual capacity, and the share of the profits of a partnership to which any taxable partner would be entitled if the same were divided whether .divided or otherwise, shall be returned for taxation and the tax paid, under the Provisions of this section, and any such firm, when requested by the Commissioner of Internal Revenue, or any district collector, shall for- ward to him a correct statement of such profits and the names of the individuals who would be entitled to the same, if distributed: Provided, Further, That persons liable for the normal income tax I). in only, on their own account or in behalf of another, shall not be required to make return of the income derived from dividends on the capital stock or from the net earnings of corporations, joint-stock companies or associations, 'and insurance companies taxable upon their net income as hereinafter provided. Any person for whom return has been made and the tax paid, D-ll or to be paid as aforesaid, shall not be required to make a return unless such person has other net income, but only one deduction of $3,000 shall be made in the case of any such person. D-12 The collector or deputy collector shall require every list to be verified by the oath or affirmation of the party rendering it. If the collector or deputy collector have reason to believe that the amount of any income returned is understated, he shall give due notice to the person making the return to show cause why the amount of the return should not be increased, and upon proof of the amount understated may increase the same accordingly. If dissatisfied with the decision of the collector, such person may submit the case, with all the papers, to the Commissioner of Internal Revenue for his decision, and may furnish sworn testimony of witnesses to prove any relevant facts. Paragraph E That all assessments shall be made by the Commissioner of g_j Internal Revenue and all persons shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, E-2 except in cases of refusal or neglect to make such return and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as provided for in E-3 this section or by existing law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such person or persons immediately upon notification of the amount of such assessment; E-4 and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the amount of tax unpaid, and interest at the rate of 1 per centum per month upon said tax from the time the same became due, E-5 except from the estates of insane, deceased, or insolvent persons. E-6 All persons, firms copartnerships, companies, corporations, joint- stock companies or associations, and insurance companies, in what- ever capacity acting, including : E-7 lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, agents, receivers, conservators, employers, and all officers and employees of the United States E-8 having the control, receipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compensations, remunera- tion, emoluments, or other fixed or determinable armual gains, profits, and income of another person, exceeding $3,000 for any taxable year, E-9 other than dividends on capital stock, or from the net earnings of corporations and joint-stock companies or associations sub- ject to like tax, 48 who are required to make and render a return' in behalf of another, E-10 as provided herein, to the collector of his, her, or its district, are hereby authorized and required to deduct and withhold from -11 such annual gains, profits, and income such sum as will be sufficient to pay the normal tax imposed thereon by this section, and shall pay to the officer of the United States Government authorized to receive the same ; and they are each hereby made personally liable for such tax. E-12 In all cases where the income tax of a person is withheld and E-13 deducted and paid or to be paid at the source, as aforesaid, such person shall not receive the benefit of the deduction and exemption allowed in paragrh C of this section except by an application for refund of tHe tax unless he shall, not less than thirty days prior to the day on which the return of his income is due, file with the person who is required to withhold and pay tax for him, a signed notice in writing claiming the benefit of such exemption and thereupon no tax shall be withheld upon the amount of such exemption : Provided, That if any person for the purpose of obtaining any -14 allowance or reduction by virtue of a claim for such exemption, either for himself or for any other person, knowingly makes any false state- ment or false or fraudulent representation, he shall be liable to a pen- alty of $300; nor shall any person under the foregoing conditions be allowed the E-15 benefit of any deduction provided for in subsection B ( Page 45 ) of this section unless he shall, not less than thirty days prior to the day on which the return of his income is due, either file with the person who is required to withhold and pay tax E-16 for him a true and correct return of his annual gains, profits, and income from all other sources, and also the deductions asked for, and the showing thus made shall then become a part of the return to be made in his behalf by the person required to withhold and pay the tax, or likewise make application for deductions to the collector of the E-17 district in which return is made or to be made for him : Provided, Further, That if such person is a minor or an insane per- -18 son, or is absent from the United States, or is unable owing to serious illness to make the return and application above provided for, the re- turn and application may be made for him or her by the person required to withhold and pay the tax, he making oath under the penalties of this Act that he has sufficient knowledge of the affairs and property of his beneficiary to enable him to make a full and complete return for him or her, and that the return and application made by him are full and complete : Provided, Further, That the amount of the normal tax hereinbefore -19 imposed shall be deducted and withheld from fixed and determinable annual gains, profits, and income derived from interest upon bonds and mortgages, or deeds or trust or other similar obligations of corpora- tions, joint-stock companies or associations and insurance companies, whether payable annually or at shorter or longer periods, although such 49 interest does not amount to $3,000, subject to the provisions of this section requiring the tax to be withheld at the source and deducted from annual income and paid to the Government; E-20 and likewise -the amount of such tax shall be deducted and withheld from coupons, checks, or bills of exchange for or in payment of interest upon bonds of foreign countries and upon foreign mortgages or like obligations (not payable in the United States), E-21 and also from coupons, checks, or bills of exchange for or in payment of any dividends upon the st6ck or interest upon the obligations of for- eign corporations, associations, and insurance companies engaged in business in foreign countries ; E-22 and the tax in each case shall be withheld and deducted for and in behalf of any person subject to the tax hereinbefore imposed, although such interest, dividends, or other compensation does not exceed $3,000, E-23 by any banker or person who shall sell or otherwise realize coupons, checks, or bills of exchange drawn or made in payment of 'any such interest or dividends (not payable in the United States), E-24 and any person who shall obtain payment (not in the United States), in behalf of another of such dividends and interest by means of coupons, checks, or bills of exchange, E-25 and also any dealer in such coupons who shall purchase the same for any such dividends or interest (not payable in the United States), otherwise than from a banker or another dealer in such coupons; but in each case the benefit of the exemption and the deduction allow- able under this section may be had by complying with the foregoing provisions of this paragraph. E-26 All persons, firms, or corporations undertaking as a matter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner of Internal Revenue, and shall be subject to such regulations enabling the Government to ascertain and verify the due withholding and pay- ment of the income tax required to be withheld and paid as the Commissioner of Internal Revenue, with the approval of the Secre- tary of the Treasury, shall prescribe; E-27 and any person who shall knowingly undertake to collect such pay- ments as aforesaid without having obtained a license therefor, or without complying with such regulations, shall be deemed guilty of a misdemeanor and for each offense be fined in a sum not exceeding $5,000, or imprisoned for a term not exceeding one year, or both, in the discretion of the court. E-28 Nothing in this section shall be construed to release a taxable person from liability for income tax, nor shall any contract entered into after this Act takes effect be valid in regard to any Federal income tax imposed upon a person liable to such payment. E-29 The tax herein imposed upon annual gains, profits, and income not falling under the foregoing and not returned and paid by virtue of the foregoing shall be assessed by personal return under rules and regulations to be prescribed by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury. E-30 The provisions of this section relating to the deduction and pay- 50 ment of the tax at the source of income shall only apply to the normal tax hereinbefore imposed upon individuals. F. That if any person, corporation, joint-stock company, asso- Paragraph F ciation, or insurance company liable to make thi return or pay the F-l tax aforesaid shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, such person shall be liable to a penalty of not less than $20 nor more than $1,000. Any person or any officer of any corporation required by law to F-2 make, render, sign, or verify any return who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this section to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be im- prisoned not exceeding one year, or both, at 'the discretion of the court, with the costs of prosecution. G. (a) That the normal tax hereinbefore imposed upon indi- Paragraph G viduals likewise shall be levied, assessed, and paid annually upon the Q.j entire net 'income arising or accruing from all sources during the preceding calendar year to every corporation, joint-stock company or association, and every insurance company, organized in the United States, no matter how created or organized, not including partner- ships ; but if organized, authorized, or existing under the laws of any Q_2 foreign country, then upon the amount of net income accruing from business transacted and capital invested within the Uinted States during such year : Provided, However, That nothing in this section shall apply to labor, (1-3 agricultural, or horticultural organizations, or to mutual savings banks not having a capital stock represented by shares, or to fraternal bene- ficiary societies, orders, or associations operating under the lodge sys- tem or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and providing for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or associations and dependents of such members, nor to do- mestic building and loan associations, nor to cemetery companies, organ- ized and operated exclusively for the mutual benefit of their members, nor to any corporation or association organized and operated exclusively for religious, charitable, scientific or educational purposes, no part of the net income of which inures to the benefit of any private stockholder or individual, nor to business leagues, nor to chambers of commerce or boards of trade, not organized for profit, or no part of the net income of which inures to the benefit of the private stockholder or individual; nor to any civic league or organization not organized for profit, but operated exclusively for the promotion of social welfare : Provided, Further, That there shall not be taxed under this section G-4 any income derived from any public utility or from the exercise of any essential governmental function accruing to any State, Territory, or the District of Columbia, or any political subdivision of a State, Territory, or the District of Columbia, nor any income accruing to the government of the Philippine Islands or Porto Rico, or of any political subdivision of the Philippine Islands or Porto Rico: 51 G-5 Provided, That whenever any State, Territory, or the District of Columbia, or any political subdivision of a State or Territory, has, prior to the passage of this Act, entered in good faith into a contract with any person or corporation, the object and purpose of which is to acquire, construct, operate or maintain a public utility, no tax shall be levied under the provisions of this Act upon the income derived from the operation of such public utility, so far as the payment thereof will impose a loss or burden upon such State, Territory, or the District of Columbia, or a political subdivision of a State or Territory ; G-6 but this provision is not intended to confer upon such person or corpo- ration any financial gain or exemption or to relieve such person or corporation from the payment of a tax as provided for in this section upon the part or portion of the said income to which such person or corporation shall be entitled under such contract. G-7 (b) Such net income shall be ascertained by deducting from the gross amount of the income of such corporation, joint-stock com- pany or association, or insurance company, received within the year from all sources. G-8 (first) all the ordinary and necessary expenses paid within the year in the maintenance and operation of its business and prop- erties, including rentals or other payments required to be made as a condition to the continued use or possession of property; G-9 (second) all losses actually sustained within the year and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use, wear and tear of property, if any ; G-10 and in the case of mines a reasonable allowance for depletion of ores and all other natural deposits, not to exceed 5 per centum of the gross value at the mine of the output for the year for which the computation is made ; G-ll and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts : G-12 Provided, That mutual fire insurance companies, requiring their mem- bers to make pjemium deposits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policyholders, but shall return as taxable income all income received by them from all other sources plus such portions of the pre- mium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves : G-13 Provided, Further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy- holders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the payment thereof, G-14 And life insurance companies shall not include as income in any year such portion of any actual premium received from any individual policyholder as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of such indi- vidual policyholder, within such year ; 52 (third) the amount of interest accrued and paid within the year G-15 on its indebtedness to an amount of such indebtedness not exceeding one-half cff the sum of its interest bearing indebted- ness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year : Provided, That in case of indebtedness wholly secured by collateral Q-16 the subject of sale in ordinary business of such corporation, joint-stock company, or association, the total interest secured and paid by such company, corporation, or association within the year on any such in- debtedness may be deducted as a part of its expense of doing business : Provided, Further, That in the case of bonds or other indebtedness, G-17 which have been issued with a guaranty that the 'interest payable thereon shall be free from taxation, no deduction for the payment of the tax herein imposed shall be allowed, and in the case of a bank, banking association, loan or trust company, G*18 interest paid within the year on deposits or on moneys received for investment and secured by interest-bearing certificates of indebtedness issued by such a bank, banking association, loan or trust company; (fourth) all sums paid by it within the year for taxes imposed G-19 under the authority of the United States or of any State or Territory thereof, or imposed by the Government of any for- eign country : Provided, That in the case of a corporation, joint-stock company, Q.9Q or a'ssociation, or insurance company, organized, authorized, or exist- ing under the laws of any foreign country, such net income shall be ascertained by deducting from the gross amount of its income accrued within the year from business transacted and capital invested within the United States, (first) all the ordinary and necessary expenses actually paid within O_21 the year out of earnings in the maintenance and operation of its busi- ness and property within the United States, including rentals or other payments required to be made as a conditipn to the continued use or possession of property; (second) all losses actually sustained within the year in business con- Q_22 ducted by it within the United States and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use, wear and tear of property, if any, and in the case of mines a reasonable allowance for depletion of ores and all other natural deposits, not to exceed 5 per centum of the gross value at the mine of the output for the year for which the computation is made; and in case of insurance companies the net addition, if any, required Q.23 by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided, Further, That mutual fire insurance companies requiring Q_24 their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium de- posits returned to their policyholders, but shall return as taxable in- come all income received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsur- ance reserves : 53 G-25 Provided, Further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and re- ceived by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy- holders on account of premiums previously paid by them* and interest paid upon such amounts between the ascertainment thereof and the pay- ment thereof G-26 and life insurance companies shall not include as income in any year such portion of any actual premium received from any individual policy- holder as shall have been paid back or credited to such individual policy- holder, or treated as an abatement of premium of such individual policy- holder, within such year; G-27 (third) the amount of interest accrued and paid within the year on its indebtedness to an amount of such indebtedness not exceeding the pro- portion of one-half of the sum of its interest bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the capital employed in the business at the close of the year which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and with- out the United States: G-28 Provided, That in the case of bonds or other indebtedness which have been issued with a guaranty that the interest payable thereon shall be free from .taxation, no deduction for the payment of the tax herein imposed shall be allowed; G-29 (fourth) all sums paid by it within the year for taxes imposed under the authority of the United States or of any State or Territory thereof or the District of Columbia. G-30 In the case of assessment insurance companies, whether domestic or foreign, the actual deposit of sums with State or Territorial officers, pursuant to law, as additions to guarantee or reserve funds shall be treated as being payments required by law to reserve funds. G-31 (c) The tax herein imposed shall be computed upon its entire net income accrued within each preceding calendar year ending December thirty-first : r r>2 Provided, However, That for the year ending December thirty-first, nineteen hundred and thirteen, said tax shall be imposed upon its entire net income accrued within that portion of said year from March first to December thirty-first, both dates inclusive, to be ascertained by taking five-sixths of its entire net income for said calendar year : G-33 Provided, Further, That any corporation, joint-stock company or association, or insurance company subject to this tax may designate the last day of any month in the year as the day of the closing of its fiscal year and shall be entitled to have the tax payable by it com- puted upon the basis of the net income ascertained as herein provided for the year ending on the day so designated in the year preceding th date of assessment instead of upon the basis of the net income for the calendar year preceding the date of assessment; G-34 and it shall give notice of the day it has thus designated as the closing of its fiscal year to the collector of the district in which its principal business office is located at any time not less than thirty days prior to the date upon which its annual return shall be filed. G-35 All corporations, joint-stock companies or associations, and insur- ance companies subject to the tax herein imposed, computing taxes 54 upon the income of the calendar year, shall, on or before the first day of March, nineteen hundred and . fourteen, and the first day of March in each year thereafter, and all corporations, joint-stock companies or associations, and insurance companies, computing taxes upon the income of a fiscal year which it may designate in the manner hereinbefore provided, shall render a like return within sixty days after the close of its said fiscal year, and within sixty days after the close of its fiscal year in each year thereafter, or in the case of a corporation, joint-stock company or association, or insurance company, organized or existing under the laws of a foreign country, in the place where its principal business is located within the United States, in such form as the Commissioner .of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, shall render a true and accurate return under oath or affirmation of its president, vice president, or other principal officer, and its treasurer or assistant treasurer/ to the collector of internal revenue for the district in which it has its principal place of business, setting forth (first) the total amount of its paid-up capital stock outstanding, G-36 or if no capital stock, its capital employed in business, at the close of the year; (second) the total amount of its bonded and other indebtedness G-37 at the close of the year ; (third) the gross amount of its income, received during such G-38 year from all sources, and if organized under the laws of a foreign country the gross G-39 amount of its income received within the year from business transacted and capital invested within the United States ; (fourth) the total amount of all its ordinary and necessary G-40 expenses paid out of earnings in the maintenance and operation of the business and properties of such corporation, joint-stock company or association, or insurance company within the year, stating separately all rentals or other payments required to be made as a condition to the continued use or possession of property, and if organized under the laws of a foreign country the amount .41 so paid in the maintenance and operation of its business within the United States; (fifth) the total amount of all losses actually sustained during .42 the year and not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the net addition, if any required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on v policy and annuity contracts : 55 G-43 an d i n case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts : G-44 Provided, Further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium de- posits returned to their policyholders, but shall return as taxable in- come all income received by them from all other sources plus such por- tions of the premium deposits as are retained by the companies for purposes other than the payment of losses' and expenses and reinsur- ance reserves: G-45 Provided, Further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be en- titled to include in deductions from gross income amounts repaid to policyholders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertainment thereof and the payment thereof G-46 anc ^ ^ e msuranc e companies shall not include as income in any year such portion of any actual premium received from any individual policyholder as shall have been paid back or credited to such indi- vidual policyholder, or treated as an abatement of premium of such individual policyholder, within such year ; G-47 an d in case of a corporation, joint-stock company or association, or insurance company, organized under the laws of a foreign country, all losses actually sustained by it during the year in business conducted by it within the United States, not compensated by insurance or other- wise, stating separately any amounts allowed for depreciation of property, G-48 and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts : G-49 Provided, Further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium de- posits returned to their policyholders, but shall return as taxable income all income received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves : G-50 Provided, Further, That mutual marine insurance companies shall include in their return of gross income gross premiums, collected- and re- ceived by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy- holders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the payment thereof u-51 and life insurance companies shall not include as income in any year such portion of any actual premium received from any individual policy- holder as shall have been paid back or credited to such individual policy- holder, or treated as an abatement of premium of such individual policyholder, within such year; G-52 (sixth) the amount of interest, accrued and paid within the year on its bonded or other indebtedness not exceeding one- half of the sum of its interest bearing indebtedness and its paid-up capital stock, outstanding at the close of the year, G-53 or if no capital stock, the amount of interest paid within the year on an amount of indebtedness not exceeding the amount of capital employed in the business at the close of the year, , 56 and in the case of a bank, banking association, or trust com- G-54 pany, stating separately all interest paid by it within the year on deposits ; or in case of a corporation, joint-stock company or association, G-55 or insurance company, organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded or other indebtedness not exceed- ing the proportion of its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of capital employed in the G-56 business at the close of the year, which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States; (seventh) the amount paid by it within the year for taxes G-57 imposed under the authority of the United Stktes and separately the amount so paid by it for taxes imposed by the Government v of any foreign country; (eighth) the net income of such corporation, joint-stock com- G-58 pany or association, or insurance company, after making the deductions in this subsection authorized. All such returns shall as received be transmitted forthwith by G-59 the collector to the Commissioner of Internal Revenue. All assessments shall be made and the several corporations, joint- G-60 stock companies or associations, and insurance companies shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assess- ment shall be paid on or before the thirtieth day of June : Provided, That every corporation, joint-stock company or association, G-61 and insurance company, computing taxes upon the income of the fiscal year which it may designate in the manner hereinbefore provided, shall pay the taxes due under its assessment within one hundred and twenty days after the date upon which it is required to file its list or return of income for assessment; except in cases of refusal or neglect to make such return, and in cases G-62 of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as provided for in this section or by existing law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint-stock company or association, or insurance company immediately upon notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of G-63 June in any year, or after one hundred and twenty days from the date on which the return of income is required to be made by the taxpayer, and after ten days' notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the amount of tax unpaid and interest at the rate of 1 per centum per month upon said tax from the time the same becomes due. 57 G-64 (d) When the assessment shall be made, as provided in this section, the returns, together with any corrections thereof which may have been made by the commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such : Q_gg Provided, That any and all such returns shall be open to inspection only upon the order of the President, under rules and regulations to be prescribed by the Secretary of the Treasury and approved by the President : G-66 Provided, Further, That the proper officers of any State imposing a general income tax may, upon the request of the governor thereof, have access to said returns or to an abstract thereof, showing the name and income of each such corporation, joint-stock company, association or insurance company, at such times and in such manner as the Secretary of the Treasury may prescribe. G-67 If an Y f tne corporations, joint-stock companies or associations, or insurance companies aforesaid, shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, or shall render a false or fraudulent return, such corporation, joint- stock company or association, or insurance company shall be liable to a penalty of not exceeding $10,000. Paragraph H H - That the wor< ^ "State" or "United States" when used in this ij * section shall be construed to include any Territory, Alaska, the District of Columbia, Porto Rico, and the Philippine Islands, when such construction is necessary to carry out its provisions. Paragraph I 1. That sections thirty-one hundred and sixty-seven, thirty-one I_l hundred and seventy-two, thirty-one hundred and seventy-three, and thirty-one hundred and seventy-six of the Revised Statutes of the United States as amended are hereby amended so as to read as follows : R. S. Sec. "Sec. 3167. It shall be unlawful for any collector, deputy col- 3167 lector, agent, clerk, or other officer or employee of the United States to divulge or to make known in any manner whatever not provided by law to any person the operations, style of work, or apparatus of any manufacturer or producer visited by him in the discharge of his official duties, or the amount of source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any income return by any person or corporation, or to permit any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law ; and it shall be unlawful for any person to print or publish in any manner whatever not provided by law any income return or any part thereof or the amount or source of income, profits, losses, or expenditures appearing in any income return; and any offense against the foregoing provision shall be a misde- meanor and be punished by a fine not exceeding $1,000 or by imprisonment not exceeding one year, or both, at the discretion of the court; 58 and if the offender be an officer or employee of the United States he shall be dismissed from office and be incapable thereafter of holding any office under the Government. (Sec. 3172. Every collector shall, from time to time, cause his R. S. Sec. deputies to proceed through every part of his district and inquire 3172 after and concerning all persons therein who are liable to pay any internal-revenue tax, and all persons owning or having the care and management of any objects liable to pay any tax, and to make a list of such persons and enumerate said objects. (Sec. 3173. It shall be the duty of any person, partnership, firm, R. S. Sec. association, or corporation, made liable to any duty, special tax, 3173 or other tax imposed by law, when not otherwise provided for, in case of a special tax, on or before the thirty-first day of July in each year, in case of income tax on or before the first day of March in each year, and in other cases before the day on which the taxes accrue, to make a list or return, verified by oath or affirmation, to the collector or a deputy collector of the district where located, of 'the articles or objects, including the amount of annual income charged with a duty or tax, the quantity of goods, wares, and mer- chandise made or sold and charged with a tax, the several rates and aggregate amount, according to the forms and regulations to be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, for which such person, partnership, firm, association, or corporation is liable : Provided, That if any person liable to pay any duty or tax, or own- ing, possessing, or having the care or management of property, goods, wares and merchandise, articles or objects liable to pay any duty, tax, or license, shall fail to make and exhibit a list or return required by law, but shall consent to disclose the particulars of any and all the property, goods, wares, and merchandise, articles, and objects liable to pay any duty or tax, or any business or occupation liable to pay any tax as aforesaid, then, and in that case, it shall be the duty of the collector or deputy collector to make such list or return, which, being distinctly read, consented to, and signed and verified by oath or affirma- tion by the person so owning, possessing, or having the care and man- agement as aforesaid, may be received as the list of such person: Provided, Further, That in case no annual list or return has been rendered by such person to the collector or deputy collector as required by law, and the person shall be absent from his or her residence or place of business at the time the collector or a deputy collector shall call for the annual list or return, it shall be the duty of such collector or deputy collector to leave at such place of residence or business, with some one of suitable age and discretion, if such be present, otherwise to deposit in the nearest post office, a note or memorandum addressed to such person, requiring him or her to render to such collector or deputy collector the list or return required by law within ten days from the date of such note or memorandum, verified by oath or affirmation. And if any person, on being notified or required as aforesaid, shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any person who is required to deliver a monthly or other return of objects subject to tax fails to do so at the time required, or delivers any return which, in the opinion of the collector, is false or fraudulent, or contains any undervaluation or understatement, it shall be lawful for the collector 59 to summon such person, or any other person having possession, custody, or care of books of account containing entries relating to the business of such person, or any other person he may deem proper, to appear before him and produce such books, at a time and place named in the summons, and to give testimony or answer interrogatories, under oath, respecting any objects liable to tax or the returns thereof. The collector may summon any person residing or found within the State in which his district lies; and when the_ person intended to be summoned does not reside and cannot be found within such State, he may enter any collection district where such person may be found and there make the examination herein authorized. And to this end he may there exercise all the authority which he might lawfully exercise in the district for which he was commissioned. R. S. Sec. "Sec. 3176. When any person, corporation, company, or associa- 3176 tion refuses or neglects to render any return or list required by law, or renders a false or fraudulent return or list, the collector or any deputy collector shall make, according to the best information which he can obtain, including that derived from the evidence elicited by the examination of the collector, and on his own view and informa- tion, such list or return, according to the form prescribed, of the income, property, and objects liable to tax owned or possessed or under the care or management of such person or corporation, com- pany or association, and the Commissioner of Internal Revenue shall assess all taxes not paid by stamps, including the amount, if any, due for special tax, income or other tax, and in case of any return of a false or fraudulent list or valua- tion intentionally he shall add 100 per centum to such tax; and in case of a refusal or neglect, except in cases of sickness or absence, to make a list or return, or to verify the same as aforesaid, he shall add 50 per centum to such tax In case of neglect occasioned by sickness or absence as afore- said, the collector may allow such further time for making and delivering such list or return as he may deem necessary, not exceed- ing thirty days. The amount so added to the tax shall be collected at the same time and in the same manner as the tax unless the neglect or falsity is discovered after the tax has been paid, in which case the amount so added shall be collected in the same manner as the tax ; and the list or return so made and subscribed by such collector or deputy collector shall be held prima facie good and sufficient for all* legal purposes." Paragraph J J. That it shall be the duty of every collector of internal revenue, j_j to whom any payment of any taxes other than the tax represented by an adhesive stamp or other engraved stamp is made under the provisions of this section, to give to the person making such payment a full written or printed receipt, expressing the amount paid and the particular account for which such payment was made; 60 and whenever such payment is made such collector shall, if required, J-2 give a separate receipt for each tax paid by any debtor, on account of -payments made to or to be made by him to separate credits in such form that such debtor can conveniently produce the same separately to his several creditors in satisfaction of their respective demands to the amounts specified in such receipts ; and such receipts shall be sufficient evidence in favor of such J-3 debtor to justify him in withholding the amount therein expressed from his next payment to his creditor ; but such creditor may, upon giving to his debtor a full written J_4 receipt, acknowledging the payment to him of whatever sum may be actually paid, and accepting the amount of tax paid as aforesaid, (specifying the same) as a further satisfaction of the debt to that amount, require the surrender to him of such collector's receipt. K. That jurisdiction is hereby conferred upon the district courts Paragraph K of the United States for the district within which any person sum- j_i moned under this section to appear to testify or to produce books shall reside, to compel such attendance, production of books, and testimony by appropriate process. L. That all administrative, special, and general provisions of Paragraph L law, including the laws in relation to the assessment, remission, collection, and refund of internal-revenue taxes not heretofore spe- cifically repealed and not inconsistent with the provisions of this section, are hereby extended and made applicable to all the pro- visions of this section and to the tax herein imposed. M. That the provisions of this section shall extend to Porto Rico Paragraph M and the Philippine Islands: M-l Provided, That the administration of the law and the collection of M 2 the taxes imposed in Porto Rico and the Philippine Islands shall be _ by the .appropriate internal-revenue officers of those governments, and all revenues collected in Porto Rico and the Philippine Islands there- under shall accrue intact to the general governments, thereof, respect- ively : And Provided, Further, That the jurisdiction in this section, con- JVI-3 ferred upon the district courts of the United States shall, so far as the Philippine Islands are concerned, be vested in the courts of the first instance of said islands: And Provided, Further, That nothing in this section shall be held to M-4 exclude from the computation of the net income the compensation paid any official by the governments of the District of Columbia, Porto Rico and the Philippine Islands or the political subdivisions thereof. N. That for the purpose of carrying into effect the provisions of Paragraph N Section 11 of this Act, and to pay the expenses of assessing and col- ?J i lecting the income tax therein imposed, and to pay such sums as the Commissioner of Internal Revenue, with the approval of the Secre- tary of the Treasury, may deem necessary, for information, detection, and bringing to trial and punishment persons guilty of violating the provisions of this section, or conniving at the same, in cases 61 where such expenses are not otherwise provided for by law, there is hereby appropriated out of any money in the Treasury not other- wise appropriated for the fiscal year ending June thirtieth, nineteen hundred and fourteen, the sum of $800,000 and the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is authorized to appoint and pay from this appropriation all necessary officers, agents, inspectors, deputy collectors, clerks, messengers and janitors, and to rent such quarters, purchase such supplies, equipment, mechanical devices, and other articles as may be necessary for employment or use in the District of Columbia or any collection district in the United States, or any of the Territories thereof : N-2 Provided, That no agent paid from this appropriation shall receive compensation at a rate higher than that now received by traveling agents on accounts in the Internal Revenue Service, and no inspector, shall receive a compensation higher than $5 a day and $3 additional in lieu of subsistence, and no deputy collector, clerk, messenger, or other employee shall be paid at a rate of compensation higher than the rate now being paid for the same or similar work in the Internal Revenue Service. N-3 In the office of the Commissioner of Internal Revenue at Wash- ington, District of Columbia there shall be appointed by the Com- missioner of Internal Revenue, with the approval of the Secretary of the Treasury one additional deputy commissioner, at a salary of $4,000 per annum ; N-4 two heads of divisions, whose compensation shall not exceed $2,500 per annum; N-5 and such other clerks, messengers, and employees, and to rent such quarters and to purchase such supplies as may be necessary: N-6 Provided, That for a period of two years from and after the passage of this Act the force of agents, deputy collectors, inspectors, and other employees not including the clerical force below the grade of chief of division employed in the Bureau of Internal Revenue in the city of Washington, District of Columbia, authorized by this section of this Act, shall be appointed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, under such rules and regulations as may be fixed by the Secretary of the Treasury to insure faithful and competent service, and with such compensation as the Commissioner of Internal Revenue may fix, with the approval of the Secretary of the Treasury, within the limitations herein prescribed : N-7 Provided, Further, That the force authorized to carry out the pro- visions of Section 11 of this Act, when not employed as herein pro- vided, shall be employed on general internal-revenue work. SECTION IV. (Matter omitted relates to tariff only.) Paragraph S S. * * * Provided, Further, That all excise taxes upon cor- S-1 porations imposed by section thirty-eight, that have accrued or have been imposed for the year ending December thirty-first, nineteen hundred and twelve, shall be returned, assessed, and collected in the 62 same manner, and under the same provisions, liens, and penalities as if section thirty-eight continued in full force and effect : And Provided, Further, That a special excise tax with respect to the S-2 carrying on or doing of business, equivalent to 1 per centum upon their entire net income shall be levied, assessed, and collected upon corpora- tions, joint-stock companies, or associations, and insurance companies, of the character described in section thirty-eight of the Act of August fifth, nineteen hundred and nine, for the period from January first to February twenty-ninth, nineteen hundred and thirteen, both dates in- clusive, which said tax shall be computed upon one-sixth of the entire net income of said corporations, joint-stock companies or associations, and insurance companies, for said year, said net income to be ascer- tained in accordance with the provisions of subsection G of section two of this Act: Provided, Further, That the provisions of said section thirty-eight of S-3 the Act of August fifth, nineteen hundred and nine, relative to the col- lection of the tax therein imposed, shall remain in force for the col- lection of the excise tax herein provided, but for the year nineteen hundred and thirteen it shall not be necessary to make more than one return and assessment for all the taxes imposed herein upon said cor- porations, joint-stock companies or associations, and insurance com- panies, either by way of income or excise, which return or assessment shall be made at the times and in the manner provided in this Act; but the repeal of existing laws or modifications thereof embraced in S-4 this Act shall not affect any act done, or any right accruing or accrued, or any suit or proceeding had or commenced in any civil case before the said repeal or modification; but all rights and liabilities under said laws shall continue and may S-5 be enforced in the same manner as if said repeal or modifications had not been made. Any offenses committed and all penalties or forfeitures or lia- S-6 bilities incurred prior to the passage of this Act under any statute embraced in or changed, modified, or repealed by this Act may be prosecuted or punished in the same manner and with the same effect as if this Act had not been passed. No Acts of limitation now in force, whether applicable to civil S-7 causes and proceedings or to the prosecution of offenses or for the recovery of penalties or forfeitures embraced in or modified, changed, or repealed by this Act, shall be affected thereby so far as they affect any suits, proceedings, or prosecutions, whether civil or criminal, for causes arising or acts done or committed prior to the passage of this Act, which may be commenced and prosecuted within the same time and with the same effect as if this Act had not been passed. T. If any clause, sentence, paragraph, or part of this Act shall Paragraph? for any reason be adjudged by any court of competent jurisdiction T_l to be invalid, such judgment shall not affect, impair or invalidate the remainder of said Act, but shall be confined to its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment shall have been rendered. U. That unless otherwise herein specially provided, this Act shall Paragraph U take effect on the day following its passage. U-l Approved, 9:10 p. m., October 3, 1913. 63 United States Treasury Department Forms FOR CLAIMING Exemptions and Deductions Annual and Monthly Return on Income of Persons and Corporations FOBM OF CERTIFICATE TO BE PRESENTED WITH COUPONS OR INTEREST ORDERS STATING' WHETHER OR NOT EXEMPTION IS CLAIMED UNDEK PARAGRAPH C, SECTION 2, OF THE FEDERAL INCOME TAX LAW. r do solemnly declare that I, _ -a citizen or resident of the United States, and residing at (Give full a*lrra.) am the owner of $ bonds of the denomination of $ each^ Nos - - - - - - of the .... -- (Give name ol debtor.) known as bonds, from which were detached (Describe the particular feme at bond*.) the accompanying interest coupons, due , 191...., amounting to $ , or upon which there matured , 191 ,"$ of registered interest. 1 { do not f now claim with respect to the income represented by said interest, the benefit of a deduction of $-_ allowed under paragraph O, Section II, of the Federal Income Tax Law, the total exemption to which I am entitled thereunder beVng $ _ _ Date, , 191 . Name, FORM OF CERTIFIfcSTE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. The Owner's Certificate, of which the following Certificate Id the counterpart, and bean the same number aa this Certificate, will be lent by the collecting agent direct to the OommiMioner of Internal Revenue, at Waihlngton, u prescribed by regulation.. No... I (we), , do solemnly declare that the owner of $ (Name of collecting agent. ) bonds of the .: _ , from which were detached the (Description of i*rae.) (Name of debtor organization.) accompanying interest coupons due .\ 191 , amounting to $.^ , has filed with me (us) a duly executed certificate tilled up in accordance with Treasury Regulations of October 25, 1913, Form No , which certificate has been indorsed by me (us) as follows: "Owner's Certificate No: ,191 ," and in (Name of collecting agency. (Date.) which the said owner ^J not } claim, with respect to the income represented by said interest, the benefit of a deduction of $ , allowed under Paragraph C, Section II, of the Federal Income Tax Law, the total exemption to which said owner now claims to be entitled thereunder being $ __,__ ., and I (we) do hereby promise and pledge { ourse'lves } to f rwart ' 'he above-described certificate executed by the owners as stated and dated , 191 , to the Commissioner of Internal Revenue, at Washington, D. C., not later than the 20th day of next month, in accordance with Treasury Regulations. Signature of Collecting 'Agent : . Date , 191 Address: CERTIFICATE TO BE FURNISHED BY ORGANIZATIONS NOT SUBJECT TO TAX ON INTEREST AT SOURCE. I, , the of the _, (Oive name.) (Olve official position.) (Name of organization.) a of , located at . , do solemnly (Character of organization.) (State.) (Host-office address.) declare that said Is the owner of 9 bonds of the denomination 011?*..'. .".I. each, Nos. ^ of tlie __ . . known as (Dive name of debtor.) (Describe particular Issue of bonds.) bonds, from which were detached the accompanying coupons, due , 191 , amounting to 9 , or upon which there matured , 191...., 9 of registered Interest, and that under the provisions of the Income-tax law of October 3, 1913, said interest Is exempt from the payment of taxes collectible at the source, which exemption is hereby claimed. Date , 191 Name (Official position.) Address Of.. (Post office.) (Name of organization.) FORM OF CERTIFICATE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (When owner la a domestic organization not subject to taxes on Income at source. ) ' (The owner's certificate, of which the following certificate ia the counterpart, and bears the same number aa this certificate, will be sent by the collf rllni agent direct to the Commissioner of Internal Revenue, at Washington, aa prescribed by regulations.) No _ I (we) do solemnly declare that the owner of $ _. bonds of (Name of collecting agent.) the -- , from which were detached the accompanying interest coupons due , 191.., (Name of debtor organization.) (Maturity.) amounting to $ , has filed with me (us) a duly executed certificate filled up in' accordance with Treasury Regula- tions of October 25, 1913, Form No. 1001, which certificate has been indorsed by me (us) as lollows: "Owner's certificate No , _.L , ...; ,. , 191..." and that under the (Name of collecting agency.) (Date.) _ provisions of the income-tax law of October 3, 1913, said interest is exempt from the payment of taxes colle6tit>le at the source, which exemption is hereby claimed, and I (we) do hereby promise and pledge { {J^llves } * f rwar d l ^ e above-described cer- tificate executed by the owners as stated and dated , 191.., to the Commissioner of Internal Revenue, at Washington, D. C., not later than the 20th day of next month, in accordance writ/ Treasury Regulations. Signature of collecting agent, Date, , 191.. Address, 65 1003. ill Ill FORM Of CERTIFICATE TO BE PRESENTED WITH COUPONS OR INTEREST ORDERS WHEN NOT ACCOMPANIED BT CERTIFICATE OF OWNERS. I .'., the - of the -. , "(Nanie) ~" (Official position.) (Bank or collecting agency.) O f , do solemnly declare that said _ _ (Address V (Collecting agency.) has (or have) purchased or accepted for collection the accompanying coupons or interest orders amounting to $ , and which represent Interest matured on 9 of bonds of the __ f and that _ received said coupons or (NameoTdebtoV.) (Collecting agency.) orders for registered interest from '. , of. , (Name of party from whom received.) (Address of said party.) and that no certificate of ownership accompanied said coupons or interest orders, and _ _, hereby acknowledges responsibility of withholding therefrom the 1 iScome*ttof i per cent, in accordance with the regulations of the Treasury Department. norma Form H III 3' I Form 1003 a HI M- ili If Name (Collecting agency.) By __ _ ___ (Signature of officer Uuly authorized to sign, and his official posttkm.) AddresS ----------- ......... - --------- FORM OF CERTIFICATE TO BE FILLED OUT AND SIGNED BT MEMBERS OF PARTNERSHIPS. , a member of the firm or partnership of .., of. , and residing at.... (Give full address.) bonds do solemnly declare that the said partnership is the owner of f bonds Of the denomination of 9 each, Nos. .. . of the . known as ------------------------------ bonds, from which were detached the accompanying Interest coupons, due_ .................... , 191..., amounting to 9 ________________________ , or upon which there matured __________________________ , 191..., 9 ..................... of registered Interest, and that the name and __ names of the individual members thereof, and sr address of said .firm or partnership, and the thelf places of residence, are as follows : Addrew: (Name of partner signing.) (Of frm of.) Date ........................ ....... 191.... Address ...... ........... . Form FORM OF CERTIFICATE TO BE PRESENTED WITH COUPONS OR INTEREST ORDERS DETACHED FROM BONDS OR OTHER OBLIGATIONS OWNED BT THOSE WHO ARE BOTH CITIZENS, OR SUBJECTS, AND RESIDENTS OF FOREIGN COUNTRIES. I do solemnly declare that I am not a citizen or resident of the United States of America, but a subject (or citizen) of , and that I am the owner of 9... _ bonds of the denominations of 9 ,. _ each, Nos to" of the ._ known as (Oivenajne odebtOT _ bonds (Describe the particular issue of bonds.) from which were detached the accompanying coupons, due_ , 191 , amounting to 9 , or upon which there matured ., 191_.j, 9 i , of registered Interest, and that being a nonresident foreigner, I am exempt from the Income tax Imposed on such Interest by the United States Government- under the law enacted October 3, 1913, and that no citizen of the United States, wherever residing, or foreigner residing In the United States, or any of Its possessions, has any Interest In said bonds, coupon*, or Interest. Signature of owner of bonds (Giro full name.) Date . 191 Address (Olve fall r^sT-oflWaddre.*.) FORM OF CERTIFICATR TO B8 ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING AGENTS CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (When Bam owners arc ftrma or copartnerships In the TTnltefl States.) wUcfa the foUowfnf certificate IB the counterpart, and agent direct to the Commissioner of Internal Revenue, at Washington, an prescribed (The owner's certificate, of wUcfa the foUowfnf certificate IB the counterpart, and bears the same number as this certificate, wffl be neat bjr the e by refutations.) No I (we) ..... ..... do solemnly declare that the owner off.. ......... ____ , bonds of (Sain, of collecting agt.) the ___ . ___ , from which were detached the accompanying interest coupons (Nam. of debtor orgaaUUon.) da" ____________________ . 191 amounting to $ __________ , has filed with me (us) a duly executed certificate filled up in (Maturity.) accordance with Treasury Regulations of October 25, 1913, Form So. 1003, which certificate has been indorsed by me (us) 88 follows: "Owner's certificate No ..... ____________________ ............ _______ .......... , ---------------------- , 191 ," (Same of collecting ag.ncy. ) (Date.) and that the name and address of the firm or partnership, and the names of the individual members thereof, and their places of residence were recorded on said original certificate, and I (we) do hereby promise and pledge { {JJ^i^g } to forward the above-described certificate executed by the owners aa stated and dated __________________ ..... ._, Ifll , to the Commissioner of Internal Revenue, at Washington, D. C., not later than the 20th day of nert month, in accordance with Treasury BegulatioM. Signature of collecting agent, . Date, ............................ -. _______ ,191 Address, ___________ ........ _... 66 FORM OF CERTIFICATE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (The owner' certificate, of which the foUowtaj certificate la Ihe counterpart, and bean the same number as this certlflcte. will be nerU bj Ux> e t direct to the Commissioner of Internal Reve : Washington, as prescribed by regulations.) I ( we ) dp solemnly declare that the owner of $. bonds of the .... .................................... , .......... . from which were detached the accompanying interest ...... (N~ame"of debtor organization. ) coupons due -> 191, amounting to $ ................ , has filed with me (us) a duly executed (Matorltj.) certificate filled up in accordance with Treasury Regulations of October 25, 1913, Form No. 10M, which certificate has been indorsed by me (us) as follows: "Owner's certificate No ................. , .................................................................. ... (Name of collecting agency.) ___ ............................. __ ....... , 191...," and that the owner in said certificate declares that, being a nonresident foreigner, said interest is exempt from the income tax imposed on such interest by the United States Government under the law enacted October 3, 1913, and that no citizen of the United States, wherever residing, or foreigner residing in the United States, or of its possessions, has any interest in said bonds, coupons, or interest; and I (we) do hereby promise and pledge to forward the above-described certificate executed by the owners as stated and dated .............................. : ......... , 191..., to the Commissioner of Internal Revenue, at Washington, D. C., not later than the 20th day of next month, in accordance with Treasury Regulations. Signature of collecting agent .......... . .............................................................. Date,.... Address, FORM OF CERTIFICATE TO BE FILED BT PERSONS, FIRMS, OR ORGANIZATIONS REQUIRED TO WITHHOLD AND PAY SAID TAX OTHER THAN THE DEBTOR AT THE SOURCE. To _ i Collector of Internal Revenue, (N.iue of collector of internal refenue.) ((Jivevddren and designate district.) I _ t _ of the '(KameO "" (bfncia"ftitie,"if au"yV)~ (Person, flrm, or organisation.) (Capacity In whith acting. ) of .................................................... _______ ......................... , do solemnly declare that I (we) received e*.) - ....... $ ............... - ...... , same being Income derived , belonging to (Give name of penon to whom income and that. the tax thereon, amounting to 9- (Addre..) to which said person. Is subject, has been withheld at the source of said Income by (Name of penon withholding.) Date, , 191 (Signed) Address .. FORM FOE CLAIMING EXEMPTION AT THE SOURCE AS PROVIDED IN PARAGRAPH C, SECTION 2, OF THE FEDERAL INCOME-TAX LAW OF OCTOBER 3, 1913. e of withholding agent.) I;hereby serve you with notice that I single married and living with my wife husband, and now claim the benefit of the exemption of f ...., as allowed In paragraphs C and D of section 2 of the Federal Income-tax lw of October 3, 1913 (my total exemption under said paragraphs being *.... ). Signed: Date:. , 191 FORM OF CERTIFICATE TO BE FILED WITH WITHHOLDING AGENTS BY PARTNERSHIPS CLAIMING DEDUCTIONS. I, , a member of the firm or partnership of of conducting the business of , and residing (Give character of business conducted by partnership.) at , _ , do solemnly declare that the said 'partnership is the owner of (Give full address.) $ bonds of the denomination of f ., each, Nos of the (Give name of debtor.) known as bonds, from Which were detached the (Describe tho particular issue of bonds.), accompanying interest coupons due , 19 , amounting to $ , or upon -which there matured , 191 , $ of registered interest, or is the owner of i-hich there accrued , 191 , $_ of income. (Property or inr. We hereby claim a deduction of $ allowed on account of the actual expenses incurred in conducting said busi- ness, under regulations made in pursuance of section 2, act of October 3, 1913, and do solemnly declare that neither the part- nership nor its individual members has claimed deductions in excess of its total actual legitimate annual expenses of conducting the business of said partnership, and that no portion of the living or personal expenses of the partners is included in the deductions claimed. Date, .... 191 i of signing partner: For. sis Addr (Name of partnership.) 67 Form FORM OF CERTIFICATE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING lOlla AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (When owners^re firms or copartnerships in Ihe Uniled States claiming deduction for lai on account of operating eipensos incurred.) (The owner's certificate, of which the following certificate la the counterpart, and bears the same number as this certificate, will be sent by the collecting lit direct to the Commissioner of Internal Revenue, at Washington, as prescribed by regulations.) NO I (we) -.. - do s'olemnly declare that the owner of $ 1 1 bonds of the - - from which were detached the accompanying interest coupons in 7 I due.... ,191 , amounting to I has filed with me (us) a duly executed certificate filled up I * i (Maturity.) ! S i in accordance with Treasury Regulations of November 28, 1913, Form No. 1011, which certificate has been indorsed by me (us) as follows: "Owner's certificate No , _, ...,191 ," (Name of collecting agency.) (Date.) and the partnership did in said certificate claim a deduction of $ allowed on account of the actual expenses incurred (f r. 5 in conducting said business, under regulations made in pursuanceof eection 2, act of Octobers, 1913, and did solemnly declare that S neither the partnership nor its individual members has claimed deductions in excess of its total actual legitimate annual expenses ! 3 of conducting the business of said partnership, and that no portion of the living or personal ex]>enses of the partners is included in the- deductions claimed; and I (we) do hereby promise and pledge {jJurelves/ to ' orwarc ' tne above-described certificate executed by the owners as stated and dated _, 191 , to the Commissioner of Internal Revenue, at Washington, D. C., not later than the 20th day of next month, in accordance with Treasury Regulations. Signature of collecting agent, -. Dtte, , 191 Address, Form FORM OF CERTIFICATE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING 1014*. AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (Wnon owners are arms or copartnerships of foreign countries and claim Immunity from Income tax.) (The owner's certificate, of which the following certificate is the counterpart, and bears the same number as this certificate, will be sent by the tettn* agent direct to the Commissioner of Internal Revenue, at Washington, as prescribed by regulations.) !J No I (we) , do solemnly declare that the owner of $ bonds of (Name of collecting agent.) the _ , from which were detached the accompanying interest coupons (Name of dsbtor organiwtion ) : el due , 191 , amounting to $ , has fHed with me (us) a duly executed certificate filled up in accordance with Treasury Regulations of November 28, 1913, Form No. 1014, which certificate has been indorsed by me (us) - ,, .. as follows: "Owner's certificate No , , ,191 ," (Name of collecting agency.) (Date.) | ^ g and that said certificates declare that said owners are a copartnership and that all the members of the firm or partnership, except ' B 5 partners whose names are recorded thereon, are nonresident foreigners and as such are exempt from the income tax imposed on such income by the United States Government under the law enacted October 3, 1913, and that no citizen of the United States, wherever residing, or foreigner residing in the United States or any of its possessions, except those named al>ove, has any interest in said bonds, coupons, or interest; and I (we) do hereby promise and P'edg 6 { "ujle'lves } * f rwar d the above-described certifi- cate executed by the owners as stated and dated , 191 , to the Commissioner of Internal Revenue, at Washington, D. C., not later than the 20th day of next month, in accordance with Treasury Regulations. Signature of collecting agent: Date, , 191 ' Address: _ Form FORM OF CERTIFICATE TO BE FILED WITH DEBTOR OR WITHHOLDING AGENTS BY FIDUCIARIES. 1015. (The following form of certificate should be filed with the debtor, or Ms paying agents, at the time of Ihe payment to the fiduciary, or his representative, of all coupons. Interest orders, rents, and all other kinds of Income whatsoever upon which Ihe tax or Income is required to be withheld at the source.) I (we) do solemnly declare that I (we), am (are) the duly authorized .'... for the beneficiaries of the estate or trust of (Indicate In what capacity acting.) , which estate or trust is entitled to the income from $ g K (Describe the Mtate or trout. ) bonds of the denominations of f each, Nos. In SM I of the , kr i <J 1 _ bonds, from which were detached (Describe the particular iue of bondi.) the accompanying coupons, due , 191 , amounting to $ , or upon which there has matured , 191 , $ of registered interest, or which estate or trust is entitled to other ! 3 income from property or investments upon which there accrued , 191 , $ of income. Acting for and in the capacity as stated herein, I (we) hereby assume the duty and responsibility, imposed upon withhold- ing agents under the law, of withholding and paying the income tax due, for which 1 (we) may be liable, and acting in said fiduciary capacity as stated herein, I (we) do hereby claim exemption from having the normal tax withheld from said income. I. Date, , 191 Address,... Form FORM QF CERTIFICATE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (Wnen owners are fiduciaries.) (The owner's certificate, of which the following certificate Is Ihe counterpart, and bean the nine number as this certificate, win be sent by the collecting agent direct lo the Commissioner of Internal Revenue, at Washington, as prescribed by regulations.) M No _.. H W I (we) .... _, do solemnly declare that the owner of f _ bonds of fc (Name of collecting agent.) S 2 the .. from which were detached the accompanying interest coupons due .-. , g g A (Name of deotor organization.) (Maturity.) S 7 ^ 191 , amounting to $ , has filed with me (us) a duly executed certificate filled up in accordance with Treasury ^ 5 Regulations of November 28, 1913, Form No. 1015, which certificate has been indorsed by me (us) as follows: "Owner's certifi- fc h* cate No , 1 , I9l ," that said certificate is I* P | executed bya fiduciary, and that the'fiduciary, acti'ng'for and in the capacity as stated therein, has assumed the duty and reepon- g o sibility imposed \ipon withholding agents under the law. of withholding and paying the income tax due, for which he (it) may B * j be liable, and that acting in said fiduciary capacity as stated therein, he ( it) did claim exemption from having the normal tax with- < 3 a held from said income; and I (we) do hereby promise and pledge myself (ourselves) to forward the above-described certificate g 5 executed by the owners as stated and dated , I9l , to the Commissioner of Internal Revenue, at H w Washington, D. C., not later than the 20th day of next month, in accordance with Treasury Regulations. R Signature of collecting agent, 7 Date, i., I9l Address, ~,~. I, U C. 111 PKS & \ Form lOlGo. j| r" S S3*. CERTIFICATE TO BE FURNISHED BY FOREIGN ORGANIZATIONS NOT SUBJECT TO TAX ON INTEREST OR OTHER INCOME AT SOURCE. 1, _ ...., the . of the , (Give name.) (Give official ponition.) (Name of organization.) a of , located at , do (Character of organization.) (Country.) (Pot-offlce address.) solemnly declare that said is a foreign organization, not engaged in busir (Give i in the United States, and is the owner of $ (61".. mm. ol d $ of registered interest, or is the owner of bonds, from which were detached the accompanying coupons, due 191.., amounting to $ , or upon which there matured ., 191.., upon which there accrued ., 191.., $ of income, and that under the provisions of the income-tax law of October 3, 1913, said organization being a foreign organization, said interest or income ia exempt from the payment of taxes collectible at the source, which exemption is hereby claimed. Date - m - Name -TriK=.-sa=5 Arlrlrroa Of ,'K;roBSo " 7""" FORM OF CERTIFICATE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (Owners Ix-lng foreign organization, not subject to the Income tar, at the source.) (The < No I ('e) _ .do solemnly declare that the owner of $ ..... bonds of (Name of collecting agent.) the ..... , from which were detached the accompanying interest coupons due , 191 , amounting to $ ., has filed with me (us) a duly executed certificate filled up in accordance with Treasury Regulations of November 28, 1913, Form No. 1016, which certificate has been indorsed by me (us) as follows: "Owner's certificate No , ..., .., 191 ," (Name of collecting agency.) (Date.) and that under the provisions of the income-tax law of October 3, 1913, the said organization in said certificate declares that it is a foreign organization, and that the said interest or income is exempt from the payment of taxes collectible at the source, which exemption it claims, and I (we) do hereby promise and 'pledge { {JtJrwYves } to forward the above-described certificate executed by the owners as stated and dated ,..., 191 , to the Commissioner of Internal Revenue, at Washington, D. C., not later than the 201 h day of next month, in accordance with Treasury Regulations. Signature of collecting agent, Date , 191 Address, .... Form 1018. CERTIFICATE TO BE FURMSHED BY FOREIGN ORGANIZATIONS ENGAGED IN BUSINESS IN THE UNITED STATES. TRKASVHY DKPA15TMKNT, INTERNAL REVENUE-INCOM E TAX 2 7:}-ll fvl. 60,000 F. C., I'"*-.- Kl-13. (Character of orpaoi7tit!on.) (Country.) solemnly declare that said (Post-office addn*a.) (Give name of organization.) the United States, and is the owner of $ bonds of the denomination of $ each, Nos of the (Give name of del bon 0,.) tie, from which were detached the accompanying coupons, upon which there matured , 191.., (Describe particular issue of bonds.) was accrued , 191.., $ of i (Property or investment*.) ncome. a is subject to the normal tax of 1 per centum pr annum upon the amount >tes, for which tax 'it will make its return in due conrw, bnt It hereby claim. Coder the prorisions of the Income-tax law of October 3. 1913, the said organizatlo of net income accruing from business transacted and capital invested vrithln the United 3t exemption from having the said normal tax of 1 per centum of said income withheld at th Date , 191 Name Address Of (OfflcWpodtion.) (Post office.) (Name of organization.) Form 1018a. Hi FORM OF CERTIFICATE TO BE ATTACHED TO INTEREST COUPONS IN CASES WHERE THE COLLECTING AGENT'S CERTIFICATE IS SUBSTITUTED FOR THE CERTIFICATE OF THE OWNERS. (Owners t>elng foreign organizations engaged In ^business In the United states and subject to tax.) collecting agent direct loThe'Commi'ssione'r o'f InternaT'ke'venue. at WaTbLVo^as "prescribed by rteulatio. ' " No. .... I (we) do solemnly declare that the owner of $ bonds of (Name of collecting agent.) the , from which were detached the accompanying interest coupons due , , 191 , amounting to 5 , has filed with me (us) a duly executed certificate (Maturity.) filled up in accordance with Treasury Regulations of December 5, 1913, Form No. 1018, which certificate has been indorsed by me (us) as follows: "Owner's certificate No , , , 191 ," (Name of collecting agency.) (Date.) and that under the regulations made in pursuance of section 2, act of October 3, 1913, said organization is subject to the normal tax of. 1 per centum per annum upon the amount of net income accruing from business transacted and capital invested within the United States, and did therein claim exemption from having the said tax withheld at the source from said income, and I (we) do hereby promise and pledge | J^elves} to ' orwar d tne above-described certificate, executed by the owners as stated, and dated _ 191 , to the Commissioner of Internal Revenue at Washington, D. C., not later than the 20tb day of next month, in accordance with Treasury Regulations. Signature of collecting agent, Date, .... , 191 Address, .... Konn of Certificate to be Filed with Debtor or Withholding Agents by Fiduciaries when Not Claiming Any Exemption, as an Alternative to the Filing of Form No. 1015 in Which Exemption is Claimed. (The foDowIn* form of certificate may be filed with the debtor, or It. paying af enU. at the time of the payment to the (IdoHary. or hi* rapreacnlMfre of all coupons. Interest orders, renta. and all other kind* of laconic whatsoever upon which the tax on income l required to be withheld at the Morce u an I (we) do solemnly declare that I (we), am (are) the duly authorized (Indicate In what capacity acting.) _ ........................ , which estate or trust is entitled to the income from f _____ ........ _____ bonds of the denominations of $ ____________________ each, New ......... _ ,.._... , known as ,, - - bonds, from which were detached the accompanying coupons, due , 191..., amounting to $ , or upon which there has matured , 191..., $ of registered interest, or which estate or trnst ia entitled to other income from property or investments upon which there accrued , 191. _., { of income. Acting for and in the capacity herein stated, I hereby declare that I (we) do not now claim any exemption from having the normal tax of 1 per cent withheld from eaid income by the debtor at the source. Address, (Capacity ID wbich acting.) Form lOOS-aVLlBO.OOO-r. 0., NOT S-l: UNITED STATES INTERNAL REVENUE FORM OF RETURN FOR MAKING APPLICATION FOR DEDUCTIONS, To I hereby solemnly declare that the following is a true and correct return of my gains, jjrofits, and income from all othf sources for the calendar year ended December 31, 191 (for the year 1913 the period to be covered is only for ten months, from March 1 to December 31), and a true and correct return of deductions asked for under paragraph B of section 2 of the act of October 3, 1913, and I hereby claim deductions as shown below. Amount of gains, profits, interest, rents, royalties, profits from copartnerships, and income from all ,other sc urces $ DEDUCTIONS 1 The amount of necessary expenses actually paid in carryinf on business, except business expenses of partnerships, and not including personal, living, or family expenses $ 2. All interest paid within the year on personal indebtedness of taxpayer 3. All national, State, county, school, and municipal taxes paid within the year (not including those assessed against local benefits) 4. Losses actually sustained during the year incurred in trade or arising from fires, 5. Debts due which nave been actually ascertained io be worthless and charged off within the yeai 6. Amount representing a reasonable allowance for the exhaustion, wear, and tear of property arising out of its use or employment in the business, not to exceed in the case of mines 5 per cent of the gross value of the output for the year for which the computation is made, but not including the expense of restoring property or making good the exhaustion thereof, for which an allowance is or 7. The amount received as dividends upon the stock or from the net earnings of any corporation, joint-stock company, association, or insurance company which is taxable upon its net income 8. The amount of income, the tax upon which has been paid or withheld for pay- Total deductions $ Date: (Signed) Address . NOTE. Honey or other things of value, disposed of by gift, donation, or endowment, shall not be deducted or be made the basis. far deduction from the income of persons or corporations in their tax returns tinder the income-tax law. c S-TOT 70 II If FUifJHI If CClilCTQg. INCOME TAX. TO IE Fttiu ii it nrcnuL KIHK KIIUB. /"//* /to. THE RENAL.TV FOR FAILURE TO HAVE THIS RETURN IN THE HANDS OF THE COLLECTOR OF INTERNAL REVENUE ON OR KFORC Pogt MARCH I IS S20 JO $1,000. - ( IMCTHUCTION* OH. PAO 4.) UNITED STATES INTERNAL REVENUE i; * ftf _- Ling RETURN OF ANNUAL NET INCOME OF INDIVIDUALS. (A. prOTldod by Act of CoDgWM. .pproyrf October 3. W13.) RETURN OF NET INCOME RECEIVED OR ACCRUED DURING THE YEAR ENDED DECEMBER 31, 191. (FOR THE' YEAR II3. FROM MARCH I. TO DECEMBER SI J - Filed by (or for) 1 of , (Full .mm. of (QdKldul.) (BUM .(Hi Xo ) it Hie City, Town, or Post Office of ,..........:. "State of (fill In pag. 1 .nd 3 btoi ouAlng entrlt. b.low.) 1. GBoes INCOME (see page 2, line 12) -^ $. 2. GENERAL DEDUCTIONS (see page 3, line 7) - _$_. t Deductions and exemptions allowed in computing income subject to the normal tax of I per cent. 4. Dirtdenda and net earnings received or accrued, of corpora- tions, etc., subject to like tax. (See page 2, line 11) t- 6. Amount of income on which the normal tax has been deducted and withheld at the source. (See page 2, line 9, column A.) 6 Specific exemption of $3,000 or $4,000, as the case may be. (See Instructions 3 and 19) Total deductions and exemptions. (Ttems 4, 5, and 6) .1 . T. TAXABLB iMOOHBon which the norinai tax of 1 per cent ia to be calculated. (See Instruction 3). _$. . When the net Income shown above on line 3 exceeds $20,000, the additional tax thereon must be calculated as per schedule belowi IHOOME. TAX. 1 per cent on amount over $20,000 and not exceeding $50,000 $ _ f. 2 " " 50,000 " " 75,000. 3 " " 75,000 " " 100,000. 4 " " 100,000 " '- 250,000. 5 " " 250,000 C * 600,000. Total additional or super tax $. Total normal tax (1 per cent of amount entered on line 7) $ .. . Total tax liability $. 71 This statement must show from all sources during the year specified on page 1. GROSS INCOME. the. proper tpaces the -entire amount of gains, profits, and income received ly or accrued to the indi, DESCRIPTION OF INCOME. A. Amount of income on wlikli lax bun t*<:u dedocted and withheld at tbe Kmrve. Amoiuit of income on which tax hai nor benuiedacted >nd withheld at thc~soorv. 1. Total amount derivedfrom salaries, wages, or compensation for personal service of whatever kind and in whatever form paid- 2. Total amount derived from professions, vocations, businesses, trade, commeroe,or sales or dealings m property, whether real or personal, growing out of the ownership or use of or interest $ | 3. Total amount derived from rents and from interest on notes, mortgages, and securities (other than reported on lines 5 4. Total amount of gains and profits derived from partnership business, w hether the same be divided and distributed or not. 6. Total amount of fixed and determinate annual gains, profits,, and income derived from interest npon bonds and mort- gages or deeds of trust, or other similar obligations of corporations, joint-stock companies or associations, and insurance companies, whether payable annually or at shorter _.._ 6. Total amount of income derived from coupons, checks, or bills of exchange for or in payment of interest upon bonds issued in foreign countries and lipon foreign mortg<i/jes or like obliga- tions (not payable in the United States), and also from cou- pons, checks,' or bills of exchange for or in payment of any dividends upon the stock or interest upon the obligations of foreign corporations, associations, and insurance companies 8. Total amount of income derived from any source whatever, irot specified or entered elsewhere on this page. 9. TOTALS., $ $. NOTE.-Enl.-r total of Column A on line 5 of first p.go. 10. AGGREGATE TOTALS OF COLUMNS A AND B - $ 11. Total amount of income derived from dividends on the stock or from the net earnings of corpo- rations, joint-stock companies, associations, or insurance companies subject t6 like tax $ (To be enter.-.! on line i of first page.) 1-. TOTAL "Gross Income" (to be entered on line 1 of first page) 1 72 GENERAL. DEDUCTIONS. 1. The amount of necessary expenses actually paid in carrying on business, but not including business expenses of partnership?, and not including personal, living, or family expenses $- 2. All interest paid within the year on personal indebtedness of taxpayer... 3. All national, State, county, school, and municipal taxes paid within the year (not including thow assessed against local benefits) 4. Losses actually sustained during the' year incurred in trade or arising from firee, storms, or shipwreck, and not eonipeneated for by insurance or otherwise . .. 8. Debts duo which have been actually ascertained to be worthless and which have been charged off within the year 9. Amount representing a reasonable allowance for the exhaustion, wear, and tear of property arising out of its use or employment in the business, not to exceed, in the case of mines, 5 per cent of the gross value at the mine of the output for the year for which the computation is made, but no deduction shall be made for any amount of expense of restoring property or making good the exhaustion thereof, for which an allowance is or has been made .' 7. Total "GENEBAL DEDUCTIONS" (to be entered on line 2 of first page) ... AFFIDAVIT TO BE EXECUTED BY INDIVIDUAL MAKING HIS OWN RETURN. I solemnly swear (or affirm) that the foregoing return, to the best of my knowledge and belief, contains a true and complete statement of all gains, profits, and income received by or accrued to me during the year for which the return is made, and that I am entitled to all the deductions and exemptions entered or claimed therein, under the Federal Income-tax Law of October 3, 1913. Sworn to and subscribed before me this .^.. day of , 191 AFFIDAVIT TO BE EXECUTED BY DULY AUTHORIZED AGENT MAKING RETURN FOR INDIVIDUAL, I solemnly, swear (or affirm) that I have sufficient knowledge of the affairs and property of 'to enable me to make a full and complete return thereof, and that the foregoing return, to the best of my knowledge and belief, contains a true and complete statement of all gains, profits, and income received by or accrued to said individual during the year for which .the return is made, and that the said individual is entitled, under the Federal Income-tax Law of October 3, 1913, to all the deductions and exemptions entered or claimed therein. Sworn to and subscribed before me this J _ . day of ;.., 191 ADDRESS IN FULL. (Official" cp*cit7.) k "" '2-7387 [SEE INSTRUCTIONS ON BACK OF THIS PAGE.) 73 INSTRUCTIONS FOR 1040 Annual Return by Individuals (1040) 1. This return shall be made by every citizen of the United States, whether residing at home or abroad, and by every person residing in the United States, though not a citizen thereof, having a net income of $3,000 or over for the taxable year, and also by every nonresident alien deriving in- come from property owned and business, trade, or profession carried on in the United States by him. 2. When an individual by reason of minority, sickness or other disability, or absence from the United States, is unable to make his own return, it may be made for him by his duly authorised representative. 3. The normal tax of 1 per cent shall be assessed on the total net income less the specific exemption of $3,000 or $4,000 as the case may be. (For the year 1913, the specific exemption allowable is $2,500 or $3,333.33, as the case may be.) If, however, the normal tax has been deducted and withheld on any part of the income at the source, or if any part of the income is re- ceived as dividends upon the stock or from the net earnings of any corpora- tion, etc., which is taxable upon its net income, such income shall be deducted from the individual's total net income for the purpose of calculating the amount of income on which the individual is liable for the normal tax of 1 per cent by virtue of this return. (See page 1, line 7.) 4. The additional or super tax shall be calculated as stated on page 1. 5. This return shall be filed with the Collector of Internal Revenue for the district in which the individual resides if he has no other place of business, otherwise in the district in which he has his principal place of business; or in case the person resides in a foreign country, then with the collector for the district in which his principal business is carried on in the United States. 6. This return must be filed on or before the first day of March succeed- ing the close of the calendar year for which return is made. 7. The penalty for failure to file the return within the lime specified by law is $20 to $1,000. In case of refusal or neglect to render the return within the required time (except in cases of sickness or absence), 50 per cent shall be added to amount of tax assessed. In case of false or fraudulent return, 100 per cent shall be added to such tax, and any person required by law to make, render, sign, or verify any return who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this section to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution. 8. When the return is not filed within the required time by reason of sick- ness or absence of the individual, an extension of time, not exceeding 30 days from March 1, within which to file such return, may be granted by the collector, provided an application therefor is made by the individual within the period for which such extension is desired. 9. This return properly filled out must be made under oath or affirmation. Affidavits may be made before any officer authorised by law to administer oaths. If before a justice of the peace or magistrate, not using a seal, a certificate of the clerk of the court as to the authority of such officer to ad- minister oaths should be attached to the return. 10. Expense for medical attendance, store accounts, family supplies, wages of domestic servants, cost of board, room, or house rent for family or personal use, are not expenses that can be deducted from gross income. In case an individual owns his own residence he can not deduct the esti- mated value of his rent, neither shall he be required to include such esti- mated rental of his home as income. 11. The farmer, in computing the net income from his farm for his annual return, shall include all moneys received for produce and animals sold, and for the wool and hides of animals slaughtered, provided such wool and hides are sold, and he shall deduct therefrom the sums actually paid as purchase money for the animals sold or slaughtered during the year. 74 Instructions for 1040 continued When animals were raised by the owner and are sold or slaughtered he shall not deduct their value as expenses or loss. He may deduct the amount of money actually paid as expense for producing any farm products, live stock, etc. In deducting expenses for repairs on farm property the amount deducted must not exceed the amount actually expended for such repairs during the year for which the return is made. (See page 3, item 6.) The cost of replacing tools or machinery is a deductible expense to the extent that the cost of the new articles does not exceed the value of the old. 12. In calculating losses, only such losses as shall have been actually sustained and the amount of which has been definitely ascertained during the year covered by the return can be deducted. 13. Persons receiving fees or emoluments for professional or other services, as in the case of physicians or lawyers, should include all actual receipts for services .rendered in the year for which return is made, together with all unpaid accounts, charges for services, or contingent income due for that year, if good and collectible. 14. Debts which were contracted during the year for which return is made, but found in said year to be worthless, may be deducted from gross income for said year, but such debts can not be regarded as worthless until after legal proceedings to recover the same have proved fruitless, or it clearly appears that the debtor is insolvent. If debts contracted prior to the year for which return is made were included as income in return for year in which said debts were contracted, and such debts shall subsequently prove to be worthless, they may be deducted under the head of losses in the return for the year in which such debts were charged off as worthless. 15. Amounts due or accrued to the individual members of a partnership from the net earnings of the partnership, whether apportioned and dis- tributed or not, shall be included in the annual return of the individual. 16. United States pensions shall be included as income. 17. Estimated advance in value of real estate is not required to be- reported as income, unless the increased value is taken up on the books of the individual as an increase of assets. 18. Costs of suits and other legal proceedings arising from ordinary business may be treated as an expense of such business, and may be deducted from gross income for the year in which such costs were paid. 19. An unmarried individual or a married individual not living with wife or husband shall be allowed an exemption of $3,000. When husband and wife live together they shall be allowed jointly a total exemption of only $4,000 on their aggregate income. They may make a joint return, both subscribing thereto, or if they have separate incomes, they may make sepa- rate returns; but in no case shall they jointly claim more than $4,000 exemp- tion on their aggregate income. 20. In computing net income there shall be excluded the compensation of all officers and employees of a State or any political subdivision thereof,, except when such compensation is paid by the United States Government. 75 10 BE RUEUM BY COLLECTOR. (List No District of Date received Form 1041. INCOME TAX. T8 M RUED BY BIEfflAl HYEIfllE BUffJU. File Ho Assessment List ~ THE HANDS or im COLLECTOR or INTERNAL REVENUE ON OR BEFORE Page Littt MARCH I IS $20 TO $1,000. (SEE INSTRUCTIONS ON PACK 4.) UNITED STATES INTERNAL REVENUE. RETURN OF. ANNUAL INCOME BY FIDUCIARIES. (Ai prorldsd by Act of Congnat approved October 3, 1913.) RETURN OF INCOME RECEIVED OR ACCRUED DURING THE YEAR ENDED DECEMBER 31. 19!.... (FOR THE YEAR 1913. FROM MARCH I, TO DECEMBER 31.) Filed by ., acting in the capacity of, (State whethor trnatee, executor, etc.) , for the beneficiaries of the estate or trust of- (Fill In pag<M 2 and 3 before I 5 entriw on this page.) 1. Gfiosa INCOME (ace page 2, 11] 2, TOTAL Drotjonous (see page 3. Amount of income paid or pi been deducted and withfif 10 11) $ 3, line 9) $ lyabto to beneficiaries on which the normal tax of 1 per cent; has Id as listed below ^ $ KamMoftHioeaciartM. Addreow. Amonnt of Income Amount of exemp- tion claimed. At nount of Income on which fiduciary la liable for tax. "^^ held. *.. $ j $ ' ' - - o 8-73M TOTALS H $ $ $... 76 GROSS INCOME. Thi;: statement must show in the proper spaces the entire amount of gains, profits, and income coming Mo the custody or control and management of the fiduciary, for the benefit of the beneficiaries of the trust or estate, during the year specified on page 1. DESCRIPTION OF INCOME. A. B. deducted and withheld at the wurco. been deducted and withheld at the source. 1. Total amount derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid. 2. Total amount derived from professions, vocations, businesses, 'trade, commerce, or salesor dealings in property, whether real or personal, growing out of theownership or use of or interest $ $ 3. Total amount derived from rents and from interest ,on notes, mortgages, and securities (other than reported on lines 5 4. Total amount of gains and profits derived from partnership business, whether the same be divided and distributed ornot- 5. Total amount of fixed and determinable annual gains, profits, and income derived from interest upon bonds and mort- gages or deeds of trust, or other similar obligations of corporations, joint-stock companies or associations, and insurance co.mpanies, whether payable annually or at shorter 6. Total amount of income derived from coupons, checks, or bills of exchange for or in payment of interest upon bonds issued in foreign countriet and upon foreign mortgaget or like obliga- tions (not payable in the United States), and also from cou- pons, checks, or bills of exchange for or in payment of any dividends upon the stock or interest upon the obligations of foreign corporations, associations, and insurance companies 7. Total amount of income derived from any source whatever, not specified or entered elsewhere on this page $ NOTE. Enter total of Column A on line 8 of Ih 9. AOOHEOATB TOTALS OF COLUMNS A AMI 10. Total amount of income derived from dividends on the stock o rations, joint-stock companies, associations, or insurance com (To be entered on line 7 of third p.e.) 11. AGGREGATE TOTAL of "Gross Income" (to be entered on line 1 c I T374 rd 'page. ).B f from the paniea su of first p net earnings of corpo- )ject to like tax $ $ 77 DEDUCTIONS. 1. The amount of necessary expenses ^tually paid in carrying on business, but not including business expenses of partnerships, and not including personal, living, or family expenses....... $.. 2. All interest paid within the year on personal indebtedness of taxpayer 3. All United States, State, county, school, and municipal taxes paid within the year (not including those assessed against local benefits) 4. Losses actually sustained during the year incurred in trade or arising from fires, storms, or shipwreck, and not compensated for Dy insurance or otherwise -, - 5. Debts due which have beeji actually ascertained to be worthless and which have been charged off within the year ... - 6. Amount representing a reasonable allowance for the exhaustion, wear, and tear of property arising out of its use or employment in the business, not to exceed, in the case of mines, 5 per cent of the gross value at the mine of the output for the year for which the computation is made, but no deduction- shall be made for any amount of expense of restoring property or making good the exhaustion thereof, for which an allowance is or baa been made 7. Total amount of income derived from dividends on the stock or from the net earnings of corpo- rations, joint-stock companies, associations, or insurance companies subject to like tax (same as entry on line 10, page 2) . 8. Amount of income on which the normal tax of 1 per cent has been deducted and withheld at the source (see page 2, line 8, column A) fl. TOTAL DEDUCTIONS (to be entered on line 2 of first page) . AFFIDAVIT TO BE EXECUTED WHERE FIDUCIARY IS AN INDIVIDUAL: I solemnly-swear (or affirm) that I am the . for the beneficiaries of the estate or (State whether trustee, executor, etc.) trust of _ _ -~ ; that the foregoing return, to the best of niy knowledge and belief, contains a true and complete statement of all gains, profits, and income coming into my custody or control and management during the year for which the return is made; that sain beneficiaries are entitled, under the Federal Income-tax Law of October 3, 1913, to all the deductions entered or claimed therein; that all certificates claiming personal exemption, presented by the beneficiaries, are herewith inclosed; and there is contained therein a true and complete list of the names and addresses of all bene- ficiaries .to whom any part of .the amount stated oh line 3 of the first page thereof has been paid or is payable. Sworn to and subscribed before me this _ - (Signature of fiduciary.) / day of ..,; , 191 NO AFFIDAVIT TO BE EXECUTED WHERE FIDUCIARY IS AN ORGANIZATION. I solemnly swear (or affirm) thafl am the of the (State official portion.) (State name o fiduciary organisation.) of which organization is the duly authorized or appointed < Addre. in-luU.) (State whether trurtee, executor, ett.) for the beneficiaries of the estate or trust of , ; that I am duly authorized to act for said fiduciary; that the foregoing return, to the best of my knowledge and belief, contains a true and complete statement of all gains, profits, and income coming into the custody or control and management of said organization in its fiduciary capacity as stated during the -year for which the return is made; that sai8 beneficiaries are entitled under the Federal Income-tax Law of Octobers, 1913. to all the deductions entered or claimed therein; that all certificates claiming personal exemption, presented by the beneficiaries, are herewith inclosed? and there is contained therein a true and complete list of the names and addresses of all beneficiaries to whom any part of the amount stated on line 3 of the first page thereof has been paid or is payable. Sworn-to and subscribed before me this (Signature of officer reprwenting fiduciary.) day of ..., m ADDRESS -1 IN FULL SEAL OF OFFICER FFIDAVIT. , . - a_74 78 INSTRUCTIONS FOR 1041 Annual Return By Fiduciaries (1041) 1. Fiduciaries shall, when the annual interest of any beneficiary in income accruing and payable through said fiduciary is in excess of $3,000, make and render a return on this form of such income of the person or persons for whom they act, to the Collector of Internal Revenue of the district in which the fiduciary resides. The return shall be made as pro- vided herein, whether the income is distributed or not. See Treasury De- cision 1906. 2. The list return required from fiduciaries by regulations provided in Treasury Decision 1906, issued November 28, 1913, shall be made on page 1 of this return, giving thereon the name of each beneficiary of the trust or estate, the amount of income paid or accrued to each beneficiary, the amount of exemption claimed by each beneficiary, if any, the amount of income on which fiduciary is liable for tax, and the amount of income withheld for tax. 3. Where several individuals act jointly in a fiduciary capacity, when this return is required it may be made and executed by one of two or more. When the fiduciary is an organization it shall be signed and executed by the President, Secretary, or Treasurer of said organization. 4. This return shall be filed with the Collector of Internal Revenue for the district in which the fiduciary resides if he has no other place of busi- ness, otherwise in the district in which he has his principal place of business. 5. This return must be filed on or before the first day of March succeed- ing the close of the calendar year for which return is made. 6. The penalty for failure to file the return within the time specified by law is $20 to $1,000. In case of refusal or neglect to render the return within the required time (except in case of sickness or absence) 50 per cent shall be added to amount of tax assessed. In case of false or fraud- ulent return 100 per cent shall be added to such tax and a fine not exceed- ing $2,000 or imprisonment not exceeding one year or both may be im- posed. 7. When the return is not filed within the required time by reason of sickness or absence of the fiduciary, an extension of time not exceeding 30 days from March 1, within which to file such return may be granted by the Collector, provided an application therefor is made by the fiduciary within the period for which such extension is desired. 8. This return properly filled out must be made under oath or affirma- tion. Affidavits may be made before any officer authorized by law to admin- ister oaths. If before a justice of the peace or magistrate, not using a seal, a certificate of the clerk of the court as to the authority of such officer to administer oaths should be attached to the return. The following instructions, so far as applicable, are to be considered by the fiduciary in determining the amount of income coming into his custody or control and management which should be reported in this return on page 2, and the deductions which should be reported on page 3. 9. Expense for medical attendance, store accounts, family supplies, wages of domestic servants, cost of board, room, or house rent for family or per- sonal use, are not expenses that can be deducted from gross income. In case an individual owns his own residence he can not deduct the estimated value of his rent, neither shall he be required to include such estimated rental of his home as income. 10. The farmer, in computing the net income from his farm for his an- nual return, shall include all moneys received for produce and animals sold, and for the wool and hides of animals slaughtered, provided such wool and hides are sold, and he shall deduct therefrom the sums actually paid as pur- chase money for the animals sold or slaughtered during the year. When animals are raised by the owner and are sold or slaughtered, he shall not deduct their value as expenses or loss. He may deduct the amount of money actually paid as expense for producing any farm products, live stock, etc. In deducting expenses for repairs on farm property the amount 79 Instructions 1041 cont'd. deducted must not exceed the amount actually expended for such repairs during the year for which the return is made. (See page 3, item 6.) The cost of replacing tools or machinery is a deductible expense to the extent that the cost of the new articles does not exceed the value of the old. 11. In calculating losses, only such losses as shall have been actually sus- tained and the amount of which has been definitely ascertained during the year covered by the return can be deducted. 12. Persons receiving fees or emoluments for professional or other serv- ices, as in the case of physicians or lawyers, should include all actual receipts for services rendered in the year for which the return is made, together with all unpaid accounts, charges for services, or contingent income due for that year, if good and collectible. 13. Debts which were contracted during the year for which return is made, but found in said year to be worthless, may be deducted from gross income for said year, but such debts can not be regarded as worthless until after legal proceedings to cover the same have proved fruitless, or it clearly appears that the debtor is insolvent. If debts due to the taxpayer and con- tracted prior to the year for which return is made were included as income in return for year in which said debts were contracted, and such debts shall subsequently prove to be worthless, they may be deducted under the head of losses in the return for the year in which such debts were charged off as worthless. 14. Amounts due or accrued to the individual members of a partnership from the net earnings of the partnership, whether apportioned and distributed or not, shall be included in the annual return of the individual. 15. United States pensions shall be included as income. 16. Estimated advance in value of real estate is not required to be re- ported as income, unless the increased value is taken up on the books of the individual as an increase of assets. 17. Costs of suits and other legal proceedings arising from ordinary business may be treated as an expense of such business, and may be de- ducted from gross income for the year in which such costs were paid. 18. An unmarried individual or a married individual not living with wife or husband shall be allowed an exemption of $3,000. When husband and wife live together they shall be allowed jointly a total exemption of only $4,000 on their aggregate income. 19. In computing net income there should be excluded the compensation of all officers and employees of a State or any political subdivision thereof, except when such compensation is paid by the Unted States Government. TO BP FILLER tN B r COLLECTORS: - - ' TO BE FILLED IN IV INTERNAL REVENUE BUREAU. .LMHo Cla THE PKNAL.TV "" rOR FAILURE TO HAVE THIS RETURN IN THE HANDS Of THE JugccMrf List 101 , COLLECTOR Of INTERNAL REVENUE ON OR Kf ORE MARCH I MinaM 191 , >! UNITED STATES INTERNAL REVENUE/ RETURN OF ANNUAL NET INCOME. (Section 2, Act of Congress approved October 3, 1913. ) INSURANCE COMPANIES. RETURN OF NET INCOME Received during the calendar (fiscal) year ended _.. W1 the principal place of business of which is located at (Street and No.) City or Town of ... in the State of- (The "year" as hereinafter nsed means the calendar year or Sac*! year as the cage may be. ) 1. Total amount of paid-up capital stock outstanding, or, if no capital stock the capital employed in business, at close of the year above stated. (See Note 8 on reverse of this form) $ 2. Total amount of bonded and other indebtedness outstanding at close of year. (See Note 9) .. 3. GROSS INCOME (see Note A, and instructions, paragraphs 10, 18, 21, 22, 23, 25, and 36) DEDUCTIONS. 4. (a) Total amount of all the ordinary and necessary expenses of mainte- nance and operation of the business and properties of the corporation EXCLUSIVE OF INTEREST PAYMENTS. (See Note B) $ (6) All rentals or other payments required to be made as a condition to : the continued use or possession of the property. (See Note 12 on reverse of this form) |u___^ 5. (a) Total amount of losses sustained during the year not compensated by insurance or otherwise $ (6) Total amount of depreciation for the year. (See Note 13) I. (o) Total amount (other than dividends) paid within the year on policy and annuity contracts $ ((Z) Total amount of net addition required by law to be made within the year to reserve fund. (See ,Note 28) .... (e) Amounts of premiums repaid' to policy holders and interest paid thereon (applicable only to Mutual Marine Insurance companies)... $ 6. (a) Total amount of interest accrued and paid within the year on an amount of bonded or other indebtedness not exceed ing one-half of ttie sum of its interest, bearing indebtedness and its paid-up capital stock outstanding at the close of the year-*. fL-. (6) Total amount of interest received upon obligations of a State or political subdivision thereof and upon the obligations of the United States or its possessions ^ $ 7. (a) Total taxes paid during the year imposed under authority of the United States or any State or Territory thereof. (See Note 20) t... (6) Foreign taxes paic . TOTAL DEDUCTIONS - , t.. 8. Net income on which tax at 1 per centum is calculated ........................................... $. ____ ........... : ....... .., ____ ...... STATE OF ..................... _ .................. _____ ......... , County of _ ............ _ ..................... _______________ , TO WIT: . ......................... . ................................. _ ............. , President, and ...................................................... _ ............ _ ...... , Treasurer of the .................... ________ .......................... _,. ____ ...... a corporation, whose return of annual net income is set forth above, being severally duly sworn, each for himself, deposes and says that the foregoing report and the several items therein set forth are, to his best knowledge and belief and from such information as he has been able to obtain, true and correct in each and every particular; that the amount of gross income therein set forth is the full amount, of gross income, including interest upon obligations of a State or any political subdivision thereof, and upon the obligations of the United States or its possessions, without any deduction whatso- ever, received from all sources by the said corporation during the year stated, and that the net income therein set forth is the full femount upon which the tax at 1 per centum is to be calculated and assessed under the terms of the Federal Income Tax Law of October 3, 1913. SWORN AND SUBSCRIBED to befo day of ______ ............ _ .................. , 191 President. (Official capacity of insurance companies shall consist of the total of the gross revenues derived from the operation and ma the gross ng divide Mutual marine insurance companies may exclude from the gross premiums collected the "amounts paid for reinsurance," including the remainder income Mutual fire insurance companies may omit from gross income " any portion of the premium depoeita returned to their policy holdew." Life " . mpanies may also omit from their gross income "such portion of any actual premium received from any individual po'icyholder aa shall have been pai'l back or f redited to such policyholder, or treated as an abatement of premium of puch individual policynolder -within toe year." The "amount thna omitted shall include only such dividends or premiums returned or applied a& represent a portion of the actual premium received from any "individual policyholder. ' Nora B. The deductions authorized shall include all expense items under the various heads acknowledged^ liabilities by the corporation making the return and entored upon its books during the year. Amounts of iucome expends! in paying dividends on stock, preferred or common, or in making permanent improvements or bettormaotg, etc., or in any way transferred to capita! account are not proper deductions in ascertaining annual net income. Interest r. uid ou mort#ago indebtedness on real estate occupied or osed by a corporation maybe deducted unrior Item 4 if th* ir.!;-:oa \ paid us rental or franchise charge, payment of which w required to b rtai'e as a condition to the contour,' '1 use aud poaseesiou of the prupcuy. The amount so paid and included in Item 4 should best&ted separately utider Iteiii 4(6). (See Note 12 on reverie of this iorii.) t-1M> 81 INSTRUCTIONS FOR 1030 Annual Return by Insurance Companies (1030) SPECIAL NOTICE. This form, properly filled out and executed, must be in the hands of the Collector of Internal Revenue for the district in which is located the principal business office of the corporation making the return, on or before March 1, in case the return is based on the calendar year, or within 60 days after the expiration of the fiscal year in case the return is made on that basis. For failure to comply with this provision of the law, the amount of the assessment is increased 50 per cent and liability to a specific penalty not exceeding $10,000 is incurred. 1. Return of annual net income of corporations should be made on forms prescribed by the Treasury Department and should be filed with the Collector of Internal Revenue of the district in which such corporations have their principal places of business. 2. Before transmitting such returns to the collectors they must be verified by two officers of the corporation; that is, by two individuals, each holding a different official title, namely: the President, Vice President, or other prin- cipal officer and its Treasurer or Assistant Treasurer, or Chief Financial Officer. 3. The affidavit of verification must be made before a Notary Public or some other officer qualified to administer oaths, and the seal of the attesting officer, if such officer is required by law to have a seal, must be impressed on the return in the space reserved for that purpose. 4. Under the provisions of the law, the return must be true and accurate in every respect and must disclose all the income arising, accruing, or re- ceived from all sources during the year for which the return is made. 5. If the return is based upon the business transacted during the calen- dar year, it should be filed with the collector on or before the first day of March next succeeding such calendar year. If it is made on the basis of business transacted during a fiscal year, or consecutive twelve months period other than the calendar year, duly designated in accordance with the law and the regulations, the return must be filed with the collector on or before the last day of the 6o-day period next following the date designated as the close of the fiscal year. 6. In case of sickness or absence of an officer required to verify the return, the collector of the district is authorized to extend the time for filing such return not exceeding thirty days from the date when such re- turn is otherwise due. Application for such extension must be made prior to the date when the return is due. 7. The principal place of business as used in the act and in these regu- lations is held to mean the place or office in which the books of account and other data to be used in preparing the return of annual net income are ordinarily kept. 8. Item No. 1 of the schedule on the reverse side of this form should not include unissued or treasury stock, but only such stock as has actually been issued and for which payment has been received, or in case no stock is issued, there should be reported under this item the amount of capital actually employed in the business and property of the corporation. In cases wherein the capital stock is issued payable in installments or upon assessment, only so much of the capital as has been actually paid in upon such installments or assessments should be reported under this item. 9. Item N'o. 2 should include all interest-bearing indebtedness for the payment of which the corporation or its property is bound. In case of banking corporations and like financials institutions, deposits should not be reported as indebtedness under this head. 10. Item No. 3 of the return form (gross income) should include all income derived from the operations and management of the business and properties, together with all actual increases in value by appraisement, ad- justment, or otherwise in the value of the assets which have been taken up 82 Instructions for 1030 cont'd. on the books as income or credited to profit and loss during the year. In the case of a corporation organized, authorized, or existing under the laws of any foreign country, the gross income to be returned is the gross amount of its income for the year, resulting from business transacted and capital invested within the United States. 11. Item No. 4 (a) should include the total amount of all ordinary and necessary expenses paid out of earnings in the operation of the business and properties of the corporation, etc., exclusive of interest and other pay- ments to be listed under their respective heads on the return forms. 12. Item No. 4(fr) should include all rentals or other payments required to be made as a condition to the continued use or possession of the property; that is to say, in cases where interest on a mortgage on property occupied or used by the corporation is paid as a condition to its possession and use, thus becoming in the nature of a rental charge, such interest charge may be included in the deduction under this item. Mortgage indebtedness, as- sumed or unassumed, on property to which the corporation has taken or is taking title, or in which it has an equity, or in the acquirement of which the mortgage was considered a part of the purchase price, is held to be a debt of the corporation, and interest paid on such indebtedness will be deductible only under Item 6 of the return, and, together with other interest charges, must not exceed the limit fixed by the law for such interest deductions. 13. The amount claimed under Item No. 5(fc) for depreciation should be such an amount as measures the loss which the corporation actually sustains during the year in the value of buildings, machinery, and such other property as is subject to depreciation on account of wear and tear, exhaus- tion, or obsolescence. The amount taken credit for on this account in order to be allowable should be so entered on the books as to constitute and show as a liability against the assets of the corporation. The amount claimed under this item should not cover losses in the value of stocks and bonds. The change in the value of stocks and bonds is properly taken up in the inventories or annual adjustment in the value of such securities and the income or losses indicated by this adjustment! may be accounted for ac- cordingly. 14. Where depreciation of physical property is made good by renewals, replacements, repairs, etc., and the expense of such renewals, replacements, repairs, etc., is charged to the general expense account, no deduction for de- preciation can be 'made in the return of annual net income. Where a depre- ciation reserve is set up, all renewals and replacements must be charged to such reserve and the addition to this reserve each year must be a fair measure of the loss which the corporation sustains by reason of the de- preciation of its property. 15. The amount of interest deductible is the amount of interest accrued and paid within the year on its bonded or other indebtedness not exceeding one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of indebtedness not exceeding the amount of capital employed in the business at the close of the year; or in case of a corporation, joint stock company', or association, or insurance company organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded or other indebtedness not exceeding the proportion of its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of capital employed in the business at the close of the year, which the c/ross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States. All interest deductions must be claimed under Item 6 on the return form. 16. Dividends declared or paid are not deductible from gross income. 17. Dividends received upon the stock- of other corporations must be included in gross income and, under the provisions of the law, are not 83 Instructions for 1030 cont'd. deductible therefrom in the ascertainment of the net income on which the tax is computed. 18. Interest received upon the obligations of a State or any political subdivision thereof and upon the obligations of the United States or its possessions should be included in gross income, as well as all other interest due and accrued during the period for which return is made. 19. Accrued interest is considered to be interest due and payable, except in the cases of banking or other similar institutions which close their accounts on the basis of the interest earned. In all cases the accrued in- terest shall be reported on the basis on which the books are closed. 20. Taxes for which credit may be taken in the return are such tax*es, actually paid within the year, as are imposed by authority of the United States or of any State or Territory thereof, or by the government of any foreign country, not including taxes paid by a corporation, pursuant to guaranty, on its bonds or the income therefrom and not including those taxes assessed against local benefits. A reserve for taxes as such is not deductible, but only taxes actually paid. 21. Reinsurance (except, as provided by Note 23) and return premiums should not be included in either gross income or deductions ; as "net written premiums," agreeing with report to States, should be shown. 22. Mutual fire insurance companies which require their members to make premium deposits to provide for losses and expenses need not return as income any portion of the premium deposits returned to their policy- holders. 23. Mutual marinjs insurance companies shall include in their return of gross income the gross premiums collected and received by them, less re- insurance. (See Note 21). 24. Mutual marine insurance companies are entitled to deduct from gross income amounts repaid to policyholders on account of premiums previously paid by them and interest paid upon such amounts between the ascertain- ment thereof and the payment thereof. 25. Life insurance companies need not include as income in any year such portion of any actual premium received from any individual policy- holder as shall have been paid back or credited to such individual policy- holder, or treated as an abatement of premium of such individual policyholder within such year. 26. Mutual fire insurance companies must return as income such portions of premium deposits are are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves. 27. The deduction allowed under the act of August 5, 1909, of amounts received as dividends upon stock of other corporations subject to the tax therein imposed is not allowed under the act of October 3, 1913. 28. In the case of assessment insurance companies, whether domestic or foreign, the actual deposits of sums with the State or Territorial officers pursuant to law, as additions to guarantee or reserve funds shall be treated as being payments required by law to reserve funds. 84 TO ?E FILLED IN- BY COLLECTORS. Form 1031. TO BE FILLED IN BY INTERNAL REVE THE PMftLTV 1r failure to hove thle Return Us, NO MUSS In the h.nde ef the Collector ~> lnt.rn.1 Revenue en er before March .. .. District Of di, after the cloae of the. fiscal yea aura not exceeding SIO.OOO. Bait received Wl-\ (Soe I UNITED STATES INTERNAL REVENUE. RETURN OF ANNUAL NET INCOME. (S.ction 3, Act of Coujrw .pprov.d Ottob.r ^ 1913.) BANKS AND OTHER FINANCIAL INSTITUTIONS. RETURN OF NET INCOME received during the year ended , 191 a corporation, the' principal place of business of which is located af _______________________ .................... _____________ City or Town of '. ............................................... ________ ......... r.... , in the State of _______ , ____________________________ (The " year'-' as hereinafter used means the calendar year or fiscal year as the case may be.) 1. Total amount of paid-up capital stock outstanding at close of the year, or if no capital stock, the capital employed in the business at the close of the year .................................... $_ 3. Total amount of bonded and other indebtedness outstanding at close of year. 3. GB099 INCOME (see Note A, and instructions, paragraphs 10, \1, 18, wad 1) DEDUCTIONS. 4. (a) Total amount of all the ordinary and necessary expenses paid within the year in the maintenance and operation of the business and prop- erties of the corporation KXOUISIVB 01- IXTEBBST PAYMENTS. (See NoteB) ....... .. ............................... : ............ .... (6) All rentals or other payment* required to be made ae a -condition to the continued use or possession of the property. (See paragraph 19 on reverse of this form) ....................................... ... 5. (a) Total' amount of losses sustained during the. year not compensated by insurance or otherwise ......... ..... ....... , ........ . ............. (6) Total amount of depreciation for the, year. . ......................... $ ______ . (a) Total amount of interest, exclusive of interest on deposits, accrued and paid within the year on an amount of bonded or other indebtedness not exceeding one- half of the ram of its interest-bearing indebtedness and its paid-up capital Block out- standing at the close of the year; or if no capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed ia the busineM at the clone of the year ........... _ ...................... -- (6) Total amount of interest paid within the year on deposits ............ (o) Total amount of interest received upon obligations of a State or political subdivision thereof, and upon the obligations, of the United States or its possessions .............. ,., ....... .......7* ............ ...... $... 7. (a) Total taxes paid during the year imposed under authority of the United States or any State or Territory -thereof..,. ........... - ..... *_ (Z>) JToreign taxes paid ........... .......... _., ....... .. ..... . ....... . TOTAL DEDUCTIONS .................. .................... -. 8. Net income on which tax at 1 perca-iumis calculated ....................... f , TO WIT! _ __., , President, and - Treasurer, of the '. , ^a corporation, whose return of annual net income is set forth above, being severally duly sworn, each tor himself, deposes and says' that the foregoing report and- the several item* .therein set forth are, to his best knowledge and belief and from such information as he has been able to obtain, true and correct in each and every partic- ular; that the amount of gross income therein set forth is the full amount of gross income, without any deduction whatsoever, received from all sources by the said corporation during the year stated, and that the net income therein get forth is the full amount upon jrhich the tax at 1 per centum is to be calculated and assessed. SWOBN AND SUBSCRIBED to before me this _ day of , 191 President. Treasurer. mcome shall consist of the total revenues derived from the operation and , . . _ " her subject to this ta: or not, and interest received > its possessions, at shown by entries ucon its books during the year for which the return is made. Nora B. The deductions authorized shall include all expense items under the various heads acknowledged as liabilities by the corporation making the return and entered upon its booka during the yea*,, Amountsof income expended in paying dividends on stock, preferred or common, or rn inakiii permanent improvements or betterments, etc.. or io any way transferred to) capital account, should not be deducted in ascertaining annual net income. Interest paid on mortgage indebtadne;} on real estate occuliied or used by a corporation may be deducted under Item 4, if the interest is paid as a rental or franchise charge, payment ol which it required to be made as a condition to the continued use and possession of the property. The amount so paid and included in Item 4 should be stated sepautaly radar Item 4 (t). (See potagrtpli 12 on reverse of this fonn.) 2-Ktt .'_ 85 TO BE FILLED IN BY COLLECTORS. Form 1O32. TO BE FILLED IN BY INTERNAL REVENUE BUREAU ................... th hand* of tho Collector of Internal Revonuo ... .... on or bofor. March I, or within 6O d.ym after Assessment List ............... District of .............................. th close of the fiscal yoar. Is sum not ex- ceeding SIO.OOO. Date received ................ _ ................ , 191 <s ..... tr.oti... .. .t.r .11.0 Page .................. .... Line UNITED STATES INTERNAL REVENUE. RETURN OF ANNUAL NET INCOME. (Section 2, Act of Cengrm .pprovod Ociob>r 3, 1913. ) PUBLIC SERVICE: CORPORATIONS. RETURN OF NET INCOME received during the " ar year ended _ ... 191 (Mime of colpontlon, Joint Mock COB1J* the principal place of business of which is located at City or Town of - _ - -~~~ , in the State of... (The "year" as hereinafter need means the calendar year or fiscal year as the case may be.) tock, the 1. .Total amount of paid-up capital stock outstanding at close of the year, or if no capital s capital employed in the business at the close of the year 2. Total amount of bonded and other indebtedness outstanding at close of year 3. GE088 INCOME (see Note A, and instructions, paragraphs 10, 17, 18, and 19).. $... DEDUCTIONS. 4. (a) Total amount of altthe ordinary and necessary expenses paid within the year in the maintenance and operation of the business and properties of the corporation, EXCLUSIVE OP INTEREST PAYMENTS. (See Note B). t_ (6) All rentals or other payments required to be made as a condition to the continued use or possession of the property. (See paragraph 12 on reverse of this form) $ _ 5. (a) Total amount of losses sustained during the year not compensated by insurance or otherwise $ _ (6) Total amount of depreciation for the year. (See paragraphs 13 and 14). t 6. (a) Total amount of interest accrued and paid within the year on an mount of bonded or other indebtedness not exceeding one-half of the ram of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year I- (6) Total amount of interest received upon obligations of a State or political subdivision thereof, and upon the obligations of the United States or its possessions ^. 7. (a) Total taxes paid during the year, imposed under authority of the United States or any State or Territory thereof t , _ (&) Foreign taxes paid * TOTAL DEDUCTIONS , *. 8. Net income on which tax at 1 per centum is calculated . $.. STATE OP ._ , County of. , TO WIT: ,_,_._,.. :., President, and _ _ , Treasurer, of the ., a corporation, whose return of annual net income is set forth above, being severally duly sworn, each for himself, deposes and says that the foregoing report and the several items therein sot forth are, to his best knowledge and. belief and from such information as he has teen able to obtain, true aud correct in each and every particular; that the amount of gross income therein set forth is the full amount of gross income, without any deduction whatsoever, received from all sources by the said corporation during the year stated, aud that the net income therein set forth is the full amount upon which the tax at 1 per centum is to be calculated and assessed. SWORN AND SUBSCRIBED to before me this _ day of , 191 'President NOTE /L. Gross income shall consist of the total ravenues derived from the operation and management of its business and properties, together with all amounts of income from other sources, including dividends received on stock of other organizations, whether subject to this tax or not, and interest received upon obligation* of a State or political subdivision thereof, and upon the obligations of the United States or its possessions, as shown by entries upon its books during the year for which return is made. pense items under the various heads acknowledged as liabilities by the corporation making the return .. of? income expended in. paying dividends on stock, preferred or common, or in making permanent improvements or betterments, etc., or in any way transferred to cr.pital account, should not be deducted in ascertaining annual net income. Interest paid on mortgage indebtedness on real estate occupied or used by a -corporation may be deducted under Item 4, if the inttrest ia paid as rental or franchise charge, payment of which in required to be made as a condition to the continued use and possession of the property. The amount RO paid and included in Item 4 should be stated separately under Item 4 (&). (See parsjrsph 12 on reverse of this form.) c 6-iwo 86 TO BE FILLED IN BY COLLECTORS. Korm 1CW3. TO BE FILLED IN BY INTERNAL REVENUE BUREAU. i :../ u. /> THE PEHftLTY for fallur. t. ha*. tbl- Return -~-~- ! th b..d. of th. C.ll.otor of lat.rn.l A ,, gsmmt IS,, 101 . ... , . on or bofor. M.rok I. .r within a*""*'""- '" ''" J day* aft.r th. ! cf th. fi.o.l r..r, U UNITED STATES INTERNAL REVENUE. RETURN OF ANNUAL NET INCOME. (Section 2, Act of Congress approved October 3, 1913.J MANUFACTURING CORPORATIONS. RETURN OF NET INCOME received during to. year ended ..................................................... , 191 by ..................................... ._ ....... : ............... . ..... .,.'. ........................ : ............... . ............................... ...... ......................... (SMofcorjxUOT, Joint the principal place of business of -which is located at ............. : City or Town of. ......................... .-... .......... :. ............ . .................... , in the State of ............ ; (The "year" as hereinafter used means the calendar year or fiscal year aa tho case may be.) 1. Total amount of paid-up capital stock outstanding at close of the year, or if no capital stock, the capital employed in the business at the close of the year ........... .'.... ..,! ................. ... $. 2. Total amount of bonded and other indebtedness outstanding at close of year.., ...... . ...... -.. $.^ 3. QBOSS INCOME (see Note A, and instructions, paragraphs 10, 17, 18, 19, 22, and 83). DEDUCTION'S. 4. (a) Total amount of all the ordinary and necessary expenses paid within the year in the maintenance and operation of the Dusiness and prop- erties of the corporation EXCLUSIVE OP INTEREST PAYMENTS, (see Note B and paragraph 23) ^...... $. (6) All rentals or other payments required to be made as a condition to the continued use or possession of the property (see paragraph 12 on reverse of this form) '.. t 6. (a) Total amount of losses sustained during the year not compensated by insurance or otherwise ; $ (6) Total amount of depreciation for the year (see paragraphs 13 and 14) . $ 6. (a) Total amount of interest accrued and paid within the year on an amount of bonded or other indebtedness not exceeding one-half of the sum of its interest-bearing indebtedness and ito paid-up capital stock outstanding at the close of the year; or if no capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year .?. $ (6) Total amount of interest received upon the obligations of a State or political subdivision thereof, and npon the obligations of the United ... States or its possessions . $_ 7. (a) Total taxes paid duringtbe year, imposed tinder authority of. the United States or any State or Territory thereof ; ; IL. :.... (6) Foreign taxes paid . .. , . $ ToiAil DEDUCTIONS 8. Net income on which tax at 1 per centum is calculated. . . Nora. The above blank spaces for figures should show the amount of each respective item. If there is nothing -to return as to any item, the word "none" must be written in such blank spaces. ____^_______ STATE OF . , County of ,._ . , TO WIT: , =.:..., President, and __ . , Treasurer, of the ... _ ;...., a corporation, whose return of annual net. income is set forth above, being severally duly sworn, each for himself, deposes and says that the foregoing report and the several items therein set forth are, to his best knowledge and belief and from such information as he has been able to obtain, true and correct in each and every particular; that the amount of gross income therein set forth is the full amount of gross income, without any deduction whatsoever, received from all sources by tho said corporation during the year stated, and that the net income therein set forth is the fall amount npon /Which the tax at 1 per centum is to be calculated and assessed. SWORN AND SUBSCRIBED to before me this _ , 191 President. AQUAVIT. - - Treasurer. (OOctal ttpeft7.) NOTE A. Gross income in the case of a manufacturing corporation shall include the total receipts from all manufactured goods sold during the year, increa! or decreased accordingly u then is gain or loss ascertained through an accounting or inventory of the finished and unfinished product, raw material, etc., on ha at the close the year. To Jhe income thus ascertained there shoufd be added theincome received from any and all other sources, including dividends received stock of other organization* whether subject to this tax or not, and interest received on the obligations of a State or political subdivision thereof, and int on the obligations cf the United States or its possessions, the aggregate to be the gross i NOTS B. The deductions authorized shall include all expense items under the various heads acknowledged as liabilities by the corporation making the returg and entered on its books during the year. " Total amount of all ordinary and necessary expenses," etc., shall include expenditures for material, labor, salaries,; wages, fuel, and other expenses incident to the cosKf the finished product. Amounts ofinoom* apendtd tn paying diwdtnb on rtoci, preferred or common, or in making permanent improvements or betterments, etc., or in any way transferred to property account, lAouU not bt. fo&wted in atcataining At net intxmt upon which the tax u computed. Interest paid ss rental or in lim of rental is deductible under Item 4 (i) (Seo paragraph 12 on the reverse of this form.) 01-7351 87 TO BE FILLED IN BY COLLECTORS. Form 1O34. TO BE FILLED IN BY INTERNAL REVENUE BUREAU. list H, ' Clast T . -. .- .......... uismct oj ..... ------- , ----------------- -aj , , ft . r th . clos . of th . .., for< ,, ....... - ............... * ..... s-sssa^' UNITED STATES INTERNAL REVENUE. RETURN OF ANNUAL NET INCOME. (Section 2, Act of Congress approved October 3, 1913. ) MERCANTILE CORPORATIONS. (Corporations whoso principal business is baying and selling.) RETURN OF NET INCOME received during the. \ff ttr \ year ended ....... _____ ...... ______________ , .............. , 757 . oint .tockc.op, r ,,.il<,nO 'ihe principal place* of business of which is located at .................... _.!.!_... City or Town of . .-. , in the State of _ (The "year" as hereinafter used means the calendar year or fiscal year as the case may be.) 1. Total amount of paid-up capital stock outstanding at close of the year, or if no capital stock, the capital employed in the business at the close of the year '. _, $.. S. Total amount of bonded and other indebtedness, outstanding at close of year |_ . 3. GEOSS INCOME .(see Note A, and instructions, paragraphs 10, 17, 18, 19, and 21)..- ._.. $L_ DEDMCTIONS. , 4. (a) Total amount of all the ordinary and necessary expenses paid within the year in the maintenance and operation of the business and properties of the corporation EXCLUSIVE or INTEREST PAYMENTS tseeNoteB).... . _ (b) All rentals or other payments required to be made as a condition to* the continued use or_ possession of the property (see paragraph 12 on reverse of this form) _ $. _. 6. (a) Total amount of losses sustained during the year not compensated by insurance or otherwise................ _____ ........... ..... . ....... - $_.. (6) Total amount of depreciation for the year ount of interest accrued and pai of bonded and other indebtedness not exceeding one-half of the snm of its -bearing indebtedness and its paid-up capital Block outstanding at the close of r; or if no capital stock, the amount of interest paid within the year on an 6. (a) Total amount of interest accrued and paid within the year on an amount of bonded and other indebtedness not exceeding one-half of the sum of its Interest-bean mo&c^toaUiJ^&*tM^&atc^3riql&mt*fal*1* business at the close of the year .77:...'. .HI *- (6) Total amount of interest received upon obligations of a State or ' political subdivision thereof and upon the obligations of the United States or its possessions . IL. . 7. .(a) Total taxes paid duringthe year, imposed under authority of the United .States or any State or Territory thereof . ..:. *. (Z>) Foreign taxes paid ;., , ,..., . TOTAL DEDUCTIONS..^ 8.' Net income on which tax at 1 per centum is calculated. , . Note. The above blank spaces for figures should show the amount of each respective Item. If there Is nothing to return as to any item, the word "none" must be written in such blank .JpaceL STATE OP Cowntyof f TO WIT: , . , President, and . .Treasurer, of the : . ,, a corporation, whose return of annual net income is set forth aboVe, being severally duly sworn, each for himself, deposes and says that the foregoing report and the several items therein set forth are, to his best knowledge and belief and from such information as he has been able to obtain, true and correct in each and every particular; that 'the amount of gross income therein set forth is the full amount of gross income, without any deduction whatsoever, received from all sources by the said corporation during the year stated, and that the net income therein set forth is the full amount upon which the tax at 1 per centum is to be calculated and assessed SWOKM ASD SUBSCEIBKD to before me this , ,_ > day of . .., 191 President. consist of the total amount NOTTS A. The gross amount of income received during the year from all sources shall, in the case of a mercantile corporation, ascertained through inventory, or its equivalent, which shows, the difference between the price received for goods sold and the cost of goods purchased during the year, with an addition of a charge to the account of the sum of the inventory at beginning of the year and a credit to the account of the sum of the inventory at the end of the year. To this amount should be added all items of income received during the year from other sources, including dividends received on stock of other corporations, joint-stock companies, and associations, whether subject to this tax or not and intc thereof, and' upon the obligations of the United States Of its possessions. In determining this at lasses, which items shall be taken account of under the proper heading above as a deduction. NCTB B. The deductions authorized shall include all 'expense items under the various heads acknowledged as liabilities by the corporation making the return and entered on its books during the year. Amounts of income expended in paying dividend! on stock, preferred or common, or in making permanent improvements or betterments, etc., or in any way transferred to capital account, should not be deducted in ascertaining annual net income. Interest paid on mortgage indebtedness on real estate occupied or used by a corporation may be deducted in Item 4, if the interest is paid as a rental or franchise charge, payment of which is required to be made as a condition to the continued use and possession of the property: The amount so paid and included in Itn 4 should, Wever, be separately stated under Item 4 (6). (See paragraph .12 on re verw of this :Snn.) - TO BE FILLED IN BY COLLECTORS. Form. IO35. TO BE FILLED IN BY INTERNAL REVENUE BUREAU. li,tHa Class *~ THE PEMLTV for f.llure to he this Return In th. hentfaof the Coll.otor of Int.rn.l Revenue .,_, ;, w in, en or before March I. or within 6O deys after Assessment LIST , IVI District of the clo. of the fiscal year. Is a sum net * eoedlnc SIO.OCO. Date received , 191 s.. ia.tr.oti... . th.r .id..) Page Line UNITED STATES INTERNAL REVENUE. RETURN OF ANNUAL NET INCOME. (S.ction 2, Act of Cong rex >pprcvd Ootob.r 3, 1913.) MISCEILLANEIOUS CORPORATIONS. RETURN OF NET INCOME received during the \^"f" r \ year ended the principal place of business of which is located at : City or Town of _ 'in the Stale of _ (The "year" as hereinafter used means the calendar year or fiscal year ae the case may be.) 1. Total amount of paid-up capital stock outstanding at close of the year, or if no capital stock, the capital employed in the business at the close of the year.... _;... $. 2. Total amoun.t of bonded and other indebtedness outstanding at close of year $... 3. GROSS INCOME (see Note A,, and instructions, paragraphs 10, 17, 18, and 19).... DEDUCTIONS. 4. (o) Total amount of all the ordinary and necessary expenses paid within the year in the maintenance and operation of the business and properties of the corporation, EXCLUSIVE OF INTEREST PAYMENTS. (See Note B.) .... (6) All rentals or other payments required to be made as a condition to the continued use or possession of the property. (See paragraph 12 on reverse of this form) $._ 6. (a) Total amount of losses sustained during the year not compensated by insurance or otherwise $. (6) Total amount of depreciation for the year. -(See paragraphs 13 and 14). _ 6. (o) Total amount of interest accrued and paid within the year on an amount of bonded or other indebtedness not exceeding one-half of the earn of it* interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year $ . (6) Total amount of interest received upon obligations of a State or political subdivision thereof, and upon the obligations of the United States or its possessions $ _ 7 (o) Total taxes paid during the year imposed under authority of the United States or any State or Territory thereof $ (6) Foreign taxes paid .. _ $ , TOTAL DEDUCTIONS ... .. *. 8. Net income on which tax at 1 per centum is calculated - Nora. The above blank spaces for figures should show the amount of each respective item. If there is nothing to return a to any item, the word "none "must B% written m such blank spaces. STATE OP ................... ------ _ .......... ______________ , County of ______________________________________________ , TO WIT r ..................... _________________________________ ........ _________ , President, and ________________ _________________________ , Treasurer, of the -------- ........ _ ................................. _______ , a corporation, whos& return of annual net income is set forth above, being severally duly sworn, each for himself, deposes and says that the foregoing report and the several items therein set forth are, to his best knowledge and belief and from such information as he has been able to obtain, true and correct in each and every particular; that the amount of gross income therein set forth is the full amount of gross income, without any deduction whatsoever, received from net income therein set fprth is the full amount upon which e amount o gross income therein set forth is the full amount of gros all sources by the said corporation during the year stated, and that the the tax at 1 per centum is to be calculated and assessed. SWOBN AND SUBSCRIBED to before me this day of --------------------------- , 191 (Official capacity.) Nor* A. Gross income shall consist of the total of the gross revenues derived from the operation and management of its business and properties, together with all amounts of income from other sources, including dividends received on stock of other organizations, whether subject to this tax or not, and interest received upon obligations of a State or political subdivision, thereof, and upon the obligations of the United States or its poeaeseioiis, a* ihovn by entries upon its hooks during the year for which the return it toad*. , -Mora B. The deductions authorized 'shall include all expense items under the various heads acknowledged al liabilities by the corporation making the return and entered on its books during the year. Amounts of income expended in paying dividend! on <oci, preferred or common, or in making permanent improvements or betterment!, etc., or in any way transferred to capital account, are not proper deductions in ascertaining annvat net income. Interest paid on mortgage indebtedness on real eUta occupied of used by a corporation may be deducted in Item 4, il the interest is paid, as a rental or franchise charas, pavmentf which is re to ^e mads as a condition, to the continued u and possession of the property. The amount so paid tod included ia JtomTiLould be ,Uted separately Item,4(). (See paragraph 12 on riyerse of .this form.) INSTRUCTIONS FOR 1031 TO 1035 (INCLUSIVE) ANNUAL RETURN Banks and Other Financial Institutions (1031), Public Service Corporations (1032) Manufacturing Corporations (1033) Mercantile Corporations (1034) Miscellaneous Corporations (1035) SPECIAL NOTICE. This form, properly filled out and executed, must be in the hands of the Collector of Internal Revenue for the district in which is located the principal business office of the corporation making the return, on or before March 1, in case the return is based on the calendar year, or within 60 days after the expiration of the fiscal year in case the return is made on that basis. For failure to comply with this provision of the law, the amount of the assessment is increased 50 per cent and liability to a specific penalty not exceeding $10,000 is incurred. 1. This return of annual net income should be filed with the Collector .of Internal Revenue of the district in which the corporation has its principal place of business. 2. The principal place of business as used in the act and in these regula- tions is held to mean the place in which the books of account and other data to be used in preparing the return of annual net income are ordinarily kept. 3. Returns must be verified by two officers of the corporation; that is, by two individuals, namely, the president, vice-president, or other principal officer, and treasurer or assistant treasurer, or chief financial officer. 4. The affidavit of verification must be made before a notary public or some other officer qualified to administer oaths, and the seal of the attesting officer, if such officer is required by law to have a seal, must be impressed on the return in the space reserved for that purpose. 5. The return must be true and accurate in every respect and must dis- close all the income arising, accruing, or received from all sources during the year for which the return is made. 6. If the return is based upon the calendar year it should be filed with the collector on or before the first day of March next succeeding such cal- endar year. If it is made on the basis of business transacted during a fiscal year, duly designated in accordance with the law and the regulations, the return must be filed with the collector on or before the last day of the 6o-day period next following the date designated as the close of the fiscal year. 7. In case of sickness or absence of an officer required to verify the return, the collector of the district is authorized to extend the time for filing such return not exceeding 30 days from the date when such return is otherwise due. Application for such extension should be made prior to the date when the return is due, or within the thirty-day period for which such extension is desired and can be granted. 8. Item No. 1 of the schedule on the obverse of this form should not include unissued or treasury stock, but only such stock as has actually, been issued and for which payment has been received; or, in case no stock is issued, there should be reported under this item the amount of capital actually employed in the business and property of the corporation. In cases wherein the capital stock is issued payable in installments or upon assess- ment, only so much of the capital as has been actually paid in upon such installments or assessments should be reported under this item. 9. Item No. 2 should include all interest-bearing indebtedness for the payment of which the corporation or its property is bound. In case of banking corporations and like financial institutions, deposits "should not be reported as indebtedness under this head. 90 Instructions for 1031-1035 cont'd. 10. Item No. 3 of the return form (gross income) should include all income derived from the operations and management of the business and properties, together with all actual increases in value by appraisement, adjust- ment, or otherwise in the value of the assets 'which have been taken up on the books as income or credited to profit and loss during the year. In the case of a corporation organized, authorized, or existing under the laws of any foreign country, the gross income to be returned is the gross amount of its income for the year resulting from business transacted and capital invested within the United States. 11. Item No. 4 (a) should include the total amount of all ordinary and necessary expenses paid out of earnings in the maintenance and operation of the business and properties of the corporation, etc., exclusive of interest and other payments to be listed under their respective heads on the return forms. 12. Item No. 4 (fc) should include all rentals or other payments required to be made as a condition to the continued use or possession of the property. In cases where interest on a mortgage on property occupied or used by the corporation is paid as a condition to its possession and use, thus becoming in the nature of a rental charge, such interest charge may be included in the deduction under this item. Mortgage indebtedness, assumed or unassumed, on property to which the corporation has taken or is taking title, or in which it has an equity, or in the acquirement of which the mortgage was considered a part of the purchase price, is held to be a debt of the corporation and interest paid on such indebtedness will be deductible only under Item 6 of the return. 13. The amount claimed under Item No. 5 (6) for depreciation should be such an amount as measures the loss which the corporation actually sus- tains during the year in the value of buildings, machinery, and such other property as is subject to depreciation on account of wear and tear, exhaus- tion, or obsolescence. The amount taken credit for on this account in order to be allowable should be so entered on the books as to constitute a liability against the assets of the corporation. Th'e amount claimed under this item should not cover losses in the value of stocks and bonds. Decrease in the book value of securities owned, so far as such decrease represents a decline in the actual value of such securities, should be deducted under Item 5 (a) of the return. 14. Where depreciation of physical property is made good by renewals, replacements, repairs, etc., and the expense of such renewals, replacements, repairs, etc., is charged to the general expense account, no deduction for depreciation can be made in the return of annual net income. When a de- preciation reserve is set up, all renewals and 'replacements must be charged to such reserve and the addition to this reserve each year must be a fair measure of the loss which the corporation sustains by reason of the depre- ciation of its property. 15. The amount of interest deductible is the amount of interest accrued and paid within the year on bonded or other indebtedness not exceeding one-half of the sum of inter-bearing indebtedness and the paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of indebtedness not exceeding the amount of capital employed in the business at the close of the year ; or in case of a corporation, joint stock company or association, or insurance company organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded or other indebtedness not exceeding- the proportion of its paid-up capital stock out- standing at the close of the year, or if no capital stock, the amount of capital employed in the business at the close of the year, which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States. All interest deductions must be claimed under Item 6 on the return form. 16. Dividends declared or paid 'are not deductible from gross income. 91 Instructions for 1031-1035 cont'd. 17. Dividends received upon the stock of other corporations must be in- cluded in gross income and are not deductible therefrom in the ascertainment of the net income on which the tax is computed. 18. Interest received upon the obligations of a State or any political sub- division thereof, and upon the obligations of the United States or its posses- sions, should be included in gross income, as well as all other interest due and accrued during the period for which return is made. 19. Accrued interest is considered to be interest due and payable, except in the cases of banking or other similar institutions which close their accounts on the basis of the interest earned. In all cases the accrued interest shall be reported on the basis on which the books are closed. 20. Taxes deductible in the return are such taxes, actually paid within the year, as are imposed by authority of the United States or of any State or Territory thereof, or by the government of any foreign country, not includ- ing taxes paid by a corporation, pursuant to guaranty, on its bonds or the in- come therefrom and not including those taxes assessed against local benefits. A reserve for taxes, as such, is not deductible. 21. The gross income of mercantile corporations should be ascertained in the following manner : From the sum of the total sales during the year plus the sum of the inventory at the end of the year, deduct the sum of the in- ventory at the beginning of the year plus the cost of the goods and materials purchased during the year; to this difference add the income received from any other source and the result will be the gross income to be reported under Item No. 3 of the return. ""22. Gross income in the case of a manufacturing corporation shall include the total receipts from the sale of all manufactured goods sold during the year plus any increase in tire inventoried value ascertained through an ac- counting of the finished and unfinished product, raw material, etc., on hand at the close of the year. 23. To the income thus ascertained there should be added the income aris- ing, accruing,, or received from any and all other sources, the aggregate thus ascertained to be the gross income to be returned under Item No. 3 of the return form. Since the gross income thus ascertained represents the total receipts as well as the inventoried value of finished and unfinished products, raw material, etc., the corporation will include in its deduction under Item No. 4 all expenditures for material, labor, fuel, and other items going to make up the cost of the goods sold or inventoried at the end of the year. 92 UNITED STATES INTERNAL REVENUE. MONTHLY LIST RETURN OF AMOUNT OF NORMAL INCOME TAX WITHHELD AT THE SOURCE. Filed by .._. To be made in duplicate to the Collector of Internal Revenue for the District in which the withholding agent is located, on or before, the 20th day of each month, showing the names and addresses of persona who have received payments of interest upon bonds and mortgages, or deeds of trust, or other similar obligations of corporations, joint-stock companies or associations, and insurance companies, on which the normal tax of 1 per cent has been deducted and withheld during the preceding month. , the duly authorized withholding agent of , located at . , do solemnly swear (or affirm) that the following ia a true and complete return of all coupon and interest payments as above described, made by said organization and from which the normal tax of 1 per cent was deducted and withheld, at the time of payment, or for which it is liable as withholding agent, during the month of . , 191 on the __.._....-... Bonds (or other similar obligations) of the _...._.-_ i ~ 5 _j , and there are herewith inclosed all certificates of ownership which were presented with said coupons or orders for registered interest covering .- turn ADDBIS3 ID JTU. SF *-^Mr *BK- ~- $ $ - = - ..................... - $ $ $ Amount of tax remitted herewith (if my) to Collector $ To (MtaMr. District of Sworn to and subscribed before me day of , 19 his Signed (553 ss I. .hit. Mtaf.) tevenue with who n the list Is fi ed, the amount of t ai withheld daring the month for which the list ia made. Not* B. All substitute certificates of collating agents, authorize.! by regulations, that are received by debtors or withholding agents will be considered the same as certificates of owners, and In entering game in making Monthly List Returns, debtors or withholding agents will enter the nairie, address, afld the number of the substitute, certificate of the 93 UNITED STATES INTERNAL REVENUE. ANNUAL LIST RETURN OF AMOUNT OF NORMAL INCOME TAX WITHHELD AT THE SOURCE ON SAURIES. WAGES, RENT, INTEREST, 08 OTHEE FIXED AND DETERH1NABLE ANNUAL CAINS, PROFITS, AND INCOKE EXCEEDING J3.000 FOR THE TAXABLE YEAR. Filed by.... \ capital slock or net earnings of corporations, joint- d from interest upon bonds or mortgages, or deeds of trusts, or other similar , or from interest upon bonds, mortgages, or dividends of foreign corporations. .., for the year 191 To be made in duplicate to the Collector of Internal Revenue for the District in which the debtor or his duly appointed withholding agent, as the case may be, is located, on or before the first day of March, showing the names and addresses of persons who have received salaries, wages, rent, etc., as above described, in excess of 3,000, on which the normal tax of 1 per cent has beau deducted and withheld during < 'tfhe preceding calendar year I (we), _ ___ __ , of the iur'ni/uu f -iii "iii;- -- .located at , do solemnly swear (or affirm) that the following is a true and complete return of all salaries, wages, rent, and other fixed and determinate annual gains, profits, and income in excess of $3,000 as above described, which were paid (or were payable) to each of the persons listed herein, and on which the normal tax of 1 par cent was deducted and withheld during the year stated, and there are herewith inclosed all certificates claiming exemptions and deductions with respect to said income. uan ADDKBU IN FULL. KggST _**. IE? ""."til?*" *"iJ" $ $ $ $ Totals for calendar 'year , Amount of tax remitted herewith (if any) to Collector. Bistrict of. 3 worn to and subscribed before me this NOTE A. Withholding agent* may, if they o deeire, pay a during the yew for which the lilt ia made. ' the time thii liat in tied, to the Collector of Internal Revenue with whom the list if filed, t 94 UNITED STATES INTERNAL REVENUE. MONTHLY LIST RETURN OF AMOUNT OF NORMAL INCOME TAX WITHHELD ON FOREIGN INCOME BY LICENSED BANKS OR COLLECTING AGENCIES Filed by _ License JVo To be made ia duplicate to the Collector of Internal Revenue for the District in which the licensee is located, on or twfor^the 20th day of each month, showing the names aud addresses of persons who have received payments from coupons, checks, or bills of exchange representing interest upon bonds issued in.foreign countries and upon foreign mortgages or like obligations (not payable in. the United States), or dividends upon the stock or interest upon the obligations of foreign corporations, associations, or insurance companies engaged in business in foreign countries, on which the normal tax of 1 per cent has been deducted and withheld during the preceding month. I (we), . , of .^ .. .. .... the of the above-named bank.or collecting agency located at __ do solemnly swear (or affirm) that the following is a true and complete return of all payments as above described, made by said bank or collecting agency, and from which the normal tax of 1 per cent was deducted and withheld at the time of payment, or for' which it is liable as withholding agent, during the month of _ _ _.,. 191 , and there are herewith inclosed all certificates claiming exemption which were presented with said coupons, checks, etc. Totals for month .... $ at of tax remitted herewith (if any) to Collector ,,.. District of Sworn to and subscribed before me this , day of _ , 191 Signed: , a made. if they BO desire par at the t i list is Bled, to the Collector of Internal Revenue with whom the I NOT. A. Withholding agenta m during the month (or which the list ia u Nor* B. All substitute certificates of collecting agents, authorized by regulations, that are received by debtors or withholding agent! \r collecting agent in lieu of the name and addrers of the owner of the bonds. Nor O. -Enter "Int ou Bonds," "Int. on Mort;?.," " Dividends" etc., as the case may be. ! filed, the amount of tax withheld 'ill be considered the aamo as 95 Form 1O44. UNITED STATES INTERNAL REVENUE. MONTHLY LIST RETURN OF AMOUNT OF NORMAL INCOME TAX WITHHELD BY FIRST BANK OR COLLECTING AGENCY RECEIVING COUPONS AND INTEREST. ORDERS NOT ACCOMPANIED BY CERTIFICATES OF OWNERS. Filed by _ To be made in duplicate to the Collector of Internal Revenue for the District in which the collecting agency is located, on or before the 20th day of each month, showing the names and addresses of persona who have received payments of interest upon bonds and mortgages, or deeds of trust, or other similar obligations of corporations, joint-stock companies or associations, and insurance companies, on which the normal tax of 1 per cent has been deducted and withheld during the preceding month, the coupon and interest orders for said payments having been presented without certificates of owners. I (we) , , of ^ . ... |t the ........ ^ of ..._...... , located fit _.. do solemnly swear (or affirm) that the following is a true and complete return of all coupon and interest orders purchased or accepted for collection as above described during the month of , 191 , and the said bank or collecting agency, having acknowledged its responsibility of withholding therefrom the normal tax of 1 per cent, has deducted and withheld the tax as listed below, in accordance with the regulations of the Treasury Department. MAUE. -,^ VSE.'tfSl" AMiywrof T*r Totals for month - - $ $ ,... $ $..:. Amount of tax remitted herewith (if a To Sworn to and subscribed before me this Signed: Collector. District of 'lay of _..., 101 NOTK A< withholding agnto may, if they K rtetire, pay ' th tim tw ltat " filc<1 ' lo the Collector of Internal Revenue with whom the list a filed, the amount of tax withheld during the month for which the li<tia made. J-TJTJ 96 PREFACE. The accompanying regulations embrace the various ad- ministrative features of the law (sec. 2, act of Oct. 3, 1913) imposing a tax on incomes. They contain instruc- tions relative to the preparation of returns, etc., and are designed to assist both the taxpayer and the officers charged with its enforcement in complying with the requirements of this law. Liberal construction of the law has been given that those charged with withholding the tax at the source may not do so unnecessarily. Withholding agents may forward evi- dences of non-liability to payment, when such evidences are received by them,- to collector for the district in lieu of the tax. This will relieve them of the necessity of withholding such tax. The regulations are arranged according to general sub- jects, as follows: Part 1. Individual income returns and collections. Part 2. Collections at the source. A. Bonds, mortgages, deeds of trust, etc. B. Bonds, mortgages, deeds of trust, etc., by first bank or collection agency where certificates of owners are not filed. C. Bonds, mortgages, dividends, etc., of foreign corporations. D. Salaries, wages, rent, etc. E. Fiduciaries. Part 3. Relative to corporations, joint-stock companies or associations, and insurance companies. Part 4. Assessment and collection. All forms of certificates herein provided shall be 8 inches wide and 3^ inches from top to bottom, and printed on paper of substantial weight and texture. 97 REGULATIONS. Regulations concerning the tax imposed by Section 2, Act of October 3, 1913, on net income of individuals, Corporations, Joint-stock Companies, Associations, and Insurance Com- panies. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., January 5, 1914. PART 1. INDIVIDUAL INCOME RETURNS AND COLLECTIONS. ARTICLE 1. Section 2 of the above-named act imposes a Persons taxable. tax of 1 per centum (designated as the normal tax) on net incomes arising or accruing from ALL SOURCES during the preceding calendar year to (a) Every citizen of the United States, whether residing at home or abroad; and (b) Every person residing in the United States, though not a citizen thereof; and (c) From all property owned and from every business, trade, or profession carried on in the United States, by a person residing elsewhere. ART. 2. Said section also imposes an additional tax on Additional r all net incomes of individuals exceeding $20,000, as follows : super ** 1 per cent on incomes exceeding $20,000 and not exceed- ing $50,000. 2 per cent on incomes exceeding $50,000 and not exceed- ing $75,000. 3 per cent on incomes exceeding $75,000 and not exceed- ing $100,000. 4 per cent on incomes exceeding $100,000 and not exceed- ing $250,000. 5 per cent on incomes exceeding $250,000 and not exceed- ing $500,000. 6 per cent on incomes exceeding $500,000. ART. 3. The NET INCOME shall consist of the total gains, Net profits, and income derived from all sources (designated as d 99 gross income) less deductions numbered first to sixth, inclusive, specifically enumerated in paragraph B of the act. (See article 6.) com- ^- n computing the taxable income for the purposes of the puted. normal tax there shall be deducted from the net income as above ascertained: (a) The amount included in the gross income received as dividends upon the stock or from the net earnings of any corporation, joint-stock company, association, or insurance company which is taxable upon its net income ; (b) The amount of income the tax upon which has been paid or withheld for payment at the source ; and (c) The specific exemption of $3,000 or $4,000, as the case may be, except in the case of nonresident aliens. wSt It inSSdes' ART. 4. GROSS INCOME includes all gains, profits, and in- come derived from (a) Salaries, wages, or compensation for personal ser- vice of whatever kind and in whatever form paid. (b) Professions, vocations, business (including income from copartnerships), trade, commerce, or sales or dealings in property, growing out of the ownership or use of or interest in, real or personal property. (c) Interest, rent, dividends, securities, or transaction of any lawful business carried on for gain or profit. (See art. 67 as to interest on deposits and certificates of deposit.) (d) Gains or profits and income derived from any source whatever, including the income from, but not the value of, property acquired by gift, bequest, devise or descent. The foregoing is held to include all income, gains, and profits arising or accruing from all sources whatever in the calendar year for which the return is made, except as here- inafter specifically stated. fcom c taxatfoiiu pt ^ RT> ^' ^ e following items should not be included as gross income: * (a) Value of property acquired by gift, bequest, devise, or descent during the year. (b) Proceeds of life insurance policies paid upon the death of the person insured to beneficiaries, or payments made by or credited to the insured, on life insurance, en- dowment, or annuity contracts, upon the return thereof to the insured at the maturity of the term mentioned in the contract, but this shall not be construed to mean that interest 100 payments to beneficiaries from insurance companies shall not be included as income. (c) Income derived from interest upon the obligations of a State or any political subdivision thereof and upon the 'obligations of the United States or its possessions. (d) The compensation of the President of the United States in office at the time of the passage of the act of October 3, 1913, during the term for which he was elected, and the judges of the Supreme and inferior courts of the United States in office at the time of the passage of the act of October 3, 1913; (e) The compensation of all officers and employees of a State or any political subdivision thereof, including public- school teachers, etc. When such State officers or employees are compensated by the United States, they must include such income as taxable. ART. 6. Deductions and exemptions allowed in computing taxable income for the purpose of the normal tax. Under paragraph B the following items are to be deducted , Deductions ai- f lowed under par- from the GROSS INCOME: agraph B. 1. The amount of necessary expenses actually paid for carrying on business, but not including business expenses of partnerships and not including personal, living, or family expenses. 2. All interest paid within the year on personal indebted- ness of the taxpayer incurred in the conduct of business. 3. All National, State, county, school, and municipal taxes paid within the year (not including those assessed against local benefits). 4. Losses actually sustained during the year incurred in trade or arising from fires, storms, or shipwreck and not compensated for by insurance or otherwise. 5. Debts due to the taxpayer which have been actually ascertained to be worthless and charged off within the year. 6. Amount representing a reasonable allowance for the exhaustion, wear, and tear of property arising out of its use or employment in the business, not to exceed, in the case of mines, 5 per cent of the gross value at the mine of the output for the year for which the computation, is made, but not including the expense of restoring property or mak- ing good the exhaustion \thereof, for which an allowance is or has been made, nor for any amount paid for new build- ings, permanent improvements, or betterments, made to increase the value of any property or estate. 101 "Gross value The term "gross value at the mine" as used in paragraphs B and G of. at the mine" de- section 2 of the act of October 3, 1913 ? prescribing a limit to the amount fined. which may be deducted in the return of individuals and corporations as de- preciation in the case of mines, is held to mean the bona fide market value of ore, coal, crude oil, and gas at the mine or well, where such value is estab- lished by actual sales at the mine or well ; and in case the market value of the product of the mine or well is established at some other place than at the mine or well, or on the basis of the bullion or metallic value of the ore, then the gross value at the mine is held to be the value of the ore, coal, oil, or gas sold, or of the metal produced, less transportation, reduc- tion, and smelting charges. 7. The amount included in gross income received as dividends upon the stock, or upon the net earnings, of any corporation, joint-stock company, association, or insurance company which is taxable upon its net income. 8. The amount of income, the normal tax upon which has been paid or withheld for payment at the source of income. Gifts or dona- None of the above items of deduction shall include money tlons made dur- , . ,. , ,. j r n T^J ^- ing the year not or other items of value disposed of by gift, donation, or to be deducted. en d ow ment. agraphc. Under paragraph C the personal exemption of $3,000 or $4,000, as the case may be, is to be deducted from the net income except in the cases of nonresident aliens. (Ser arts. 7, 9, and 10.) on T the C SS P ndw ART - ^' The act provides that the said normal tax shal 7 i9u except for be computed on the remainder of said net income accruing during each preceding calendar year, and that for the year ended December 31, 1913, said tax shall be computed on the net income accruing from March 1 to December 31, both dates inclusive, after deducting five-sixths only of the specific exemptions and deductions authorized. A specific exemption, therefore, of $2,500 or $3,333.33, as the case may be, will be allowed for the year 1913. , . subject to ormai tax. the income of noH- ART. 8. The income of nonresident aliens subject to the- res , ident . alie P s normal tax of 1 per cent shall consist of the total gains, ~ , . 1 1 < pronts, and income derived trom all property owned, and from every business, trade, or profession carried on and capital invested within the United States (to be designated as gross income), less deductions (1 to 8, inclusive) spe- cifically enumerated in paragraph B of the act (see art. 6), in so far as said deductions relate to said gains, profits, etc. Exemption un- not P aiBweS in abre p inc n o g me8 ax of nonre s i d e n t Nonresident to c additiona? e or surtax. The specific exemption in paragraph C of the act can not be allowed as a deduction in computing the normal tax of nonresident aliens. Nonresident aliens are subject to additional or surtax the same as prescribed in the case of citizens of the United! States or persons residing in the United States. 102 The responsible heads, agents, or representatives of said nonresident aliens who are in charge of the property owned or business carried on or capital invested shall make full .and complete returns of said income and shall pay the tax .as provided herein. ART. 9. Under paragraph C, every single person and every married person not living with husband or wife in single person or the sense below defined, who has a net income exceeding $3,000 per annum, is liable to pay the normal tax under this law, but in making return for such tax such person may claim an exemption of $3,000 from his or her total net income. ART. 10. Husband and wife living together are entitled to . specific exemp-* ,. c a** r\f\r\ 1 f i tion allowed with an exemption of $4,000 only from the aggregate net income respect to aggre- of both, which may be deducted in making the return of f a u te s such income for taxation. However, when the husband and wife. wife are separated and living permanently apart from each other each shall be entitled to an exemption of $3,000. If the husband and wife not living apart have separate ^ ea estates, the income from both may be made on one return, ?ate estates S ?ne but the amount of income of each, and the full name and J^ Swing address of both, must be shown in such return. income of each. The husband, as the head and legal representative of the household and general custodian of its income, should make and render the return of the aggregate income of himself and wife, and for the purpose of levying the income tax it is assumed that he can ascertain the total amount of said income. If a wife has a separate estate managed by herself as of ^^^^ her own separate property and receives an income of $3,000 tate^fo^be S- or over, she may make return of her own income, and if bamf's return "or the husband has other net income, making the aggregate c u m s e b , a n d b '| |j' of both incomes more than $4,000, the wife's return should chSed!? wife's be attached to the return of her husband, or his income return - should be included in her return, in order that a deduction of $4,000 may be made from the aggregate of both incomes. The tax in such case, however, will be imposed only upon so much of the aggregate income of both as shall exceed $4,000. If either husband or wife separately has an income equal Return re- to or in excess of $3,000, a return of annual net income hushed V^ife is required under the law, and such return must include the ha * *" income r 1 1 * 1 . of $3,000 or over. income 01 both, and in such -case the return must be made 103 even though the combined income of both be less than $4,000. rn re- if the aggregate net income of both exceeds $4,000, an gate 6 income g "f annual return of their combined incomes must be made in fefa^^ess^of tne manner stated, although neither one separately- may $4,000, alth ^eh have an income of $3,000 per annum. They are jointly and S?*?co*m.e a 3 separately liable for such return and for the payment of $3,000 or over. the tax When statuses The single or married status of the person claiming the mined 6 " specific exemption shall be determined as of the time of claiming such exemption if such claim be made within the year for which return is made, otherwise the status at the close of the year. i n t r e tn r e j s h i t ART. 11. His or her prorata share of the net profits de- p^ofit pa how rs re- rived from a partnership business, 'whether or not divided p rted - and paid out shall be included in the personal return of each partner. Partnerships as ART. 12. Partnerships, as such, are not subject to the such, not liable . . i j A 1 to tax, but state- income tax, and are only required to make return when be rC ~ requested to do so by the Commissioner of Internal Revenue or the collector of internal revenue for the district in which said partnership has its principal place of business ; and when a return is required it shall give a complete and correct statement of the gross income of the said partnership and also a complete statement of the actual expenses of con- ducting the business of said partnership, and the net profits and the name and address of each member of said partner- ship, and their respective interest in the net profit thus reported. ro > fit r s n t er b h in p ^ RT ' ^' ^ e net annua l P r fi ts of a partnership when eluded in returns divided and paid to the members thereof shall be included ^y each individual partner receiving same in his annual return of net income, and the tax shall be paid thereon as required by law. When the annual profits of a partnership are not distributed and paid to the members thereof the respective interest of each member in said profits shall be ascertained, and the individuals entitled thereto shall include the said amount in their annual return as a part of their gross income, the same as if said profits had been distributed and paid to them. individual ART. 14. Undivided annual net profits of partnerships thus partnership pro i- returned by the individual members thereof, and tax paid thereon, shall not, when said profits are actually distributed and paid to such members, be again included in their annual return as a part of their gross income. 104 Partnerships owning interest coupons or registered in- Partnerships as t , P . f . . such, may file terest orders may claim deduction for legitimate expenses certificate claim- incurred in business by filing the proper certificate with the ing c withholding agent. (See article 47.) RETURNS. ART. 15. Each person of lawful age whose net income is ^^Sai^etS $3,000 or over shall, on or before the 1st day of March, come of $3,000 1914, and on or before the 1st day of March each year STade." thereafter, file an accurate return of income under oath or affirmation, except as herein provided. (See article 8.) If the person making the return of income has his place Where filed. of business in the collection district in which he resides, the return shall be filed with the collector of that district. If his principal place of business is elsewhere, the return shall be filed in the district in which that business is located. In the case of an individual residing in a foreign country return shall be made to the collector of internal revenue for the district where his principal business is carried on within the United States. ART. 16. The required return will be made on Form 1040 Form of return - in accordance with the instructions printed thereon, and will specifically set forth 1. All income received from each specific source and the total thereof. 2. All the separate items of deduction claimed under para- graph B of this law. 3. The amount of specific exemption claimed under para- graph C. 4. All amounts of income upon which tax has been with- held at source by withholding agent or agents. ART. 17. When by reason of minority, insanity, absence, . Wh , en r . etu n . , , M-J 1 1- -j i 11 1 W1 U be made by sickness, or other disability, the individual is unable to make guardian or duly his own return, the same shall be made by his guardian or authorized a g ent - duly authorized agent. In the case of the death of a person whose net .income Executor r i r i 1 i 1 i 1- i rso s\r\r\ or administrator for the part of the year during which he lived .was $3,000 to make return or over, return of net income shall be made by the executor ln case of death - or administrator of the estate of the deceased, and in com- puting the taxable income of such estate there shall be allowed the specific exemption provided by law. ART. 18. When the required return has not been made by Notice of faii- j. f -11- ure to file return a person acting as guardian, agent of a nonresident alien, to be served on or by one acting in any other capacity in which the law f g u e nt. rdian r 105 makes it a duty for him to represent the individual, notice of failure to make such return will be served upon such guardian or agent. , E 7 1 id ? mc , e m *y The person upon whom such notice is served may, how- be meet showing * if rt 1 1 ,1 11 oniiabiiity to ever, when the facts warrant, file evidence with the collector showing that the individual for whom he acts did not receive an income subject to tax during the year, or that the said guardian or agent had filed the return with some other collector. f "er- ART. 19. Any individual whose net income is less than onsfor whom $20,000, for whom full return has been made by others as been ret m"d s e ha by withholding agents, shall not be required to make a return. others. Returns to be ART. 20. If any person liable to pay an income tax for i p ec e to a r re in certafn himself or others shall fail to make and deliver the return cases - required by law, but shall consent to disclose the particulars of any business or occupation liable to pay such tax, it shall be the duty of the collector or deputy collector to make such list or return, which being distinctly read and consented to, signed, and verified by oath or affirmation by the person liable to make such return, the same may be received as the list or return of such person. Refusal or ART. 21. In case any person liable to make return shall *' e neglect or refuse to make or render a list or return, or shall render a wilfully false or fraudulent return, it shall be the duty of the collector, after due notice has been given, to make such list, according to the best information he can obtain by the examination of such person, or any other evidence.* Penalty for When duly certified by the collector, the said list thus r^ur^orfor Prepared shall be the return of said person and the tax so making false re- ascertained to be due, together with the 50 per cent or 100 per cent penalty incurred, shall be assessed and collected. Returns to be ART. 22. The annual return must be verified by oath or an ^ rrnat i n * tne Person making the same. Collectors are directed by law to require every return to be so verified by the person rendering it. The affidavit may be made before the collector for the district or before any officer authorized by law to administer oaths. *For method of procedure in such cases, see sects. 3173 and 3176, Rev. Stat., and also Form 1045, the form of notice to be given in such cases. 106 ART. 23. When the return is not filed within the required ti ^ e xt ^ si gj n e r ! time by reason of sickness or absence of the individual, an turn may be extension of time, not exceeding 30 days from March 1, gra within which to file such return may be granted by the collector, provided a written application therefor is made by the individual within the period for which such extension is desired. ART. 24. The annual returns will be forwarded by col- lectors by registered mail to the Commissioner of Internal Commissioner of Revenue with the list for the month in which the returns nue ern by r are filed. Collectors must provide that said returns and all tured mail - forms relating thereto are securely sealed in envelopes or packages before forwarding the same. ' ART. 25. All assessments shall be made by the Commis- mot tf c atfo en qf |: sioner of Internal Revenue, and all persons shall be notified *hn to be paid' of the amount for which they are respectively liable on or before the 1st day of June of each successive year, and said assessments shall be paid on or before the 30th day of June, except in cases of refusal or neglect to make such return and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the dis- covery thereof, at any time within three years after said return is due, make a return upon information obtained, as provided by the law, and the assessment made by the Com- missioner of Internal Revenue thereon shall be paid by such person or persons immediately upon notification of the amount of such assessment. To any sum or sums due and unpaid after the 30th day of Penalty f o r June in any year, and for 10 days after notice and demand tax. ure thereof by the collector, there shall be added the sum of 5 per cent on the amount of tax unpaid, and interest at the rate of 1 per cent per month upon said tax from the time the same became due, except from the estates of insane, deceased, or insolvent persons. ART. 26. If any person, corporation, joint-stock company, f a iTu7 e al t'o 5 association, or insurance company liable to make returns returns, or pay tax shall refuse or neglect to make returns at the time or times specified in each year, such person shall be liable to a penalty of not less than $20 nor more than $1,000. Any person or any officer of any corporation required by m 5SJ alti f al se oi law to make, render, sign, or^verify any return who makes fraudulent re- any false or fraudulent return or statement with intent to * 107 defeat or evade the assesment required by law to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution. ART. 27. Nothing in the law or these regulations shall be construed to release a taxable person from liability for income tax, nor shall any contract entered into after the act of October 3, 1913, took effect be valid in regard to any Federal income tax imposed upon a person liable to such payment. ART. 28. For regulations relative to the claiming of ex- emptions and deductions on income, the tax on which is to be deducted and withheld at the source, see article 33. 108 PART 2. COLLECTIONS AT THE SOURCE. Collections at source applic ART. 29. The deductions and payment of the tax at the only to the nor- . , . 11 ma * tax imposed source of income applies only to the normal tax imposed upon individu- upon individuals and shall not be construed to require any ^' S ource ect nat of such tax to be withheld prior to the 1st day of Novem- SP erat 1 ive 1Q t J? til 1PM ~ J Nov. 1, 1913. her, 1913. Persons, firms, etc., required to withhold tax at the source. ART. 30. Paragraph E of section 2 of the act provides that- All persons, firms, copartnerships, companies, corporations, joint-stock companies or associations, and insurance companies, in whatever capacity acting, including lessees or mortgagors, of real or personal property, trustees acting in any trust capa- city, executors, administrators, agents, receivers, conservators, employers, and all officers and employees of the United States having the control, receipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compen- sation, remuneration, emoluments, or other fixed or determin- able annual gains, profits, and income of another person, ex- ceeding $3,000 for any taxable year, other than dividends on capital stock, or from the net earnings of corporations and joint-stock companies or associations subject to like tax, who are required to make and render a return in behalf of another, as provided herein, to the collector of his, her, or its district, are hereby authorized and required to deduct and withhold from such annual gains, profits, and income such sum as will be sufficient to pay the normal tax imposed thereon by this section, and shall pay to the officer of the United States Government authorized to receive the same; and they are each hereby made personally liable for such tax. ART. 31. All persons, firms, etc., mentioned in the above- Withhold i n t quoted paragraph are referred to in these regulations as "debtors" or "withholding agents," and the word "source" is to apply to the place where the income originated and is payable. ART. 32. The INCOME from which the normal tax of 1 income as to . . i i -1111- -11 which tax is to per cent is to be WITHHELD by withholding agents includes be withheld. all items of income exceeding in the aggregate $3,000 and payable to any one person during the year, except: (a) Dividends on capital stock or from the net earnings of corporations and joint-stock companies or associations and insurance companies subject to like tax. 109 (b) Income of an individual which is not fixed or cer- tain and not payable at stated periods, or is indefinite or irregular as to amount or time of accrual, shall not be withheld at the source, but shall be listed in the annual return of the individual, and the tax shall be paid thereon, by him. Incomes derived from the following professions and voca- tions come under this head: Agents compensated on the commission basis, lawyers, doctors, authors, inventors, and other professional persons whose income is irregular and indefinite. Such persons shall make personal return of all their in- come, provided their total net income from all sources is and pe an*nuai ' re- $3,000 or over. For example i When a lawyer receives a tainers. retainer of $5,000 as a special fee, a deduction therefrom shall not be made by the payer ; but when a lawyer receives a retainer of $5,000 per annum, and the exemption claimed is $3,000, $2,000 of such income would be taxed and the tax retained at the source ; or if his exemption claimed should be $4,000, $1,000 of such income would be taxed and the tax thereon withheld at the source. (c) Items listed in article 5, which are wholly exempt from tax. Exemptions ART. 33, (a) In all cases where the income tax of a c de cert!fi2te p to person is withheld and deducted and paid or to be paid at be filed with the source, such person shall not receive the benefit of the withholding,,.. , ,, ,. i/-^/ agent. deduction and exemption allowed in paragraph C (see arts. 9 and 10) except by an application to the collector for refund of the tax unless, he shall, not less than 50 days prior to the day on which the return of his income is due, file with the person who is required to withhold and pay tax for him, a certificate claiming the benefit of such exemption. Penalty for and thereupon no tax shall be withheld upon the amount of rjp'rfsentatioms sucn exemption. If any person for the purpose of obtaining to obtain exemp- ail y allowance or reduction by virtue of a claim for such exemption, either for himself or for any other person, knowingly makes any false statement or false or fraudulent representation, he shall be liable to a penalty of $300. Deductions un- (b) Nor shall any person under the foregoing conditions e For a m ag i r oo8 to he allowed the benefit of any deduction provided for in i e i fhold/ng subsection B ( see art - 6, 1 to 6) unless he shall, not less agent or col- than 30 days prior to the day on which the return of his income is due, either file with the person who is required 110 to withhold and pay tax for him a true and correct return (on Form 1008) of his annual gains, profits, and income from all other sources, and also the deductions asked for, and the showing thus made shall then become a part of the return to be made in his behalf by the person required to withhold and pay the tax and the debtor or withholding agent will only withhold the tax on the payments made in excess of the deductions claimed on said form. Or such person may likewise make application for deductions to the collector of the district in which return is made or to be made for him. If such person is a minor or an insane person, or is Certificate filed absent from the United States, or is unable owing to serious nor? eh a r lf illness to make the return and application above provided P ersons - for, the return and application may be made for him or her by the person required to withhold and pay the tax, he making oath on certificate (Form 1009) under the penalties of this act that he has sufficient knowledge of the affairs and property of his beneficiary to enable him to make a full and complete return for him or her, and that the return and application made by him are full and complete. (c) When, however, claims for exemption and deductions Claims for re- as above described are not filed within the prescribed time, the tax collected in excess can be remitted only on presen- tation of a claim for refund under the provisions of section 3220, Revised Statutes, said claims to be made either by the withholding agent against whom the assessment was made, or by the person on account of whom such taxes were withheld. Claims for abatement of taxes erroneously assessed, or claims for which are excessive in amount, may, prior to collection abatement - thereof, be filed under the provisions of said section 3220, Revised Statutes, either -by the withholding agent against whom the assesment was made, or by the persons on account of whom such taxes were withheld. In the monthly list returns as now prescribed a space is Taxes with- provided to show the amount of taxes which the withhold- Awarded tocoi- ing agent may remit to the collector when such returns 1 ? ctor " ntil n - /-i 1 -r>i -,1 1 ij- MI i e tices of assess- are filed. The withholding agents will not, however, for- ment have been ward to the collector amounts withheld by him until notices received - of assessment are received from the collector. Claims for exemption and deductions may be filed with the withholding agent and claims for deductions may be 111 filed with the collector, not later than jo days prior to March I. withholding In cases where claims for deductions are filed with the statement collector within the time prescribed, the collector will imme- of deductions diately furnish the withholding agent (whose name and claimed through J ^ *= ^^r>\ 1 collector of dis- address must be shown on Form 1008) with a statement of the amount of deductions claimed, and said withholding agent shall not withhold and pay the normal tax to the extent of the deductions claimed as per said list. Withholding agents should not file their annual returns until after the expiration of the time allowed persons to file claims for exemptions and deductions and if claims for deductions are filed with the collector in the required time, yet not in sufficient time to have the adjustment made by the withholding agent, the collector will make the adjust- ment on the withholding agent's return and in reporting such withholding agent for assessment will make allowance for the amount of such deductions claimed. Notice of such adjustment, however, must be furnished the- withholding agent. to T t>e w lid he to ART. 34. The normal tax of 1 per cent shall be deducted collector of dis and withheld at- the source, and payment made to the collector of internal revenue as provided in the law, by the debtor, or his, her, or its duly appointed agent authorized to make such deduction and payment. Tax withheld N O other person, firm, or organization, in whatever by one agent not . .. > 1 j 1 r to be again with- capacity acting, having the receipt, custody, or disposal 01 agent by an ther any income, as herein provided, shall be required to again deduct and withhold the normal tax of 1 per cent thereon, provided that any such person, firm, or organization other than the debtor who has withheld said tax, shall file with the collector of internal revenue for his, her, or its district, a certificate (Form 1006) showing from whom and in what amount the tax has been so withheld. Returns to be ART. 35. Withholding agents who are required to make iTcto? of internal monthly returns will, on or before the 20th day of each revenue. month, file with the collector for their respective districts such returns for the preceding month, accompanied by all certificates relating thereto, and there shall also accompany said returns all certificates claiming exemptions and deduc- tions which are not required to be listed thereon; and on or before the 1st day of March in each year said withholding agents shall likewise file their annual returns for the pre- ceding calendar year. Annual returns (Forms 1041 and 112 1042) must be accompanied by all certificates claiming exemptions and deductions relating thereto. ART. 36. For regulations as to assessment and collection of taxes from withholding agents, see article 25 and "Assess- ments and collections," Part 4. A. Income derived from interest upon bonds and mortgages or deeds of trust or other similar obligations of corporations, etc. on income in- ART. 37. Under the law a tax of 1 per cent, designated . T . ax ,n inc 1 11 1 1 1 1 a i 55 derived irom n- as the normal tax, shall be deducted at the source, terest on bonds, beginning November 1, 1913, from all income accruing and ducted*. payabla to any person subject to such tax which may be derived from interest upon bonds and mortgages, or deeds of trust, or other similar obligations, including equipment trust agreements and receivers' certificates of corporations, joint-stock companies or associations, and insurance com- panies, although such interest does not amount to $3,000. Income derived from the interest upon the obligations ^ stVte^n of a State, county, city, or any other political subdivision Government ot>- thereof , and upon the obligations of the United States or its possessions, is not subject to the income tax, and certificates of ownership in connection with coupons or registered inter- est orders for such interest will not be required. ART. 38. The term "debtor," as hereinafter used, shall to apply to ail apply to all corporations, joint-stock companies or associa- etcj anYtVd'uiy tions, and insurance companies; and such "debtor" may hoFdlng e and^pay-. appoint a withholding and paying agents to act for it in ing agents, matters pertaining to the collection of this tax, upon filing with the collector of internal revenue for the district a proper notice of the appointment of such agent or agents. Where such withholding agent is so authorized by the debtor corporation, he may file with the collector of his district the required returns and accompanying certificates (arts. 50 and 51), in which case the assessment of the tax withheld by him will be made in that district. Unless such authority is given, such reports, etc., will be furnished by the debtor corporation to the collector of its district (i. e., the district in which its principal financial or business office is located), where, in such case, assessment will be made. 113 duSed a ndwit ART - 39 ' For , the P ur pose of collecting the tax on all held by debtor coupons and registered interest originating or payable in the United States, the source shall be the debtor (or its withholding and paying agent in the United States), who Banks and m- shall deduct the tax when same is to be withheld, and no iruerelft^uponf other bank, trust company, banking firm, or individual for collection. taking coupons or interest orders for collection, or other- wise, shall withhold the tax thereon, where such coupons Certificates of or orders for registered interest are accompanied by certifi- company^nterest cates * ownership signed by the owners of the bonds upon coupons for col- which the interest matured. These certificates shall be made on the prescribed forms and shall be made out by each owner of bonds for the coupons or interest orders for each separate issue of bonds or obligations of each debtor. (See arts. 43 and 46.) ti{kate s s, itu w e h c |n ART. 40. Responsible banks, bankers, and collecting agents permitted. receiving coupons for collection w r ith the aforesaid certifi- cates of ownership attached, may present the coupons with the attached certificates to the debtor or withholding agent for collection, or such certificates may be detached and forwarded direct to the Commissioner of Internal Revenue, provided such bank, banker, or collecting agent shall substi- Record to be tute for such certificates its own certificate, and shall keep a kept by collect- t 1 r 1 1 intr agent. complete record of each transaction, showing 1. Serial number of item received. 2. Date received. 3. Name and address of person from whom received. 4. Name of debtor corporation. 5. Class of bonds from which coupons were cut. 6. Face amount of coupons. 7. Exemptions from tax claimed by owner under para- graph C. Privilege of For the purpose of identification, such substitute certifi- cates should be numbered consecutively, and corresponding ed countries -ries foreign numbers given the original certificates of ownership. The permission here granted will extend to responsible banks, bankers, and collecting agents in foreign countries, through whom collection of such interest coupons is made. 114 The various substitute certificates hereby authorized will correspond with the form numbers of the ownership certi- ficates detached by the collecting agent, except that the substitute certificates' form numbers will be followed by the letter "a." ART. 41. A debtor whose bonds may be registered, both , ill r -i be deducted be- as to principal or interest, shall deduct the normal tax ot 1 fore payment of per cent from the accruing interest on all bonds before mterest - sending out checks for said interest to registered owners or before paying such interest upon interest orders signed by the registered holders of said bonds unless there shall be filed with said debtor or its fiscal agent (not later than 30 days prior to March 1), through whom said interest is customarily paid, the proper certificates claiming exemption from liability for said tax as herein provided, executed By a citizen or resident of the United States, the bona fide owner of the registered obligations, who may claim tax, by whom exemption under paragraph C, section 2, of the income tax law, or By corporations, joint- stock companies, associations, or insurance companies organized in the United States, or organizations, associations, fraternities, etc., which are either taxable or exempt from taxation, as provided in paragraph G, subdivision (a), of the act, or By a bona fide resident and citizen of a foreign country, claiming exemption as such. ART. 42. If the owners of the bonds are individuals who ownership es to are citizens or residents of the United States, the aforesaid |?, e d cif ^ m j u nt n d S f certificates shall accompany the coupons, or, with respect to interest due. the interest on registered bonds, shall be filed with payer of said interest, and such certificates shall describe the bonds and show the amount of coupons attached or the amount of interest due such owners on registered bonds and the name and address of the owners, and if registered in names other than the owners such names with addresses shall also be given. Such certificates shall also show whether the claim- ants do or do not then claim exemption from taxation at e mpt! u n'd ?r the source, under paragraph C, articles 9 and 10 ($3,000, paragraph c. and under certain conditions $4,000), as to the income represented by such coupons or interest. The certificates will be prepared on Form 1000 and must show the amount, if any, of exemption claimed, the total amount of exemption to which the claimant is entitled and must be signed by the 115 claimants, who shall use their ordinary business signatures. The certificates shall also show the postoffice and street address of the claimants, the internal-revenue district, and the date when signed. Certificates ART. 43. Duly authorized agents may sign such certificates by^duiy author- for the persons for whom they act, and withholding agents, ired agents, etc. ban^ or others, with whom such certificates are filed, if satisfied as to the identity and responsibility of the persons so signing, shall stamp or write on the face of each such certificate "Satisfied as to identity and responsibility of agent," giving name and address of person thus certifying. Certificates to Certificates so verified may be accepted by all other persons, withholding fi rms > or organizations to whom presented, without question agents. as to authority of such agent. If the person, firm, or organ- ization first receiving such certificate is not satisfied as to the agent's identity and responsibility, then, in that event, the agent shall furnish evidence of his authority to so act, which will be retained by the person, firm, or organization receiving it, and the certificate of ownership shall be in- dorsed as above provided. Tax to be de- ART. 44. Whenever interest coupons, accompanied by a payment* e of fn' certificate of an individual who is a citizen or resident of terest - the United States, are presented to a debtor or its with- holding agent for 'payment, or whenever interest is payable to such individual on a bond registered as to both principal and interest, the debtor or its withholding agents shall deduct and withhold the amount of the normal tax, except to the extent that exemption is claimed in the certificate of ownership (Form 1000). Where the interest to be paid is registered, the same form of certificate shall be used where exemptions are claimed, and it shall be filed with the debtor at least five days before the due date of such interest. est Ta payTbie nte to ART> ^' If tne owners of tne bonds are corporations, certain corpora- joint- stock .companies, associations, or insurance companies fo n be deducted! organized in the United States, no matter how created or organized, or organizations, associations, fraternities, etc., which are either taxable or exempt from taxation as pro- vided in paragraph G, subdivision (a) of the act, the debtor is not required to withhold or deduct the tax upon income derived from interest on such bonds, provided coupons or orders for interest from such bonds shall be accompanied by a certificate of the owners thereof certifying to such ownership, which certificates shall be filed with the debtor when such coupons or interest orders are presented for payment. Such certificate will be made on Form 1001, and must be signed in the name of the organization (stating its place of 116 business) by the president, secretary, or some other prin- cipal officer of the said corporation or organization duly claiming authorized to sign same, and must be properly dated. ART. 46. Coupons, or orders for registered interest, pay- able in the United States, representing the interest on bonds aliens, owned by nonresident aliens, must be accompanied by the prescribed certificate (Form 1004), but this certificate may be signed either by the owner or, in behalf of the owner, by a reputable bank or bankers or other responsible collect- ing agency, certifying to the ownership of the bonds and giving the name and address of the bona fide nonresident and alien owners, and when such certificate is thus attached the normal tax of 1 per cent on such coupons or interest orders need not be withheld at the source by the debtor or collecting agency. Unless such proof of foreign ownership is furnished, the normal tax of 1 per cent, should be deducted. Foreign organizations engaged in business within the United States are subject to the normal tax of 1 per cent per annum upon the amount of net income accruing from business transacted and capital invested within the United States; but said organizations shall be exempt from having any part of their income withheld by a debtor or with- holding agent, and claim for such exemption will be made on Form 1018. ART. 47. Inasmuch as individual members of a partner- Certificate* ship are liable for income tax upon their respective interest s h?p, showfn^fn- in the net earnings of such partnership, the partnership may J, e a r 1 es i n of partner- file with the withholding agent a notice signed in the name ship profits, etc. of the partnership, by a member thereof, claiming a deduc- tion of a specific amount on account of the legitimate expense incurred in conducting the business of said part- nership; and upon receipt of said notice said withholding agent shall not withhold, and shall not be held liable for, the normal tax on the amount of income equal to the amount of deduction claimed in said notice ; but in no event shall the total of the amounts claimed, as provided herein, be in excess of the total amount of the actual legitimate annual expenses incurred by said partnership in the conduct of its business. Application for such deduction shall be made on Form 1011. 117 Foreign part- ART. 48. Foreign partnerships or firms, all the members nerships, certifi- . , & f , . . , cate of owner- of which are both citizens, or subjects, and residents of a ship may be filed f ore ig n coun try, which are the owners of bonds and mort- gages or deeds of trust or other similar obligations, includ- ing equipment trust agreements, receivers' certificates, and stocks of corporations, joint-stock companies or associations and insurance companies, organized or doing business in the United States, may file with the debtor or withholding agent, with their coupons or orders for registered interest, or orders for other income derived from property or invest- ments in the United States, a certificate and notice of ownership (Form 1016) setting forth the above facts; and the debtor or withholding agent shall not withhold any part of said income. Foreign part- ART. 49. Where a. foreign partnership or firm is composed posed 1 o'f no C n?esi- of both nonresident foreigners and citizens of the United and 1 citiiS ne of States, or foreigners residing in the United States or its United States, possessions, the certificate of ownership shall show this fact, and the name arid legal address of each member of said partnership who is a citizen of the United States, or who is a foreigner residing in the United States or its pos- sessions, shall be given on the back of said certificate, and no part of said income shall be withheld. The said certifi- cate and notice of ownership in either case above provided shall be on Form 1014. list ART. 50. Withholding agents are required to file in dupli- cate a monthly list return (Form 1012) giving a list of all coupon or interest payments made on which the normal tax of 1 per cent was deducted and withheld from interest pay- ments made upon bonds or other similar obligations, and shall show the name and address in full of the owners of the bonds, amount of the income, amount of exemption claimed, amount of income on which withholding agent is liable for tax, and the amount of tax withheld. Forms 1012a, 1012b, and 1012c are to be used where Form 1012 does not afford sufficient space in which to enter all items. i s ts Form 1012d, when necessary to be used, shall be made may be used. j n duplicate and shall be a summary of the monthly list return, Form 1012, as made in detail by the withholding agent, and the said summary and lists thereto attached 118 when properly filled in and the summary signed and sworn to shall constitute the complete monthly list return of the withholding agent making same as fully as if each list attached to the summary was signed and sworn to separately. An annual list return (Form 1013) in duplicate is also required to be made by debtors or withholding agents of the normal tax of 1 per cent withheld from interest payments made upon bonds or other similar obligations, and it shall be filed on or before March 1 of each calendar year. ART. 51. The monthly list return in the form as required Monthly list herein shall constitute a part of the annual list return to pa rt of the an- be made by debtors or withholding agents, and the debtor nual l or withholding agent will not be required, in making an annual list return of the tax withheld from income derived from interest upon bonds and mortgages or deeds of trust, or other similar obligations of corporations, joint-stock com- panies, or associations and insurance companies, to again make an itemized list of the amount of tax with- held from each person, but will give in the annual list return the totals of the monthly list return for each month of the year for which annual list return is made. All substitute certificates of collecting agents, authorized by regulations, that are received by debtors or withholding agents will be considered the same as certificates of owners, and in entering same in making monthly list returns debtors or withholding agents will enter the name and address of the collecting agent and the number of the substitute cer- tificate issued in lieu of the original certificate containing the name and address of the owner of the bonds. Until the further ruling on this subject by this department no list return is required to be made of certificates of ownership accompanying coupons or registered interest orders filed with a debtor or withholding agent when the owners of the bonds are not subject to having the normal tax withheld at the source, but all such certificates of ownership shall be Certificates to forwarded by the debtor or withholding agent to the col- collector! 1 ' lector of internal revenue for the district, on or before the 20th day of the month succeeding that in which said certi- ficates of ownership were received. 119 B. Income derived from interest upon bonds, mortgages, etc., paid by first bank or collecting agency when certificates of owners are not filed. ^interest cou- ART. 52. Where the coupons or interest orders are not IpmpaniS accompanied by certificates as heretofore prescribed, the by certificate. fa$t b^k^ trust company, banking firm, or individual, or collecting agency receiving the coupons or interest orders for collection, or otherwise, shall deduct and withhold the tax and shall attach to such coupons or interest orders its own certificate (Form 1002), giving the name and address of the owner of, or the person presenting such coupons or interest orders if the owner is not known, with a description of the coupons or interest orders ; also setting forth the fact that they are withholding the tax upon them ; whereupon the debtor shall not again withhold the tax on said coupons or interest orders, but in lieu thereof shall deliver to the Collector of Internal Revenue the certificate of such bank, trust company, etc., which is withholding such tax money. soS en presenfing Any corporation, collecting agency, or person first receiv- jnterest coupons ing from the owner any interest coupons or orders for the ished. e '" collection of registered interest should require the persons tendering such coupons or orders for registered interest to satisfactorily establish their identity. Monthly and ART. 53. Withholding agents receiving coupons or inter- hst re ~ est orders not accompanied by certificates of owners are required to file monthly and annual list returns in duplicate. The required monthly list return (Form 1044) shall give a list of all coupon or interest payments made on which the normal tax of 1 per cent was deducted and withheld and shall show the name and address in full of the owner of, or the person presenting such coupons or interest orders, if the owner is not known, amount of the income subject to tax and the amount of tax withheld. An annual list return (Form 1044a) is also required to be made by such withholding agents, showing the amount of tax withheld during the preceding year on income of this character. This return must be filed on or before the 1st day of March of each calendar year. The monthly list returns in the form as required herein shall constitute a part of the annual list return to be made, and the withholding agent will not be required, in making 120 an annual list return of the tax thus withheld, to again make an itemized list of the amount of tax withheld from each person, but will give in the annual list return the totals of the monthly list returns for the year for which annual list return is made. c. Income derived from coupons, checks or bills of exchange on foreign bonds, mortgages, dividends, etc. ART. 54. All persons, firms, or corporations undertaking . CcflUcitoa^of for accommodation or profit (this includes handling either bTffs s ' of e ex- by way of purchase or collection) the collection of coupons, chan s e ' etc - checks, bills of exchange, etc., for or in payment of interest upon bonds issued in foreign countries, and upon foreign mortgages or like obligations, and for any dividends upon stock or interest upon obligations of foreign corporations, associations, or insurance companies engaged in business in License to be foreign countries, are required by law to obtain a license commissioner 5 from the Commissioner of Internal Revenue. n ue ernal Reve " ART. 55. Applications for such license (Form 1017) will . Application for be made to the collector for the district in which such busi- nSe^to %n e ^ e ness is to be carried on. Upon the acceptance of such tor of dis t"ct. application the collector will issue to the applicant without cost a license (Form 1010) which will continue in force until revoked or canceled. Blank forms of such license, bearing the fac simile signature of the Commissioner of Internal Revenue, will be furnished collectors on requisition, who will in all cases countersign the same before issuing it to applicant. Failure to obtain a license or to comply with regulations is punishable by a fine not exceeding $5,000 or Penalty for ' . ,. J 1 ^1 f failure to obtain imprisonment not exceeding one year, or both, in the dis- license, cretion of the court. ART. 56. Where the collector is not sufficiently informed as to the entire responsibility of the applicant, or where in any case he deems it advisable, the Commissioner of Internal tncases. Revenue may upon the recommendation of the collector require of the applicant a bond, in duplicate, with satisfac- tory sureties, in a penal sum at least equal to the estimated amount of tax to be withheld by such applicant during any one year. A form of bond to be given in such cases will be furnished collectors on application for the same. Where licenses are issued without bond, the collector will each year inquire into and satisfy himself of the financial responsi- bility of the licensee. 121 License to be ART. 57. When any person, firm or corporation shall o b t a i n e d for r branch offices. have branch orhces and desire to collect ioreign interest or dividend income through said branch offices, the application for license or licenses shall be made by the person, firm, or corporation through its principal office for its branch office or offices. Application for licenses in such cases shall be Ap lication for ma de to the collector of internal revenue for the district in license to be cer- which the home office is located. The names and addresses o? ed distriS ect ?n of the branch offices shall be furnished to the collector in the offices h are"*"!? a PP^ ca tio n of the said principal, and if the requirements of cated. the foregoing regulations have been complied with to the satisfaction of the collector, he shall certify this fact to the collector of internal revenue for the district in which the branch office is located, and the collector to whom this certi- fication is made shall issue to such branch office a license, as in the case provided in article 55. Normal tax on ART. 58. The licensed person, firm, or corporation first 'to te be st Withheld receiving any such foreign items for collection or otherwise, shall withhold therefrom the normal tax of 1 per cent, and will be held responsible therefor. Such licensee shall indorse statement as or stamp on each such coupon, check, or bill of exchange, to 4 be il?do?s e ed wnen practicable, the words "Income tax withheld by" (giv- or appended to ing his or their name, address, and date), which shall be coupons, d :ks, su ffi c j ent evidence to relieve subsequent holders or pur- chasers from the duty of also withholding the income tax. ^ ^ e s ^ ze or nat ure of such coupons, checks, etc., makes of district with it impracticable to make said indorsement thereon, a state- ducted, t etc es ' *" rnent identifying the item on which tax is withheld and bear- ing said indorsement may be attached thereto with the same effect as if the indorsement was made directly thereon. ART. 59. Such licensee shall obtain the names and ad- dresses of the persons from whom such items are received and shall prepare a list of same in duplicate (on Form 1043) and file it with the collector of internal revenue for his dis- trict not later than the 20j:h day of the month next succeed- ing the month in which such items were paid. The list shall be dated, and shall contain the names and addresses of the taxable persons, the character and amount of income, amount of exemption claimed, amount of income on which withhold- ing agent is liable for tax, and the amount of tax withheld. In addition to the monthly lists the licensee will, on or be- fore the 1st day of March in each year, file with the col- 122 lector in duplicate a return (Form 1043a), showing the amount of income paid and the amount of tax withheld by him during the preceding year and such other information as the form prescribes. The monthly list return in the form as required herein shall constitute a part of the annual list return to be made by the licensee as withholding agent, and he will not be re- quired, in making an annual list return of the tax withheld from income described in article 54, to again make an item- ized list of the amount of tax withheld from each person, but will give in the annual list return the totals of the monthly list return for each month of the year for which annual list return is made. ART. 60. In the event such coupons, checks, or bills of Claims for ex- . , . , x , - 11 -L emption under exchange above mentioned are presented tor collection by an paragraph c may individual claiming the benefit of the exemptions allowable filed- under paragraph C (arts. 9 and 10), such individual shall be permitted to avail himself of the exemption claimed, upon signing on the form heretofore prescribed for coupons payable in the United States, and no tax shall be deducted for the amount of the exemption so claimed; or if such items are presented by corporations, joint-stock companies, ex?m a P T a from or associations and insurance companies, organized in the JJSd" 8 a? x "th h e United States, the form of certificate heretofore prescribed source. for such organizations shall be used, and in such instances no tax shall be deducted. ART. 61. In both instances the licensee first receiving Certificates of such items shall retain such certificates for delivery with fofvrded, with the lists aforesaid, and with respect to said coupons, checks, t n s thl t o coiiec" or bills of exchange, said licensee shall attach thereto (iden- tor. tifying the items) or indorse or stamp thereon the words "In-come tax exemption claimed through" (giving name and address of licensee), which shall be sufficient evidence to relieve subsequent holders or purchasers from the duty of also withholding the tax thereon. The provisions for collection of the tax on foreign obli- Licensee to gations herein set forth includes the interest upon all foreign bonds, even though the coupons may, at the option of the holder, be payable in the United States as well as in some foreign country. keep records. ART. 62. All persons licensed shall keep their records in. such manner as to show from whom every such item has been received, and such records shall be open at all times to the inspection of internal-revenue officers. 123 D. Income derived from wages, rent, interest, or other fixed and determinable gains, profits, and income. Wages, sal- ART. 63. The above title includes all income derived from anes, rents, etc. sa l a ries, wages, rents, royalties, interest, taxable annuities, emoluments, or other fixed and determinable annual gains, profits, and income of another person. ("Income derived from interest upon bonds and mortgages, or deeds of trust, or other similar obligations of corporations, etc.," and "In- come derived from coupons, checks, or bills of exchange on foreign bonds, mortgages, dividends, etc.," which have been covered by regulations under such titles, are not to be in- cluded here.) withholding ART. 64. Copartnerships, companies, corporations, joint- smd nt a t0 tax d * Ct stoc ^ companies or associations, insurance companies, in whatever capacity acting, including lessees, mortgagors of real or personal property, trustees acting in any trust ca- pacity, executors, administrators, agents, receivers, con- servators, employers and all officers and employees of the United States, hereinafter referred to as "debtors" or with- holding agents, having the control, receipt, custody, disposal, or payment of income as described in article 63, shall de- duct and withhold from such annual gains, profit, and income, when the same shall have reached an aggregate amount in excess of $3,000, such sum as will be sufficient to pay the normal tax of 1 per cent imposed by law, and shall pay the taxes so withheld to the collector of internal revenue for the district in which the said withholding agent resides or has his, her, or its principal place of business. withheld on per? A RT : 65 ' A withholding agent who pays monthly, or odicai payments periodically during the year, interest, rents, salaries, wages, Jregate^I.ooo^" etc., shall not withhold the said tax until such time as the in- terest, rents, salaries, wages, etc., shall have reach an aggre- gate amount in excess of $3,000. When such amount has been reached, such agent shall withhold the tax on the whole $3,000, and any excess thereof, unless the person to whom the income is due files a notice claiming exemption Exemption un- , i /~> / 1 i -><>/ \\ i i der paragraph c under paragraph C (as provided in art. 33(a)), m which .nay be claimed. case ^ withholding agent shall withhold only the tax on the income in excess of said exemption of $3,000 or $4,000 (as the case may be), and the tax so withheld shall be paid as required by law. 124 ART. 66. In case the person to whom the income is due . Deductions un- , i ''* - 1 der paragraph is entitled to any deductions under paragraph B, he may B may be avail himself of such deductions by filing with the with- holding agent Form 1 008, as provided in article 33 (b), in which case the withholding agent will only withhold the tax on such income in excess of the deductions claimed on said form. Tax not to be A ^->7 T-> 1 1 i withheldby ART. o/. Banks, bankers, trust companies, and other banks .on inter- banking institutions receiving deposits of .money, are not ld required to withhold at the source the normal income tax of 1 'per cent on interest paid, or accrued, or accruing to depositors, whether on open accounts or on certificates of deposit; but all such interest, whether paid or accrued and unpaid, must be included in the annual income return of the person entitled to receive such interest, whether on open account or on the certificate of deposit. n e s given ART. 68. When a note shall have been given in payment Tax to be with- of interest, rents, or other income accruing after March 1, 1913, the maker of the note, as the "debtor" and as the "source" where the income originates, is required, in paying such note, to withhold the normal tax of 1 per cent on the entire amount of the note, if in excess of $3,000, unless claim for exemption or deductions under article 33 (a) or 33 (b) is filed, in which case the said tax shall be withheld only on the amount of said note in excess of the exemption or deductions so claimed. If any person who has purchased or discounted any such Purchasers of notes omitted, in acquiring them from previous holder, to make a deduction or allowance for said tax, he can look for ot relief only to the person from whom the notes were ob- tained, as the "debtor," the maker of said notes, is required to deduct, withhold, and pay to the collector of internal rev- enue the amount of the normal tax of 1 per cent which may be due thereon. been ART. 69. Withholding agents shall make an annual list Annual l return (Form 1042), in duplicate, to the collector of in- oidin b ternal revenue for the district in which the withholding agent resides or has his principal place of business on or before the 1st day of March in each year, showing the names and addresses of persons who have received incomes in excess of $3,000, on which the normal tax of 1 per cent has been deducted and withheld during the preceding year. This return must be accompanied by all forms presented claiming exemptions and deductions. 125 st re- a ems th " E. Fiduciaries. ART. 70. Guardians, trustees, executors, administrators, agents, to deduct agents, receivers, conservators, and all persons, corpora- tions, or associations acting in any fiduciary capacity here- inafter referred to as fiduciary agents, who hold in trust an estate of another person or persons, shall be designated duct?on e to d be ^ e "source" for the purpose of collecting the income tax, filed with other and by filing notice with other debtors or withholding agents agents. " g said fiduciary shall be exempt from having any income, due to them as such, withheld for any income tax by any other debtor or withholding agent. Other debtors or withholding agents upon receipt of such notice shall not withhold any part of such income from said fiduciary and will not in such case be held liable for normal .tax of 1 per cent due thereon. The form of notice to be filed with the debtor or withholding agent by fiduciary will be on Form 1015. Where such exemption is not claimed, notice thereof on Form 1019 should be filed with the withholding agent. Annual return ART. 71. Fiduciaries shall, on or before March 1 of each to be made to 111 ' r . . the collector of year, make and render a return of the income coming into the district. their custody or control and management from each trust or estate when the annual interest of any beneficiary in said trust or estate is in excess of $3,000. This return (Form 1041) must be filed with the collector for the dis- trict in which the fiduciary resides or has his principal place of business, and shall contain an itemized statement of the gross income and deductions claimed. Notice of failure to file return as required shall be served upon the fiduciary. (See art. 18.) The entries on the first page of Form 1041 in column headed "Amount of income paid or accrued to beneficiaries" should not include their respective shares of income de- rived from dividends on the stock or from the net earnings of corporations, joint-stock companies, etc., subject to like tax or the income on which the normal tax of 1 per cent has been deducted and withheld at the source by the debtor or the prior withholding agent, as these two items of income are treated as deductions in determining the amount of in- come subject to tax for which the fiduciary as withholding agent has to account. 126 When the share of any beneficiary, therefore, in the amount stated on line 3 of the first page of said return is in excess of $3,000, return must be made. ART. 72. As each such fiduciary acts solely in behalf of , R eturn , to |n- , , ~ . . ... . J . * . , . elude only in- the beneficiaries of the trust, the annual return required in come accruing such cases has reference only to the income accruing and otheT^seih^ payable through said fiduciary, and not to the income of the thorized by i J r i j r rr 1 1 beneficiary. beneficiary derived from other sources. If, Jiowever, such fiduciary is legally authorized to act for such beneficiary as agent or attorney in fact, he may in such case also make for the beneficiary the personal annual return (Form 1040) re- quired by law. ART. 73. The annual return of the fiduciary shall con- Annual return tain a list of the name and full address of each beneficiary *9 i nclu ^ e . . list ... ,. . , . ,-i * beneficiaries, and the share of said income to which each may be en- showing tax titled. There must also be entered opposite the name of Sch hel< each beneficiary the amount of exemption, if any, claimed by him, the amount of income on which the fiduciary is liable for tax, and the amount of tax withheld, and the said return shall be signed and sworn to by the fiduciary, if an individual, making same, and his full address must be stated. If the fiduciary is an organization, the return shall be signed and sworn to by the president, secretary, or treas- urer of said organization. Return to be ART. 74. Fiduciaries having control of any portion of an i . i ,1 1 1- M 1 eurn o e annual income accruing during the year, but not distributed made of undis- or paid to the beneficiaries during the year, shall, in render- Jj^J^ ing their annual return (Form 1041), give the name and the year address of each of said beneficiaries having a distributive interest in said income, and shall furnish all information called for in such returns. The fiduciary shall in all such cases withhold and pay to the collector, as provided by law, the normal tax of 1 per cent upon the distributive interest of each of said beneficiaries when in excess of $3,000, the same as if said income was actually distributed and paid. Exemption under paragraph C, however, may be claimed by the beneficiary or his legal representative bv filing his claim income. Para- r i -.1 ,1 r j graph C. for exemption with the fiduciary agent. Claim for ex- i b u " .ART. 75. When the normal tax on undivided annual net Tax withheld income has been so withheld, such tax shall not be again on ""divided in- .,,.,.,, ..... . , fc> . come not to be withheld when such portion of the income is actually dis- again withheld tributed and paid to said beneficiary. lisSbmed" 16 127 PART 3. RELATING TO THE INCOME TAX IMPOSED BY SECTIONS 2 AND 4 OF THE ACT OF OCTOBER 3, 1913, ON CORPORATIONS, JOINT- STOCK COMPANIES OR ASSOCIATIONS, AND INSURANCE COMPANIES. Organiza- ART. 76. Under the provisions of sections 2 and 4 of tions subject to . _ ., _ ... . tax. the act of October 3, 1913, every corporation, joint-stock company or association, and every insurance company or- ganized in the United States, no matter how created or or- One per cent ganized, except those specficially exempted, shall be subject to pay annually an income tax of 1 per centum per annum upon the entire net income arising or accruing from all sources during the preceding calendar or fiscal year, as the case may be. Certain exceptions as to taxability will be noted specifically hereinafter. on entire net in- come. Foreign cor- ART. 77. A similar tax shall be levied, assessed against, porations subject . , . . & . to the tax. and paid annually by corporations, joint-stock companies or associations, and insurance companies organized, authorized, or existing under the laws of any foreign country upon the amount of net income accruing from business transacted and capital invested within the United States during such year. defined P rations ^ RT> ^' "Corporation" or "corporations," as used in these regulations, shall be construed to include all cor- porations, joint-stock companies or associations, and all in- surance companies coming within the terms of the law, and such organizations will hereinafter be referred to as "cor- porations." Associations, ART. 79. It is immaterial how such corporations are trusts, etc., 1 sub- created or organized. The terms "joint-stock companies" ject to tax. or "associations" shall include associates, real estate trusts, or by whatever name known, which carry on or do business in an organized capacity, whether organized under and pur- suant to State laws, trust agreements, declarations of trusts, or otherwise, the net income of which, if any, is distributed, or distributable, among the members or share owners on the basis of the capital stock which each holds, or, where there is no capital stock, on the basis of the proportionate share of capital which each has invested in the business or property of the organization, all of which joint-stock com- panies or associations shall, in their organized capacity, be subject to the tax imposed by this act. Corporations ART. 80. Every corporation not specifically enumerated returns? *' aake as exempt shall make the return of annual net income re- 128 quired by law whether or not it may have any income liable to tax, or whether or not it shall be subordinate to or con- trolled by another corporation. Mutual telephone com- h Mutuai teie- panies, mutual insurance companies, and like organizations, t*aT e insurance although local in character, and whose income consists large- not exempt. ly from assessments, dues, and fees paid by members, do not come within the class of corporations specifically enu- merated as exempt. Their status under the law is not depend- ent upon whether they are or are not organized for profit. Not coming within the statutory exemption, all organizations of this character will be required to make returns of annual net income, and pay any income tax thereby shown to be due. For this purpose the surplus of receipts of the year over expenses will constitute the net income upon which the tax will be assessed. A railroad or other corporation which has leased its properties in consideration of a rental equivalent to a cer- tain rate of dividends on its outstanding capital stock and the interest on the bonded indebtedness, and such rental is paid by the lessee directly to the stock and bond holders, should, nevertheless, make a return of annual net income showing the rental so paid as having been received by the corporation. ART. 81. A railroad company operating leased or pur- .interest deduc- chased lines shall include all receipts derived therefrom, mfons y operat- and, if bonded indebtedness of such lines has been assumed, ^chased line? such operating company may deduct the interest paid there- on to an amount not exceeding one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year. ART. 82. Corporations operating leased lines should not Lessee corpo- 1 j ^i - i i r xi i ,1 rations not to include the capital stock of the lessor corporations in their include capital own statement of capital stock outstanding at the close of e d^s% the year. The indebtedness of such lessor corporations corporations, should not be included in the statement of the indebtedness of the lessee unless the lessee has assumed the same. Each leased or subsidiary company will make its own separate re- , turn, accounting for therein all income which it may have received by way of dividends, rentals, interest, or from any other source. ART. 83. A foreign corporation having several branch offices in the United States should designate one of such branch offices branches as its principal office and should also designate Ye^S?at? at the proper officers to make the required return. cipaf office. 129 ART. 84. A corporation organized during the year should to e makr render B. sworn return on the prescribed form, covering that portion of the year (calendar or fiscal) during which it was engaged in business or had an income accruing to it. Corporations ART. 85. Corporations going into liquidation during any datio g n. mt tax period may, at the time of such liquidation, prepare a "final return" covering the income received or accrued to them during the fractional part of the year during which they were engaged in business, and immediately file the same with the collector of the district in which the corpora- tions have their principal places of business. Limited part- ART. 86. Limited partnerships are held to be corpora- tions within the meaning of this act and these regulations, and in their organized capacity are subject to the income tax as corporations. Corporations ART. 87. The act specifically enumerates and exempts tax. empt r m from its provisions and requirements labor, agricultural, or horticultural organizations, mutual savings banks not having a capital stock represented by shares, fraternal beneficiary societies, orders, or associations operating under the lodge system, or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and pro- viding for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or asso- ciations, and dependents of such members, domestic build- ing and loan associations, cemetery companies organized and operated exclusively for the mutual benefit of their mem- bers, any and all corporations or associations organized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of whose net income inures to the benefit of any private stockholder or individual, busi- ness leagues, chambers of commerce, or boards of trade not organized for profit, no part of the net income of which inures to the benefit of the private stockholder or individual, and civic leagues or similar organizations not organized for profit, but operated exclusively for the promotion of social welfare. Domes tic Domestic building and loan associations are among those loan associations enumerated as exempt from the requirements of the law. defined. Mutual- A domestic building and loan association is held to be one organized under and pursuant to the laws of the United States, or of a State or Territory thereof, or under the laws applicable to Alaska or the District of Columbia. Mutuality 130 in operation and in the distribution of profits and benefits is essential to exemption. Therefore, in order to come within the exempted class such associations must not only be "Domestic," as defined, but they must be organized and operated exclusively for the mutual benefit of the members ; that is, all the profits and benefits provided for in the arti- cles of association and by-laws must be ratably distributed among all members regardless of the kind of stock held, according to the amount of money they have on deposit. An association issuing different classes of stock upon which different rates of interest or dividends are guaranteed or paid, does not come within the exempted class. ART. 88. All corporations and all beneficiary societies enumerated above shall by affidavit, or otherwise, at the their right to request of the collector or Commissioner of Internal Reve- exem P tlon - nue, establish their right to the exemption provided, in which case it will not be sufficient to merely declare that they are exempt, but they must show the character and purpose of the organization, the manner of distributing the net in- come, if any, or that none of the net income inures to the benefit of any private stockholder or individual. In the absence of such a showing, such organizations may, at any time, be required to make returns of annual net income or disclose their books of account to a revenue officer for exam- ination in order that the status of the company may be de- termined. 3577 Regulations 22P 2-14 Jolley ELEVEN ART. 89. A society or association "operating under the Society or asso- , , ,, . J . , -1 ciation subject lodge system is considered to be one organized under a to exemption de- charter, with properly appointed or elected officers, with fined ' an adopted ritual or ceremonial, holding meetings at stated intervals, and supported by fees, dues, or assessments. ART. 90. Cemetery companies organized and operated cemetery com- exclusively for the mutual benefit of their members are ^^uSai^ene- exempt. The provisions of the law clearly indicate that fit of their mem- companies which operate cemeteries for profit are liable to the tax. The status of cemetery associations under the law will, therefore, depend upon the character and purpose of the organization and what disposition is made of the income. ART. 91. Any corporation, concerning whose status under Corporations the law there is any doubt, or which does not clearly come h 7xemp a tion 15- within one or another of the classes of those specifically in , doubt m u s * 1 , 1 1 /-I / , 1 , ' r 1 make return. enumerated as exempt, should file a return (in blank if de- sired) and attach thereto a statement setting out fully the nature and purpose of the organization, the source of its income, and what disposition is made of it, and particularly of any surplus. Coop erative ART. 92. Cooperative dairies not issuing stock and allow- dairies not issu- . !- i < -n r i i ing stock and ing patrons dividends based on butter fat in milk furnished dWS eTdT are not liable. In such case the "dividends" are the pur- exempt. chase price of the raw material furnished. ART - 93. The income derived from any public utility or ides is not tax- from the exercise of any essential governmental function, which income accrues to any State, Territory, the District of Columbia, or any political subdivision of a State, Territory, or the District of Columbia, and any in- come accruing to the government of the Philip- pine Islands, or to Porto Rico, shall not be subject to the tax imposed by this act. In cases wherein any State, Territory, or the District of Columbia, or any political sub- division of a State, or Territory, shall have, prior to the pas- sage of this act, contracted in good faith with any person or corporation to acquire, construct, operate, or maintain a public utility, no income tax pursuant to this act shall be levied upon the income derived from the operation of such public utility, so far as the assessment and payment of such tax will impose a loss or burden upon such State, Territory, Persons or cor- District of Columbia, or political subdivision. But the per- porations not , i 1 r i ri exempt. son or corporation is not relieved irom the payment ot the tax upon that portion of the income accruing to him, or it, under such contract. ART - 94. Ordinary copartnerships are not, as such, sub- corporations. ject to the tax imposed by this act, but the individual mem- bers of any such partnership are liable for income tax only in their individual capacity on their respective shares of the earnings of such partnership, whether such earnings be dis- tributed or not. ART - 95 - Ful1 amount of stock, as represented by the par capital stock. value of the shares issued, is to be regarded as the paid-up capital stock, except when such stock is assessable on ac- count of deferred payments, or payable in installments, in which case the amount actually paid on such shares will constitute the actual paid-up capital stock of the corpora- tion. hoS r< d SS inc ined! ART - 96. The following definitions and rules are given for determining the gross income of various classes of cor- porations : 132 Gross income of banks and other financial institutions t G ? oss ' lncom * r . , .. of banks and consists of the total revenue derived from the operation of other financial the business, including income, gains, or profits from all mstltutlons - other sources, as shown by the entries on the books of ac- count, within the calendar or fiscal year for which the re- turn is made. ART. 97. Gross income of insurance companies consists of the total revenue derived from the operation of the busi- ness, including income, gains, or profits from all other sources, as shown by the entries on the books of account within the calendar or fiscal year for which the return is made, except as modified by the express exemptions of the articles which apply to mutual fire, mutual marine, and life insurance companies. Gross income a n ART. 98. Mutual fire insurance companies, which' re- Gross income quire their members to make premium deposits to provide i for losses and expenses, shall not return as gross income any P anies - portion of the premium deposits returned to their policy- holders, but shall return as taxable income all income re- ceived by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves. of mutual fire insurance com- ART. 99. Mutual marine insurance companies may in- . Mutual elude in their deductions from gross income amounts repaid to policyholders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the payment thereof, such amounts and interest having been included in gross income. ART. 100. Life insurance companies are authorized to omit from gross income such portion of any actual premium ibi, when received from any individual policyholder as shall have been paid back or credited to the policyholder or treated as an abatement of his premium. In so far as "deferred divi- dends" payable at a stated period represent "a portion of any actual premium received," such deferred dividends may be included in the amounts to be omitted from gross income for the year in which they were actually paid back, credited to the policyholder or applied as an abatement of premium. In the case of dividends credited or apportioned annually to the policyholder, only the aggregate amount so actually credited or apportioned during the premium-paying period, and not any accretions thereto, can be excluded from gross 133 income. In the case of whole-life or five-year distribution policies, deferred dividends may be excluded from gross in- come to the extent that they are paid back, or credited to> the insured, or used as an abatement of his annual pre- miums. Gross c elude what. ART. 101. Gross income of insurance companies, as de- - fined above, will include net premium income as reported to t j ie State insurance departments, except the foregoing items specifically exempted in the act, and, in the case of life insurance companies, surrender values applied in any manner, consideration for supplementary contracts involving and not involving life contingencies, and all other income, gains, or profit as shown by the books of account. Consideration for supplemen- tary contracts, ART. 102. Applied surrender values and consideration for , ....... . . supplementary contracts not involving lite contingencies in- cluded in income will, of course, be deducted as payments under policy contracts, but for convenience in verifying the returns, these items should appear in the return in both gross income and deductions. company ^3. ^ insurance companies should include and attach to their returns a supplementary statement showing, for life companies, the aggregate of items "of such portion of any actual premium received from any individual policy- holder as shall have been paid back or credited to such in- dividual policyholder, or treated as an abatement of pre- mium of such individual policyholder within such year;" in the case of mutual fire insurance companies a statement showing "any portion of the premium deposits returned to their policyholders ;" and in the case of mutual marine com- panies "amounts repaid to policyholders on account of pre- miums previously paid by them, and interest paid upon such amounts between the ascertainment thereof and the pay- ment thereof," which are, or may be, omitted from gross in- come. (For authorized deductions, on account of losses, etc., see Arts. 113 and 147.) Gross income of manuiactur- ing companies, ART. 104. Gross income of manufacturing 1 companies , . shall consist of the total sales of manufactured goods dur- ing the year covered by the return, increased or decreased by the gain or loss as shown by the inventories of finished and unfinished products, raw material, etc., at the beginning and end of the year. To this amount should be added the income, gains, or profits from all other sources as shown by the books of account. 134 ART. 105. Gross income of mercantile companies shall .Gross income - 11 , , ,. , - . * . ofmerca ntile include the total merchandise sales during the year, in- corporations, creased or decreased by the gain or loss as shown by the inventories of merchandise at the beginning and end of the year for which the return is made; to this amount should be added the income, gains, or profits derived from all other sources as shown by the books of account. ART. 106. Gross income of miscellaneous corporations consists of the total revenue derived from the operation and management of the business and property of the cor- poration making the return, together with all amounts of income, including the income, gains, or profits from all other sources as shown by the books of account. Gross income " 16 ART. 107. It will be noted from these definitions that the Definition of gross income embraces not only the operating revenues, but gr l also income, gains, or profits from all other sources, such as rentals, royalties, interest, and dividends from stock owned in other corporations, and appreciation in values of assets, if taken upon on the books of account as gain; also profits made from the sale of assets, investments, etc. ART. 108. For the purpose of determining the income re- , income derived , r i from sale of cap- sultmg from the sale of capital assets and the amount to be itai assets, accounted for as income under this act, there shall be in- cluded any and all profit resulting from such sale and which may be apportioned to the period during which the cor- poration tax law (sec. 38, act of Aug. 5, 1909) was in force and effect, which was not returned as income during that period. ART. 109. In ascertaining net income derived from the A s c e rtaining sale of capital assets, if such assets were acquired subse- "he sale? cap? quent to January 1, 1909, the difference between the selling tal ass ets. price and the buying price shall constitute an item to be added to or subtracted from gross income according to whether the selling price was greater or less than the buying price. If the capital assets were acquired prior to January 1, 1909, the amount of profit or loss representing the differ- ence between the selling and buying price is to be prorated to determine the proportion of the gain or loss arising sub- sequent to January 1, 1909, and the proportionate part be- longing to the years subsequent to January 1, 1909, shall be added to or deducted from the gross income for the year in which the sale was made. 135 'from ^he ART - ^^' For the P ur P ose of determining the profit or sale of such loss arising from the sale of such assets, there shall be added to the price actually realized from the sale any amount which has heretofore been set aside and deducted from gross income by way of depreciation since January l r 1909, which has not been paid out in making good such de- preciation on the property sold. book a vafue s o? ART - H 1 - In the case of changes in book values of capi- assets. tal assets resulting from a reappraisal of property, the con- sequent gains or losses shall be computed for the return in the manner prescribed above in the case of the sale of capital assets. ^ n cases wherein there is an annual adjustment of book va ^ ues ^ securities, real estate and like assets, and the in- creases and decreases in values, thus indicated, are taken up on the books and reflected in the profit and loss account, such readjusted values will be taken into account in making the return of annual net income and no prorating will be re- quired. If such adjustment had been made annually prior to March 1, 1913, the book value of the assets at that date will be taken as the basis for determining gain or loss re- sulting from subsequent sale, maturity, or adjustment. The adjustment referred to will comprehend assets which have increased in value as well as those which have decreased. rattons re are r en- ART. 112. Where a corporation is engaged in carrying f*fn d onl n cia?sof on more t ^ ian ne c ^ ass of business, gross income derived bulriness! c from the different classes of business shall be ascertained ac- cording to the definitions above, and which are applicable thereto. how aJceSSnSdl ART. H3. The net income shall be ascertained by de- ducting from the gross amount of the income of such cor- poration received within the year from all sources : Firs t- A1 1 the ordinary and necessary expenses paid within the year in the maintenance and operation of its business and properties, including rentals or other payments required to be made as a condition to the continued use or possession of property. t s h| ta year d Second. All losses actually sustained within the year and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use, wear and tear of property, if any, and in the case of mines, a rea- Depreciation. sonable allowance for depletion of ores and all natural de- posits, not to exceed 5 per centum of the gross value at the mine of the output for the year for which the computation 136 is made ; and in the case of insurance companies, the net ad- dition, if any, required by law to be made within the year to reserve funds, and the sums other than dividends paid within the year on policy and annuity contracts, except as provided in the cases of mutual fire, mutual marine, and life insurance companies. Third. The amount of interest accrued and paid within the year on its indebtedness to an amount of such indebted- ness not exceeding one-half of the sum of its interest- bearing indebtedness and its paid-up capital stock out- standing at the close of tfce year, or if no capital stock, on the amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year: Provided, That in case of indebtedness wholly secured by collateral the subject of sale in ordinary business of such corporation, joint-stock company, or association, the total interest secured and paid by such company, corporation, or association within the year on any such indebtedness may be deducted as a part of its expense of doing business: Provided further, That in the case of bonds or other in- debtedness, which have been issued with a guaranty that the interest payable thereon shall be free from taxation, no deduction for the payment of the tax herein imposed shall be allowed; and in the case of a bank, banking association, loan, or trust company, interest paid within the year on deposits or on moneys received for investment and secured by interest-bearing certificates of indebtedness issued by such bank, banking association, loan, or trust company. Interest accrued and paid within the year. Interest on in- debtedness se- cured by collat- eral. Tax paid on guaranteed bonds not de- ductible. Fourth. All sums paid within the year for taxes imposed Taxes paid under the authority of the United States, or any State or " Territory thereof, or imposed by the government of any foreign country. ART. 114. Expenses of operation and maintenance shall General ex- include all expenditures for material, labor, fuel, and other P enses - items entering into the cost of the goods sold or inventoried at the end of the year, and all other expenses incurred in the operation of the business except such as are required by the act to be segregated in the return. ART. 115. The cost of erecting permanent buildings on ground leased by a company is a proper deduction as a rental charge, provided such buildings are left on the ground at the expiration of the lease as a part of the rental payment. In such case the cost will be prorated according to the num- ber of years constituting the term of the lease and the an- nual deduction will be made accordingly. 137 Cost of build- ings on leased grounds. Expense, for- ART. 116. General expenses, such as coal, ship stores, eign steamship ..... ... r . 1111 i companies. etc., of foreign steamship companies, shall be prorated as provided in the act for interest deductions in the case of foreign corporations. n si aid A RT - 117. Commissions allowed salesmen, paid in stock, in s tok n may be deducted as expense if so charged on books at the actual value of such stock. betterments. Additions and ART. 118. Amounts expended in additions and better- ments which constitute an increase in capital investment are not a proper deduction. Compensation ART. 119. Amounts paid as compensation or additional based on stock- . . . holding not de- compensation to officers or employees, which amounts are based upon the stockholdings of such officers or employees, are held to be dividends, and although paid in lieu of sal- aries or wages, are not allowable deductions from gross in- come, for the reason that dividends are not deductible. ons if or 8 ' ratal- ART. 120. Amounts paid for pensions to retired em- des^not deduct- ployees, or to their families, or others dependent upon them, or on account of injuries received by employees, are proper deductions as "ordinary and necessary expenses"; gifts or gratuities to employees in the service of a corporation are not properly deductible in ascertaining net income. which n are 1 <?e- ART. 121. Donations made for purposes connected with ductibie. ' the operation of the property when limited to charitable in- stitutions, hospitals, or educational institutions, conducted for the benefit of its employees, or their dependents, shall be a proper deduction for ordinary and necessary expenses. for ART. 122. Funds set aside by a corporation for insuring its own property are not a proper deduction, but any loss actually sustained and charged to such fund may be de- ducted. ^Materials and ART. 123. In ascertaining expenses proper to be included in the deductions to be made under the item of "Expenses," corporations carrying materials and supplies on hand for use should include in such expenses the charges for ma- terials and supplies only to the amount that the same are actually disbursed and used in operation and maintenance during the year for which the return is made. 138 ART. 124. The deduction for losses must be losses ac- Losses sus- ,, , , . , , tamed during tually sustained during the year and not compensated .by the year, insurance or otherwise. It must be based upon the differ- ence between the cost value and salvage value of property or assets, including in the latter value such amount, if any, as has, in the current or previous years, been set aside and deducted from gross income by way of depreciation, as elsewhere defined, and has not been paid out in making good such depreciation. ART. 125. Bad debts, if so charged off the company's ch a r g d ed d ff. bts books, during the year, are proper deductions. But such debts, if subsequently collected, must be treated as income. ART. 126. Reserves to take care of anticipated or prob- . ? ese . es n t 111 1 j . c deductible. able losses are not a proper deduction from gross income. ART. 127. Loss due to voluntary removal of buildings, r L* v d & ^ e * etc., incident to improvements is either a proper charge to buildings, the cost of new additions or to depreciation already pro- vided, as the facts may indicate, but in no case is it a proper deduction in determining net income, except as it may be re- flected in the reasonable amount allowable as a deduction for depreciation of the new building. Any loss claimed because of the voluntary removal of a building is presumed to have been covered by previous depreciation charges; otherwise the amount of such loss will constitute a part of the cost of the new building. ART. 128. All losses claimed arising from sale of capital s jf ss ^ s assets should be 'arrived at in the manner prescribed in arti- assets, cle 109, defining gains arising from sale of capital assets. ART. 129. The deduction for depreciation should be the D^p reciation estimated amount of the loss, accrued during the year to which the return relates, in the value of the property in respect of which such deduction is claimed, that arises from exhaustion, wear and tear, or obsolescence out of the uses to which the property is put, and which loss has not been made good by payments for ordinary maintenance and re- pairs deducted under the heading of expenses of mainte- Depreciation, nance and operation. This estimate should be formed upon how d the assumed life of the property, its cost, and its use. Ex- penses paid in any one year in making good exhaustion, wear and tear, or obsolescence in respect of which any de- duction for depreciation is claimed must not be included in the deduction for expense of maintenance and operation of 139 the property, but must be made out of accumulated allow- ances, deducted for depreciation in current and previous years. de?uctFbie, da how ART - 13 - The depreciation allowance, to be deductible, treated. must be, as nearly as possible, the measure of the loss due to wear and tear, exhaustion, and obsolescence, and should be so entered on the books as to constitute a liability against the assets of the company, and must be reflected in the an- nual balance sheet of the company. The annual allowance deductible on this account should be such an amount as that the aggregate of the annual allowances deducted during the life of the property, with respect to which it is claimed, will not, when the property is worn out, exhausted, or obsolete, exceed its original cost. P a?r n s? idellt * 1 re " ART - 131 - Incidental repairs which neither add to the value of the property nor appreciably prolong its life, but keep it in an operating condition, may be deducted as ex- penses. Depreciation ART. 132. Depreciation set up on the books and deducted from gross income cannot be used for any purpose other than making good the loss sustained by reason of the wear and tear, exhaustion, or obsolescence of the property with respect to which it was claimed. If it develops that an amount has been reserved or deducted in excess of the loss by depreciation, the excess shall be restored to income and so accounted for. Diversion of ART. 133. If any portion of the depreciation set up is depredate re- Diverted to any purpose other than making good the loss sustained by reason of depreciation, the income account for the year in which such diversion takes place must be cor- respondingly increased. Shrinkage in ART. 134. Depreciation in book values of capital assets shall be treated in the return in the manner prescribed in the case of loss from the sale of capital assets (art. 109), but amounts arbitrarily charged off will not be allowed as deductions except so far as they represent an actual shrink- age in values which may be determined to have taken place during the year for which the return is made. ART. 135. Where a corporation holds bonds which were purchased at a rate above par and said corporation shall pro- portionately reduce the value of those bonds on its books each year so that the book value shall be the redemption value of the bonds when such bonds become due and payable, the return of annual net income of the corporation holding 140 such bonds may show the depreciation on account of amor- tization of such bonds. The requirement is, however, that the amount carried to the amortization account each year shall be equitably proportioned with respect to the difference between the purchase price and the maturing value and the number of years to elapse until the bonds become due and payable. With respect to bond issues where such bonds are disposed of for a price less than par and are redeemable at par, it is also held that because of the fact that such bonds must be redeemed at their face value, the loss sustained by reason of their sale for less than their face value may be prorated by the issuing corporation in accordance with the life of the bond. Am o r tizatioH of bonds. Loss to be pro- rated. ART. 136. "Good will" represents the value attached to a business over and above the value of the physical prop- erty, and is such an entirely intangible asset that no claim for depreciation in connection therewith can be allowed. Good will. ART. 137. An allowance for depreciation of patents will be made on the following basis : D e p reciatioa on patents. The deduction claimed for exhaustion of the capital assets as represented by patents to be made in the return of annual net income of a corporation for any given year shall be one-seventeenth of the actual cost of such patents reduced to a cash basis. Where the patent has been secured from the Government by a corporation itself, its cost would be represented by the various Government fees, cost of draw- ings, experimental models, attorneys' fees, etc. Where the patent has been purchased by the corporation for a cash con- sideration, the amount would represent the cost. Where the corporation has purchased a patent and made payment there- for in stocks or other securities, the actual cash value of such stocks or other securites at the time of the purchase will represent the cost of the patent to the corporation. H o w deter- mined. ART. 138. With respect to the depreciation of patents, Deduction one-seventeenth of the cost is allowable as a proper deduc- S n ceof tion each year until the cost of the patent has been returned to the corporation. Where the value of a patent has dis- appeared through obsolescence or any other cause and the fact has been established that the patent is valueless, the un- returned cash investment remaining in the patent may be claimed as a total loss and be deducted from gross income in 141 the return of annual net income for the year during which the facts as to obsolescence or loss shall be established, such unreturned cash value to be fixed in accordance with the proportion that the number of years which the patent still has to run bears to the full patent period of 17 years. D e p reciation of timber land. ART. 139. Corporations owning tracts of timber lands and removing therefrom and selling, or otherwise disposing of the timber will be permitted to deduct from their gross in- come on account of depreciation or depletion an amount rep- resenting the original cost of such timber, plus any carrying charges that may have been capitalized or not deducted from income. The purpose of the depreciation or depletion de- duction is to secure to the corporation, when the timber has been exhausted, an aggregate amount which, plus the salvage value of the land, will equal the capital actually invested in such timber and land. Deductions to cease, when. ART. 140. When an amount sufficient to return this capi- tal has been secured through annual depreciation deduc- tions no further deduction on this account shall be allowed. For the purpose of increasing the deduction on this account no arbitrary increase in values shall be made, unless such increase in value shall be returned as income for the year in which the increase in value was taken up on the books. D e p reciation of natural depos- its. ART. 141. The depreciation of "coal, iron, oil, gas and all other natural deposits must be based upon the actual cost of the properties containing such deposits. In no case shall the annual deduction on this account exceed 5 per cent of the gross value at the mine (well, etc.) of the output for the year for which the computation is made. Definition of 'gross value" at the mine. ART. 142. The term "gross value at the mine," as used in paragraphs B and G of section 2 of the act of October 3, 1913, prescribing a limit to the amount which may be de- ducted in the return of individuals and corporations as de- preciation in the case of mines, is held to mean the market value of ore, coal, crude oil, and gas at the mine or well, where such value is established by actual sales at the mine or well ; and in case the market value of the product of the mine or well is established at some place other than at the mine or well, or on the basis of the bullion or metallic value of the ore, then the gross value at the mine is held to be the value of the ore, coal, oil, or gas sold, or of the metal pro- duced, less transportation, reduction, and smelting charges. 142 If the rate of 5 per cent per annum shall return to the t i ^ at t of ^re- corporation its capital investment prior to the exhaustion duced, when, of the deposits, the rate on which the annual deduction for depletion of deposits is based must be lowered in accordance with the estimated number of years it will take to exhaust the estimated reserves. In case the reserves shall be in excess of the estimates, no Deduction to further deduction on account of depletion shall be made cease> when - where the capital investment has been returned to the cor- poration. ART. 143. In addition to the deduction to measure the Depreciation loss due to depletion, the corporation will be allowed the of plant ' etc< usual depreciation of its machinery, equipment, etc., such depreciation to be determined on the basis of the cost and estimated life of the property with respect to which the depreciation is claimed. ART. 144. Corporations leasing oil or gas territory shall Corporations base their depletion deduction upon the cost of the lease, and g e a a s s . ing not upon the estimated value, in place, of the oil or gas. ART. 145. Corporations operating mines (including oil Corporations or gas wells) upon a royalty basis only can not claim depre- P eratm g mines, ciation because of the exhaustion of the deposits. ART. 146. Unearned increment will not be considered in fixing the value on which depreciation shall be based. Unearned in- crement. ART. 147. (a) Under item 5 (a) of the return form, the , Deduction of , , j'j_.f 11 i 11 losses, deprecia- msurance company may take credit for all losses actually tion, payments sustained during the year and not compensated by insurance ? r " ct sby y insur- er otherwise, including losses resulting from the sale or ance companies, maturity of securities or other assets, as well as decreases by adjustment of book values of securities, in so far as such decreases represent actual declines in values which have taken place during the year for which the return is made ; also losses from agency balances, or other accounts, charged off as worthless ; losses by defalcation ; premium notes voided by lapse, when such notes shall have been included in gross income. This item will not, however, include pay- ments on policy contracts. (>) In this item may be deducted actual losses sustained Losses by within the year by reason of the depreciation of property, value n of a ^op" which shall have been so entered on the books of the com- ert y- pany as to constitute a liability against its assets. An arbi- trary depreciation deduction claimed in the return, but not evidenced by book entry, can not be allowed. 143 tracts 1 paid 7 c n " ( c ) In this * tem cred ^ wil1 J 36 taken for a11 death, dis- ability, or other policy claims, including fire, accident, and liability losses, matured endowments, annuities, payments on installment policies, surrender values, and all claims actually paid under the terms of policy contracts. Salvage need not be included in gross income if deducted in ascer- taining the net amount paid for losses under policy con- Losses in- tracts. Reserves covering liabilities for losses incurred, pai r d e not a dedtIS- reported, resisted, adjusted or unadjusted but not paid, ible - can not be deducted from gross income under this or any other item of the return. , W The reserve funds of insurance companies to be by law, how de- considered in computing the deductible net addition to re- serve funds are held to include only the reinsurance reserve and the reserve for supplementary contracts required by law in the case of life insurance companies, the unearned pre- mium reserves required by law in the case of fire, marine, accident liability, and other insurance companies, and only such other reserves as are specifically required by the statutes of a State within which the company making the return is doing business. The reserves used in computing the net addition must not include the reserve on any policies the premiums on which have not been accounted for in gross income. For the purpose of this deduction, the net addition is the excess of the reserve at the end of the year over that at the beginning of the year and may be based upon the highest authorized reserve required by any State in which the company making the return does business. ^ n ^ e case ^ assessmen t insurance companies, the actual deposits of sums with the State or Territorial officers pur- suant to law, as additions to guaranty or reserve funds, shall be treated as payments required by law to reserve funds. Mutual marine insurance companies will deduct under item 5 (<?) amounts repaid to policyholders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the payment thereof. ART * 148 ' The amount * interest accrued and paid nterest de- within the year by a corporation on an amount of bonded or other indebtedness not in excess of one-half of the sum of the interest-bearing indebtedness and the paid-up capital 144 stock outstanding at the close of the year, or, if no capital stock, on the amount of interest-bearing indebtedness not exceeding the amount of capital employed in the business at the close of the year, constitutes an allowable deduction ; that is, the maximum principal, upon which interest for the purpose of this deduction, can be computed must not exceed, in the one case, one-half of the sum of the interest-bearing indebtedness and the capital stock outstanding at the close of the year, or, in the other case, must not exceed the amount of capital employed in the business at the close of the year. The interest to be deductible must have been computed on the proper principal at the contract rate and must have been actually paid within the year. Interest paid pursuant to contract on an indebtedness interest paid secured by mortgage or real estate occupied and used by f^ 6111 * 1 deduct ' a corporation, in which real estate the corporation has no equity or to which it is not taking title is an allowable deduc- tion from gross income as a rental charge, payment of which is required to be made as a condition to the con- tinued use and possession of the property. If, however, the interest on corporation has an equity in or is purchasing for its own mortgage on real J , . , estate in which use the real estate upon which such mortgage is a prior corporation has lien, the indebtedness will be held to be indebtedness of gSte."** de ~ the corporation within the meaning of the law and the interest paid on such mortgage will be deductible only to the extent that it, with interest on other obligations of the corporation, is within the limit fixed by the act. ART. 149. In the case of banks and banking associations, Banks and loan or trust companies, interest paid within the year on {fojj* associ a- deposits, or on moneys received for investment and secured by interest-bearing certificates of indebtedness issued by such bank, banking association, loan or trust company, may be allowably deducted from the gross income of such cor- porations. ART. 150. Interest paid on indebtedness, wholly secured interest paid by collateral the subject of sale in ordinary business of such n indebtedness, corporations, is also deductible to the full amount of such interest paid. This contemplates that the entire interest received on the collateral securing such indebtedness shall be included in the gross income returned. ART. 151. Interest on bonded or other indebtedness Different rates bearing different rates of interest may be deducted from of interest, gross income during the year, provided the aggregate <%> 145 amount of such indebtedness on which the interest is paid does not exceed the limit prescribed by law, and in case the indebtedness is in excess of the amount on which interest may be legally deducted the indebtedness bearing the highest rate may be first considered in computing the interest de- duction and the balance, if any, will be computed upon the indebtedness bearing the next lower rate actually paid, and so on until interest on the maximum principal allowed has been computed. Taxes deduct- ART. 152. All sums paid within the year for taxes im- posed under the authority of the United States or of any State or Territory thereof, or imposed by the government of any foreign country, are deductible from gross income. Taxes not de- ductibie. ART. 153. Taxes paid for local benefits are not deduct- Taxes paid by a corporation pursuant to a contract guaranteeing that the interest payable on its bonds or other indebtedness shall be free from taxation are not deductible. Tax on capital ART. 154. Banks paying taxes assessed against their stock of bank*, stockholders because of their ownership of the shares of stock issued by such banks can not deduct the amount of taxes so paid in making their return for the income tax imposed by this act unless specially authorized to do so by the laws of the State in which they do business. The shares of stock are the property of the stockholders, and such holders are primarily liable for the tax. import duties.' ART. 155. Import duties or taxes are not deductible under the item of taxes paid during the year, but should be included in arriving at the cost of goods under item No. 4 (expenses). Reserves for ART. 156. Reserves for taxes can not be allowed, as the law specifically provides that only such sums as are paid within the year for taxes shall be deducted. Foreign corpo- ART. 157. Foreign corporations shall be subject to the toTax 8 subject normal tax of 1 per cent computed upon the net income received by or accruing to such corporations from busi- ness transacted and capital invested in this country. For the purpose of the tax the net income of such foreign organizations shall be ascertained by deducting from the gross income arising, received, or accruing from business done and capital invested in this country the deductions enumerated in the act, which deductions shall be limited Deductions to expenditures or charges actually incurred in the main- con fined to ex- , *? , , . J ncnses of busi- tenance and operation 01 the business transacted and capi- r e mted n stites he tal invested in the United States or, as to certain charges, 146 such proportion of the aggregate charges as the gross in- come from business done and capital invested in the United States bears to the aggregate income within and without the United States. In other words, the deductions from the gross income of a foreign corporation doing business in this country should, as nearly as possible, represent the actual expenses and authorized charges incident to the busi- ness done and capital invested in this country and must not comprehend, either directly or indirectly, any expenditures or charges incurred in the transaction of business or the investment of capital without the United States. ART. 158. It is immaterial whether the deductions except HOW deduc- for taxes and losses are evidenced by actual disbursements *^| nc |5 a11 be in cash, or whether evidenced in such other way as to be properly acknowledged by the corporate officers and so entered on the books of the corporation as to constitute a liability against the assets of the corporation making the return. Deductions for taxes, however, should be the aggre- gate of the amounts actually paid, as shown on the cash book of the corporation. Deductions for losses should be confined to losses actually sustained and charged off dur- ing the year and not compensated by insurance or other- wise. Except as the same may be modified by the pro- visions of the act, limiting certain deductions and author- izing others, the net income as returned for the purpose of the tax should be the same as that shown by the books or the annual balance sheet. ART. 159. The tax imposed upon the income of cor- . Tax on net porations, whether domestic or foreign, shall be computed StSSs for r fhe upon the net income, ascertained in the manner hereinbefore year 1913 - indicated, except that for the year ending December 31, 1913, the income tax will be imposed upon the net income accrued from March 1 to December 31, both dates inclu- sive, and such amount of net income is ascertained by tak- ing five-sixths of the entire net income for said calendar year. ART. 160. The special excise tax on corporations pro- Special excise vided for in the act of August 5, 1909, is reaffirmed and Jf x ns on cor P ra ' made operative and effective as to the period from January 1 to February 28, 1913, both dates inclusive, which said tax shall be computed upon one-sixth of the entire net income of said corporations for said year, and the net income shall be ascertained in accordance with the pro- visions of the income-tax law. 147 Return and p or the year 1913 it shall be necessary to make but one assessment. t <f , ., J , . , return and assessment for all taxes imposed in the income- tax law upon corporations, either by way of income or excise, which return and assessment shall be made at the times and in the mariner provided in section 2 of the act of October 3, 1913. NO specific ex- Under the present law, no specific exemption is allow - abie'aTa deduc- a ^ e > as was tne case un der the corporation-tax law; hence tion. the assessment will be based upon the entire net income of the corporation arising or accruing to it from all sources during the entire year for which the return is made. inventories. ART. 161. In order that certain classes of corporations may arrive at their correct income, it is necessary that an inventory, or its equivalent, of materials, supplies, and mer- chandise on hand for use or sale at the close of each calen- dar year shall be made in order to determine the gross income or to determine the expense of operation. Physical in- A physical inventory is at all times preferred, but where ltory * a physical inventory is impossible, and an equivalent inven- tory is equally accurate, the latter will be acceptable. An equivalent inventory is an inventory of materials, supplies, and merchandise on hand taken from the books of the corporation. Corporations, ART. 162. For the purpose of this tax, corporations are classes of. divided into five classes, as follows : Class A. Class A. Financial and commercial, including banks, banking associations, trust companies, guaranty and surety companies, title insurance companies, building associations (if for profit), and insurance companies not specifically ex- empt. class B. Class B. Public service, such as railroad, steamboat, ferry- boat, and stage-line companies; street-railway companies; pipe-line, gas-light, and electric-light companies; express companies, telegraph and telephone companies. class c. Class C. Industrial and manufacturing, such as mining, oil and gas producing companies, lumber and coke com- panies; rolling mills; foundry and machine shops; saw- mills; flour, woolen, cotton, and other mills; manufac- turers of cars, automobiles, elevators, agricultural imple- ments, etc. ; manufacturers or refiners of sugar, molasses, 148 sirups, or other products ; ice and refrigerating companies ; slaughterhouse, tannery, packing, or canning companies; printing and publishing companies, etc. Class D. Mercantile, including all dealers (not otherwise classed as producers or manufacturers) in coal, lumber, grain, produce, and all goods, wares, and merchandise. Class D. Class E. Miscellaneous, such as architects, contractors, hotel, theater, or other companies or associations not other- wise classified. Class E. ART. 163. Under the authority conferred by this act, Form of return, forms of return have been prescribed, in which the various items specified in the law are to be stated. Blank forms of this return will be forwarded to collectors and should be furnished to every corporation, not expressly exempted, on or before January 1 of each year, in the case of corporations making their returns for the calendar year, or on or before the first day of the next fiscal year in the case of corpora- tions making returns for their fiscal year. Failure on the part of any corporation, joint-stock company, association, or insurance company liable to this tax to receive a pre- scribed blank form will not excuse it from making the re- turn required by law, or relieve it from any penalties for failure to make the return in the prescribed time. Corpora- tions not supplied with the proper forms for making the re- turn should make application therefor to the collector of in- ternal revenue in whose district is located its principal place of business in ample time to have its return prepared, verified, and filed with the collector on or before the last due date as hereinafter defined. Failure in this respect subjects it not only to 50 per cent additional tax, but to the specific penalty imposed for delinquency. Each corporation should carefully prepare its return so as to fully and clearly set forth the data therein called for. Imperfect or incorrect returns will not be accepted as meeting the requirements of the law. ART. 164. To any sum or sums due and unpaid after the penalties i date for payment stated in the notice and demand issued by P sed b y act - the collector there shall be added the sum of 5 per cent of the amount so unpaid, and interest at the rate of 1 per cent per month. To the amount assessable on the basis of the net income there shall be added 50 per cent in case of refusal or neglect of a corporation to make a return or 100 per cent 149 in case of a false or fraudulent return. For refusal or neglect to make a return within the prescribed time, or for a false or fraudulent return, the corporation so offending shall be liable to a specific penalty not exceeding $10,000. Any person divulging unlawfully any information whatever" dis- closed by a return shall be punished by a fine not exceeding $1,000, or by imprisonment not exceeding one year, or both. Any person or any officer of any corporation required by law to make, render, sign, or verify any return, who makes Fraudulent re- any f alse or fraudulent return or statement with intent to- defeat or evade the assessment required by section 2, act of October 3, 1913, shall be guilty of a misdemeanor and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, wth the costs of prosecution. Fiscal year; ART. 165. The Federal income-tax law authorizes cor- how established, porations, joint-stock companies, etc., under certain condi- tions to make their returns on the basis of an established "fiscal year" or consecutive 12-months period, which may be other than the calendar year. Pursuant to this provision the following instructions are issued for the guidance of collectors and other interested parties : M'av designate Any corporation, joint-stock company, or association, or of y fiscaf y ei? s lSI an Y insurance company subject to the tax imposed by this must give at act may, at its option, have the tax payable by it computed least 30 days' . /V. . J it notice to coiiec- upon the basis of the net income arising or accruing from all so r des f ignated day sources during its fiscal year, provided that it shall designate the last day of the month selected at the month in which its fiscal year shall close at the day of the closing of its fiscal year, and shall, not less than 30 days prior to the date upon which its annual return is to be filed give notice, in writ- ing, to the collector of internal revenue of the district in which its principal place of business is located, of the day it has thus designated as the closing of such fiscal year. niustratiom of ART. 166. In pursuance of this provision, a corporation year. or jj^e organization subject to this tax may, for example, designate the 30th day of September as the day for the clos- ing of its fiscal year, whereupon its return of annual net in- come shall be filed with the collector of internal revenue of the district in which its principal place of business is located not later than 60 days after the close of its said proposed ISO fiscal year; that is to say, on or before the 29th day of November next succeeding. The date of the closing of the fiscal year having been des- ignated, notice thereof must be given to the collector not less than 30 days prior to the last day of such 60-day period. In the case just instanced the notice must be given not later than October 29. If such designation (September 30, 1913) had been made and notice given, as hereinbefore indicated, as to the closing of the fiscal year 1913, the corporation would be authorized to make its return and have the tax payable by it computed upon the basis of the net income arising or accruing to it during the period from January 1 to September 30, 1913, both dates inclusive. ART. 167. Collectors of internal revenue receiving notices Collectors of the selection and designation of the "fiscal years," as ????/ of *the above indicated, will make record of the same, recording, f e ' n a (a) the name of the corporation or like organization, (b) year." the date when notice was given, (c) the day designated for the closing of the fiscal year, and (d) the date when the re- turn under such designation must be filed, which must be, as above stated, not later than the last day of the 60-day period next following the day designated as the close of the fiscal year. ART. 168. If it shall appear that for the year 1913 the Uuiess notice . . . ,. r ' ., , . ? . , . ... was given within notice was given within the prescribed time that is, within prescribed time, 30 days of the last day of the 60-day period the 1913 re- $$ n ^ ern y e a r turn may be made as of the fiscal year so established ; other- wise it will be made on the basis of the calendar year until such time as the designation shall be duly made and notice thereof properly given. ART. 169. The designation and notice can not be retro- Designation .... .y . , . A -1 anc * notice can active ;. that is to say, if a corporation now designates April not be retroac- 30, 1914, as the date of the closing of its fiscal year and gives tive ' notice of such designation, it would not be authorized .to make a return for the four months ended April 30, 1913, and then for the fiscal year ended April 30, 1914, nor would it be authorized to make one return covering the entire 16 months ended April. 30, 1914. In the case of such corpora- tion the return for the year must be made for the calendar year ended December 31, 1913, and then, assuming that designation and notice had been properly made and given, it may make a return for the four months ended April 30, 1914, and thereafter the return will be made on the basis of the fiscal year so established. 151 Where fiscal ART. 170. In all cases where a fiscal year is not estab- year is not prop- . -11 11 t t " eriy established, lushed as above prescribed returns must be made on the basis made ns fo U caien- of the calendar year, in which case such returns must be dar year. n i e d on or before the 1st day of March next succeeding such calendar year. Such returns in either case provided must be verified under oath or affirmation of its president or other principal officer, and its treasurer or assistant treas- urer; that is to say, by two different persons acting in the official capacity indicated. Returns made ART. 171. If it shall appear in any case that returns have year a S?t8o de- been made to the collector on the basis of a fiscal year not be^acce ted nOt designated as above indicated, the corporations making" such returns will be advised that such returns can not be accepted, but must be made to cover the business of the calendar year. Returns for ART. 172. Returns made under this act and pursuant to made "if* new these instructions must be made on the new forms pre- forms - scribed by this department. The forms heretofore in use, under the special excise tax law, can not be used for making returns for either the fiscal or calendar year 1913. Extension not ART. 173. An extension of time within which a return <iays. ex( may be filed can in no case exceed 30 days from the date on which the return is due and can be granted only upon writ- ten application to the collector, and in case of sickness or absence of an officer whose signature to the return is re- quired, such application to be made prior to the expiration of the period for which the extension is desired. Returns prop- ART. 174. If a return is made and placed in the United eriy maUed^m s ta f- es mails, properly addressed, and postage paid, in ample e sub' e e C ct 0r to "en* ^ me ' * n ^ ue course f mails, to reach the office of the col- aity^und^r ^Sr- lector or deputy collector on or before the last due date, no ons - penalty will be held to attach should the return not be actually received by such officer until subsequent to that date. Last due date ART. 175. "Last due date," as hereinbefore used, is con- strued to mean the last day upon which a return is- required to be filed in accordance with the provisions of the law, or the last day of .the period not exceeding 30 clays covered by an extension of time granted by the collector. faiS^oS d sSn d d a ay ART< 176> When tne due date as above defined falls on or legal holiday. Sunday or on a legal holiday, the last due date will be held 152 to be the day next following such Sunday or legal holiday and the return should be made to the collector not later than such following day, or, if placed in the mails, it should be posted in ample time to reach the collector's office, under ordinary handling of the mails, on or before the date on which the return is thus made due in the office of the col- lector. ART. 177. All assessments against corporations, etc., mak- Assessment ing returns for the calendar year are required to be made ?ax es payment f and the several corporations, joint-stock companies, etc., notified of the amount for which they are liable on or be- fore the 1st of June of each successive year, and said assess- For ca i endar ments shall be paid on or before the 30th day of June of y ear - such year. In the case of corporations making returns for Notice of as- the fiscal year, the assessments shall be made and notice sessment. given on or before the expiration of 90 days from the date when the returns were required to be filed, and the taxes assessed against such corporations, etc., shall be paid within 120 days after the date upon which the returns were re- quired to be filed. In case of refusal or neglect by a cor- poration, etc., to make a return, and in case of false or fraudulent return, the commissioner, upon the discovery thereof within three years after such returns are due, shall make a return upon information obtained in the manner pro- vided in the act, and the assessment made on the basis of such return shall be paid immediately upon notice and de- mand given by the collector. Upon failure to pay the tax when due and for 10 days Failure to pay after notice and demand, a penalty of 5 per cent of the tax when due - amount of the tax unpaid and interest at the rate of 1 per cent per month until .paid shall be added to the amount of such tax. ART. 178. When the assessments shall have been made, Returns are the returns shall be filed in the office of the commissioner and r t e o cor ^ : shall constitute public records, subject to inspection upon spectkm the order of the President, under rules and regulations pre- President. scribed by the Secretary of the Treasury and approved by the President. Copies of returns on file in the Commis- sioner's office are not permitted to be sent to any person, except to the corporation itself or to its duly authorized attorney. ART. 179. Upon request of the governor of a State which information to imposes a general income tax, the proper officers of such States y hich * m - -_ A * /- 1 1 pose i n c o m c State may have access to the returns filed by corporations taxes. 153 doing business in such States, or to an abstract thereof showing the name and income of such corporations, etc., at such times and in such manner as the Secretary may pre- scribe. In no case are the original returns to be removed from the office of the commissioner, except upon order and by directon of the Secretary of the Treasury or the Presi- dent. Certified copies ART. 180. At the request of the Attorney General, or by direction of the Secretary of the Treasury, certified copies of returns may be made and delivered to the United States district attorneys for their use as evidence in the prosecu- tion or defense of suits in which the collection or legality of the tax assessed on the basis of such returns is involved, or in any suit to which the United States Government and the corporation, etc., making the return are parties and in which suit such certified copies would constitute material evidence. Penalty for ART. 181. The disclosure by any collector, deputy col- giving informa- 1 rv- i r 1 tion in regard lector, agent, clerk, or other officer or employee of the to returns. United States to any person of any information whatever contained in or set forth by any return of annual net in- come made pursuant to this act is, by the act, made a mis- demeanor, and is punishable by a fine not exceeding $1,000, or by imprisonment not exceeding one year, or both, at the discretion of the court, and if the offender is an officer or employee of the United States he shall be dismissed and be incapable thereafter of holding any office under the United States Government. Bookkeeping. ART. 182. No particular system of bookkeeping or ac- counting will be required by the .department. However, the business transacted by corporations must be so recorded that each and every item set forth in the return of annual net income may be readily verified by an examination of the books of account. Books of ac- ART. 183. The books of .a corporation are assumed to e. gmc e reflect the facts as to its earnings, income, etc. Hence they will be taken as the best guide in determining the net income upon which trie tax imposed by this act is calculated. Ex- cept as the same may be modified by the provisions of the law, wherein certain deductions are limited, the net income disclosed by the books and verified by the annual balance sheet, or the annual report to stockholders, should be the same as that returned for taxation. Omitted taxes ART. 184. In cases wherein corporations have neglected may be assessed. r j , j i or refused to make returns, and in cases wherein returns 154 made are found, upon investigation or otherwise, to be false or fraudulent, the commissioner may, upon discovery thereof, at any time within three years after said return is due, make return upon the information obtained in the man- ner provided in the act, and the tax so discovered to be due, together with the additional tax prescribed, shall be assessed, and the amount thereof shall be paid immediately upon no-, tice and demand. ART. 185. Corporations coming within the terms of this corporations law are subject to the normal tax only; that is, a tax com- 5JjJ/ e * Xi to n r puted at a level rate of 1 per cent of their entire net income regardless of the amount of such net income. ART. 186. For the purpose of verifying any return, made pursuant to this act, the Commissioner of Internal Revenue may, by any duly authorized revenue agent or deputy col- lector, cause the books of such corporation to be examined, and if such examination discloses that the corporation is liable to tax in addition to that previously assessed, or asses- sable, the same shall be assessed and shall be payable im- mediately upon notice and demand. For the purpose of such examination, the books of corporations shall be open to the examining officer, or shall be produced for this pur- pose upon summons issued by any properly authorized officer. Examination of books. 155 Taxes due to ART. 187. All income taxes found to be due will be re- be reported on assessment lists, ported by collectors on their assessment lists, Form 23-A in the case of corporations, and on Form 23-B in the case of individuals and withholding agents. a? P ha- ART - 188. The names of corporations subject to tax will beticai order. fo Q listed on Form 23-A, according to their designated class, and in alphabetical order as to each class. Names of indi- viduals subject to tax will be listed on Form 23-B, alpha- betically, without reference to class or rate of tax. Follow- Names of with- ing such names there will be listed, alphabetically, the names how to be listed! of all withholding or licensed collecting agents, and the aggregate amount of tax withheld by each, as shown by the annual returns rendered by them. An assessment against each person, firm or company, from whose income the tax has been so withheld, will be unnecessary in such cases. Assessment ART. 189. To avoid, as far as possible, the assessment of against with- to ld i>? delfrr * taxes as to which claims for exemption or deduction may until annual re- be filed under article 33, collectors will delay reporting for ports a r e re* . . assessment taxes remaining in the hands of withholding agents, until the annual reports of such agents, which must be filed not later than March 1 in each year, are received. <o R b e e tu a 9 <ie When ART - 19 - Returns of withholding agents (including those of licensed collecting agents) as to interest payments shall be made monthly and returns containing summaries of said monthly returns shall be made annually. (See Part 2, A, B, and C.) Returns of individuals (see Part 1), corpora- tions (see Part 3), and withholding agents, withholding tax on wages, salaries, rents, etc. (see Part 2, D), and fiduciaries acting as withholding agents (see Part 2, E) shall be made annually. All monthly returns are required to be made on or before the 20th day of each month for the preceding inonth. All annual returns are required to be made on or before the 1st day of March in each year, except in the 156 case of corporations which have given due notice of the termination of their fiscal year, in which cases the pre- scribed return is to be filed within 60 days after the termina- tion of such fiscal year. ART. 191. Corporations which are subject to the special Corporations excise tax on income received during the months of January "fj^ff^ear and February, 1913, may, under the provisions of section 19 13 income sub- 4, paragraph S, of the act of October 3, 1913, include such income, as also the income taxable under said act, in one re- turn for the year 1913. In each such case one assessment only will be made. ART. 192. All returns of income, whether of individuals Returns of in- or corporations, should be forwarded with the assessment ^led^Jitli f as- list rendered. Where in any case the collector has reason sessment lists. to believe that any return rendered is false or fraudulent, False or fraud- he will prepare and retain in his office a copy of such return, ulent returns - and will note on the original and under the head of "Re- marks" of his assessment list the words "Investigation pending." He will in all such cases make his investigation in the manner prescribed in section 3173, Revised Statutes, and paragraph D of said act of October 3, 1913 ; and he will report the results of his investigation to the Commissioner of Internal Revenue, referring to the list, folo, and line on which the assessment was reported. ART. 193. Monthly and annual returns of withholding certain returns agents (including those of licensed agents) as to interest ^enTs^to^e^S payments and the annual returns of withholding agents dup?ic S ate withholding tax on wages, salaries, etc., will be made in duplicate, one copy of which will be retained by the col- lector in his office and one copy transmitted to the Commis- sioner of Internal Revenue. Annual returns of withhold- ing agents (including those of licensed agents) as to in- terest payments, and returns of withholding agents as to wages, salaries, etc., and of fiduciaries will be forwarded by the collector with his list, Form 23-B, on which the tax withheld is reported for assessment. ART. 194. All certificates of exemption or deductions, filed c e r t ificates by or on behalf of persons subject to tax, will be forwarded S^onwded as by the collector as soon as received ; and all such certifi- soon as received. cates, reports, and returns, before being transmitted to the commissioner, will have stamped thereon the name and number of the district; will be arranged (unfolded) in alpha- betical order and, in the case of corporations, according to the designated class to which they belong. Care should be taken to have all such papers, when so arranged, carefully 157 secured by cord or other fastening, so as to insure their re- ceipt in like order. This is especially necessary in view of the large number of like papers which will be forwarded from the various districts. Reports and returns to be at once examined by collectors. Assessment' lists to be pre- pared and for- warded without delay. ART. 195. In order that assessment lists may be promptly prepared and forwarded, collectors will see that all reports and returns to be listed are examined as received, and that no delay occurs in this branch of the work. Special dili- gence in this matter is necessary, as sufficient time must be given for the reexamination of such returns in the com- missioner's office before assessment is made. The forward- ing of assessment lists, however, should in no case be de- layed, beyond the time allowed, on account of unexamined returns, as such returns can be examined and reported on a subsequent list. As the law limits the time in which these assessments are to be made and notice of assessment given, collectors will assign to this work all available force in their respective offices. to be ART. 196. Where the required returns are not filed with- sent to dehn- ,. ., , . -,1 i- -j quents. in the prescribed time, either by individuals or corporations, notice on Form 1045, should in each case be sent to the delinquent. (For authorized extension of time, see articles 23 and 173.) f **' ART> ^ - When assessment has been made, collectors will, on receipt of their returned lists, at once issue pre- liminary notices of assessment (Form 647), and where in any case the tax assessed is not paid on or before the 30th day of June, or in case of corporations designating their own fiscal year, within 120 days following the date on which the return should have been filed, notice and demand Demand for (Form 17) should be at once issued, and* unless the tax in 5 int'er'est. 13 '' such case is paid within 10 days after the service of such notice, general demand for tax, penalty, and interest (Form 21) should at once be issued. Immediate notice and demand (Form 17) will, however, be served in case of failure to file the required return within the statutory period. on return of list. ?o be" ART - 19 . 8 ' Pending assessment on returns forwarded to sent immediately the commissioner, collectors will have prepared the neces- r\** -A+-* f\( I,'*-*- . sary notices of assessment, with properly addressed en- velopes, to be used immediately on return of their assess- ment lists. 158 ART. 199. Statements of payment, abatement, and out- 1-11 - 11 -11 1 11 abatements, and standing balances of such assessed taxes will be rendered outstanding bai- monthly by collectors on special Form 325. Such state- z ments will be prepared in the same manner as required in the case of assessments on. the regular Form 23, except that in Statement III the outstanding balances on the various lists will be reported in aggregate only. Items constituting outstand- such balances, however, will be carded by collectors, but ' b n e g carded" b? only as to such as were assessed during the month for collectors, which the return is rendered, thus avoiding detailed state- ments each month of outstanding balances previously re- ported. A separate card (Form 1020) will be used for each such item; and all cards so prepared each month should be arranged alphabetically, and so forwarded by the collector with his report on special Form 325. ' W. H. OSBORN, Commissioner of Internal Revenue. Approved : W. G. McADOO, Secretary of the Treasury. 159 INDEX NOTE. Regulations are indexed by article number. Statute is indexed by marginal reference. ABATEMENT: Article. Claim for, of tax, may be filed when, by whom 33c ABSENCE: From United States, who may make claim for deductions (Form 1008) for 33b Nonresident alien subject to, computed same as for citizens of United ADDITIONAL TAX: States 8 Regulations for 2 ADDITIONS AND BETTERMENTS: Constituting increase in capital investment not deductible expense of corporation 118 ADJUSTMENT: Assessment of tax withheld, withholding agent to be notified 33c ADMINISTRATOR: Is fiduciary when 70 Make return of income deceased person, when and what 17 AFFIDAVIT: Verifying return of income, before whom made 22 AGENT: Authorized, may sign for principal, certificate of ownership of bond. ... 43 Compensated on commission basis, income of, not subject to withhold- ing at source 32 Return made by, when 17 Signing for principal, certificate of ownership of bonds, to furnish evidence of authority to act, when 43 AGRICULTURAL ORGANIZATIONS : m Exempt from tax 51 ALIENS* Nonresident Duly authorized agent of, to make return for and pay tax, when. . 8 Income of, what to be included in return of 8 Net income of, defined.' 8 Normal tax on entire net income of 8 Not allowed exemption under paragraph C 8 Not entitled to exemption under paragraph C 3 Subject to additional tax 8 Taxable on entire net income in United States 1 Tax on coupons or registered interest payable in United States to be withheld unless certificate of exemption (Form 1004) filed . . 46 Resident Certificate of ownership of bond, when and how to be used, and to specify what 42 Income of, from coupon or registered interest, tax on to be de- ducted and withheld exempt to extent exemption claimed .... 44 Taxable on net income less exemption and deductions 1 161 INDEX. AMENDMENTS: Article. Sections 3167, 3172, 3173, 3176, Rev. Stat. pp 58-59 AMORTIZATION: Depreciation for, corporation allowed, when, how 135 ANNUAL RETURN: Form 1013, to show what, and to be filed on or before Mar. 1 each year 50 Of coupons or interest orders not accompanied by certificate of owner- ship (form of), what to show when filed, totals only of monthly re- turn 53 Of licensee for collection of foreign items (form of) what to show, with whom filed, when 59 ANNUITY: Money paid for (returned) not to be included in gross income 5 Taxable, how treated 63 ANSWER: Of guardian, etc., to notice for failure to make return, may show what 18 APPEAL : Decision of collector All papers of, to Commissioner of Internal Revenue; dissatisfied may submit case; furnish sworn testimony to prove facts 48 APPLICATION: For license For collection foreign items 55 To collect foreign items to be made through principal office to col- lector of district in which located principal office 57 APPLIED SURRENDER VALUES AND CONSIDERATION: For supplementary contracts To be both added and deducted in return life insurance company 102 ARRANGEMENT AND PACKING: Certificates, reports, returns, for forwarding by collector 194 ASSESSMENT: Insurance company, reserve of , definition 147d Of tax to be made by Commissioner of Internal Revenue 25 Against income withheld at source, where to be made 38 Against withholding agent 36 Form and notice of 197 List rendered, collector to forward 192 Amount of, when persons shall be notified pp 48-9 Basis of calendar year or fiscal year, time to be made '. . 177 Failure to pay, extra tax on p 48 Limitation on time of making p 48 Made by Commissioner of Internal Revenue p 47 Of tax against withholding agent, deferred until agent makes return. . 189 Penalty and interest for non-payment of, exceptions P 48 Persons notified of amount of . % ' p 48 When to be paid p 48 ASSETS, CAPITAL: Corporation Change in book value by annual Adjustment on books, that value to be used in making annual returns, net income Ill Change in- book value by reappraisal, gain or loss, how computed . Ill Profit or loss on sale of, how determined 110 Loss from sale of, how ascertained 128 Sale of corporation, net income from, how determined 109 Sale of by corporation, income from, how determined. . . / 108 Shrinkage in book value of corporation, 'how treated 134 162 INDEX. ASSOCIATION : Charitable, exemption, when p . 51 Making false return, penalty for p . 51 Mutual,, domestic building, etc p.. 51 Neglecting to make return, penalty for . . .p . 51 Net income of, preceding calendar year, normal tax on p . 51 Operating under "Lodge system, " Defined 89 Refusing to make return, penalty for p . 51 Religious, exemption p. 51 Return of, when available p . 58 Scientific, exemption, when p. 51 Taxes to be assessed by Commissioner of Internal Revenue, when, section 3176 p. 60 To make list or return of taxes, how, when, section 3173 pp . 59-60 AUTHORS: Earnings of, indefinite or irregular, not subject to withholding at source. . . 32 B. BAD DEBTS: Corporation, deductible, when 125 Collected, are income : 125 BALANCES: Outstanding tax, how treated 199 BANKS: Allowing interest on deposits, not to withhold tax from 67 Deductible status of taxes assessed against stockholder, paid by 154 Interest paid on deposits allowable deduction 149 Taking coupons for collection, originated or payable in the United States, duty of 39 MUTUAL SAVINGS: Having capital stock represented by shares, exempt from tax p. 51 BENEFICIARIES: Exemption from tax may be claimed by, from fiduciaries 74 Interest received by, from insurance companies on insurance contract, part of gross income 5 BEQUEST: . Of property Income from part of gross income ; . . . . 4 Value of, not income 4 BOARDS OF TRADE: Exempt, when p . 51 BOND: May be required of licensee for collection of foreign items 56 BONDS, ETC: Of corporations, etc. Income from, subject to withholding at source, regardless of amount 37 Interest of foreign, subject to deduction and withholding, when p. 50 BOND AND MORTGAGES: Interest on, subject to deduction, when .p. 50 BOOKKEEPING: Requisites of, for verifying return 182 BOOKS: Of corporation subject to examination, by whom, for what, result 186 ids INDEX. BOOK VALUE: Capital assets Article Change in, by reappraisal, gain or loss, how computed Ill Shrinkage in, how treated 134 BUILDING: Removal of, corporation, not deductible loss, why 127 BUILDING AND LOAN ASSOCIATION: Domestic, defined; what necessary to exempt from tax 87 BUSINESS: Lawful, carried on for gain or profit ; income from part of gross income. . . 4 C. CALENDAR YEAR: To govern when notice of corporation fiscal year not given in time 168 CAPITAL ASSETS: Book value of corporation, shrinkage in, how treated 134 Corporation Change in value of, by annual adjustment on books, that value used in making return annual net income Ill Change in book value by reappraisal ; gain or loss, how computed. . . Ill Loss from sale of, how ascertained 128 Profit or loss on sale of, how determined 110 Net income from sale of, how determined 109 Sale of, by corporation, income from, how determined 108 CAPITAL INVESTMENT: Corporation, increased by additions and betterments, not deductible expense 118 CEMETERY COMPANY: Taxable status depends on what 90 CERTIFICATE: Accompanying foreign items, disposition of, by licensee 61 Claiming deductions account partnership expense, what and how 47 Claiming exemption and deductions to accompany annual return of with- holding agents 69 Claiming exemption As nonresident alien must be filed or tax withheld from payment payment coupon or registered interest 46 From tax on registered interest to be filed at least five days before due date of interest 44 Of withholding, by foreign organization, Form 1018 46 For nonresident alien, may be executed by whom 46 Exemption or deduction, disposition of 194 Form of, for foreign partnership composed of nonresident aliens, resident aliens, and citizens of United States 49 Of deposit, interest on, part of gross income 4 Of ownership accompanying coupons or registered orders, duty of col lecting agency 39 Of ownership By corporations organized in United States claiming exemption of, by form of, and how executed 45 Disposition of, by collecting agent 40 Of persons not subject to having tax withheld, disposition of, by debtors and withholding agent 51 Not accompanying coupons or interest orders, tax to be withheld by first collecting agent, disposition of certificate 62 164 INDEX. CERTIFICATE Continued. Of ownership Continued. Of bonds Arcicle By citizen or resident of United States, when and how to be used and to specify what 42 By corporations organized in United States and certain ex- empt, must be filed to prevent withholding 45 May be signed by authorized agents 43 Of corporal ons, etc., organized or do^ng business in United States, form of, for foreign partnership 48 Signed by agent, when verified by first withholding agent, etc., good in other hands 43 Who to make and for what 39 Size and paper for p 97 Substitute by collecting agent, how to be treated by debtors or with- holding agent 51 That of collecting agent substituted when 40 CERTIFICATES, REPORTS, RETURNS: Arrangement and packing of, for forwarding by collector 194 CHAMBERS OF COMMERCE: Exempt, when p 51 CHANGE IN BOOK VALUE: Capital assets, corporation, reappraisal, gain or loss, how computed ... Ill CITIZEN: Income of, from coupon or registered interest, cax to be withheld on except to extent exemption claimed 44 Of United States, certificate of ownership of bond, when and how to be used and to specify what 42 Taxable on net income less exemption and deductions 1 Civic LEAGUES: Exempt, .when p 51 Organizations Exempt, when p 51 CLAIM : For exemption By whom, for what, who to file 41 Paragraph C, in connection with foreign item, allowed to person entitled to ' 60 Penalty for false p 48 What must show and how executed 42 When, and when to be filed p 48 Insurance company, amount actually paid under policy contract, con- stitute deduccion 147c COLLECTING AGENCY: First receiving coupons or interest orders not accompanied by certifi- cates of ownership should withhold tax and attach its certificate, Form 1002, that tax withheld 52 Agent In foreign countries to have privilege of substituting certificates for original ownership 40 Record to be kept by, what 40 Should require person presenting coupon or interest orders to es- tablish identity '. 52 165 INDEX. COLLECTION : Of tax from withholding agent 36 COLLECTOR: Advanced preparation notice of assessment by, particulars 198 Arrangement and packing certificates, reports, returns 194 Authority of, in any district, section 3173 p. 59 Claim for deductions may be filed with, when 33c Dispatch of business in offices of 195 Duty of As to returns withholding agents 193 If persons refuse or neglect to render return p!59 In absence from home or place of business p . 59 In case of refusal or neglect of liable individual to make return. ... 21 In case of undervaluation or understatemenc p .59 In forwarding Annual individual return to commissioner 21 Return and assessment list and investigation of return 192 In making returns for persons failing to do so p. 59 Upon receiving notice of fiscal year of corporation 167 Failure' to find person at home, duty of, section 3173 p .59 Sickness or absence, may extend time for making returns, section 317G.p.60 Legality of returns made by, section 3176 p. 60 Make return for individual, when 57 May enter any collection district to examine witnesses, when, section 3173 p. GO Method of handling and accounting for outstanding tax balances 199 Must require returns to be verified by oath or affirmation 22 Not satisfied with responsibility, applicant for license to collect foreign items, may require bond 56 Of what district, Form 1008 to be filed 33b Order of arrangement, names in list made by 188 Shall make report of false or fraudulent returns, how, section 3176 p. 60 Shall require deputies to ascertain persons liable to tax, section 3172. .p. 59 Tax statement rendered monthly, particulars of 199 Tax withheld to be paid to 34 To adjust in assessment in case of withholding, when 33c To furnish withholding agent with statement of claim for deductions filed with collector 33c To obtain testimony, may summon whom, section 3173 p. 59 To report tax due, how, forms for 187 To send notice of what, form of and time to serve 197 To send notice to delinquent and file return 196 To which, application of principal office made for license for branch office, to serve collector in district of branch with what 57 When claim for deductions, paragraph B, to be filed with 33b COMMISSIONER OF INTERNAL REVENUE. Annual return of individual to be forwarded to, how 24 Assessments -made by P-48 Facsimile of signature on licenses for collecting foreign items furnished collectors 55 Shall add 50 per cent or 100 per cent to tax, when p -60 Shall assess taxes, when, section 3176 p. 60 To impose additional tax,' when p .48 166 INDEX. COMMISSIONER OF INTERNAL REVENUE Continued Article Bo issue licenses for collection of foreign items through collectors 54 To make assessment of taxes; give notice of, when; duty of in case neglect or refusal to make return or false or fraudulent return 25 COMMISSIONS: Paid to salesmen in stock of corporation, deductible expense, when 117 COMPANY: Foreign, normal tax on business transacted in United States p 51 Joint-stock, etc., withholding normal tax on behalf of others p 48 Mutual cemetery, exempt when p 51 Taxes to be assessed by commissioner, when, section 3176 p 60 COMPENSATION: For personal service, part of gross income 4 Officers and employees of State or political subdivision of, not to be in- cluded in gross income. 5 Paid to employees of corporation on basis of stockholdings not deducti- ble, why 119 Present President and judges of court exempt from tax, what 5 Public-school teachers of State or political subdivision of, not part of gross income , 5 CONSIDERATION FOR SUPPLEMENTARY CONTRACTS AND APPLIED SURRENDER VALUES: To be both added and deducted in return life insurance companies 102 CONSTRUCTION OF LAW: As to withholding at source, liberal 97 CONTRACT: Affecting liability of a taxable person as such, to be invalid 27 COPIES OF RETURNS: How obtained, for what purpose 178, 180 CORPORATION: Additions and betterments constituting increase in capital investment not deductible '. 118 All organized in United States subject to tax (certain exceptions) 76 Amount allowed for depreciation of property p 55 Amounts paid employees As compensation on basis of stockholdings not deductible, why 119 For pension or on account of injuries, deductible expense 120 Assessment Insurance company, reserve, definition 147d To be paid when p 57 Bad debts deductible, when 125 Banks, etc. Interest paid on deposits, etc., allowable deduction 149 Paying taxes assessed against their stockholders, deductible status of 154 Books of, subject to examination, by whom, for what, result 186 CEMETERY, taxable status depends on what 90 Certificates of ownership by claiming exemption, form of and how execu- ted 45 Change in book value of capital acsets by annual adjustment on books, that value to be carried into return Ill Change in book value of capital assets by reappraisal, gain or loss, how computed Ill CHARITABLE, exempt, when p 51 167 INDEX. CORPORATION Continued. Article. Classes, enumeration of 162 Collector to furnish blanks for return of 163 Collecting foreign income, to have license p 50 Commissions to salesmen paid in stock, deductible expense when 117 Complete return to be made by or will not be accepted 163 Contract with by State, etc., prior to passage income-tax act, income from accruing to individual, subject to tax 93 Contract with by State, etc., prior to passage income-tax act, income from accruing to State, etc.,, exempt from tax when 93 Cost of buildings on leased ground, deductible as rent, when 115 DAIRIES, cooperative, not subject to tax, what 92 Deductible loss defined 124 Deduction account interest on indebtedness limited to what; when 81 Deduction Account materials and supplies on hand, what 123 For depletion of mines regulation and rate of, limit of 142 For depreciation of natural deposits, basis and limit of 141 For depreciation on timberlands, limit of, excess of, is income 137 For depreciation on patent, what, how determined 140 For interest paid at different rates, rule of application 151 For obsolescence of patents, what, how determined 138 Defined 78 Depreciation timberland from removal of timber, amount, how deter- mined 139 Depreciation Deductible, amount, how treated 130 Defined 129 For amortization allowed, when, how 135 How determined 129 Reserve, use of, disposition excess of 132 Division of depreciation of reserve, correction 133 Donation for charitable purposes, deductible when 121 Duties not deductible as tax but item of cost 155 Educational, exempt, when p 51 Engaged in more than one class of business, gross income ascertained in accordance with applicable definitions of such income 112 Every, not specifically exempt, required to make return of income 80 Evidence requisite for allowance of deductions 158 Excise and income tax for 1913 in one return 191 Excise tax on, for what period, how computed 160 Exempt from tax, what are 87 Expense of operation and maintenance to be shown in return p 55 Includes what 114 Failure to receive blanks will not excuse from making returns, or from penalties for such failure 163 Firms, etc,, withholding normal tax on behalf of others p 9 Fiscal year of, how established, what to do 165 Illustration of and what to do 166 FOREIGN, normal tax on business in United States p 51 Coupons, checks, bills of exchange, etc., normal tax deducted from, when. . . .- -P 50 Dividends on stocks of, normal tax deducted when p 50 168 INDEX CORPORATION Continued. FOREIGN Continued. Article. Having more than one branch office in the United States to desin- nate principal office and person to make return 83 Interest on indebtedness to be deducted, what p 57 To give amount of bonded and other indebtedness p 56 To set forth paid-up capital stock p 57 Form of return prescribed for 163 General expense foreign steamship companies, how treated 116 Gifts or gratuities to employees not deductible 120 Good will, depreciation not allowed in connection with 136 Gross income Difinition of 96 General definition 107 Gross value at the mines, definition of 142 In addition to deduction for depletion of mines, etc., deduction for de- preciation of plant, what, basis of 143 Income Excepted during the year 15 From sale of capital assets, how determined 108 How ascertained p 52 Losses from p 52 INSURANCE COMPANY "Deductible net addition to reserve," definition; what basis of com- putation of; whan not to be included in 147d Deduction, claims actually paid under policy contract 147c Depreciation loss by shrinkage in property value, what and when deductible 147b Gross income of, definition of 97, 101 Losses, deductions for, what 147a Reserve to meet losses, how treated 147c Salvage, how to be treated in return of 147c Interest paid As rental, how treated 148 By, on mortgage on property in whach corporation has equity or is purchasing 148 Deduction, what, when 148 On debts secured by collateral subject to sale, deductible, when, why 150 On deposits, etc., deductible, when 113 Inventory, purpose and use of; kinds of 161 Leased, to make its own return 82 Leasing oil or gas territory, deductions for depletion, basis of 144 Lessee, property of, assuming indebtedness of lessor, return by lessee, what 81 Lessee, not to include capital stock or debts of lessor in return, except . . 82 LIFE INSURANCE COMPANY Applied surrender values and consideration for supplementary contracts both added and deducted in return 102 Deductions from gross income, what 100 Gross income, definition of 101 Supplementary statement attached to return of, showing what . . . 103 Liquidation of, make final return of whac; filed when and where 85 "Lodge system," defined 89 169 INDEX. CORPORATION Continued. Loss Article. Actual, sustained p 52 Sustained during year p 55 From removal of buildings, not deductible, why 127 From sale of capital assets, how ascertained 128 Securities below par, how treated 135 Making false return, penalty for p 51 May designate day to pay tax p 57 Manufacturing company, gross income, definition 104 Mercantile company, gross income, definition 105 Miscellaneous, gross income, definition 106 Mutual companies making return, definition^ net income 80 Mutual fire insurance company Gross income, definition 98 Supplementary statement attached to return, showing, what 103 Mutual marine insurance company Deductions from gross income, whai 99 Supplementary statement attached to return of, showing what. ... 103 Will deduce, what 147d Neglecting to make return, penalty for p 51 Net income Annual, normal tax on p 51 Engaged in more than one class business, how ascertained 113 For 1913, how ascertained 159 Preceding calendar year, normal tax on / p 51 Of, should be what 158 Of, which is distributable to owners thereof; subject to tax 79 From all sources p 52 From sale of capital assets, how determined 109 To be shown on return p 57 No specific exemption from tax 160 Notice Given of assessments made p 57 Of fiscal year, not retroactive 169 Not receiving blank for making return, should make application for, to whom, when 163 Not to include taxes paid in foreign countries in income; see seventh deduction . .p 57 Officers of, making false return, penalty p 51 Only on return and assessment for 1913 160 On what taxed; what, and amount of p 51 Operacing mines, oil or gas wells, on royalty basis, not allowed, deduction for depletion of deposits 145 Operations of, etc., unlawful to divulge. Section 3167 p 58 Organized- During the year, to make return of what 84 Elsewhere than in United Stales, subject to tax on what 77 In United States and certain exempt, interest on bonds payable to, tax not to be withheld if certificate of ownership filed 45 Paid-up capital stock, definition of 95 Partnership Limited, is, and subject to corporation tax 86 Ordinary, not subject to tax as 94 170 INDEX. CORPORATION Continued. Article. Payments on account of tax from covenant in bonds, not deductible in ^ ascertaining net income. 113 Penalty for Failure to Make return p. 20, Art. 163 Pay tax by j une 30 p . 57 Refusal to make return p . 51 Profit or loss on sale, capital assets, how determined 110 Public utility, governmental function, income accruing through, to State, exempt from tax 93 Railroad whose income paid by its lessee direct to stock holders must make return of income 80 Religious, exempt p . 51 Repairs may be deducted, what. 131 Reserve for Insurance of own property not deductible 122 Losses, not deductible .' 126 Taxes, not deductible 156 Return For 1913 must be on new form and not on excise form heretofore used ; 172 To be made, when 190 When available p . 58 When State officers may have access to p . 58 When to be made. Section 3173 p . 59 Shrinkage in value, capital assets, how treated 134 Special excise tax, how computed p . 63 Status for taxation purposes to be established, how 88 Subject to tax Classes enumerated p . 51 Normal only, but not entire net income 185 Special ecxise, under act August 5, 1909 p. 63 Taxable status in doubt, must make return and attach thereto statement showing what 91 Tax- Computed on nee income of 159 Deduct amount paid for . . . p . 57 Paid by- Constitute deduction, when 152 When not deductible 153 To be assessed by Commissioner of Internal Revenue, when. Sec- tion 3176 p. 60 To give notice, day designated for return p .54 Make list or return, how, when. Secion 3173 p. 59 Unearned increment, not value for depreciation purposes 146 United States, filing certificates of ownership, exempt from withholding of foreign items 60 When to make return : p. 54 COST: Of buildings on leased ground, deductible as rent of corporation, when. 115 171 INDEX. D. DAIRIES: Article. Cooperative, not subject to tax, what 92 DEBTOR: Annual List return by, when and what 50 Return by, to show totals only of monthly list return 51 Definition of 38 How to treat substitute certificate of collecting agent and certificate of owner not subject to having tax withheld 51 Interes. on bonds due, corporations organized in United States and certain exempt, not to withhold tax if certificate filed ,45 Maker of note given in payment of interest held responsible for tax on. 68 May appoint withholding and paying agent to act for it 38 Note given in payment of income, maker of note is 68 Not to withhold agams, nonreside. alien or foreign organization doing business in Unked Scales, when 46 Not to withhold when receiving certificate of collecting agenc that tax withheld by same, disposition of certificate 52 Return of withholding by, where to be filed 38 In United States (or its wkhholding^agent) charged with duty of with- holding from coupons or registered interest 39 In United States, duty of, before payment of registered interest 41 When source for withholding purposes 31 "DEDUCTIBLE NET ADDITION TO RESERVE"; Insurance company; definition; what basis of computation of; what not to be included in 147d DEDUCTION: Account partnership expense, account of and form for claiming 47 Additions and betterments constituting increase in capital investment, not 118 Allowance for in computing, what, when p 45 Amount of, to ascertain net income p 45 At suorce, applies to normal tax only p 51 Bad debts of corporation, when 125 Basis, for depletion leased oil or gas territory 144 Claims for Filed with collector, withholding agent to be furnished statement of. 33 c May be filed with withholding agenc, when 33 c Not allowed unless made, when p 49 Commission to salesmen paid in stock of corporation is, when 117 Compensation, officers and employees of State, etc., except, when; judges Federal courts now in office; present President for present term, p 46 Compensation paid employees of corporation based on stockholding, not, why 119 Corporation Account interest paid on debt, limited to what, when. . 81 Material and supplies on hand, what 123 Depreciation, amount, how treated ' 130 Donation for charitable purposes, when 121 Evidence requisite for allowance of 158 For interest paid at different rates, rule of application 151 Gifts or gratuities to employees, not 120 Pensions and damages for injuries to employees, are 120 172 INDEX. DEDUCTION Continued. Corporation Continued. Reserve Article. For insurance its own property, not 122 To meet losses insurance companies, not 147c Status of tax for, to bank, assessed against stockholder, paid by bank 154 And exemptions in certain cases p 49 Debts due taxpayer, ascertained worthless and charged off in year p 45 Depletion of mines, regulation of rate of, limit of 142 Depreciation Defined 129 For amortization, allowed when, how 135 How determined 129 Loss by shrinkage in property value, insurance company, what and when 147d Reserve, how, disposition excess of. ". 132 Of good will not allowable 136 Of natural deposits, basis and limit of 141 Of plant (in addition to deduction for depletion of mine), what, and basis of 143 On patent, what, how determined 137 Unearned increment, not value for purpose of 146 Timberland - Limit of, excess of, is income 140 Removal of timber, amount, how determined 139 Dividends on stock, what, when p 46 Exemption under paragraph C, not allowed nonresident alien. . .p 46, art. 8 False statement in regard to, penalty p 49 From gross income Mutual marine insurance companies, what 99 Of nonresident alien, what 8 To ascertain net income, for normal tax, paragraph B, what 6 From net income to ascertain taxable, exemption, paragraph C 6 From premiums, etc., by whom made, when P 49 For ascertaining net income, what 3 For fire, storm, shipwreck p 45 Foreign corporation, to ascertain net income 157 For expense of business, partnership may claim, >when and how 14 For restoring property, etc., none p 45 Increase value of property, none p 45 Insurance company Claims actually paid under policy contract, are 147c Losses, what 147a Interest on obligations, State or political subdivision of, and of United States or possession ' p 46 Interest paid by Bank, etc., on deposits, etc., is 149 Corporation As rental, not allowable 148 Is, what, when 148 On indebtedness secured by collateral subject to sale, when, why 150 On mortgage on property in which corporation has equity, is and amount of 148 178 INDEX. DEDUCTION Continued. Article. Joint-stock company p . 45 Life insurance company From gross income, applied surrendered values and consideration for supplementary contracts 102 From gross income, what ' 100 Loss During year p . 5 Which corporation may make, defined 124 From removal of building not deductible, why 127 From sale Capital assets, how ascertained 128 Corporation securities below par, how treated 135 May be claimed account tax on note given in payment of income 68 Only, claim for, may be filed wich collector, when 33c Mutual marine insurance company, what 147d Not compensated by insurance or otherwise p. 45 Notice to be filed for p . 10 Obsolescence of patents, whac, how decermined 138 Paid for new buildings, none p . 45 Paragraph B For normal tax only, 7 and 8 included for purpose of additional tax . 44 May be claimed in case of fixed, deterrriinable annual income 66 Not claimed of withholding agent in time, only remedy, applica- tion for refund 33c When claim for (Form '. at or collector 33b Permanent improvements or betterments, none p. 45 Property owned, business carried on in Unite;] -rson residing elsewhere, what p. 45 Repairs, when 131 Reserve for losses, not 126 Single person, amount allowed p . 45 Tax withheld, when p . 45 Taxss paid by corporation Are, when 152 When not 153 To ascertain net income corporation ei : s of business 113 DEEHS OF TRUST, ETC.: Corporation, income from, subject to withholding at source regardless of amount, when p . 10, art . 37 DELINQUENT: Tax becomes, if not paid by June 30 25 DEPLETION: Deduction for, mines, oil or gas wells operated on royalty basis, not allowed operating corporation 145 Leased oil or gas territory, basis for deduction for 144 Of mines, etc., regulation of rate of deduction for, limit of 142 DEPOSIT: Certificate of, in ceres t on, part of gross income 4 Interest on, not subject to withholding; must be included in personal return whether paid or not 67 Interest on, part of gross income 4 174 INDEX. DEPRECIATION : Article. Corporation, defined 129 Deductible, amount how treated 130 Deduction for Of natural deposits, basis and, limit of 141 Of plant (in addition to deduction for depletion of mine), what, and basis of 143 On patent, what, how determined : 137 Diversion reserve for, correction 133 For amortization, allowed when, how 135 Gross value at the mine, defined 6 How established in case of mines 6 Loss by shrinkage in property value, insurance company, what, and when deductible 147b Of good will not allowable deduction 136 Timber-land From removal timber, amount, how determined 139 Deduction for, limit of, excess of is income 140 Unearned increment, not value for basis of deduction for 146 DEPRECIATION RESERVE: Use of, disposition excess of 132 DEPUTY COLLECTOR: Ascertain persons liable to tax and enumerate objects, section 3172. . . .p 60 Legality of returns made by, section 3176 p 60 To make report, false or fraudulent return, how, section 3176 p 60 DESCENT: Of property Income from, part of gross income 4 Value of, not income 4 DEVISE OF PROPERTY: Income, part of gross income; value of, not income 4 DISPATCH OF BUSINESS: In collector's office .' 195 DISTRICT OF COLUMBIA: Exemptions, proviso p 51 DIVERSION: Depreciation reserve, correction 133 DIVIDENDS: Compensation paid employees of corporation based on stockholding are, when 119 Cooperative dairies, is purchase price of raw material . . ' 92 Of corporations subject to tax not subject to withholding p 49, art 32 Deducted from net income, when 3 Part of gross income 4 Stock foreign corporations, subject to withholding when p 50 Stock subject to tax individual owning, how treated p 48 DOCTORS: Fees of, indefinite or irregular not subject to withholding 32 DONATIONS: By corporation for charitable purpose, deductible when 121 DOMESTIC BUILDING AND LOAN ASSOCIATION: Definition, what necessary to exempt from tax 87 DUE DATE: Return on Sunday or legal holiday, effect of .176 DUTIES: Not tax and not deductible but are item of cost 155 175 INDEX. E. EDUCATIONAL CORPORATIONS: Article. Exempt when p 51 EMPLOYEES: State or political subdivisions, compensation of officers and employees paid by, not part of gross income 5 vState officers or employees, compensation paid by United States a part of gross income 5 ENDOWMENT: Money paid for; returned not to be included in gross income 5 EVIDENCE: Furnished by agent of authority to sign ownership certificate to be re- tained by verifying agent 43 Guardian, etc., served with notice for failure to make return, may fur- nish, what 18 Of nonliability to payment of tax, filed with withholding agent, may be forwarded to collector in lieu of tax p 57 Requisite for allowance of deduction by corporation 158 EXCISE AND INCOME: Tax, corporation, 1913 In one return 191 EXCISE TAX: Corporation ., for what period, how computed 160 EXECUTOR: Is fiduciary when 70 Make return of income of deceased within taxable year, when and what. 17 EXEMPT: From tax Corporations, what 87 Co-operative dairies, what 92 Income from public utility 93 EXEMPTION: Allowed in computing taxable income of deceased person, when 17 Amount allowed married person p 46 Beneficiary may claim from fiduciary 74 Boards of trade, when p 51 And deductions i . .p 11 Cemetery Company, depends on what 90 Certificate claiming by corporation organized in United States form of and how executed 45 Certificate claiming, what must show and how executed 42 Chambers of commerce, when p 51 Charitable associations, when p 51 Civic leagues or organizations, classes of, when p 51 Claimed by fiduciary, forms 1015 or 1019 70 Claimed for By whom, with whom and when to be filed p. 49, Art. 41 How to be filed p 49 May be filed with withholding agent when 33c Under paragraph C Allowed to person permicted to claim 60 Failure to claim, effect of 65 Corporation claiming To establish rights to, how gg Whose taxable status in doubt, must make return and attach state- ment showing what 91 Districts of Columbia, provisions p 51 176 INDEX. EXEMPTION Continued. Article. Domestic building and loan associations .p 51 Educational corporation, when p 51 False claim or statement as to, penalty for 33a Fraternal societies p 51 Husband and wife Living together, citizen or resident alien, add incomes for purpose of, amount of 1 10 Separated and living permanently apart, citizen or resident alien, each entitled to $3,000 10 Individual Deduction of from net income to ascertain taxable 3 Amount of for 1913 7 Single, or married but not living with husband or wife, may claim $3,000 each 9, 10 May be claimed, note given in payment of income 68 Mutual Cemetery Companies p 51 None for corporations 160 Paragraph C Not allowed nonresident alien 8 Not claimed of withholding agent in time, only remedy application for refund 33c To be filed with withholding agent when 33 Philippine Islands p 51 Porto Rico p 51 Public utility p 51 Religious associations and corporations p 51 Scientific associations when p -51 Status of person claiming determined as of time of claim 10 To be deducted from net income to ascertain taxable under paragraph C 6 EXPENSE: Deductible, pension or amounts paid employees account injuries are . . . 120 General, foreign steamship companies, how treated 116 Of operation and maintenance corporate business, what includes 114 Partnership may claim deduction for, when and how 14 EXTENSION: Time for filing return, when, what, how 23 To make return, not exceed what, how and to whom made 173 FALSE RETURNS: Additional tax imposed p 48 Or fraudulent, penalty p 60 FIDUCIARY: Annual return by, what to show and how executed 73 Definition of 70 Filing notice with other withholding agent (Form 101), nothing to be withheld 70 Having withheld and paid tax on undistributed annual net income not to again withhold when distribution made 75 Income of beneficiary not distributed during the year; what to be shown in return; tax to be withheld and paid when 74 May be appointed agent or attorney for the purpose of making personal return of income (Form 1040) for beneficiary 72 Optional claim (Form 1015 or 1019) 70 liigulations as to 70-75 Iff INDEX. FIDUCIARY Continued. Article. Return by must be made when 71 Return by to include only matter within scope of authority 72 Return of not to include income on which tax paid 71 Return, when to be made 190 To make annual return (Form 1041) to collector of District when, to show what 71 FIRM: To make return, how, when, section 3173 p 59 Collecting foreign items, license required p 11 FISCAL YEAR: Corporation Duty of collector upon receiving notice of 167 How established, what to be done 165 Illustration of and what to do 166 Making return on basis of but not so designating, return not accepted and must be made for calendar year 171 Notice of not retroactive 169 Notice to collector not given in prescribed time, calendar year to govern 168 Not properly established, return to be made for what calendar year and filed when ' 170 FOREIGN: Corporation Doing business in United States Provision for p 55 Return by p 57 Particulars of p 56 Where filed p 55 Subject to tax on what 77 Tax on net income; net income defined; deduction^ to ascertain. . . 157 Items Too small for notation on. statement of facts may be attached to. 58 License required for collection of, when and from whom 54 Provisions for collection of tax on apply wherever said items pay- able, if paid in United States 61 Income paid in United States, provisions for collection of tax on 54-62 Organization doing business in United States subject to tax but exempt from withholding upon filing certificate claiming (Form 1018) 46 Partnership owning bonds of corporations organized or doing business within United States, not subject to withholding on interest of, when . . 48 Payments of dividends, etc., provisions as to collection, license, penalty .p 50 Steamship company, general expense of, how treated 116 FRAUDULENT RETURN: Additional tax imposed; time limit for paying after notice p 48 G. GAINS: For taxable purposes arising or accruing within calendar year, part of gross income, what 4 GAS OR OIL TERRITORY LEASED: Corporation, basis of deduction for depletion of 144 GAS OR OIL WELLS AND MINES: Operated on royalty basis, deduction for depletion of deposits not allowed operating corporation 145 INDEX. GIFT: Article. Of property, income from part of gross income; value not income 4 To employees of corporation not deductible 120 GOVERNMENTAL FUNCTION : Income accruing to State from exercise of, exempt 93 GOOD WILL: Corporation, depreciation of, not allowable deduction 136 GRATUITIES: To employees of corporation not deductible 120 GROSS INCOME: Corporation Definition of 96 Engaged in more than one class business, ascertained in accordance with applicable definition each class 112 General definition of gross income- v 107 Manufacturing company, definition of 104 Mercantile company, definition of 105 Miscellaneous corporation, definition of 106 All sources to be specified p 47 Definitions 3,4 Deductions from By mutual marine insurance companies, what 99 To ascertain net income for normal tax, paragraph B 6 Insurance company, definition of 101 Life insurance company Definition 101 To include applied surrender values and consideration for supple- mentary contracts 102 Of nonresident alien, what constitutes 8 What to be excluded in computing - 5 GROSS VALUE AT THE MINE: Defined 6 Corporation, definition 142 GUARDIAN: Is fiduciary, when 70 Return made by, when, regulation : .p 47, 17 H. HOLIDAY: Due date of return falling on, effect of 176 HORTICULTURAL ORGANIZATIONS: Exempt p 51 HUSBAND: Assumed to have sufficient knowledge of income of wife to make return for ..., 10 Having net income other than wife's income from separate estate so that aggregate income both more than $4,000, wife return attached to hus- band or his income included in her return for purpose of $4,000 exemp- tion 10 Should make return of income for self and wife 10 HUSBAND AND WIFE: Combined net income of, exceeds $4,000, return of must be made 10 Both jointly and separately liable for return and payment of tax 10 179 INDEX. HUSBAND AND WIFE Continued. ( Article. Not living apart, having separate estates, income of both may be made on one return, but return must show income of each separately stated with name and address of both 10 Living together, citizen or resident alien, entitled to $4,000 exemption from their aggregate net income 10 Separated and living permanently apart, citizen or resident alien, each entitled to $3,000 exemption from net income 10 HUSBAND OR WIFE: Either having net income of $3,000, return required, and must include incomes of both 10 IDENTITY: Persons persenting coupons or interest orders should be required to establish . . 52 INCOME: Additional tax on, referred to as additional tax p 43 Amount from which withholding to be had 32 Banks, interest paid on deposits by, to be deducted p 57 Bonds or other indebtedness p 54 But not value of property, acquired by gift, bequest, devise or descent . . .p 44 Compensation of officers and employees of State or political subdivision of, paid by United States, part of gross income 5 Corporation Allowance for depreciation by wear and tear p 52 Amount allowed for Depreciation p 52 Taxes p 53 Bad debts collected are .' 125 How ascertained p 52 From sale of capital assets, how determined p 52 Interest paid deductible 108 Losses sustained during the year p 54 May designate fiscal year p 52 Ordinary expenses of operation deductible Penalty for failure to p 51 Make return of Pay tax on after June 30 p 51 To give notice of fiscal year adopted p 55 Deductions from gross, mutual marine insurance company, what p 99 Derived from all sources p. 51, Art. 14 Fixed determinable annual From what derived ^ 63 Normal tax on bonds, etc., when deducted . .p 49 Withholding from, when 64 Foreign corporation doing business in the United States, return of, particulars pp. 51-53-55 Foreign, paid in United States, provisions for collection of tax on. . . .54-62 For taxable purposes is income for calendar year 4 For 1913, how computed p 54 From all sources part of gross income 4 From bonds, mortgages, deeds of trust, and similar obligations of corpora- tions, etc., subject to withholding at source regardless of amount. ... 37 From capital invested in the United States p 55 From certain professions not subject to withholding at source 32 180 INDEX. INCOME Continued. Article From^public utility or governmental function accruing to State, etc., exempt from tax 93 From what, obligations not subject to tax and certificate of ownership not required 37 Gross, denned 3,4 Corporation Engaged in more than one class of business, ascertained in accordance with applicable definition for each class 112 Definition of 96 General definition 107 Insurance company, definition of gross income 97, 101 Life insurance company, to include applied surrender values and consideration for supplementary contracts 102 Manufacturing company, definition 104 Mercantile corporation, definition 105 Miscellaneous corporation, definition 106 Mutual fire insurance company, definition 108 What to be included in computing 5 Husband and wife, what 10 Individual, not subject to withholding when 32 Insurance company, to be separately stated p 56 Insurance reserve, how treated p 55 Interest Accruing during year p 55 On deposits p 54 On obligations of State, etc p 5 Joint stock companies, how ascertained and stated pp 53-55-56 Life insurance companies, -what included, deductions. . . pp 53-56, art. 100 Mutual fire insurance companies pp 53-55-56 What taxable 98 Mutual marine insurance companies pp 55-56 Net- Defined 3 Of corporation engaged in more than one class of business, how ascertained 113 Deductions allowed for ascertaining p 44 Shall include what pp 43-44-51-53-54-55-56 Not subject to withholding at source, to be covered in personal return 32 Note given in payment of; maker of note is debtor and source; required to withhold, except, when . . . . 68 Of corporations, verified how 183 Returns of, filed, are public records; inspection of, who may and for what purpose p 58 Penalty for divulging information on or exhibiting returns, section 3167 ' p 58 Tax paid at source, deducted in ascertaining taxable 3 On, from coupon or registered interest to be deducted and withheld, except to extent exemption claimed 44 Taxable Defined 3 Persons subject to 1 For normal tax, what, how ascertained p 43, Art. 7 181 INDEX. INCOME Continued. Articile Subject to additional tax p 43 What not liable to withholding at source 32 Withheld, what, when, by whom p 48 INDIVIDUAL: Who may claim exemption paragraph C 9, 10 Duty of, collection interest coupons originating in United States 39 Husband and wife living together, citizen or resident alien, exemption $4,000 10 Income accruing to, from contract with State, etc., prior to passage of act of construction, operation, or maintenance, public utility, taxable 93 Income less than $20,000 required to make return, except when 19 Income of, liable to withholding at source on and after November 1, 1913 29 Liable for income tax on share of net earnings of partnership 47 Married and not living with husband or wife, amount exemption 9 Normal tax, what " 1 Partnership profits included in return of and tax paid, not reported as income again 14 Residing in foreign country, where to file return ' 15 Return For calendar year 4 Required of guardian, etc., notice of failure to make, served when . . 18 When to be made 190 Share of earnings, partnership, property of, subject to tax chargeable to individual *;" ^4 Share of partnership profits to be included in personal return 13 Single, allowable exemption for 9 Status for claiming exemption, determined as of time of claim 10 INFORMATION: From returns to officers of State, when, what, how 179 INSANE: Who make claim for deductions for 33b INSPECTION: Of returns, how 178 INSURANCE COMPANY: "Deductible net addition to reserve"; definition; what basis of com- putation of; what not to be included in 147d Deduction, claims actually paid under policy contract 147c Depreciation loss by shrinkage in property value, what and when deductible 147b Gross income, definition 97, 101 Income to be stated separately p 56 Losses Actually sustained pp 53 -56 Deduction for what 147a Making false return, penalty p 51 Mutual marine, deduct what 147d Neglecting to make return, penalty p 51 Net addition to reserve p 56 Net income, source, time of accrual, return of . . . . .pp 12, 14, 20 Notice of assessments to p 59 Penalty for failure to pay tax p 60 Refusing to make return, penalty p 51 182 INDEX. INSURANCE COMPANY Continued. Article. Reserve Definition '. '. 147d Fund, how treated ' p 54 To meet losses, how treated . . 147c Returns of, when available p 58 Salvage, how treated in return of 147c Special excise tax, how computed, time, what p 62 To make return of others, when p 48 INSURANCE: Life- Paid to beneficiaries not to be included in gross income, when .... 5 Payment credited to insurance not to be included in gross income, when 5 Received by insured not to be included in gross income, when .... 5 INTEREST: Coupon or registered, originating or payable in the United States, who to withhold 39 From what obligation not subject to tax and certificates of ownership not required 37 How treated 63 On deposits Part of gross income 4 Subject ot withholding ; must be included in personal return whether paid or not 67 On obligations of State or political subdivision of, United States or pos- sessions, not part of gross income 5 Paid as rental by corporations, how treated 148 Paid by bank, etc., on deposits, etc., allowable deduction 149 Paid by corporation Deduction of what, when 148 On indebtedness secured by collateral subject to sale, deductible when, why 150 At different rates, rule for application of deduction of 151 On mortgage on property in which corporation has equity or is pur- chasing, how treated 148 Part of gross income 4 Payment of, to beneficiaries by insurance companies, part of gross income 5 Registered, certificate claiming exemption to be filed at least five days before due-date of interest 44 Registered, duty of debtor before payment of 41 INVENTORS: Earnings of, indefinite or irregular not subject to withholding 32 INVENTORY: Corporation, purpose and use of, kinds of 161 JOINT STOCK COMPANY: Assessment against, payable pp 44-57 Deductions allowable to 9 Income How ascertained p 52 To be separately stated p 55 Losses actually sustained p 55 Neglecting to make return, penalty p 51 2478514 -8 INDEX. JOINT STOCK COMPANY Continued. Article. Net income from all sources p 52 Net income taxable for preceding calendar year p 48 Notice to be given of assessments p 57 Penalty for failure To make return p 57 To pay tax p 57 Return False, penalty for ' p 48 For others made by p 48 Net income to be shown on p 57 Refusing to make, penalty p 48 When available p 58 When to make p 55 Special excise tax and how computed p 62 JUDGES: United States courts, salaries exempt, what 5 JURISDICTION: Of courts p 61 L. LABOR ORGANIZATIONS: Exempt p 51 LAST DUE DATE: Defined 175 LAWS: Relating to assessment, remission, collection, refunding p 60 LAWYERS: Fees, indefinite or irregular, not subject to withholding 32 LESSEES OR MORTGAGORS: Make return for others, when p 48 LIABILITY: To tax of a taxable person not to be released 27 LICENSE: Bond may be required on form furnished 56 Failure to obtain, penalty for 55 For branch, to be made through principal office 57 Form of application for, to be made to collector of district 55 Form of; to be issued by collector, good until revoked 55 Required for collection of interest or other foreign items, when, by whom, where obtained p. 50, art. 54 LICENSEE: First, receiving foreign item for collection to withhold and be responsible for tax and to note fact of withholding on such item, effect of 58 For collection of foreign items Disposition of certificates accompanying, by , 61 To keep record showing what 62 To report to collector (Form 1043), what, when 59 LIFE INSURANCE: Proceeds of policies, when to be excluded from gross income. . ..p. 44, Art. 5 LIFE INSURANCE COMPANY: Applied surrender values and consideration for supplementary con- tracts both to be added and deducted in return 102 Deductions from gross income, what p. 57, Art. 100 Gross income, definition pp. 52-57, Art. 101 Supplementary statements attached to return of, showing what 103 184 INDEX. LIMITATION, STATUTE OF: Article. For income tax purposes, thee years 177 LODGE SYSTEM: Corporation operating under, defined 89 Loss: Corporation- Deductible, defined 124 From sale capital assets, how ascertained 128 From sale securities below par, how treated 135 Insurance company, deduction for, what 147a Removal of building not deductible, why 127 Reserve for, not deductible 126 M. MAKER: Of note given in payment of interest held responsible for normal tax. . 68 MANUFACTURING COMPANY : Gross income, definition 104 MANUFACTURERS : Returns of, accessible how, penalty, sec. 3167 p 22 MARINE INSURANCE COMPANY: Deductions by p 55 MATERIALS AND SUPPLIES ON HAND: Deduction by corporation on account of, what 123 MERCANTILE CORPORATION: Gross income, definition 105 MINE: Gross value at Defined 6 Corporation, definition 142 Depreciation p 52 Operated on royalty basis, corporation, deduction for depletion of de- posits not allowed operating corporation 145 MINOR: Who make claim for deductions for 33b MISCELLANEOUS CORPORATION: Gross income, definition 106 MONTHLY LIST RETURN: Form of, what to contain, to be filed in duplicate 50 Of coupon or registered interest orders received with ownership certifi- cates, form of and what to show 53 Of licensee for collection of foreign item, form of, what to show, with whom filed, when 59 Summary of, when to be filed and what to show 50 Totals only to be carried into annual return 51 MORTGAGES: Interest on, when subject to withholding p 50 Not payable in United States, when subject to withholding.. r p 50 Paid by corporation which has equity, how treated 148 Of corporation, income from, subject to withholding, regardless of amount 37 MUTUAL COMPANIES: To make return of income; definition of net income 80 185 INDEX. MUT.UAL FIRE INSURANCE COMPANY: Article Gross income of, definition 98 Premium deposits returned, what p 55 Return of pp 53-55-56 Supplementary statement attached to return of, showing wfrat 103 Taxable income, what 98 MUTUAL MARINE INSURANCE COMPANY: Deductions, what p 19, Arts 99, 147d Gross income pp 53- 56 Supplementary statement attached to return of, showing what.. . . 103 . N. NAMES. Arrangement of, in list by collector 188 NATCJRAL DEPOSITS: Deduction for depreciation of, basis and limit of 141 NET INCOME: Defined 3 Corporation Engaged in more than one class of business, how ascertained 113 For 1913, how ascertained 159 From sale of capital assets, how determined 109 Should be what 158, 183 Foreign corporation, defined 157 Mutual companies, defined 80 NORMAL TAX 1 NOTE: Gjven in payment of income; maker is debtor or source and must with- | hold on entire amount of note if in excess of $3,000, except allow- ance exemption or deduction claimed 68 Given in payment of interest; failure of purchaser to make allowance or deduction for tax, only remedy is against vendor, how 68 NOTICE: Answer of guardian, etc., may show what 18 Assessment, advance preparation of, by collector 198 Claiming deduction account partnership expense, by whom filed, what and how x 47 Collector to give withholding agent, when tax withheld is ad juste : in assessment 33c Form 1015 filed by fiduciary with other withholding agent, nothing withheld 70 Of assessment; failure to pay tax; make return; form of; time 197 Of claim for exemption by foreign partnership, when, what, how 48 Of failure fiduciary to file return, served 71 Of failure to make return, when to be served on guardian, etc 18 To delinquent, failure to file return in time 196 To taxpayer, of amount for which liable as on or before June 1 25 O. OATH OB AFFIRMATION: Required in verifying returns 22 OBLIGATIONS: Interest on, of State or political subdivision; United States or posses- sions not paxt of gross income 5 INDEX. OBLIGATIONS OF CORPORATIONS, ETC.: Article. Similar to bonds, mortgages, and deeds of trust, income from, subject to withholding, regardless of amount 37 OBSOLESCENCE: Of patents, deduction for, what, how determined 138 OFFICERS: Of State or political subdivision of, compensation Of not part of gross income 5 Paid by United States is part of gross income. 5 Regulations designed for enforcing compliance with law p 61 Of the United States making returns for others 9 OlL OR GAS TERRITORY LEASED: Basis of deduction for depletion of 7 . 144 OlL OR GAS WELLS AND MINES: Operated on royalty basis, deduction for depletion of deposits not allowed operating corporation 145 OMITTED TAX: May be assessed and with penalty, when 184 ORGANIZATIONS: Civic, exemptions p 51 P. PAID-UP CAPITAL STOCK: Definition of 95 PARTNERSHIP: As such not subject to tax and not required to make return except on request Commissioner or Secretary 12 Foreign Composed of nonresident aliens, resident aliens, and citizens of United States, either or both, requisites of ownership certificate 49 for Owning bonds, etc., of corporations, etc., organized or doing business in the United States not subject to withholding on interest of provided exemption claimed (Form 1016) 48 Individual share of profits of, to be included in personal return 11 Limited, is corporation and subject to corporation tax 86 Liable only in individual capacity p 48 May claim deduction for expense of business, when and how 14 Members of, liable in individual capacity for tax on their respective shares of earnings of, whether distributed or not p 44, Art 94 Profits of Once returned and tax paid, not again reported as income 14 To be included by individuals entitled to, in their personal return. 13 Return of, when to be made, section 3173 p 59 Shall forward correct statement of profits and names p 49 Share of profit to partners ' p 49 To file with withholding agent notice claiming deduction for expense of, what and how 47 To make list or return, how and when, section 3173 p 59 Art 23 When required to make return must make complete and correct 12 PATENTS: Deduction for Depreciation, what, and how determined 137 Obsolescence, what, how determined 138 187 INDEX. PAYMENT: Article. To officer authorized to receive p 48 PENALTY : And interest for nonpayment when due and for 10 days after notice.whenp 48 Delinquent tax Amount of, and how determined, not assessed against estates, in- sane, deceased, or insolvent persons 25 PENALTY: For divulging Information on return, what 181 Unlawfully, information on return, fine or imprisonment, or both, with costs 164 Failure to make return in prescribed time or for false or fraudulent, fine or imprisonment, or both P 58, Art, 164 Failure to pay tax, 5 per cent tax plus 1 per cent per month 164 False claim or statement to secure exemption p 49, Art. 33a False or fraudulent return with intent to evade or defeat tax, what. ... 26 Falss or fraudulent return 100 per cent to tax p 60, Art. 164 False statement in regard to deduction p 49, Art. 33b Making false return p. 51 Neglect or refusal to make return p51, Art. 164 Person or officer of corporation required to make return, making false or fraudulent, with intent to defeat or evade assessment 164 Refusal or neglect tomake return, liable person, corporation, etc. p 12, Art. 26 Refusal to make or for false return, to be assessed and collected, what. . 21 Return made and properly mailed in time but not received in time, none 174 PENSIONS: Or payments on account of injuries to employees of corporations, de- ductible expense -. 120 PERSON: Whose income is not subject to withholding at source, make personal return 32 PERSONS, FIRMS, ETC.: Collecting foreign items, license required p 50 Whatever capacity acting, withholding agent, when, what p 48 Withholding none prior to November 1, 1913 p 48 PHILIPPINE ISLANDS: Exemptions p 51, Arts. 25, 26 PLANT: Corporation, deduction for depreciation (in addition to the deduction for depletion of mine), what and basis of 143 POLITICAL SUBDIVISION OF STATE: Interest on obligations of, not part of gross income 5 Officers and employees of, compensation not part of gross income 5 PORTO Rico: Exemptions and provisions p 51, Arts. 25, 26 POSSESSIONS: Of United States, interest on obligations of, not part of gross income . . 5 PREMIUMS: Deduction from, by whom, when p 48 PRESIDENT OF THE UNITED STATES: Salary of, exempt, what 5 188 INDEX. PROCEDURE: Article. In case of refusal or neglect, liable individual to make return on or for false return made Note to Art. 21 PROFFESSIONAL : Persons whose income indefinite or irregular, not subject to withholding. 32 PROFIT OR LOSS: Corporation, on sale of capital assets, how determined 110 PROFITS: For taxable purposes of those arising or accruing within calendar year. . . 4 From any source part of gross income 4 Partnership once return and tax paid, not reported as income 14 Partnership, individual entitled to include in his personal return 13 Share of, in partnership to be included in return of individual 11 PROPERTY: Received by gift, bequest, devise, descent, income from but not value, part of gross income f 4 PUBLIC RECORDS: Returns are, inspection of or copies, how 178 PUBLIC UTILITY: Income from accruing to State, etc., exempt from tax 93 PURCHASER: Of note given in payment of interest, failure to make allowance or deduc- tion of tax in purchase or discount only remedy is against vendor. 68 R. RATE: Deduction for depletion 'Of mines, etc., regulation and limit of 142 RECEIPTS: Separate to be issued, when 25 RECORD : To be kept by- Collecting agent, what 40 Licensee for collection of foreign items, what to show 62 REFUND: Failure to make claim for exemption or deductions with withholding agent in time; only remedy is by application for 33c REGISTERED INTEREST: Certificate claiming exemption from tax on, to be filed at least five days Lbefore due date of interest 44 REGUATIONS: Designed to assist taxpayer and officer in complying with the law p 61 Subjects covered and arrangement of p 61 REMOVAL OF BUILDINGS: Not deductible loss, corporation, why 127 RENT: Corporation, cost of buildings on leased ground deductible, when 115 How treated 63 Interest paid by corporation as, how treated 148 Part of gross income 4 REPAIRS: Deduction, when 131 INDEX. RESERVE: Article. Assessment insurance company, definition 147d For depreciation Diversion of, correction 133 Use of, disposition of excess of 132 For insurance of corporate property not deductible 122 For losses not deductible 126 For taxes of corporation not deductible 156 Insurance company, deductible net addition to, definition; what basis computation; what not to be included in 147d To meet loss, insurance company, how treated 147c RESIDENT ALIENS: Certificates of ownership of bonds, when and how to be used and to specify what ' 42 Income of, from coupon or registered interest, subject to withholding except to extent of exemption claimed 44 RETURNS: Administrators to make for heirs, when 9 Agents to make for others 9 Annual individual and monthly list to be forwarded to Commissioner, how 24 Annual list (Form 1013), to show what, and to be filed on or before 50 March 1 Annual, of coupon or registered interest orders not accompanied by certificates of ownership; form of, and what to show; to be filed when; to show totals only on monthly return 53 Annual, of debtors or withholding agents to show totals only on month- ly list 51 Annual, fiduciary to collector of district when; show what 71 Annual, of withholding agent, form for. to be accompanied by 'what, when to be filed 35 Annual, of withholding agent (Form 1042), what to show and when to be filed 69 Approval of Secretary 7 Blanks for, furnished corporations by collector 163 By persons of lawful age 7 Certified copies of, when, why, delivered to whom 180 Conservators to make for others 9 Corporation Every, not specifically exempt, to make 80 Fiduciaries, withholding agents, when to be made 190 Going into liquidation to make final; filed when and where 85 Not receiving blank for, should make application for, to whom, when 136 One only for 1913 160 Organized during year, to make 84 To make complete or nor accepted 163 When income paid by lessee direct to stockholders, must neverthe- less make . . . 80 Copy of, unlawful to exhibit, section 3167 P 58 Divulging Information from, penalty 181 Unlawfully, information on, penalty 164 Due date on Sunday or legal holiday, effect of 176 Duplicate, when, of whom required, disposition of }. . 193 190 INDEX. RETURNS Continued. Duty of collector Article On failure to find person at home, section 3173 p 60 In forwarding and investigation of 192 Employees to make for others p 49 Evidence by which to verify, what 183 Executors to make for others p 48 Extension of time For filing, when, what, how 23 To make, not to exceed what, how, to whom made 173 Failure of corporation to receive blank for, not excused from making return or penalties for failure 163 Failure Of fiduciary to file, notice of, served 71 To make by guardian, agent, or other person acting in trust cap- acity, notice to, served on 18 To make in prescribed time, of a false or fraudulent, penalty 164 To make- Notice of, form and time to serve 197 Legal provisions as to p 23 False or fraudulent Penalty p 51, Art 164 Duty of collector in matter of .....; 192 With intent to defeat or evade tax, penalty 26 Fiduciary Having income not distributed; what to be shown; tax to be with- held and paid when 24 Must be made when 71 Not to include income on which tax paid 71 To include only matter within scope of authority 72 What to show, and how executed 73 For 1913, must be on new form and not on excise form heretofore used 172 Foreign corporation having more than one branch office in United States to designated principal office and person to make return 83 Form of for corporation prescribed 163 For persons incapacitated, by whom made p 49 For persons absent from United States, by whom made p 49 Fraudulent Duty of collector p 60 Extra tax because of p 49 Time limitation for paying after notice 1 .p 49 _ Husband and wife, net income both exceeds $4,000, of combined in- come, required 10 Husband and wife not living apart, separate income from separate es- tate may be made on one; separately stated and with names and ad- dresses of both 10 Husband should made for himself and wife 10 Husband or wife, either having net income $3,000 or over, required, and must include income of both 10 Individual To be made when 190 For calendar year . . : 4 Made by collector when 20 INDEX. RETURNS Continued. Individual Continued. Article Not required to make, when made by other for him, when 19 To include share of partnership profits in 13 Information or copies from, to officiers of State, when, what, how; ori^ inal not removed except 1 79 Last due date defined 175 Leased corporations make their own 82 Legality of, made by collector of deputy, sec. 3176 p 60 Lessee corporation assuming debts of lessor to include in lessee return all receipts of lessor 81 Lessee corporation not to include in its own statement of capital stock, that of lessor; nor in its own statement of indebtedness, that of lessor except when said indebtedness is assumed by lessee 82 Life insurance company Applied surrender values and consideration for supplementary con- tracts both added and deducted 102 Supplementary statement attached to return of, showing what. . . . 103 Made and properly mailed in time, no penalty if not received in time 174 Made by guardian or authorized agent, when 17 Made on basis of fiscal year but not so designated, not accepted, and must be made for calendar year 171 Made to collector p 49 Monthly, by withholding agent, when to be filed; with whom, what to accompany 35 Monthly list and annual, by licensee for collection of foreign items, what, to whom, when 59 Monthly list, form of, what to contain, to be filed in duplicate 50 Monthly list of coupon or interest orders not accompanied by certifi- cates of ownership, form of, and what to show 53 Must be made, when, section 3173 p 59 Mutual companies to make; definition net income '. 80 Mutual fire insurance companies, supplementary statement attached to, showing what 103 Mutual marine insurance companies, supplementary statement attached to, showing what 103 Neglect or refusal of liable person, corporation, etc., to make, penalty.. 26 Neglect or refusal to make, 50 per cent additional tax 164 Neglect to make, penalty p 51 Nonresident alien, agent or representative to make for, when, what to be included in 8 Not required, income not exceeding $3,000 p 47 Not filed in time, notice sent to delinquent 196 Officers and employees of the United States, having control salaries, rents, etc., to make when p 49 Of income When required, where filed 15 Persons deceased within taxable year, made by executor or adminis- trator 17 On basis of calendar year or fiscal year, time of assessment and payment of tax 177 One deduction only of exemption p 47 One to cover both special excise and income tax for 1913 for corporation.? 62 Open to inspection, when p 68 192 INDEX. RETURNS Cont'nued. Article. Partnership profits included by individual and tax paid, not again re- ported as income 14 Partnership, requisite of . . . 12 Penalty Against corporation for failure to make 163 For failure to make at time specified p 57 For refusal to make p 51 Personal, Form 1040; fiduciary may be appointed agent or attorney to make for beneficiary 72 Personal not required when 8 Person or officer of corporation required to make, making false or frau- dulent with intent to defeat or evade; penalty 164 Person residing in foreign country, provision for 7 Public record-, inspection or copies, how p. 58 Art. 178 Receivers to make for others 9 Refusal or neg'ect of liable individual, duty of collector p. 60 Art. 21 Refusal to make, extra tax p 9 Requisite of bookkeeping for verifying 182 State officer may have access to p 58 To be filed, when p 46 To be made on Form 1040 for individuals 16 To be made to collector pp. 46-47 To include Personal income not subject to withholding 32 Share of profits in partnership whether divided or not 11 To be verified, how, before whom pp. 46-59 Trustees to make for others p 47 Understatement of income, cause to be shown why amount not in- creased p 48 Undervaluation or understatement p 59 Unlawful to exhibit or divulge information from, section 3167 p 58 Wife having income of $3,000 from separate estate managed by herself may make her own , 10 What must be shown on 16 When to be made; where filed, section 3173 p 59 Withholding agent, what disposition of; should not be filed until expira- tion of time allowed for filing claims for exemption or deductions 33c REVISED STATUTES: Amended sections of, providing duties and penalties, sections 3167 3172, 3173 PP 58-59-60 ROYALTIES: How treated 63 ROYALTY BASIS: Mines, oil or gas wells, operated on, deduction for depletion of deposits not allowed operating corporation 145 S. SALARIES: How treated 4, 63 J3ALE OF CAPITAL ASSETS.* Corporation Income from, how determined 108, 109 Loss from, how ascertained 128 Profit or loss on. . 110 193 INDEX. SALESMEN: Article. Commission to, paid in stock, deductible expense when 117 SALVAGE : How treated in return of insurance company 147c SCIENTIFIC ASSOCIATION: Exemptions p 5 1 SECURITIES: Income from; sale of, below par; 'loss 4,135 SHRINKAGE : In book value capital assets, how treated 134 In property value insurance company, depreciation loss by, what and when deductible 147b SIZE: Foreign items too small for notation on, statement may be attached to . . 58 SOCIETY : Operating under the "lodge system," defined; exemptions p 51 Art 89 SOURCE : Defined 31 Example of where and where not withholding at 32 Fiduciary is, when 70 Note given in payment of income, maker of note is 68 Persons, firms etc., acting as, designated "debtors" or "withholding agents" 31 Tax withheld at, to be paid to collector 34 Withholding at, applies only to normal tax imposed on individuals .... 29 Who required to act as; liable for tax withheld 30 SPECIAL TAX: See sections 3173, 3176 pp 59-60 STATE : Information from return when, how 179 Officers and employees, paid by United States; compensation part of gross income 5 Political subdivision of, compensation of officers and employees not part of gross income; interest on obligations of, not part of gross income 5 STATE OR UNITED STATES: Construction; exemptions, distinction as to, for certain income from ' State, etc p pp 51- 58 STATUS: For claiming exemption by individuals 10 STATUTE OF LIMITATION: For income-tax purposes, three years 177 STOCK: Paid-up capital, definition 95 SUBSTITUTE CERTIFICATES 40 SUMMARY OF MONTHLY LIST RETURN 50 SUMMONS, SECTION 3173 p 59 SUNDAY OR LEGAL HOLIDAY 176 SUPPLEMENTARY STATEMENT ATTACHED TO RETURN 103 SUPPLIES ON HAND 123 T TAX: Additional, on individuals only, rates and classes 2 Amounts added as penalty, section 3176 P 60 Assessment and collection 25 From withholding agent 36 194 INDEX TAX Continu . Assessment Article. Against income withheld at source. ... 38 Of, against withholding agent deferred. 189 Claim for abatement of 33c Co-operative dairies exempt 92 Corporation .*>i Exempt 87 On entire net income 185 Organized in United States, all (with certain exceptions) subject to 76 Delinquent if not paid by June 30 25 Deputy collectors, duties, section 3172 p 59 Domestic building and loan association, what necessary to exempt .... 87 "Duties" are not but item of cost 155 Evidence of nonliability, received by withholding agent, disposition of . .p 61 Evidence of payment of, by corporation for deduction purposes 158 Excise on corporation Arts. 160, 191 Extra p 48 Failure to pay 164, 177, 197 Fixed determinate annual income, subject to withholding 65, 66 Fraternal societie , exempt , p 51 Individual Net income over $3,000 annually, liable to p. 45, Art. 9 Income from public utility taxable when 93 Income of corporations organized elsewhere than in the United States liability 79 Normal Computation of. Art. 1, 7 Deductions in connection with, pp. 10-12, Art. 41 Agricultural, horticultural, an 1 1 abor organizations certain mutual savings banks, exempt p 51 N-t to b^ withheld against partnership profits 47 Not to be withheld on bank deposits 67 Omitted, procedure upon discovery o" 184 Once withheld, subsequent withhold in agent, exempt on filing certifi- cate (Form 1006) 34 On excess of income over exemption 10 Paid by corporation, when not deductible 153 Partnership limited is corporation and subject to corporation tax 86 Penalty on delinquent 2c On income From bonds, etc. corporations, etc 37 Paid by note 68 On interest on bonds owned by corporations organized in United States . 45 On net income for foreign corporation; definition; deduction 157 On net income of corporation Computation of 159 Distributable to owners 79 Receipts to be given by coll ctor p 61 Returns of, to be made, section 3173 p 59 Special excise 62 Taxable person not to be relieved from liability 27 To be i aid 177 195 INDEX. TAX Continued. Ar;icle. To be withheld ' 44, 64 Withheld At source, to b > paid to 30 By first licensee, fact of withholding noted 58 Collector to adjust in assessment a a'nst wi hholding agent 33c From what 64, 75 To be paid to collector 33c, 34 TAXABLE INCOME: Definition; liability 3, 7 TAX DUE 187 TAXES: Paid by corporation constitute deduction 152 Reserve for, by corporation not deductible 156 TAXPAYER: Regulations designed to assist p 27 TAX STATEMENTS 199 TAX YEAH 1913 7 TRUSTEE : As fiduciary 70 Duties of p 9 TEACHER: Public school 5 TlMBERLAND : Deduction for deprec ation Account removal of tinier 159 Limit of, excess of, is income 140 TIME: Extension of, for making and filing return 23, 173 U. UNEARNED INCREMENT: Not value for depreciation purposes 146 ''UNITED STATES" OR ''STATE": Con traction p 21 Interest upon obligations of 5 V. VALUE : Book, capital assets, shrinkage in 134 Gross at the mine, definition 6,142 Of property, acquired by gift, etc 4, 5 Shrinkage in property, deductible 147b Unearned increment, not as basis of deduction for depreciation 146 W. WAGES 4, 63 WIPE: Having income of $3,000 from separate estate managed by herself may make return of her own income 10 WIFE AND HUSBAND: Combined net income of exceeds $4,000, return required, both jointly and separately liable for return and tax 10 WIFE OR HUSBAND: Either having income $3,000 or over, return required and must include incomes of both. . 10 196 INDEX. WITHHOLDING: Article. At source 30 Example of where and where not 32 On and after November 1, 1913 29 By first liscensee; notation by; responsibility of 58 From what ~ 64 WITHHOLDING AGENT: Annual return by By, when, to show what 50, 51 Of (Form 1042), when to be filed, to be accompanied by what .. 35, 69 Not to be filed until , 33c Assessment of tax against, deferred until 189 Claim for exemption and deductions filed with Par B and C p 49 Arts 33ac Definition of, as source 31 Disposition of returns of 193 Duty in matter of certificates of ownership .' p 49 Art 43 Duty of, in matter of claims for deduction (par B) 33c Duty of, in case of foreign partnership 48 Evidence of nonliability to tax filed with, disposition of p 61 How to treat substitute certificate of collecting agent and certificates of owners not subject to having tax withheld. 51 May file claim for abatement of tax '. . 33c Monthly return by, when to be made, with whom filed, to be accom- panied by what 35 Notice filed with, claim for deduction, account partnership expense. ... 47 Not to withhold against nonresident alien or foreign organization doing business in United States, when 46 Return of, when to be made 190 Relieved from necessity of withholding, when p 61 To file monthly list return, form of, and what to contain 50 To forward to collector tax withheld, when 33c To furnish statement of claim for deductions filed with collector 33c To pay to collector tax withheld v 64 To withhold from, what, amount of 32, 65 When claim for deductions, paragraph B, to be filed with, duty of. . .33b, 66 When so authorized, may file return of withholding in district of his location 38 Who to be, in cases cited .* 64 WITHHOLDING AND, PAYING AGENT: Of debtor in United States, charged with duty of withholding, when. . . 39 WITNESSES: Jurisdiction for compelling attendance p 60 Y. YEAR: For taxable purposes for individual, is calendar year 4 (See fiscal year for corporation.) 197 232 10 UNIVERSITY OF CALIFORNIA LIBRARY