M = — ^ r- A = iji = (_ = - m m =^= 33 3 S 4 ^ R ^ =^= CO :d 7 = 9 = ;=^^ i> 3 ^ 1 — 1 :s ^^^ -<; 1 1 CLARK J. MILLIRON REGULATIONS NO. 33 U. S. INTERNAL REVENUE LAW AND REGULATIONS RELATIVE TO THE INCOME TAX SECTION 2, ACT OF OCTOBER 3, 19i3 In8r33 UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY LAW AND REGULATIONS RELATfVE TO THE TAX ON INCOME OF INDIVIDUALS, CORPORATIONS, JOINT STOCK COM- PANIES, ASSOCIATIONS, AND INSURANCE COMPANIES IMPOSED BY SECTION 2 ACT OF OCTOBER 3J913 January 5, 1914 WASHINGTON GOVEFINMENT PRINTING OFFICE I9I4 Regulations No. 33 : : : : : United States Internal Revenue LAW AND REGULATIONS RELATIVE TO THE TAX ON INCOME OF INDIVIDUALS, CORPORATIONS, JOINT STOCK COM- PANIES, ASSOCIATIONS, AND INSURANCE COMPANIES IMPOSED BY SECTION 2 ACT OF OCTOBER 3, 1913 January 5, 1914 WASHINGTON GOVERNMENT PRINTING OFFICE 1914 s so Tv) ^r- 33 INCOME TAX LAW. [Section 2, act October 3, 1913.] A. Subdivision 1. That there shall be levied, assessed, j^^^^,™^^^_ *^^' collected and paid annually upon the entire net income arising or accruing from all sources in the preceding calendar year to every citizen of the United States, whether residing at home or abroad, and to every per- son residing in the United States, though not a citizen thereof, a tax of 1 per centum per annum upon such income, except as hereinafter provided; and a like tax shall be assessed, levied, collected, and paid annu- ally 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. f (_7) Subdivision 2. In addition to the income tax provided Additional tax '^ on net incomes in under this section (herein referred to as the normal excess of $20,000. 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 net income exceeds $20,000 and does not exceed $50,000, and 2 per centum per annum upon the amount by which the total net income exceeds $50,000 and does not exceed $75,000, 3 per centum per annum upon the amount by which the total net income exceeds $75,000 and does not exceed $100,000, 4 per centum per annum upon the amount by which the total net income exceeds $100,000 and does not exceed $250,000, 5 per centum per annum upon the amount by which the total net income exceeds $250,000 and does not exceed $500,000, and 6 per centum per annum upon the amount by which the total net income exceeds $500,000. All the pro- visions of this section relating to individuals who are chargeable with the normal income tax, so far as they are applicable and are not inconsistent with this sub- division of paragraph A, shall apply to the levy, assess- ment, and collection of the additional tax imposed under 4 INCOME TAX LAW. this section. Every person subject to this additional tax shall, for the purpose of its assessment and collection, of^iu^r/iKome"™"^'^^^ ^ personal return of his total net income from all be made a°nu-soiuces. Corporate or otherwise, for the preceding cal- endar year, under rides and reticulations to be prescribed by the Commissioner of Internal Ilevenue and approved vevei] by the Secretary of the Treasuryt^/For the purpose of Interest jnthis additional tax the taxable income of any individual pains and prolits '' ofcorponitions togliall embracc the share to which he would be entitled be jncliKlec). 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 fraudulently availed of for the pur])ose of ])reventing the imposition i)f such tax through the medium of permitting such gains and profits to accumulate instead of being divided or distributed; and the fact that any such corporation, joint-stock com- pany, or association, is a mere holding company, or that patis*^im"profUsthe gains and profits are permitted to accumulate beyond how°?eKardeT^^' ^1^6 reasonable needs of the business shall be prima facie evidence of a fraudulent purpose to escape such tax; but the fact that the gains and profits are m any case permitted to accumulate and become surplus shall not be construed as evidence of a purpose to escape the said tax in such case unless the Secretary of the Treasury shall certify that in his opinion such accumiUal-ion is unreasonable for the purposes of the business; ' When requested by the Commissioner of Internal Revenue, or any district collector of internal revenue, such corpora- tion, joint-stock company, or association shall forward to him a correct statement of such ])rofits and the names of the individuals who would be entitled to the same if distributed. (s) B. That, s itenis con'suuit- ^- That, subjcct Only to such exemptions and deduc- ing same, tioiis as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for per- sonal serAdce of whatever kind and in whatever form paid, or from pi'ofessions, vocations, businesses, 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 law- ful business carried on for gain or profit, or gains or profits INCOME TAX LAW. O and income derived from any source whatever, including the income from but not the vakie pfproperty acquired q^^^'eT'^by gfn, by gift, bequest, devise, or dcscen&^r ovided, That the^t-^^-^^^^','!^ ^°; proceeds of hfe insurance policies paid upon the death of ^i^°^*^<^' exempt. the person insured or payments made by or credited to the insured, on life insurance, endowment, or annuity contracts, upon the return thereof to the insured at the maturity of the term mentioned in the contract, or upon surrender of contract, shall not be included, as income. (7^, hat in computing net income for the purpose of t he j^^educWons ^ai- normal tax there shall be allowed as deductions: First, P^u^^^^f^^ °et ^m- the necessary expenses actually paid in carrying on a^Jg^aftai.*^^ ^°^' business, not /mcluding personal, liv^ing, or family ex- penses; second, all interest pdd within the year by a tax- able person on indebtednes^;7t/iird, all national. State, coimty, school, and municipal taxes paid within the year, , not including those assessed against local benefits; (/6j fourth, losses actually sustained during the year, in- curred in trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otnerwise;^fth, debts due to the taxpayer actually ascertained to be / y^ \ worthless and charged off within the yearj'^sixthTa^' 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 centum of the gross value at the mine of the output for the year for whicn the computation is made, but ]io 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 for new buildings, permanent improvements, or better- ments/^made to increase the value of any property or estatJ/'^'iventh, the amount received as dividends upon the stock or from the net earnings of any corporation, joint stock company, association, or insurance company which i^ taxable upon its net income as hereinafter pro- vided^ (Eighth, the amount of income, the tax upon which has been 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 required to be withheld and paid at the source as here- inafter required, if such annual income does not exceed the sum of S3, 000 or is not fixed or certain, or is indefinite, O^k tcrest o juab.- ations of 6 INCOME TAX LAW. or irregular as to amount or time of accrual, the same shall not be deducted in the personal return of such person, //S) Net income or rt^\ i • t i i i i • nonresidents, ihc net uicomc irom property owne(i and busmess car- o\TO'cd^in'?r^ted lit'd ou in the United States by persons residing elsewhere states. shall be computed upon the basis prescribed in this par- agraph and that part of paragraph G of this section relating to the computation of the net income of corpora- tions, joint-stock and insurance companies, organized, created, or existing under the laws of foreign countries, in so far as applicable. Sto^~~^ That in computing net income under this section there states^ and con?- shall be cxcludcd the interest upon the obligations of a takru.'°s. officers St ate or any political subdivision thereof, and upon the exempt Irom tax. obligations of the United States or its possessions; also the compensation of the present President of the United States during the term for which he has been elected, and of the judges of the supreme and inferior courts of the United States now in office, and the compensation of all officers and employees of a State or any pohtical sub- division thereof except when such compensation is paid by the United States Government. I /v) ssJoo^aVi'owed C.^That thcrc shall be deducted from the amount of son^ndlf oooad- ^^^^ ^^^ income of each of said persons, ascertained as ricdmlliandw!fePro^^ed herein, the sum of $3,000, plus $1,000 additional living together, jf ^j^^ person making the return be a married man with a wife living with him, or plus the sum of $1,000 additional if the person making the return be a married woman with a husband living with her; but in no event shall this addi- tional exemption of $1,000 be deducted by both a husband and a wife: Provided, That only one deduction of $4,000 shall be made from the aggregate income of both husband and wife when living together. wWcVtaxfstobe ^- The Said tax shall be computcd upon the remainder computed. Q-f gg^j^j j^q^ incomc of each person subject thereto, accru- ing during each preceding calendar year ending Decem- ber thirty-first : Provided, however, That for the year end- ing December tliirty-first, nineteen hundred and thirteen, said tax shall be computed on the net income accruing from March first to December thirty-first, nineteen hun- dred and thirteen, both dates inclusive, after deducting five-sixths only of the specific exemptions and deductions INCOME TAX LAW. 7 herein provided for. On or before the first day of March, jn^^fe'^jer^oath nineteen hundred and fourteen, and the first day of by .each i^rson ilSVm^ £i DcL 111" of March in each year thereafter, a true and accurate come of ja.ooo or 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 S3, 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 , Gross income o ■*■ irom 2Li.i S0UXCG3 from the total thereof, deducting the aggregate items or to be specified. expenses and allowance herein authorized; guardians, Guardians, trustees, executors, administrators, agents, receivers, make retum' for , , , . . persons for whom conservators, and all persons, corporations, or associa- they act. tions acting in any fiduciary capacity, shall make and render 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 pro- visions 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 instru- ment under which he acts is recorded, under such regu- lations as the Secretary of the Treasury may prescribe, shall be a sufficient compliance with the requirements of this paragrapMr^^nd also all persons, firms, companies, Persons, firms, ^ ,. . .. . etc., having con- copartnerships, corporations, ioint-stock companies or troi of determina- ^ . . "^ . . , ble income pay- associations, and insurance companies, except as here- able to others. inafter 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 Normal tax to / ^ be deducted and the same and make and render a return, as aforesaid, return thereof but separate and distinct, of the portion of the income of each person from which the normal tax has been thus withheld, and containing also the name and address of 8 INCOME TAX LAW. such person or statiiiji; that the name and address or the address, as the case may be, are unknown: Provided, That the provision roquirin«jj the normal tax of individuals to be withheld at the source of the income shall not be con- strued to rocpiire any of such tax to be withheld prior to the first day of November, nineteen hundred and thirteen: n^i^ca n^s In- F*^omded further, That in either case above mentioned w!rm^'^''"''i>() return jof income not exceeding $3,000 shall be re- m^^\'^\vo^flo^^^^^^^^^^^^^^^ ^^^^^^^^^ That any persons carrying on be included in business ill partnership shall be liable for income tax return. _ .... onl}^ 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 ranncrshipssuch firm, wheii requested by the Commissioner of Inter- must submit IT-. T • 11 statements when 11 a 1 Revenuc, or any district collector, shall forward to required. p i r- i i him a correct statement of such profits and the names of the individuals who would be entitled to the same, if dis- ivvhuiQiVr^rTlvided 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 Dividends on of the iiicome derived from dividends on the capital stock stock, when to be . , . . , excluded from or iroiii the net earnings oi corporations, joint-stock com- panies 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, 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. The collector or deputy collector shall Returns to be require every list to be verified by the oath or affirmation ami^lmended^re^of the partyVendcring ftl^f the collector or deputy col- qu'^c.rbj rouec- lector 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 Appeals from accordingly. If dissatisfied with the decision of the col- decisfon of eol- ^ i • i • i n i lector. lector, 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 A\'itnesses to Drove any relevant facts. Assessments, E. That all assessments shall be made by the Commis- ments'of. sioner of Internal Revenue and all persons shall be notified INCOME TAX LAW. 9 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, except in cases of refusal or neglect to make such return and in cases of false or fraudulent returns, in to^ttae when a^'s- which cases the Commissioner of Internal Revenue s^^^ll p''af™w"ithmu in- upon the discovery thereof, at any time within three years curring penalty. 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 person or persons immediately upon notification of the amount of such as- sessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days Penalty and in- ter6st in ca,s9 of after notice and demand thereof by the collector, there nonpayment , within 10 flavs sliaU be added tiie sum oi 5 per centum on the amount oi after June 30th. tax unpaid, and interest at the rate of 1 per centum per month upon said tax from the time the same became due, except from the estates of insane, deceased, or insolvent persons. ^ .yi persons, firms, copartnerships, companies, corpora- etc ,^"°ithhoSg tions, jomt-stock companies or associations, and insurance ^0™^!^^!^^^.°" '^«- companies, in whatever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, agents, receivers, conservators, employers, and all officers and em- ployees of the United States having the control, receipt, custody, disposal, or payment of mterest, rent, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual gains, profits, and mcome of another person, exceeding $3,000 for any taxable year, other than dividends on capital stock, or from the net earnings of corporations and jomt- 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 Return to be , . . , 1 1-1 1 ' ^ ± ^ ^ . made to collector its district, are hereby authorized and required to deduct of district, and withhold from such annual gains, profits, and income such sum as will be sufficient to pay the normal tax im- posed thereon by this section, and shall pay to the officer ^^T^ax^to ^e^^aid of the United States Government authorized to receive j.^„«d^ to receive the same; aiid ^e^ are each hereby made personally liable for such taxS^n all cases where the income tax of a person is withheld and deducted and paid or to be paid at same. 10 INCOME TAX LAW. the source, as aforesaid, such person shall not receive the benefit of the deduction and exemption allowed in para- fiied'^in'Idfan^ g^aph C of this scctiou cxccpt by an application for refund empuin"* ^under ^^ the tax uiiless he shall, not less than thirty days prior to paragraph c. ^]^p ^\^^j ^^i wliicli 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 Penalty for fli- thc amount of such exemption: Provided, That if any per- son for the purpose of obtaining any allowance or reduc- tion 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 SSOO^nor shall any person under the foregoing conditions be allowed the benefit of Notice must be any deduction provided for in subsection B of this section filed in advance iiiii.i i ^ • -i for claim for de- uiiless he Shall, not Icss than thirty days prior to the day duction under i-ii , i-i-- -i-i m -i paragraph B. ou whicli the rcturii 01 his income is due, either file with the person who is required to withhold and pay tax 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 th^^strict Keturns, for in wliich rctum Is made or to be made for hir^Provided mmors, msane . . persons, etc., by further, That if such person is a minor or an msane person, whom made. ^ ' r ^ ^ r > or is absent from the United States, or is unable owing to serious illness to make the return and application above provided 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 under the penalties of this Act that he has sufficient knowledge of the affairs and prop- erty of his beneficiary to enable him to make a full and complete return for him or her, and that the retjirn^nd » application made by him are full and complete /Provide^t^j// be^dldJfct^^and/^'^^^^''' That the amount of the normal tax hereinbefore ^,iii' I'Al^A^l imposed shall be deducted and withheld from fixed and SOUiC 6 01 111001x16 l- ofrorporatiom''' determinable annual gains, profits, and income derived from interest upon bonds and mortgages, or deeds of trust or other similar obligations of corporations, joint-stock companies or associations, and insurance companies, whether payable annually or at shorter or longer periods, although such interest does not amount to S3, 000, subject to the provisions of this section requiring the tax to be (3^ INCOME TAX LAW. 11 withheld at the source and deducted from annual income and paid to the Government; 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 Dividends on . " . ij>' stocks, or interest upon bonds of foreign countries and upon foreign mort- on foreign bonds, ,.. ,. . mortgages, etc. gages or like obligations (not payable in the United States), and also from coupons, 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 engaged in business in foreign countries; 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, by any banker or person who shall sell or otherwise realize cou- pons, checks, or bills of exchange drawn or made in pay- ment of any such interest or dividends (not payable in the United States), 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, and also any dealer in such coupons who shall purchase the same for any such dividends or mterest (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 allowable under this section may be had by complying with the foregoing provisions of tliis paragraph. i/J All persons, firms, or corporations undertaking as aobtaiQed^by°per- matter of business or for profit the collection of foreign |aged 'in business payments of such interest or dividends by means of cou- eig^°p^^|ts°of pons, checks, or bills of exchange shall obtain a license '°*^'"^^*'®'''^' from the Commissioner of Internal Revenue, and shall be subject to such regulations enabhng the Government to ascertain and verify the due withholding and pay- ment of the income tax required to be \vithheld and paid as the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury, shall prescribe; and any person who shall knowingly undertake to coUect ^^^.P^naity for ^ii- such payments as aforesaid without having obtained a^^ense. license therefor, or without complying with such regula- tions, 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. 12 ^1 INCOME TAX LAW. ( prenuum deposits to provide tor losses and expenses shall not return as income any por- tion of the premium (k>2)osits returned to their policy- holdere, but shall return as taxable income 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 reinsurance reserves: Provided further, Mutual marmeTliat inutual marine insurance companies shall include in iiistiranoe. . „ . . llieir return oi gi'oss 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 poli(;yholders on account of premiums p^e^^ously paid by them, and interest paid upon such amounts between the ascertainment thereof and the payment thereof and life insurance companies shall not include as income in any jenr such portion of any actual premium received from any individual policy- holder as shall have been paid back or credited to such individual jjolicyholder, or treated as an abatement of premium of such individual policyholder, within such inj°ndt*aid^™-year; (third) the amount of interest accrued and paid indebtedDe^^ ^"^ within the year on its indebtedness to an amount of such indebtedness not exceeding the proportion 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 caj^ital 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 gi'oss amount of its income derived from all sources within and without the United States: Provided, That in the case Bonds whose of bonds or other indebtedness which have been issued insKors h 3 V 6 agreed to pay with a guaranty that the interest payable thereon shall be tax deduction, free from taxation, no deduction for the paj^ment of the tax herein imposed shall be allowed; (fourth) all sums Taxes. P^'''^^ ^J ^^ 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. In the case of assess- INCOME TAX LAW. 17 ment 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 se?^rtodb% ^''' by law to reserve funds. (c) The tax herein imposed shall be computed upon its ^J^l^ on^ne*t°S- entire net income accrued within each preceding calendar ^"^^^j^^'^^'^'^s year ending December thirty-first: Provided, liowever,'^^^^- That for the year ending December thirty-first, nineteen hmidred 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: Provided further, But fiscal year •^ . . other tftan calen- That any corporation, joint-stock company or association, dar may bedesjg- or insurance company subject to this tax may designate rations, 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 paj'able by it computed upon the basis of the net income ascertained as herein provided for the year ending on the day so designated in the year preceding the date of assessment instead of upon the basis of the net income for the calendar year preceding the date of assessment ; 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. All corporations, joint-stock to be rSdered ™ companies or associations, and insurance companies sub- ject to the tax herein imposed, computing taxes 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 corpora- tions, 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 hke return within sixty d ays ^^g^^f^^s^^^l^ after the close of its said fiscal year, and within sixty days ^^^^^ cdiSto?'^o1 after the close of its fiscal year in each year thereafter, or district. in the case of a corporation, joint-stock company or asso- ciation, or insurance company, organized or existing under the laws of a foreign country, in the place where its princi- pal business is located within the United States, in such form as the Commissioner of Internal Revenue, with the 24785°— 14 2 18 INCOME TAX LAW. approval of tho Secretary of llio Treasury, shall prescribe, shall render a true and accurate return under oath or alUrmation of its president, vice president, or other princi- pal officer, and its treasurer or assistant treasui'er, to the Information to collector of internal revenue for the district in which it bo included in _ _ retiirn of corpo-l^as itg principal place of business, setting forth {first) Paid-upcapitai. the total amount of its paid-up capital stock outstanding, or if no capital stock, its capital employed in business, at the close of the year; {second) the total amount of its ed^^^®*^^**^*"^' bonded and other indebtedness at the close of the year; {third) the gross amount of its income, received during such year from all sources, and if organized under the laws Gross income. ^£ ^ foreign couutry the gross amomit of its income re- ceived within the year from business transacted and capi- tal invested within the United States; {fourth) the total Ordinary amount of all its ordiiiarv and necessary expenses paid out expenses of opo- _ _ " ^ i i ^ ration and main- gf earnings ill the maintenance and operation of the busi- tenance. * . ... ness and properties of sucli corporation, joint-stock com- pany or association, or insurance company within the Kentai.etc. 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 so paid in the mainte- nance and operation of its business within the United pr^Sn^^ "^^ States; {fifth) the total amount of all losses actually sus- tained during the year and not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance com- panies the net addition, if any, required by law to be servo f{S) '^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 their members to make premium deposits to provide for losses and expenses shall not re- mhrm^"^deposite ^^''^ ^^ iucomc any portion of the premium deposits re- "nrned^aa ?axab^ ^^^^'i ^° ^^^■"' policyholders, but shall return as taxable income. incomc all income received by them from all other sources plus such portions of the premium deposits as are retained Premiums r in ^^ ^^^ Companies for purposes other than the payment of surance,etc.' losscs and expcnscs and reinsurance reserves: 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 re- insurance, but shall be entitled to include in deductions from gross income amounts repaid to poUcyholders on INCOME TAX LAW. 19 account of premiums previously paid by them, and in- terest paid upon such amounts between the ascertain- ment thereof and the payment thereof and Ufe insurance companies shall not include as income in any year such portion of any actual premium received from any in- dividual policyholder as shall have been paid back or credited to such individual policyholder, or treated as an abatement of premium of such individual policyholder, within such year; and in case of a corporation, joint- Foreign corpo- ,1 • , • • rations doing bus- stock company or association, or insurance company, ness in the united organized under the laws of a foreign country, all losses actually sustained by it during the year in business con- ducted by it within the United States, not compensated by insurance or otherwise, stating separately any amounts n ici • 1 • p J !• (•• Reserve fund. allowed tor depreciation oi property, and in case oi in- surance 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 poUcy j^^tu^i are in- and annuity contracts : Provided further, That mutual fire ^^f^^^ compa- 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 deposits returned to their poUcyholders, but shall return as taxa- ble 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: Provided further, That mutual marine insurance com- Mutual marine ,,,.,,.,. » . Insurance com- panies shall include in their return oi gross income gross panics. 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 accoimt of premiums previously paid by them and interest paid upon such amounts between the ascer- tainment thereof and the payment thereof and life in- Life insurance , ,, ,'11 • • companies. surance companies shall not include as mcome m any year such portion of any actual premium received from any individual poUcyholder as shall have been paid back or credited to such individual polic_y holder, or treated as an abatement of premium of such individual pohcy- holder, within such year; (sixth) the amount of interest what interest accrued and paid within the year on its bonded or other <3ebt«dness may 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 20 INCOME TAX LAW. capital stock, Ihc aiuoimt of interest paid witliin the year on an amount of indebtedness not exceeding the amount of capital employed in the business at the close Interest paid on of tlie v ill', and in the case of a bank, bankini; associa- deposits dcducti- • ' . i ii • , i Mefroiniucoines. tion, oi' trust compauy, statmg separately al'. mterest paid by it within the year on deposits; or in case of a corporation, joint-stock company or association, or in- surance coin])any, organized under the laws of a foreign country, interest so paitl on its bonded or other indebted- ness to an amount t)f such bonded or other indebtedness not inu^rcst on in- exceeding the proportion of its paid-up capital stock oiit- cign corporations, 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 Taxes paid. States; {seventh) the amount paid by it within the yeai' for taxes imposed imder the authority of the United States and separately the amount so paid by it for taxes imposed by the Government of any foreign country; be^shownTn re° (^^5'^^^) ^^c net incomc of such corporation, joint-stock *"™- company or association, or insurance company, after making the dedvictions in this subsection authorized. All such returns shall as received be transmitted forthwitli by the collector to the Commissioner of Internal Kevenue. All assessments shall be made and the several corj)o- rations, joint-stock companies or associations, and insur- b" mld^Tnd^n!^ ^i^c<3 companies shall be notified of the amount for which tioetobegiven. \}xQj RFC respectively liable on or before the first day of June of each successive year, and said assessment shall be paid on or before the thirtieth day of June: Provided, That every corporation, joint-stock company or asso- ciation, and insurance company, computing taxes upon tlie income of the iiscal year which it may designate in the manner hereinbefore provided, shall pay the taxes whcTiobe^pafd' ^^^^^ undcT its assessment within one hundred and twenty by corporation, (jrjys 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 of false or fraudulent returns, in which cases the Com- When false rc-missioncr of InterFjrd Revenue shall, upon the discovery tun) Ms been. e • ^ rendered and thereof, at any time withm three years after said return faots a:e do- . ' •' . . • . ^ ^ tcc'.ed witliin .•• is due, mokc a return upon information obtamed as pro- ye.i;', commis- • -, ^ \. . ^ . . -, .., ,, s?u .ler may vidcd for ui this scction or by existing law, and the assess- make neA«- assess- f , c t in ment. ment made by the Commissioner of Internal Kevenue INCOME TAX LAW. 21 thereon shall be paid by such corporation, joints-stock company or association, or insurance company imme- diately upon notification of the amount of such assess- ment : and to any sum or sums due and unpaid after the thirtieth day of 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 toil daj^s notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the Penalty and m- '■ tcrestincuiT'd by amount of tax unpaid ana interest at the rate of 1 per faUnre to pay tax '■ . ^ within prescribed contum per month upon said tax from the lime the same time, becomes due. (d) When the assessment shall be made, as provided , Returns ren- . 1 • 1 • dered to be filed in this section, the returns, together with anv corrections with commis- ' 111 1 " •• Rioner of Internal thereof which may have been made b^ the commissioner. Revenue. 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 opg^^^^gp^ptjon returns shall be open to inspection only upon the order of ^°^^qq^''**'°^°°' the President, under ndcs and regulations to be pre- scribed by the Secretary of the Treasury and approved by the President: Promded further, That the proper officers of any State imposing a general income tax may, * upon the request of the governor tliereof, have access to said returns or to an abstract thereof, showing the name and income of each such corporation, joint stock com- pany, association or insurance company, at such times and in such manner as the Secretary of the Treasury may prescribe. If any of the corporations, joint-stock companies or ^^.1^^^^^^° ^°l' associations, or insurance companies aforesaid, shall re- ^J jg^^|^^"\^ ^^r fuse or neglect to make a return at the time or times '"^'i""'^*^ ''®^"™- hereinbefore specified in each year, or shall render a false or fraudulent return, such corporation, joint-stock com- pany or association, or insurance company shall be liable to a penalty of not exceeding $10,000. H. That the word ''State" or "United States'' when used ill this 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. 22 INCOME TAX LAW. Sees. 3167, 3i?2, T. That soctidus tlurty-one hundred and sixty-seven, 3173, 3176, Re- -^ , , , , '' ^ , ^i • , i j J vised Statutes, t^j^irty.yne hiir.(h-(Ml and seventy-two, tnu'ty-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 foHows: Sec. 3167. "Sec. 3167. It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employee of the United States to divulge or to make known in any manner wliatever 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 or source of income, profits, losses, expenditures, or any particular thereof, set forth or dis- closed in any income return by any person or corporation, or to permit any income return or copy thereof or any book containing any abstract of 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 misdemeanor and be punished by a • fine not exceeding $1,000 or by imprisonment not exceed- ing one year, or both, at the discretion of the court; 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. "Sec. 3172. Every collector shall, from time to time, cause his deputies to proceed through every part of his district and inquire after and concerning all persons therein who are liable to pay any internal-revenue tax, and all persons owning or having the care and manage- ment of any objects liable to pay any tax, and to make a a list of such persons and enumerate said objects. 800.3173. "Sec. 3173. It shall be the duty of any person, part- nership, firm, association, or corporation, made liable to any duty, special tax, or other tax imposed by law, when not othervsase 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 ac- crue, to make a list or return, verified by oath or affirma- tion, to the collector or a deputy collector of the district where located, of the articles or objects, including the INCOME TAX LAW. 23 amount of annual income charged with a duty or tax, the quantity of goods, wares, and merchandise made or sold and charged with a tax, the several rates and aggregate amount, according to the forms and regulations to be pre- scribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, for which such person, partnership, firm, association, or corpora- tion is hable : Provided, That if any person liable to pay any duty or tax, or owning, possessing, or having the care or management of property, goods, wares, and merchan- dise, articles, or objects hable to pay any duty, tax, or license, shall fail to make and exhibit a list or return re- quired by law, but shall consent to disclose the particu- lars of any and all the property, goods, wares, and mer- chandise, articles, and objects Uable to pay any duty or tax, or any business or occupation Uable 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 Hst or re- turn, which, being distinctly read, consented to, and signed and verified by oath or affirmation by the person so owning, possessing, or having the care and manage- ment as aforesaid, may be received as the hst of such person: Provided further, That m case no annual list or return has been rendered by such person to the collector or deputy collector as requh-ed by law, and the person shall be absent from his or her residence or place of busi- ness 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 col- lector or deputy collector the list or return required by law within ten days from the date of such note or memo- randum, verified by oath or affirmation. And if any per- son, on being notified or required as aforesaid, shall re- fuse 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 de- livers 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 to summon such person, or any other person having posses- Sec. 3176. 24 INCOME TAX LAW. tsiun, custody, or taiv of books of accoimt oi>ntaiuiiig cu- tries relating to the business oi sucli jiei-son, or any other person he may deem proper, to appear before him and prothice such books, at a time and place named in the summons, and to give testimony or answer interroga- tories, under oath, respecting any objects Uable to tax or the returns thereof. The collector may summon any pei-son residing or found within the State in which his dis- trict lies; and when the person intenchnl to be summoned does not reside and can not be found within such State, he may enter any collection district where such person may be found and there make the examination herein author- ized. And to this end he may there exercise all the au- thority which he might lawfully exercise in the district for which he was commissioned. *'Sec. 3176. When any person, corporation, company, or association refuses or neglects to render any return or list requu-ed by law, or renders a false or fraudulent return or list, the collector or any dei)uty collector shall make, accordhig 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 information, 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, company 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 valuation intentionally he shall add 100 per centum to such tax; and in case of a refusal or neglect, except in cases of siclaiess 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 Ijy sickness or absence as aforesaid the collector may allow such further time for makmg and delivering such list or return as he may deem necessary, not exceedmg thirty days. The amount so added to the tax shaU 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, m 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." INCOME TAX LAW. 25 J. That it shall be the duty of every collector of internal Receipts for tax •^ -^ paid to be given revenue, to \vhom any payment of any taxes other than °y c°"®<'^°'"- the tax represented by an adhesive stamp or other en- graved stamp is made under the provisions of this sec- tion, to give to the person making such payment a fidl written or printed receipt, expressmg the amount paid and the particular account for which such payment was made; and whenever such payment is made such col- lector shall, if requked, give a separate receipt for ^ach^gfJPj^^l^l^^^g^^ tax paid by any debtor, on account of payments niade ^j^g^^^^^'^j^.^^^^^^^ to or to be made by him to separate creditors in such form that such debtor can conveniently produce the same separately to his several creditors in satisfaction of then* respective demands to the amounts specified in such receipts; and such receipts shall be sufficient evidence in favor of such 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 receipt, acknowledging the pay- ment to him of whatever sum may be actually paid, and accepting the amount of tax paid as aforesaid (speci- fy mg the same) as a further satisfaction of the debt to that amount, require the surrender to hun of such collector's receipt. K. That jurisdiction is hereby conferred upon the dis-p^j^yg^'^^g^'^j]^^^"^" trict courts of the United States for the district within t^"^*^ /j°']''^«g ^^"^ which any person summoned under this section to appear ^^g°gg^g°^g^jp°^ '^^^' to testify or to produce books shall reside, to compel such attendance, production of books, and testunony by appropriate process. L. That all administrative, special, and general pro- to assessment,'^"e? visions of law, including the laws in relation to the™on,'and refund^ assessment, remission, collection, and refund of internal- ^|,j^cab]ie? ™^*^^ revenue taxes not heretofore specifically repealed and not inconsistent with the provisions of this section, are hereby extended and made applicable to all the provisions of this section and to the tax herein imposed. M. That the provisions of this section shall extend to lat^g^to" income Porto Rico and the Philippine Islands: Provided, That the^TrtrS^d administration of the law and the collection of the taxes Fsiands.' ^ ^ ' ° ^ imposed in Porto Rico and the Phihppine Islands shall be by the appropriate internal-revenue officers of those governments, and all revenues collected in Porto Rico 26 INCOME TAX LAW. and Iho Philij)pine Islands thoreundor shall accrue intact to the general governments, thereof, respectively: And frovided further, That the jurisdiction in this section con- ferred upon the district courts of the United States shall, so far as the Philij)})ine Islands are concerned, be vested in the courts of the first instance of said islands: Arid provided further, That nothing in this section shall be held to 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 PhiHp- pinelslandsor the political subdivisions thereof. * * * Income subject Scction 4 (paragraph S) of the act of October 3, 1913, tax^umier act" o^f further provides * * * That a special excise tax with "^' ' respect to the carrying on or doing of business, equiva- lent to 1 per centum upon their entire net income, shall be levied, assessed, and collected upon corporations, 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-eighth, nineteen hundred and thirteen, both dates inclusive, 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 ascertained in accordance with the pro- visions of subsection G of section two of this act: Pro- vided further, That the provisions of said section thirty- eight of the act of August fifth, nineteen hundred and nine, relative to the collection of the tax therein imposed shall remain in force for the collection of the excise tax One return may herein provided, but for the year nineteen hundred and special excise and thirteen it shaU not be necessary to make more than one y^M9i3.*^'' ""^ return and assessment for all the taxes imposed herein upon said corporations, joint stock companies or asso- ciations, and insurance companies, either by way of in- come or excise, which return and assessment shall be made at the times and in the manner provided in this act. * * * PREFACE. The accompanying regulations embrace the various administrative features of the law (sec. 2, act of Oct. 3, 1913) imposing a tax on incomes. They contain in- structions relative to the preparation of returns, etc., and are designed to assist both the taxpayer and tiie officers charged with its enforcement in complying with the re- quirements 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 imnecessarily. Withholding agents may forward evidences of non-Uabihty to payment, when such evidences are received by them, to collector for the dis- trict in Heu of the tax. This wiU reheve 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 coUection 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. 27 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 Companies. Treasury Department. Office of Commissioner of Internal Revenue, Washington, D. C, January 5, 1914- PART 1. INDIVIDUAL INCOME RETURNS AND COLLECTIONS. Article 1. vSection 2 of the above-named act imposes abi^®"^""^ *y^° 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 resid- ing at home or abroad; and (6) 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 pei-son residing elsewhere. Art. 2. Said section also imposes an additional tax on Additional or . super tax. all net incomes of individuals exceeding $20,000, as follows : 1 i^er cent on incomes exceeding $20,000 and not exceeding $50,000. 2 per cent on incomes exceeding $50,000 and not exceeding $75,000. 3 per cent on incomes exceeding $75,000 and not exceeding $100,000. 4 per cent on incomes exceeding $100,000 and not exceeding $250,000. 5 per cent on incomes exceeding $250,000 and not exceeding $500,000. 6 per cent on incomes exceeding $500,000. Art. 3. The NET INCOME shall consist of the total ^ Net income de- gains, profits, and income derived from all sources ( desig- 29 iV 30 INCOME TAX REGULATIONS. (y ") piitess than $4,000. Return re- Jf the aggregate net income of both exceeds $4,000^. gale income of an annual return of their combined incomes must be made husband and wife . i i i i • i is in excess ofm the manner stated, although neither one se])arately $4,000, although . ' ® rm • • 1 neither may have mavhavo an uicomeof $3,000 i)er annum, ihey are lomtly anincomeof ;' iTiir i ^ r i $3,000 or over, and separately liable for such return and for the payment of the tax. tobedetermtaed* ^^^^' single or married status of the person claiming the specific exemption shall be determined as of the tune 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. nerehip^*^ p?oflt" ^^^' ^^' ^^^ ^^ ^^^ prorata share of the net profits de- how reported, rived from a partnci'ship business, whether or not divided and paid out shall be included in the personal return of each partner. Partnerships Art. 12. Partnerships, as such, are not subject to the as such. Hot hable ^ ' . ' •' to tax, but state- income tax, and are only required to make return when ment may be re- ' i z-n • • n t i t-» quired. requested to do so by the Commissioner of Internal Keve- nue 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 conducting the business of said partnership, and the net profits and the name and address of each member of said partnersliip, and theu' respective interest in the net profit thus reported, profits *t"*be^m- "^^*' ^^' '^^^ ^^^ annual profits of a partnership when madeliy^indi^i-^^i'^i^^^ ^^^ P^i<^^ ^^ ^^^ members thereof shall be included uai partners. ^jy gach 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 part- nership 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 sliall include the said amount in their annual return as a part of their gross income, the same as if said I)rofits had been distributed and paid to them. Individual Alt. 14. Undivided annual net profits of partnerships partnership i ^ ^ profits. thus 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. INCOME TAX REGULATIONS. 35 Partnerships owning interest coupons or registered in- ^^^g^'^^|^"gj'' terest orders may claim deduction for legitimate expenses ^^'''^e'ducti'''^™' incurred in business by filing the proper certificate with the withholding agent. (See article 47.) RETURNS. A \3 \ Where filed. Form of return. Art. 16. Each person of lawful age whose net income is when returns $3,000 or over shall, on or before the 1st day of March, comeofS3,o(wor 1914, and on or before the 1st day of March each year made. 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 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 m 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 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 paragraph B of this law. 3. The amount of specific exemption claimed under paragi'aph C. 4. All amounts of income upon which tax has been withheld at source by withholding agent or agents. Art. 17. When by reason of minority, insanity, ab sence, sickness, or other disability, the individual is un- futhor^ed agent able to make his own return, the same shall be made b}^ his guardian or duly authorized agent. In the case of the death of a person whose net income mfafg^'^ra'to^r^to for the part of the year during which he lived was S3,000^^ofdlath° '° or over, return of net income shall be made by the executor or administrator of the estate of the deceased, and in computing the taxable income of such estate there shall be allowed the specific exemption provided by law. Art. 18. When the requu'ed return has not been made Notice of fauure , ,. 1 . , „ to file return to by a person acting as guardian, agent of a nonresident be served on 1- 1 .• • ^1 -J 1-1 guardian or agent. alien, or by one acting in any other capacity in which When return will be made by 36 INCOME TAX REGULATIONS, tho law makes it a iluty for Jiim to represent the in- dividual, notice of failure to make such return will be served upon such guardian or agent. The person upon wliom such notice is served may, how- i./fli"lrshow^^^ wlien the facts warrant, file evidence with the col- lua'krnuira. '" lector sliowiug t hat the individual for whom he acts did not receive an income subject to tax during tlic joar, or that the said guardian or agent had filed the return with some other collector. Returns not Alt. 19. Anv individual whose net income is less than required of per- i i. n i i i i i sons for whom $2 0,000, lor whoui lull retum has been made by others tu»l returns hav6 been made by as witldioldiug agents, shall not be required to make a others. tot.' 1 return, jiciiirns to be Art. 20. If auv person liable to pav an income tax for prepared by col- . i i n c -i i i i t i lector in certain imnsoU or others sJiall fail to make and deliver tlie re- turn required by law, but shall consent to disclos(\ the ])articulars 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 dis- tinctly read and consented to, signed, and verified by oalli or affirmation by the person liable to make such return, the same may be received as the list or return of sucli person. Refusal or neg- Art. 21. Ill case any persoii liable to make return sliall lect to make re- , » ^ i , t , , turn. neglect or refuse to make or render a list or return, or sliall render a willfully 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 informa- tion he can obtain by the examination of such person, or any other evidence.^ faiTitrf "to make Wlicu duly Certified by the collector, the said fist thus mak^ing fabe re! prepared sliall be the return of said person and the tax *™"- so ascertained to be due, together with the 50 per cent or , 100 per cent ])enalty incurred, sliall be assessed and collected. R,etums to be Art. 22. The annual return must be verified by oath or verified by oath -^ oramrmation. affirmation of the 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 bv law to administer oaths. 1 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. INCOME TAX EEGULATIONS. 37 Art. 23. When tlie return is not filed within the I'o- ttoelS^etiirn quired time by reason of siclaiess or absence of the indi-^^^y^^"'^"*®^- •yidual, .in extension of tinn- not exceeding 30 days from March 1, witliin wliich to file such return may be gi-anted by the collector, provided a written application therefor is made by the individual within the period for which such exten: ion i^ desir'ed. Art. 24. The annual returns will be forwarded by col- Returns to bo . . (• r forwarded to lectors bv i e^dstcrtHl man to the Commissioner of Internah'"iniju,;.icmer of ^' . . , , internal Usvenue Revenue with the list for the month in which the retm-nsby re;,isteied are filed. Collectors must provide that said returns and all forms relating thereto ai-e securely sealed in envelopes or packages before forwarding the same. Art. 25. All assessments shall be made by the Com- Assessments; missioner of Internal lievenue, and all persons shall be when to be paid! notified of the amount for which they are respectively liable on or before the 1st tlay of June of each successive y(^ar, 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 fraadulent returns, iji which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time Hnthin three years after said return is due, make a return upon information obtained, as provided by the law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such person or pcjsons immediately upon notification of the amount of such assessment. To anv sum or sums due and unpaid after the 30th Penalty for faii- " ^ i _ ure to pay tax. day of June in any year, and for 10 days after notice and demand thereof by the collector, there shall be added the sum of 5 per cent on the amount of tax unpaid, and in- terest at the rate of 1 pej- cent per month upon said tax from the time the same becann^ due, except from the estates of insane, deceased, or insolvent persons. Art. 26. If any person, corporation, joint-stock com-fg^ifu®e^|"^ake pany, association, or insurance company liable to make ''^*'"^^^" returns or pay tax ;,hall refuse or neglect to make retm'us at the time or times specified in each yeai, such person shall be liable to a penalty of not less than $20 nor more than $1,000. Any person oi- any ofhcer of any corporation lequiredmrking Wise^^or bylaw to make, render, sign, or verify any return whotum^!''^^*'"*'^^" makes any false or fraudulent return or statement with 38 INCOME TAX REGULATIONS. intent to defeat or evade the Rvssessment required by law to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or bo 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 pa3^ment. Art. 28. For regulations relative to the claiming of exemptions and deductions on income, the tax on which is to be deducted and withheld at the source, see article 33. PART 2. COLLECTIONS AT THE SOURCE. Art. 29. The deductions and payment of the tax at theg^Cfij!«<'««^s^,;^t source of income applies only to the normal tax imposed ^^J^^y^^° 1]^^®"°^ upon individuals and shall not be construed to require gP^yj^^'^^iYj^'iuahi^ any of such tax to be withheld prior to the 1st day of soujc^e^noypera- November, 1913. wi'- Art. 30. Parao:raph E of section 2 of the act provides Persons, firms, '^ i -T etc., required to ■f^Jj^at withhold tax at the source. All persons, firms, copartnerships, companies, corporations, joint- stock companies or associations, and insurance companies, in what- ever capacity acting, including lessees or mortgagors of real or per- sonal property, trustees acting in any trust capacity, executors, ad- ministrators, agents, receivers, conservators, employers, and all ofiicers and employees of the United States ha\-ing the control, re- ceipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual gains, profits, and income of an- other person, exceeding |3,000 for any taxable year, other than divi- dends on capital stock, or from the net earnings of corporations and joint-stock companies or associations subject to like tax, who are re- quired to make and render a return in Ijehalf of another, as provided herein, to the collector of his, her, or its district, are hereby author- ized 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 withhouiing ^ . agents. above-quoted paragraph are referred to m these regula- tions as " debtors" or ''withholding agents," and the word "source" is to apply to the place where the income origi- nated and is payable. Art. 32. The income from which the normal tax of income as to ,. , .T1-1T1 -iiiT • which tax is to be 1 per cent is to be withheld by withholdmg agents m- withheld. eludes all items of incomes 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. 39 40 INCOME TAX REGULATIONS. (b) Income of an indivithial which is not fixed or cer- tain and not payable at stated periods, or is indefinite or irrefi;ular as to amount or time of accrual, shall not be » \\'ithheld at the source, but shall he listed in the annual return, of the individual, and \hr tax shall bo paid thereon by him. Incomes derived from the followini:; professions and vo- cations come under this head: Agents compensated on the commission basis, lawyers, doctors, authors, inven- tors, and other professional persons whose income is irregu- lar and indefinite. Such persons shall make personal i-eturn of all their income, provided their total net income from all sources is annffietaS'^'"^'^'^^^ ^^ ^^^^- ^^^ example: When a lawyer receives a ^' retainer of $5,000 as a special fee, a deductioii therefrom shall not be made by the payer; but when a lawyer re- ceives a retainer of $5,000 per annum, and the exemp- tion claimed is $.3,000, $2,000 of such income would be taxed and the tax retained at the source; or if his ex- emption claimed should be $4,000, $1,000 of such income would be taxed and the tax thereon \vithheld at the source. (c) Items listed in article 5, which are Mdiolly exempt from tax. nn^erp^ragraph ^^^' 33. (a) In all cascs where the income tax of a bemeTw?afwith-P^'^son is withheld and deducted and paid or to be paid holding agent. ^^ ^^le sourcc, such pcrson shall not receive the benefit of the deduction and exemption allowed in paragraph C (see arts. 9 and 10) excepb by an application to th(^ col- lector for refund of the tax unless he shall, not less than 30 days prior to the day on which the return of his in- come is due, file %vith the person Avho is required to %\ntli- hold and pay tax for him, a certificate claiming the benefit of such exemption, and ther(mpon no tax shall maidng^fiiserep-bt^ withheld upon the amount of such exemption, if oTt°^^n °"xemF° ^^J pcrsou for the purpose of obtaining any 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 frauclulent repre- sentation, he shall be liable to a penalty of $.300. del^irag^L^h^B ^^^ -^^^ shall any person under the foregoing eondi- nifd'^w/th'Muh- ^'^^^^^'^ ^^ allowed the benefit of any deduction provided Stor.*"^^"^ °'^"^' i^ subsection B (see art. 6, 1 to 6) unless he shall, not less than 30 days prior to the day on which the return of his income is due, either file with the person who is re- INCOME TAX BErJULATTON-S. 41 quired to mthhold ami pa}'- 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 ■\\dthhold the tax on the pay- ments made in excess of the deductions claimed on said form. Or such person may hkewise 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 oif be'haif of^mN absent from the l^iuted States, or is unable owing toperfoa^' '°'''"^ serious illness to make the return and application above provided for, the return and application may be made for him or her by the person requii'ed 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 propert}^ of his beneficiary to enable him to make a fuU and complete return for him or her, and that the return and appUcation made by liim are full and complete. ((?) "Wlien, however, claims for exemption and dcdiictions fund.™^ ^°'^ ^^ as above described are not filed withui the prescribed time, the tax collected in excess can be remitted vjnly on presentation of a claim for refund mider the provisions of section 3220, Revised vStatntes, said claim.s to be made cither by the withholding agent against whom the assess- ment was made, or by the person on account of whom such taxes were withheld. Claims for abatement of taxes eri'oneously assessed, abatement^ or which are excessive in amount, may, prior to collec- tion liiereof, be filed under th^ provisions of said sec- tion 3220, Revised Statutes, either by the withholding agent against whom the assessment was made, or by the ]>ersons on account of whom stich taxes were withheld. In the montlily list returns as now prescribed a space ^J^xes'^^jti^'jeH is provided to show the amount of taxes which the ^^^th- warded to coii^- ^ . tor until n.i:ic*9 holdmg agent may remit to the collector when such re- 9^ assossmcnt *=" ° -^ have been re- turns are filed. The withholding agents will not, how-ceived. ever, forward to the collector amounts wilhh(4d by him until notices of assessment arc received from the collector. Claims for exeniptron and deductions may be filed with the withholding agent and claims for deductions mr> r be 42 INCOME TAX REGULATIONS. filed with the collector, not later than SO days prior to March 1. ag^Tits'to'bo^fSr^ In casGS whcFG clauTis for deductions are filed with the of%-d?etTo'nsC()]lect()r withiii the time prescribed, the collector will collator. ^^""^'^ immediately furnish the withholding ag'^nt (whose name and address must be shown on Form lOOS) with a state- ment of the amount of deductions claimed, and said with- holding agent shall not withhold and pay the normal tax to the extent of the deductions claimed as per said list. Withholding agen ts should not file their annual returnis 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 adjustment on the withhohhng agent's return and in reporting such withholding agent for assessment wiU make allowance for the amoimt of such deductions claimed. Notice of such adjustment, however, must be furnished the withholding agent. to'bTpaiTto col- Art. 34. The normal tax of 1 per cent shall be deducted ector of trict. ^^^^ withheld at th' source, and payment made to the collector of internal revenue as provided in the law, by the debtor, or his, her, or its didy appointed agent author- ized to make such deduction and payment, by^rae alenfnot ^o other pcrsou, firm, or organization, in whatever heid^by^otherCiipacity acting, having the receipt, custody, or disposal agent. ^f ^^j 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, fu-m, or organiza- tion other than the debtor who has withheld said tax, shall file v/ith 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 Alt. 35. Withholding agents who are required to make Difldo to collGCtor c? cj J. of interaiu reve- monthly retums will, on or before the 20th day of each month, file with, the collector for their respective dis- trict ■; such returns for the preceding month, accom- panied by all certificates relating thereto, and there shall also accompany said returns all certificates claiming exemptions and deductions which are not required to bo listed thereon; and on or before the 1st day of j^Tarch in each year said ^vitliholding agents shall hkewise file tr.eii' annual returns for the preceding calendar yevr. Annual IITCOME TAX EEGULATIONS. 43 returns (Forms 1041 and 1042) must be accompanied by all certificates claiming exemptions and deductions relating thereto. Art. 36. For regulations as to assessment and collec- tion of taxes from withholding agents, see article 25 and '^ Assessments and collections," Part 4. Income derived from interest upon bonds and mortgages or deeds of trust or other similar obligations of corporations, etc. Art. 37. Under the Inw a tax of 1 ])er cent, designated Tax on income 1 1 1 (^1 11 ich separate issue of bonds or obliga- tions of each debtor. (vSee Arts. 43 and 46.) tilcaifsf"*when Alt. 40. Ecsponsiblo banks, bankers, and collecting permitted. agents receiving coupons for collection with the aforesaid certificates of ownership attached, may present tho cou- pons w^ith the attached certificates to the debtor or withholding agent for collection, or such certificates 7nay be detached and forwarded direct to the Commissioner of Internal Revenue, provided such bank, banker, or collecting agent shall substitute for such certificates its Record to beowu Certificate, and shall keep a complete record of each Icepi by collecting _ ' _ ' ' age"' 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. f). Face amount of coupons. 7. Exemptions from tax claimed by owner under para- gi-aph C. For the purpose of identification, such substitute cer- tificates should be numbered consecutively, and cor- responding numbers given the original certificates of ownership. stituting"^certifi'- ^he permission here granted will extend to responsible foreTp^''comitriJs°^"riks, bankers, and collecting agents in foreign coun- tries, through whom collection of such interest coupons is made. INCOME TAX EEGULATIONS. 45 Tlie various substitute certificates hereby authorized will correspond with the form numbers of the ownership certificates 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 ^^^Norma^^tax^to as to principal and interest, shall deduct the normal tax [^^^^^.P^y^^nt of of 1 per cent from the accruing interest on all bonds before 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 cer- tificates claiming exemption from liability for said tax as herein provided, executed — By a citizen or resident of the United States, the bona claims for ex- fide owner of the registered obligations, who may claim tax, by wiiom I " I. ri J.- .-, r ii • same may be filed. exemption under paragraph C , section 2, of tfie mcome tax law, or By corporations, joint-stock companies, associations, or msurance 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 certificates of who are citizens or residents of the United States, the specify bonds and » . , -n 1 in ,1 amoimt of inter- atoresaid certmcates shah accompany the coupons, or, est due. with respect to the interest on registered bonds, shall be filed with payer of said interest, and such certificates shall describe the bonds and show the amoimt of cou- pons attached or the amount of interest due such ownei's 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 claimants do or do not then claim exemi^tion from taxation at the source, ciaim for ex 1 !/"( .•! ^ 1-^^^^^^^ -I 1 emption u n d er under paragraph C, articles 9 and 10 ($3,000, and under paragraph c. 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 exemp- tion to which the claimant is entitled and must be sijrned 46 INCOME TAX REGULATIONS. by the claimants, who shall iiso their ordinary business signatures. The certificates shall also show the post- oflicc and street address of the claimants, the internal-rev- enue district, and the date when signed. Certificates Art. 43. Dulv authorized agents may sign such cer- may bo signed by ' . i • , i i i i duly authorized tilicatcs lor tlio pcrsons lor whom they act, and withhold- ing agents, banks, 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 be^^vmXT by person thus certifying. Certificates so verified may be ^gQt3^°'^'°^acce})ted by all other persons, firms, or organizations to whom presented, without question as to authority of such agent. If the person, firm, or organization 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 retamed by the person, firm, or organization receiving it, and the certificate of ownership shall be indorsed as above provided. Tax to be de- Art. 44. Whenever interest coupons, accompanied by payment of inter- a Certificate of an individual who is a citizen or resident of the United States, are presented to a debtor or its withholding 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 withholdmg 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. Tax on interest Art. 45. If the owncrs of the bonds are corporations, payable to ce* . . , . . . . tain corporations, J omt-stock companics, associatious, or msurance com- ducted. panics 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 provided in paragraph G, subdivision (a) of the act, the debtor is not required to withhold or de- duct 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 INCOME TAX KEGULATIONS. 47 Bhall be filed with the debtor when such coupons or inter- est orders are presented for payment. Such certificate will be made on Form 1001, and must^i^,^^^!ff'f.*'?„J>f be signed in the name of the organization (stating its t'^^"^^ exemp- place of business) by the persident, secretary, or some other principal officer of the said corporation or organi- zation duly authorized to sign same, and must be prop- erly dated. Art. 46. Coupons, or orders for registered interest, n on r^s^^fe n"t payable in the United States, representing the interest ^^'^'^^ on bonds owned by nonresident aliens, must be accom- panied by the prescribed certificate (Form 1004), but this certificate maj'^ be signed either by the owner or, in behalf of the owner, by a reputable bank or bankers oi other responsible collecting 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 fur- nished, 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 withholdmg agent, and claim for such exemp- tion will be made on Form 1018. Art. 47. Inasmuch as individual members of a part-«,^®itifi^?*«s . ^ nled by partner- nership are liable for income tax upon their respective ^^^P'^s^o^yj^gm- interest in the net earnings of such partnership, the part-^^| 'roflts^'^etc'^' nership may file with the withholding agent a notice signed in the name of the partnership, by a member thereof, claiming a deduction of a specific amount on account of the legitimate expense incurred in conducting the business of said partnership; and upon receipt of said notice said withholding agent shall not withhold, and shall not be held Hable 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 providful herein, be in excess of the total amount of the actual legitimate annual expenses incurred by said partnership in the conduct of its busi- 48 INCOME TAX REGULATIONS. ness. A])plk'ation for such deduction shall be made on Form 1011. Foreign part- Art. 48. Foreio:!! i)artnerships or firms, all the members norships, certifi- i • i i i • • eatc of ovraership of which aro botli citizeiis, or subjects, and residents of a may be filed by. . ' j > foreign country, which aro the owners of bonds and mort- gages or deeds of trust or other similar obligations, in- cluding equipment trust agreements, receivers' certifi- cates, 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 cou})ons or orders for registered uiterest, or orders for other income derived from property or investments in the United States, a certificate and notice of ownershi}) (Form 1016) setting forth the above facts; and the debtor or withholding agent shall not withhold any ])art of said income. Foreign part- Art. 49. Whcrc a foreign partnership or firm is composed nership, com- „ , , . , , . i • • p i tt • i posed of nonresi-of both nonrcsideut foreigners and citizens ot the United dent foreigners « • • i- • i tt • i n and citizens of States, or foreigners residmg in the United States or its UHited States. ' o o possessions, the certificate of ownershij) 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 back of said certificate, and no part of said income shall be withheld. The said certificate and notice of ownership in either case above provided shall be on Form 1014. tum°""''^^^''"^' -A-rt. 50. Withholding agents are required to file in duplicate 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 payments made upon bonds or other similar obligations, and shall show the name and address ui full of the owners of the bonds, amount of the income, amoimt of exemption clauned, amount of in- come on which withholding agent is liable for tax, and the amount of tax \vithheld. Forms 1012a, 1012b, and 1012c are to be used where Form 1012 does not afford sufficient space in which to enter all items. m'l)Tt"h7y list"! Form 101 2d, when necessary to be used, shall be made may be used. ^-^ 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 when properly filled in and the summary signed and INCOME TAX REGULATIONS. 49 sworn to shall constitute the complete monthly list re- turn 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) m duplicate is also required to be made by debtors or withholding agents of the normal tax of 1 per cent withheld from interest pay- ments made upon bonds or other similar obligations, and it shall be filed on or before March 1 of each calendar year. Art. 61. The monthly hst return in the form as re- Monthly list to 1 1 . 1 n . PI 11. constitute a part quired herem shall constitute a part or the annual Ustof the annual iist ■•• ■'- return. return to be made by debtors or withholding agents, and the debtor or withholding agent will not be required, in maldng an annual list return of the tax withheld from income derived from interest upon bonds and mortgages or deeds of trust, or other similar obHgations of corpora- tions, joint-stock companies, or associations and insurance companies, to again make an itemized list of the amount of tax \A4thlield from each person, but will give in the annual Hst return the totals of the monthly Ust return for each month of the year for which annual Hst return is made. All substitute certificates of collecting agents, author- ized 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 Hst returns debtors or withholding agents will enter the name and address of the collecting agent and the number of the substitute certificate issued in Heu of the original certificate containing the name and address of the owner of the bonds. Until the further ruHng on this subject by this department no Hst return is required to be made of certificates of ownership accompanying cou- pons or registered interest orders filed with a debtor or withholding agent when the owners of the hands are not subject to having the normal tax withheld at the source, but all such certificates of ownership shall be forwarded by certificates to ,, . , • 1 1 1 T 1 'i.^^ forwarded to the debtor or withholding agent to the collector oi collector, internal revenue for the district, on or before the 20th day of the month succeeding that in which said certificates of ownership were received. 24785°— 14 4 50 INCOME TAX REGULATIONS. B. Income derived from interest upon bonds, mortgages, etc , paid by (irst bank or collecting agency "when certificates of OAvners are not liled. Interest con- ^ft. 52. Where the coupons or interest orders are not pons or orders, _ ^ -t^ bv^MnTflcate^^^^^^^^^^P*^"^^'*^ ^y certificates as heretofore prescribed, the first bank, trust company, banking firm, or individual, or coUocting agency receiving the coupons or interest orch'rs 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 mterest orders if the owner is not known, with a descrip- tion 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. Identity of per- Aiiv corporation, collectinp; agency, or person fu'st sons presenting ^ '' ^ ^ ' o o c/ ^ i interest coupons receiving from the owner any interest coupons or orders to be establisned. ® . . "^ . ^ for the collection of registered interest should require the persons tendering such coupons or orders for registered interest to satisfactorily establish their identity. Art. 63. Withholding agents receiving coupons or an^uai^'^Lt ^°^ interest orders not accompanied by certificates of owners turns. fjpg required to file monthly and annual hst returns in duplicate. The requu-ed 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 in- come 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 hst return to be made, and the withholding agent will not be required, in making INCOME TAX REGULATIONS. 51 an annual list return of the tax thus witlilield, to again make an itemized list of tlie 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 hst return is made. C. Income derived from coupons, checks or bills of exchange on foreign bonds, mortgages, dividends, etc. Art. 64. All pei-soiis, firms, or corporations under- couection of !• j2/i'*iii 1 coupons, checks, taking for accommodation or pront (this includes hand- buis of exchange, ling either by way of purchase or collection) the collec- tion of coupons, checks, bOls of exchange, etc., for or in payment of interest upon bonds issued in foreign coun- tries, and upon foreign mortgages or Uke obhgations, and for any dividends upon stock or interest upon obligations of foreign corporations, associations, or insurance com- ^^i9«°?e to be " ^ . / ... . obtained from panics engaged m business m foreign countries, are re- commissioner quired by law to obtain a Hcense from the Commissioner enue. of Internal Revenue. Art. 55. Apphcations for such license (Form 1017) will,. Application for ^ '■ .... license to be be made to the collector for the district in which suchpiade to coUec- tor of district. business is to be carried on. Upon the acceptance of such application the collector will issue to the applicant with- out 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 Commis- sioner of Internal Revenue, will be furnished collectors on requisition, who will in all cases countersign the same before issuing it to apphcant. Failure to obtain a license or to comply mth regulations is punishable by a fine not Penalty for T m.^ ^r^^ , , t' failure to obtain exceeding S5,000 or imprisonment not exceeding one year, license. or both, in the discretion of the court. Art. 56. Where the collector is not sufficiently in- formed as to the entire responsibility of the apphcant, 01*^.^^^?^^^^^^^.^ where in any case he deems it advisable, the Commissioner ^^^ ^^^^■ of Internal Revenue may upon the recommendation of the collector require of the applicant a bond, in duplicate, with satisfactory sureties, in a penal sum at least equal to the estimated amount of tax to be withheld by such appli- cant 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 him- seK of the financial responsibility of the Hcensce. 52 INCOME TAX REGULATIONS. Art. 67. When any person, finn, or corporation shall obtained *° for^^'^^'*' hraiu'li offices and desire to collect fcn-eign uiterest branch offices, yj. (^Hyidond uiconie through said branch offices, the ap- plication for license or licenses shall be made by the per- son, firm, or corporation through its principal office for its brancli office or offices. Appli(;ation for licenses in Application for such cases shall be made to tlic collector of internal license to be ccr- t • • i • i tified to collector revenue for the (hstrict m which the home ofhce is of district in wiiich 1)1 an('ii located. The names and athh'csses of the branch offices oflices arc located. ,„,„.., . , t . shall be lurmslied to tiie collector in the apphcation of the said principal, and if the requirements of the fore- going regulations have been complied with to the satis- faction 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 certification is made shall issue to such branch office a license, as in the case provided in article 55. int^re^^oucctcd ^^^' ^^' "^'^^ Hcenscd pcrsoii, firm, or corporation first to be withheld by j.(^.(.eiyi2jq- aiiv such foreign items for collection or other- agent. O .J o \vdsc, shall withhold therefrom the normal tax of 1 per cent, and will be held responsible therefor. Such Hcensee shall indorse or stamp on each such coupon, check, or statement as to bill of exchange, wlieii practicable, the words "Income tax withheld to ... . be indorsed or ap- tax withheld bv " (giving liis or their name, address, and pended to cou- . " . . . pons.checks, etc. date), whicli shall be sufficient evidence to relieve subse- quent holders or purchasers from the duty of also with- holdmg the mcome tax. If the size or nature of such coupons, checks, etc., makes it impracticable to make said indorsement thereon, a statement identifying the item on which tax is with- held and bearing said indorsement may be attached thereto with the same effect as if the indorsement was made directly thereon. Licensee to fur- ^^^ 59 gych Ucensce shall obtain the names and nish collector of of^ taxes^deduct- '^'^^^*^^^®^®^ ^^ ^^^^ pcrsous from whom such items are re- ed, etc. ceived and shall prepare a list of same in duplicate (on Form 1043) and file it with the collector of internal revenue for his district not later than the 20th day of the month next succeeding the month in which such items were paid. The list shall be dated, and shall contam the names and addresses of the taxable pei-sons, the character and amount of income, amount of exemp- tion claimed, amount of income on which withholding agent is liable for tax, and the amount of tax witliheld. In addition to the monthly lists the licensee wiU, on or INCOME TAX REGULATIONS. 53 before the 1st day of March in each year, tile with the collector in duplicate a return (Form 1043a), showing the amount of mcome paid and the amount of tax with- held by him during the precedmg year and such other information as the form prescribes. The monthly hst 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 required, in making an annual list return of the tax with- held from income described in article 54, to again make an itemized list of the amount of tax withheld from each person, but will give in the annual Hst return the totals of the monthly list return for each month of the year for which annual Ust return is made. Art. 60. In the event such coupons, checks, or bills of ^^^^ ^"^^lei exchange above mentioned are presented for collection ^^f|P^ ^ °^*y by an individual claiming the benefit of the exemptions allowable under paragraph C (arts. 9 and 10), such indi- vidual 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 organizations companies, or associations and insurance companies, or-^|™^^°^|[^ ganized in the United States, the form of certificate here- ^* t^® source, tofore prescribed for such organizations sliaU be used, and in such instances no tax shall be deducted. Art. 61. In both instances the hcensee fu'st receiving certificates of . ,11 . -n PIT • 1 exemption to be such items shall retain such certificates lor deuvery with forwarded with , , . p .1 1 • > 1 2 J • 1 monthly Ust re- tire fists aforesaid, and with respect to said coupons, turns to collector. checks, or biUs of exchange, said Hcensee shall attach thereto (identifying the items) or indorse or stamp thereon the words "Income tax exemption claimed through" (giving name and address of Hcensee), which sliaU be sufficient evidence to refieve subsequent holders or purchasers from the duty of also Avithholding the tax thereon. The provisions for coUection of the tax on foreign obli- gations herein set forth includes the interest upon all for- eign 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. Art. 62. All persons licensed shall keep their records in , Licensee to i- i^ _ keep records. sucli manner as to show from whom every such item has been received, and such records shall be open at aU times to the inspection of internal-revenue officers. 64 INCOME TAX KEGULATIONS. D. Income derived from -wages, rent, interest, or other fixed and determinable gains, profits, and income. ienis%?cf '^^^' Art. 63. The abovo title includes all income derived from salaries, wages, rents, royalties, interest, taxable annuities, emoluments, or other fixed and determinable animal gains, profits, and income of another person. C' Income derived from interest upon bonds and mort- gages, or deetls of trust, or other similar obligations of corporations, etc.," and ''Income 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 mcluded here.) agents to deduct Art. 64. Copartnerships, companies, corporations, joint- and pay tax. , , • ... . . stock companies or associations, insurance companies, m whatever capacity acting, including lessees, 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, hereinafter referred to as ''debtors" or withholding agents, having the control, receipt, custody, disposal, or payment of income as described in article 63, shall deduct and withhold from such annual gains, profit, and income, when the same shall have reached an aggre- gate 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. Tax to be with- Art. 66. A withholduig agent who pays monthly, or held on periodical _ _ , . ir j j i ^ pajments when periodically during the year, interest, rents, salaries, they aggregate '■ '' tr> ^ j i ^i j ^ i $3,000. wages, etc., shall not withhold the said tax until such time as the interest, rents, salaries, wages, etc., shaU have reached an aggi'egate amount m 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 Exemption un- claiming exemption under paragraph C (as provided in der paragraph C s - ^ • ^ i • i i i i- i n • i may beciaimed. art. 33 (a) ) , m which casc the withholdmg agent shah with- hold only the tax on the income in excess of said exemp- tion of $3,000 or $4,000 (as the case may be), and the tax so withheld shall be paid as required by law. INCOME TAX REGULATIONS. 55 Art. 66. In case the person to whom the income is due de? MraerapVB is entitled to any deductions under paragraph B, he may ^^^ ^® claimed, avail himself of such deductions by filing with the with- holding agent Form 1008, 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. Art. 67. Banks, bankers, trust companies, and other^^'fhhfid" by banking institutions receiving deposits of money, are notp^jf o°°(j^*oJ^|' 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. Art. 68. When a note shall have been given in payment heuf ra^p'ayment of interest, rents, or other income accruing after March or notes^iven^for 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 discomited any jj^^^^^^^^^l^ °^ such notes omitted, in acquhing them from previous ^^^^^^j^^j^^^^j^^s holder, to make a deduction or allowance for said tax, he^^''^- can look for relief only to the person from whom the notes were obtained, as the "debtor," the maker of said notes, is required to deduct, withhold, and pay to the collector of internal revenue the amount of the normal tax of 1 per cent which may be due thereon. Art. 69. Withholding agents shall make an annual list Annual list re- return (r'orm 1042), m duplicate, to the collector of m- iioiding agents. 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 S3, 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 deduc- tions . 56 INCOME TAX REGULATIONS. E. Fiduciaries. as "nd'u^^iar'^y Art. 70. Giiardians, trustees, executors, aduunistrators, agents, to deduct .^^^j^^^^ receivers, conservators, and all ])crsons, corpora- tions, or associations acting; in any fiduciary capacity hereinafter referred to as fiduciary agents, who hold in trust an estate of another ])erson or j)ersons, shall bo des- ignated the "source" for the j)Ui'pose of collecting the in- Notice of de- come tax, and bv filing notice with other debtors or with- duction tobefiled ' " . ^ . with other with-holduig agents said fiduciary shall be exempt from having: holding agents. . ^ '^ an}' mcome, due to them as such, withheld for any income tax by an}' other debtor or withholding agent. Other debtors or withholding agents upon receipt of such notice shall not withhold any j)art of such income from said fidu- ciary and will not in such case be hold liable for normal tax of 1 per cont due thereon. The form of notice to be filed with the debtor or withholding agent by fiduciary will be on Form 1015. A¥here such exemption is not claimed, notice thereof on Form 1019 should be filed with the withholding agent, tob^made'foth^ ^^^' '^^' Fiduciaries shall, on or before March 1 of each d^stric^ °' ^^®year, make and render a return of the income coming mto 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 distiict 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 bene- ficiaries'" should not include their respective shares of in- come derived 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 income subject to tax for which the fiduciary as withholding agent has to account. INCOME TAX KEGULATIONS. 57 Wlien the share of iiny beneficiary, therefore, in tlie amount stated on hne 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 pi^^'g*"™jji^° gl the beneficiaries of the trust, the annual return required f°o'JJf^rusMmie°l in such cases has reference only to the income accruing ?^*g^^j'''^^® ^^'J^°^: and payable through said fiduciary, and not to the^'^""^- income of the beneficiary derived from other sources. If, howerer, 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) required bylaw. Art. 73.' The annual return of the fiduciary shall con- ^^^""uai^ return tain a fist of the name and full address of each beneficiary ^beneficiaries, '^ snowing tax and the share of said income to which each may be enti- ^^Jj^*'^*^ from tied. There must also be entered opposite the name of each beneficiary the amount of exemption, if any, claimed by him, the amount of income on which the fiduciary is Hable for tax, and the amount of tax with- held, and the said return shall be signed and sworn to by the fiduciary, if an individual, making same, and his full addrevss must be stated. If the fiduciary is an organiza- tion, the return shall be signed and sworn to by the president, secretary, or treasurer of said organization. Art. 74. Fiduciaries having control of any portion of an jj^^^fg"™ *" ^® of imdis- annual income accruing during the year, but not dis- ^^^^^j.*;^^.^'^ "during tributed or paid to the beneficiaries during the year, shall, the year. m rendering their annual return (Form 1041), give the name and address of each of said beneficiaries having a distributive interest in said income, and shall furnish all uiformation 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 para- gi-aph C, however, may be claimed by the beneficiary or^^^^^'^ ^°l ^^;_ his legal rej^resentative by filing his claim for exemption ^jjS^i^"*®'|,^j.°- with the fiduciary agent. sravh c. Art. 75. When the normal tax on undivided annual net ^^''^^^^jj^j^^g*^^^^. income has been so withheld, such tax shall not be again ^^™j^ "witiSiew withheld when such portion of the income is actually dis- ^1^^^° ^^^^°™® ^ tributed and paid to said beneficiary. 58 INCOME TAX REGULATIONS, 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 COM- PANIES. subject\'o'tax'"°' Art. 76. Uiidor the provisions of s(>ctions 2 and 4 of the act of October 3, 1913, every corporation, joint-stock company or association, and every insurance company organized in the Unitcnl vSlates, no matter how created or organized, except those specifically ex(>mpted, shall be en?^ene\'^tocom"^^'^i^^^ ^^ P^^ annually an income tax of 1 per centum per annum upon the entire net income arising or accruing from all sources during tlie preceding calendar or fiscal year, as the case may be. Certain exce})tions as to taxability will be noted sijecifically hereinafter. po^atfoS\ubject Art. 77. A similar tax shall be levied, assessed against, to the tax. ^^^^^ 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. detoe(?°'^'*"°"^ ^^^' '^^' ''Corporation" or "corporations," as used in these regulations, shall be construed to include all cor- porations, joint-stock companies or associations, and all insurance companies coming within the terms of the law, and such organizations will hereinafter be referred to as "corporations. " re^ estate trus"!' •^^*' '^^' ^^ ^^ immaterial how such corporations are etc., subject to created or organized. The terms "joint-stock com- panies" or "associations" shall include associates, real estate trusts, or by whatever name known, wliich carry on or do business in an organized capacity, whether organ- ized under and pursuant to State laws, trust agreements, declarations of trusts, or otherwn.se, 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 organiza- tion, all of which joint-stock companies or associations shall, in their organized capacity, be subject to the tax imposed by this act. requiJe^d'to^makl ^^^' ^^- Every Corporation not specifically enumerated returns. ^s exempt shall make the return of annual net income INCOME TAX EEGULATIONS. 59 required by law whether or not it may have any income hable to tax, or whether or not it shall be subordinate to or controlled by another corporation. Mutual telephone jj^^q^Iq^ ^y* companies, mutual insurance companies, and like organi- ^mpanfes^^'^^S^ zations, although local in character, and whose income ^^®™p*- consists largely from assessments, dues, and fees paid by members, do not come within the class of corporations specifically enumerated as exempt. Their status under the law is not dependent upon whether they are or are not organized for profit. Not coming mthin the statu- tory 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 ^^ill be assessed. A railroad or other corporation which has leased its properties in consideration of a rental equivalent to a certain rate of dividends on its outstanding capital stock and the interest on the bonded indebtedness, and such rental is paid b}^ the lessee du'ectly 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- tiJn*^bTco1^pora- chased lines shall include all receipts derived therefrom, [g^^j o?^''^pS> and, if bonded mdebtedness of such lines has been as- ''^^^ ^"^^" sumed, such operating company may deduct the interest paid thereon 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 operatmg leased lines should no t,. lessee corpora- ■i _ ^ ° tions not to m- mclude the capital stock of the lessor corporations in'^l"*^,'' capital . ■'• _ -i stock or indebted- their own statement of capital stock outstanding at the ^^^^ 9^ lessor cor- ^ ^ " po rations. close of the year. The indebtedness of such lessor cor- porations should not be mcluded 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 return, 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 ^^^^^^^sn ^corpo- offices in the United vStates should designate one of such^^'^Pt^^ If^^^ ^ branches as its principal office and should also designate ^f^^f^f^®^ P'""^" the proper officers to make the required return. GO INCOME TAX REGULATIONS. orpauiLTd^uHnl ^^'^' ^^- '^ corporatiuii organized cluriiig tho year lunls'*' '"'*''*' "^ t^liould render a sworn return on the prescribed form, covering that portion of the year (calendar or fiscal) dur- ing which it was engaged in business or had an income accruing to it. goh^nuJ'^iuTu^ ^^^' ^^' Corporations going into licpiidation during any dation. ^.^^ ])eriod may, at the time of such Hquidation, prepare a ''final return" covering the income received or accru(!d to thcim during the fractional ])art of the year during which they were engaged in business, and immediat(^ly file the same with the collector of the district in which the corporations have their principal places of business. iiersw^s*^'^ ^'^^' ^^^' ^^' Limited partnerships are held to be corpo- rations within the meaning of this act and these regula- tions, and in their organized capacity are subject to the income tax as corporations. exemp?from^tS^ ^^^- ^'^' ^he act s])ecifically enumerates and exempts from its provisions and reqiurements labor, agricultural, or horticultural organizations, mutual saAdiigs 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^dding for the payment of life, sick, accident, and other benefits to the members of such soci- eties, orders, or associations, and dependents of such mem- bers, domestic building and loan associations, cemetery companies organized and operated exclusively for the mutual benefit of their members, any and all corpora- tions or associations organized and operated exclusively for religious, cliaritable, scientific, or educational pur- poses, no part of whose net income inures to the benefit of any private stockliolder or individual, business leagues, cliambers of commerce, or boards of trade not organized for ])rofit, no part of the net income of which inures to the benefit of the i)rivate stockholder or individual, and civic leagues or similar organizations not organized for profit, but operated exclusively for the promotion of social welfare. ■Domostic build- Domestic building and loan associations are among ingand loauasso- *= _ o ciations defined, tiiose enumerated as exempt from the requirements of Mntiiahty essen- -i • < • i i i tiai- the law. 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 hiws applicable to Alaska or the District of Colum- INCOME TAX REGULATIONS. 61 bia. Mutuality in operation and in the distribution of profits and benefits is essential to exemption. There- fore, 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 articles of asso- ciation 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 corporations 11 1 11 1 nr- 1 • 1 • must esta b 1 i s h enumerated above shall by affidavit, or other\\-ise, at their right to ex- r • • c T 1 emption. the request of the collector or Commissioner of Internal Revenue, 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 distribut- ing the net income, if any, or that none of the net income inXires to the benefit of any private stockholder or indi- vidual. In the absence of such a showing, siicli organiza- tions may, at any time, be required to make returns of aimual net income or disclose their books of account to a revenue officer for examination in order that the status of the company may be determmed. Art. 89. A society or association ''operating under the society or asso- ,, ,,.., , ., ciation subject to lodge svstem is considered to be one organized under a exempt ion d e - o fined. charter, with properly appointed or elected officers, with an adopted ritual or ceremonial, holding meetings at stated intervals, and supported by fees, dues, or assess- ments. Art. 90. Cemetery companies organized and operated panl^^ or|aniz?d' exclusively for the mutual benefit of then* members are fi[ oTtheh-' mem- exempt. The provisions of the law clearly indicate that'^^''^'^''^™pt- companies which operate cemeteries for profit are Uable 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 corporations ] ,, ii- iii 1-11 whose status as to under tne law there is any doubt, or wliich does not exemption is in I , • 1 • 1 r- 1 1 !■ 1 doubt must make Clearly come withm one or another of the classes of those return, specifically enumerated as exempt, should file a return C2 INCOME TAX REGULATIONS. (ill blank if desired) and allacli Uieieti) a statement sot- ting out fully tlio nature and purj)ose of the organization, the source of its income, and what disposition is made of it, and particularly of any surplus. Cooperative Art. 92. Cooperative dairies not issuing stock and in "s?ock"and"ai- alio whig patrons dividends based on butter fat in milk (iTvidMidsV^ex- furnished are not Uablc. In such case the ''dividends" ^'"'^ are the purchase price of the raw material furnishr policy claims, ineluding fire, aceidcnt, and liability losses, matured endo\nnents, annuities, pay- ments on installment policies, surrender values, and ail claims actually paid under tho terms of policy contracts. Salvage need not bo included in gross income if deducted in .ascertaining the net amount paid for losses under Losses incurro.] policv Contracts. Reserves covering liabilities for losses niuliipaid not cie-^ " • i t i ductihif. incurred, reported, resisted, adjusted or unadjusted but not paid, can not be deducted from gross income under this or any other item of the return. Additions to (d) Tho rcscrvB funds of insurance companies to bo reserves required ., ,. . . ,, ... it- by law, iiow de- considered m computing the deductible net addition to reserve funds are held to include only the reinsurance re- serve and the reserve for supplementary contracts required by law in the case of life insurance companies, tho un- earned premium reserves required b}^ law in the case of fu'e, marine, accident, liability, and other insurance companies, and only such other reserves as are sj^ecifically required by the statutes of a State within which the com- pany 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 jourpose of this deduction, the net addition is tho excess of the reserve at the end of the year over that at the beginning of the yeeir and may be based upon the highest authorized reserve required by any State in which the compai;y making the return does business, co^mpan^i^^r"- ^^'^ ^lio caso of assessmont insurance companies, the serves. actual deposits of sums with the State or Territorial officers pursuant 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(e) amounts repaid to policyholders on account of premiums previously paid by them and interest joaid upon such amounts between the ascertainment thereof and tho payment thereof. What consti- Art. 148. The amount of interest accrued and paid tutes allowable -■■ iiueresi dcduc- -^yitj^jj^ (j^q jquy hj a Corporation on an amount of bonded or other indebtedness not in excess of one-liolf of the sum of the interest-bearing indebtedness and the j^aid-up INCOME TAX EEGULATIOlsrS. 75 capital 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 em- ployed in the business at the close of the year, consti- tutes 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 indebted- ness 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 jiaM as 1 !■ _ rental deductible. secured by mortgage on real estate occupied and used by a corporation, in which real estate the corporation has no equity or to which it is not taking title is an allov\'able deduction from gross income as a rental charge, paj^ment of which is required to be made as a condition to the continued use and possession of the property. If, how-jj^Jr"gagron*reTi ever, the corporation has an equity in or is purchasing ^^^^^^^^j^jf^j^^''^^'^^^ for its own use the real estate upon which such mortgage ^,^^fi?;,p"°^ '''^■ is a prior lien, the indebtedness will be held to be indebt- edness of the corporation v.ithin the meaning of the law and the interest paid on such mortgage will be deductible only to the extent that it, Anth interest on other obliga- tions of the corpQration, is within the limit fixed by the act. Art. 149. In the case of banks and banking associa- bankiiig a^soda- tions, loan or triist companies, interest paid witliin the '"'^'" year on deposits, or on moneys received for investment and secured by interest-bearing certificates of indebted- ness issued by such bank, banking association, loan or trust company, may be allowably deducted from the gross income of such corporations. Art. 150. Interest paid on indebtedness, wholly secured i,^i^{;;^^«||^P^^'io° by collateral the subject of sale in ordinary business of such corporations, is also deductible to the full amount of such interest paid. This contemplates that the entire interest received on tlu^ collateral securing such indebted- ness shall be included in tlu^ gross income returned. Art. 151. Interest oji bonded or other indebtedness ^fjlj^f^^^t rates bearing different rates of interest mav be deducted from gross income durijig the year, provided the aggregate We. *JQ INCOME TAX REGULATIONS. amount of aiK-ii indebtedness on which the interest is paid does not exceed the limit presciibed by hiw, and in case the indebtedness is in excess of the amount on which interest may be h^gally deducted the indebtedness bearing the liighest rate may be fii-st considered in computing the interest deduction and the bahince, if any, will be com- puted upon the indebtedness b(ianng the next lower rate actually paid, and so on until interest on the maximum princij^al allowed has been computed. Taxes deducti- j^^.^^ 5^52, ^11 sums paid witliui the 3'ear 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- ^j.*^ 153^ Taxcs paid for local benefits are not deducti- ductible. . , , . , , j. ble. Taxes paid by a corporatKm 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 Alt. 164. Bauks paying taxes assessed against their stock of >an .. g^Q^.j^^^ij^j.^, jjecause of their ownership of the shares of stock issued by such banks can not deduct the amount of taxes so paid ^n making their return for the income tax imposed by this act unless specially authorized to do so by the laws of the State in wliich they do business. The shares of stock are the property of the stocldiolders, and such holders are primarily liable for the tax. Import duties. Alt. 155. Import duties or taxes are not tleductible un- der 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. Rcscrvcs for taxes can not be allow^ed, as the law specifically provides that only such sums as are paid ^^-ithin the 3'ear for taxes shall be deducted. Foreign corpo- Art. 157. Foreign corporations shall be subject to the rations subject to ^^^^^^^^_^j tax of 1 per ccut computed upon the net income received by or accrumg 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 or- ganizations shall be ascertamed by deducting from the gross income arismg, received, or accruing from business done and capital invested m this country the deductions enumerated in the act, wliich deductions shall be hmited Deductions to expenditures or charges actually mcurred in the main- pens^s'^^of^^busl: tcnaucc and operation of the business transacted and cap- un1te1fStates.'''°ital invested in the United States or, as to certain charges, taxes. INCOME TAX REGULATIONS. 77 i such proportion of the aggregate charges as the gross m- coine from business done and capital invested in the ; United States bears to the aggregate income within and j without the United States. In other words, the deduc- i tions from the gross income of a foreign corporation doing business in this country sliould, as nearly as possible, rep- ^ i resent the actual expenses and authorized charges incident | to the business done and capital hivested in this country and must not comprehend, either directly or indirectly, » any expenditures or charges incurred in the transaction of busmess or the investment of capital without the United i States. Art. 158. It is immaterial whether the deductions ex- ^. now dedvc- '■ tions shall be evi- | cept for taxes and losses are evidenced by actual dis-^ienced. ; bursements in cash, or whether evidenced in such other I 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 cor- i poration making the return. Deductions for taxes, how- : ever, should be the aggregate of the amounts actually paid, as shown on the cash book of the corporation. Deductions for losses should be confined to losses actually sustamed and charged off during the year and not com- ; pensated by insurance or otherwise. Except as the same may be modified by the provisions of the act, limiting ; certain deductions and authorizing others, the net in- ! come as returned for the purpose of the tax should be the j same as that shown by the books or the annual balance j sheet. • I Art. 159. The tax imposed upon the income of cor- Tax on uet in- \ -i -c come of corpora- , porations, whether domestic or foreign, shall be com- twns for the year puted upon the net income, ascertained in the manner • ; hereinbefore indicated, except that for the year ending December 31, 1913, the income tax vnll be imposed upon the net income accrued from March 1 to December 31, j both dates inclusive, and such amount of net income is , ascertahied by taking five-sixths of the entire net income ' for said calendar year. i Art. 160. The special excise tax on corporations pi'o- ^^x^ on^'^orpora- ' vided for in the act of August 5, 1909, is reaffirmed and ^'on^. j made operative and cftective as to the period from Janu- i ary 1 to February 28, 1913, both dates inclusive, wliich j said tax shall be computed upon one-sixth of the entire net income of said corporations for said year, and the 78 INCOME TAX BEGULATIONS. iict iiRomc ^hail l)(' ascHTlaincd in acc-ordar.co willi the provisions of the income-tax law. ses^smem/'"'^ "'' For tlie year 1913 it shall he necessary to make hut t)ne return and assessment for all taxes imposed iu the income-tax law upon corporations, either hy way of income or excise, which return and assessment shall be made at tlie times and in the manner provided in section 2 of the act of October 3, 1913. Xo specific ex- T"' 1 j1 i i • i- j- • n emption allow- Liider the present law, no spocilic exemption is aUow- lion. able, as was the case under the corporation-tax hiw; hence the assessment will be based upon the entire net income of the corporation arising or accruing to il from all sources during the entire year for w^hich the ret inn is made. Inventories. ^j,^ ^q^ j^^ ordcr that Certain classes of corporations may arrive at their correct income, it is iiecessar}' that an inventory, or its equivalent, of materials, sup]>lies, and merchandise on hand for use or sale at the close of each calendar year shall be made in order to determine the gross income or to determine the expense of opera- tion. ^^Physicaiinven- j^ physical inventory is at all times preferred, but where a physical inventory is impossible and an equiva- lent inventory is equally accurate, the latter will be ac- ceptable. An equivalent inventory is an inventory of matf^rials, supplies, and merchandise on hand taken from the books of the corporation. ciass/s^or^*'"'^'''' -^^t- 1^2- For the purpose of this tax, corporations are 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 ])rofit), and insurance companies, not specifically exempt. Class B. Public service, such as railroad, steamboat, ferryboat, and stage-line companies; street-railway com- panies; pipe-line, gas-light, and electric-light companies; express companies, telegraph and telephone companies. Class c. Class C. Industrial and manufact'uring, such as mining, oil and gas producing companies, lumber and coke com- panies; rolling mills; foundry and machine shops; sawmills; flour, woolen, cotton, and other mills; manu- facturei-s of cars, automobiles, elevators, agricultural implements, etc.; manufacturers or refiners of sugar, Class B. ISrCOME TAX EEGULATIOlirS. 79 molasses, sirups, or oilier products; ice and refrigerating companies; slaughterhouse, tannery, packing, or can- ning companies; printing and publishing companies, etc. Class D: Mercantile, including all dealers (not other- ciassD. wise classed as producers or manufacturers) in coal, lum- ber, grain, produce, and all goods, wares, and merclian- dise. Class E : Miscellaneous, such as architects, contractors, class e. hotel, theater, or other companies or associations not otherwise classified. Art. 163. Under the authority conferred by this act, ^^^^ re.iun. forms of return have been prescribed, in which the various items specified in the law are to be stated. Blank forms of this return mt.11 be forwarded to collectors and should be furnished to every corporation, not ex- pressly exem.pted, 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 fii^st day of the next fiscal year in the case of corporations maldng returns for their fiscal year. Failure on the part of any corporation, joint-stock company, association, or insurance company liajjlc to this tax to receive a prescribed blank form will not excuse it from making the return required by law, or relieve it from any penalties for failure to make the return in the prescribed time. Corporations not supplied with the proper forms for making the return should make application therefor to the collector of internal 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 fidly and clearly set fortli the data therein called for. Imi)erfect 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 posid by ?ct. ™" the date for payment stated in the notice and demand issued by 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 b(? added 50 p(»r C(mt in case of refusal or neglect of a corporation to make a return or 100 per cent in case of a false or fraud- 80 INCOME TAX REGULATIONS. ulent return. For rd'usal or ncgloct to make a return \\ithin the prescribed time, or for a false or fraudulent return, the cor])oration so offending shall be liable to a specific penalty not exceeding Si 0,000. Any person divulging unlaw-fully any information whatever disclosed by a return shall be punished by a fine not exceeding $1,000, or b}' imprisonment not exceeding one year, or both. Any person or any officer of an}^ corporation required by law to make, render, sign, or verify any return, who Fraudulent re-mak{>s any false or fraudulent return or statement with ^^^' intent to defeat or evade the assessment required by section 2, act of October 3, 1913, shall bo guilty of a misdemeanor and shall be fmed not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution. Fiscal year; j^^t. 165. The Federal income-tax law authorizes cor- how established. poi'ations, joint-stock companies, etc., under certain con- ditions to make their returns on the basis of an estab- lished ''fiscal year" or consecutive 12- months period, which may be other tlian the calendar year. Pursuant to this provision the following instructions are issued for the guidance of collectors and other inter- ested parties: da'^^'for cifskiTo^ "'^^^ Corporation, joint-stock company, or association, must give^at least <^i" ^^^Y insurance company subject to the tax imposed con^tor°of'''thot>y this act may, at its oi)tion, have the tax payable by nated ^° ''^^^S'it Computed upon the basis of the net income arising or accruing from all sources during its fiscal year, provided that it shall designate the last day of the montli selected as the month in whicli its fiscal 3^ear shall close as the day of the closing of its fiscal ^'^ear, and shall, not less than 30 days prior to the date upon which its annual return is to be filed give notice, in wiiting, to the col- lector of internal revenue of the district in which its })rincipal place of business is located, of the day it has thus (k^signated as the closing of sucli fiscal year. fis-ai'vear'"'^ °^ ^^^' ^^^' ^^ pursuancc of this proAdsion, a corporation or Hke organization 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 davs after the close INCOME TAX EEGTJLATIONS. 81 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 designated, 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 I'eceiving j^^°^^^tore^™^st notices of the selection and designation of the " fiscal t|^de|iguation of years," as above indicated, \\dU make record of the same, recording, (a) the name of the corporation or like organi- zation, (h) the date when notice was given, (c) the day designated for the closing of the fiscal 3^ear, 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 GO-day period next following the day designated as the close of the fi.scal 3'ear. Art. 168. If it shall appear tJiat for the year 1913 ^^^^^^ ^9\}^^ ^ ^ '^ was given within the notice was given within the prescribed time — that is, prescribed time, . 1 (. 1 1 calendar year will Avithm 30 days of the last day of the 60-day period — the govern. 1913 return may be made as of the fiscal year so estab- lished ; otherwise it will be made on the basis of the cal- endar 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 ~ ana notice caji active; that is to say, if a corporation now designates °°*g ^^ retroac- 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 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 corporation the return for the year must be made for tlie 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 24785°— 14 6 82 INCOME TAX KEGULATIONS. the return will bo made mi the basis of tlie fiscal 3"ear so established. Where fiscal ^jt., 170. In all cases whore a fiscal year is not estab- yoar is not prop- _ •' eriy established, liyll^^fl as abovc prescribed returns must be made on the returns must be i . ^ made for ciiicndar basis of the Calendar year, in which case such returns must year. *' ' be filed on or before the 1st da^' of March next succeeding such calendar year. Such returns in either case pro- vided must be verified under oath or afhrmation of its president or other principal officer, and its treasurer or assistant treasurer; tliat is to say, by two different persons acting in the ofiicial capacity indicated. i^ba"Tm-fec!fi Art. 171. If it shall appear in any case that returns on rated'can nofifo ^^^^ been niadc to the collector on the basis of a fiscal accepted. year not designated as above indicated, tho 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. 1913 "^ 'mus't ^ bo Ai't' ^'^^' Kcturns made under this act and pureuant forms. ^^ ^^^^' ^o these instructions must be made on the new forms prescribed 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 ^j.^ 273. An extension of time within w^hich a return toexceeu Jo days. 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 written appUcation to the collector, and in case of sickness or absence of an officer whose signature to the return is requu'ed, such application to be made prior to the expi- ration of the period for which the extension is desired, Ketnrns prop- Art. 174. If a Tctum is made and placed in the United erly mailed m i i i i i • i • time to reach col- States mails, properly addressed, and postage paid, in to penalty under ample time, m duc course of mails, to reach the oince of certain condi- ,•'-,, „ i c i i i tions. the collector or deputy collector on or before the last due date, no penalty \Till be held to attach should the return not be actuall}^ received by such officer until subsequent to that date. Last due date Art. 175. *' Last due date," as hereinbefore used, is con- defined. . . strued to mean the last day upon which a return is re- quired to be filed in accordance with the provisions of the law, or the last day of the period not exceeding 30 days covered by an extension of time granted by the collector, faKn '^sun'day ^^^' ^'^^- When the due date as above defined falls or legal holiday.' q^ Sunday or on a legal holidiiy, the last due date will INCOME TAX EEGULATIOl!fS. 83 be held to bo the day next following sucii Sunday or legal holiday and the return should be made to the collector not later than such foUovrmg 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 i made due in the ofFice of the collector. < Art. 177. All assessments against corporations, etc., Assessment , IT •11 ^"'^' payment of makmg returns lor the calendar year are requu-ed to bet^-^es. made and the several corporations, joint-stock companios, etc., notified of the amount for which they are liable on ' or before the 1st of June of each sucessive year, and said,,/5 calendar i ^ ' year. assessments shall be paid on or before the 30th day of June of such year. In the case of corporations making ji^^^"**'^^^^^^^®^^- returns for the fiscal year, the assessments shall be made i and notice 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 required to be filed. In case of refusal or neglect by a corporation, etc., to make a return, and in case of false or fraudulent return, the commissioner, , upon the discovery thereof witiiin thi'ee years after such : returns are due, shall make a return upon information j obtained in the manner provided in the act, and the assessment made on the basis of such return shall be paid immediately upon notice and demand given by the col- lector. Upon failure to pay the tax when due and for 10 days ^^^^^^'^^^ ^^^^P^y ; after notice and demand, a penalty of 5 per cent of the | amount of the tax unpaid and interest at the rate of 1 ! per cent per m^onth until paid shall be added to the ' amount of such tax. ! Art. 178. When the assessments shaU have been made, pJ^i^®f-™^recoids! ' the returns shall be filed m the ofBce of the commissioner tk,u^upo°n'o?der and shall constitute public records, subject to inspection"^ *^®^'''*''*^'*^"'- upon the order of the President, under rules and regula- tions prescribed by the Secretary of the Treasury and approved by the President. Copies of returns on file in the Commissioner'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 ^^^»f™|^°"j/„« whicii imposes a general income tax, the ]n'oper officers oi^.°^^^ income ^ such State may have access to the returns filed by corpo- 84 INCOME TAX EEGULATIONS. rations doing business in such States, or to an abstract thereof sho\^dng the name and income of such corpora- tions, etc., at such times and in such manner as the Secre- tar}^ may prescribe. In no case are tlie original returns to be removed from the office of the commissioner, except upon order and by direction of the Secretary of the Treasury or the President. Certified copies Art. 180. At thc rcqucst of the Attorney General, or by ilirection of the Secretary of the Treasury, certified copies of returns may be made and deUvered to the United States district attorneys for their use as evidence in the prosecution or defense of suits in which the collection or legality of the tax assessed on thc basis of such returns is involved, or in any suit to which the United States Gov- ernment and the corporation, etc., makmg thc return are parties and in which suit such certified copies would con- stitute material oAddence. Peuaityforgiv- Art. 181. The disclosure by any collector, deputy col- in regard to ro- lector, agont, clcrk, or other officer or employee of the United States to any person of any information whatever contamed in or set forth by any return of annual net income made pursuant to this act is, by the act, made a misdemeanor, and is punishable by a fine not exceeding $1,000, or by imprisonment not exceedmg one year, or both, at the discretion of the court, and if the oflender 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- countmg wiU 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 exami- nation of the books of account. Books of ac- Art. 183. The books of a corporation are assumed to count best guide ^ , » , . • • tt to income. reflect the facts as to its eammgs, mcome, etc. lience they will be taken as the best guide in determining the net income upon which the tax imposed by this act is calcu- lated. Except as the same may be modified by the pro- visions of the law, wherein certaui deductions are limited, the net income disclosed by the books and verified by the annual balance sheet, or the annual report to stockhold- ers, should be the same as that returned for taxation. Omitted taxos Art. 184. In cases wherein corporations have neglected may be assessed. « i i , ^ • i • j. or refused to make returns, and m cases wherem returns INCOME TAX EEGULATIONS. 85 made are found, upon investigation or otiierwise, to be false or fraudulent, the commissioner may, upon discov- ery thereof, at any time witliin three years after said re- turn is due, make return upon the information obtained in the manner jjrovided in the act, and the tax so discov- ered to be due, together with the additional tax jDre- scribed, shall be assessed, and the amount thereof shall be paid immediately upon notice and demand. Art. 185. Corporations coming within the terms of thiSs^bj^^Pt^^^^j^'^^ law are subject to the normal tax only; that is, a tax^^^- computed 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 collector, cause the books of such corporation to be examined, and if such examination discloses that the corporation is hable to tax in addition to that previously assessed, or assessable, the same shall be assessed and shall be payable immediately upon notice and demand. For the purpose of such examination, the books of corpo- rations shall be open to the examining officer, or shall be produced for this purpose upon summons issued by any l^roperly authorized officer. PART 4. ASSESSMENT AND COLLECTION. ^.l^'f V^Tn"",!'.'" Art. 187. All income taxes found to be due -will bo re- reported on a.^- sessmeni lists, ported by colloctors 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. Names to he Art. 188. The names of corporations subject to tax beticai order. " ' ^vi]l be listed on Form 23-A, according to their designated class, and in alphabetical order as to each class. Names of individuals subject to tax Avill be listed on Form 23-B, alphabetically, without reference to class or rate of tax. Following such names there will be listed, alphabetically, Names of with- the namcs of all withholding or licensed collecting holdiiiij asonts, '^ • i i i i i i how to be listed, 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 against witUiold- i-ii- p ,• ii.- ing agents to be of taxcs as to wlucli claims lor exem])tion or deduction deferred imtil an- , /^i i i • i r^,-. ^^ -n t i j nuai reports are may DC filed uiidcr articlo 33, collectors will delay report- received. . • -■ ing for assessment taxes remaining in the hands of with- holding agents, until the annual reports of such agents, which must bo filed not later tlian March 1 in each year, are received. to^e*made.'^^''° Art. 190. Rctums of withholding agents (including those of licensed collecting agents) as to interest payments shall be made monthly and returns containing sum- maries of said monthly returns shall be made annually. (See Part 2, A, B, and C.) Returns of individuals (see Part 1), corporations (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 month. All annual returns are required to be made on or before the 1st day of March in each year, except in the case of 86 INCOME TAX REGULATIONS. " 87 corporations wliicli have given due notice of the termi- nation of tlieir fiscal year, in which cases the prescribed return is to be filed within 60 days after the termination of such fiscal year. Art, 191. Corporations which are subject to the special ^corp_or^au^oiis excise tax 3n income received during the months of returns for year '^ 1913 income sub- January and February, 1913, may, under the pro\dsions j^e«t to^speciai ex- of section 4, paragraph S, of the act of October 3, 1913, include such income, as also the income taxable under said act, in one return for the year 1913. In each such case one assessment only will be made. Art. 192. All returns of income, whether of individuals coml'^'t"\o^or- or corporations, should be forwarded with the assessment ^ssmentTi^'S. '''^' list rendered. Where in any case the collector has reason to believe that any return rendered is false or fraudulent, leJt^retons!"*^'" he will prepare and retain m his office a copy of such return, and will note on the original and under the head of '•Remarks" of his assessment hst the words "''Investi- gation ponding." lie will in all such cases make his inves- tigation in the manner prescribed in section 3173, Revised Statutes, and paragraph D of said act of October 3, 1913; and he wHl report the results of his investigation to the Commissioner of Internal Revenue, referring to the Hst, folio, and hue on which the assessment was reported. Art. 193. Monthly and annual returns of withholding ^^c^rtam^retui^s agents (including those of licensed agents) as to interest Ig^'J^ate. ^"^ "" payments and the annual returns of withholding agents withholding tax on wages, salaries, etc., will be made in duplicate, one copy of wliicli will be retained by the col- lector in his office and one copy transmitted to the Com- missioner of Internal Revenue. Annual returns of with- holding agents (including those of licensed agents) as to interest 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, ^j,^^j^tm^°f„^^| filed by or on behalf of persons subject to tax, will be f/^^^^f^^'^!"""'' forwarded by the collector as soon as received; and all such certificates, reports, and returns, before being trans- mitted to the commissioner, will have stamped thereon the name and number of the district; ^viU be arranged (unfolded) in alphabetical order and, in the case of cor- porations, according to the designated class to which th(>y belong. Care should be taken to have all such papers, 88 INCOME TAX BEGULATIONS. when so arrjiDgcd, curcfully secured by cord or other fastening, so as to insure their receipt in like order. This is especially necessaiy in view of the large number of like pa])ers v\-hich will be forwarded from the various districts. tunwuftfeatoiiTO ^^t. 195. In order that assessment lists may be foctois?^'^ '^^^°'' pi'^^^^P^'ly pi'epared 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 diligence in this matter is necessary, as suflicient time must be given for the reexamination of such returns in the commissioner's office before assess- lisfs^ to' ^bo™pre- ™^^* i^ made. The forwarding of assessment lists, how- wd1;d '^"^tho°u t <^^'^^> sliould in uo casc be delayed, beyond the time delay. 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 assess- ments are to be made and notice of assessment given, collectors v/ill assign to this work all available force in their respective offices. Notice to bo j^rt. 196. Where the required returns are not filed sent to delin- t^ quents. within tlic prescribed time, either by individuals or corporations, notice on Form 1045, should in each case be sent to the dehnquent. (For authorized extension of time, see articles 23 and 173.) ^Notice of assess- ^^t. 197. 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 30tli 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 (Form 17) should bo at once issued, and unless tax ^^^uy, and ^^^ ^^^ i^ ^"^^ ^^^0 is paid within 10 days after the interest. scrvice of such noticc, general demand for tax, penalty, and interest (Form 21) should at once be issued. Imme- diate notice and demand (Form 17) will, however, be served in case of failure to file the required return within the statutory period. Notice of assess- ^j-t. 198. Pending assessment on returns forwarded to ment to be sent ^ m onIsI °" ^^^^ commissioner, collectors will have prepared the neces- sary notices of assessment, with properly addressed envelopes, to be used immediately on return of their assessment lists. return INCOME TAX EEGULATIONS. 89 Art. 199. Statements of payment, abatement, and out-j^^j^^^y^^l^*^^ standincj balances of such assessed taxes will be rendered °"*^*^°^^°g ^^i- monthly by collectors on special Form 325. Such statements will be prepared in the same manner as requu-ed in the case of assessments on the regular Form 23, except that in Statement III the outstanding bal- ances on the various Hsts will bo reported in aggregate only. Items constituting such balances, however, will balances *^to*^'be be carded by collectors, but only as to such as wereL^ctoK. ^ ^°^' assessed during the month for which the return is ren- dered, thus avoiding detailed statements each month of outstanding balances previously reported. 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 forv/arded 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. INDEX. Note. — Regulations are indexed l)y article nnnilier; law indexed hy page. A. Abatement: Article. Claim for, of tax, mny be filed when, by whom 33(; Absence: From United States, who may make claim for deductions (Form lOOS) for 331> Additional tax: Nonresident alien subject to, computed same as for citizens of United States. 8 Regulations for 2 Additions and betterments: Constituting iiv:;rease in capital investment not deductible expense of corporation 118 Adjustment: Assessment of tax withheld, Avitliholding agent to be notilied 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, certilicate of ownership of bond. ... 43 Compensated on commission basis, income of, not subject to withholding at source 32 Retm-n made by, when 17 Signing for principal, certificate of ownershijj of bonds, to fiu'ni.sh evidence of authority to act, when 43 Ac rtcultural org.anizations : Exempt from tax p . 12 Aliens: Nonresident — Duly authorized agent of, to make return for and j^ay 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 excmpiion (Form 1004) filed 4<) Resident — Certificate of ownership of bond, when and how to be used, and (o specify what 42 Income of, from coupon or registered interest, tax on to be deducted and withheld except to extent exemption claimed 44 Taxable on net income less exemption, and deductions 1 91 92 IKDEX. i Amendments: Aiticlo. Sections 31fi7, 3172, 3173. 317(5, Kov. Sial j)p. 22-24 Amortization: Doprociatiou for. corporation ullnAvcd, wlion, how 135 Annual return: Form 1013, to show what, anu to be filed on or before Mar. 1 each year. . 50 Of coupons or interest orders not accompanied by certificate of ownership (form of), M-hat to phow when filed, totals only of monthly rot am 53 Of licensee for collection of foreign items (form of) what to shmv, with whom filed , when 59 Annuity: Money ])aid for (returned) not to l)e included in ^ross income 5 Taxabl?, how treated 03 Answer: Of guardian, etc., to notice lor failure to make return, may .sliow what. . 18 Appeal: Decision of collector — All papers of, to Commissioner of Internal Revenue; dissatisfied may submit case; furnish sworn lestimony to proA-e facts p. 8 Application : For license— For collection foreign items 55 • To collect foreign items to be made tlirough principal ofiice 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 Arranc;ement 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 "^o" Against withholding agent 36 Form and notice of 197 List rendered, collector to forward 192 Amount of, when persons shall be notified ]>p. 8, 9 Basis of calendar year or fiscal year, time to he made 177 I'^ailure to pay, extra tax on p. 9 Limitation on time of making p. 9 Made by Commissioner of Internal Revenue p. 8 Of tax against withholding agent, deferred until agent makes return... 189 Penalty and interest for nonpayment of, exceptions p. 9 Persons notified of amount of p. 9 Y\Tien to be paid p . 9 Assets, capital: Corporation — Change in book Aalue by annual adjustment ou books, that value to be iKsed in making annual returns, net income Ill Change in book value by reappraisal, gain or loss, how computed. . . Ill Profit or loss ou sale of, how determined 110 Loss from sale of, how ascertained 128 Sale of corporation, net income from, how determined 109 Sale of l)y corporation, income from, how determined 108 Shrinkage in book value of corporation, how treated 134 INDEX. 93 ASSXDCIATIOX: Article. Charitable, exemption, when p. 13 Making false return, penalty for p. 12 Mutual, domestic building, etc p. 13 Neglecting to make return, penalty for p. 12 Net income of, preceding calendar year, normal tax on p. 12 Operating under "Lodge system, " defined 89 Refusing to make return, penalty for p. 12 Religious, exemption p. 13 Return of, when available p. 21 Scientific, exemption, when p. 13 Taxes to be assessed by Commissioner of Internal Reven-ue, when, section 3176 p. 24 To make list or return of taxes, how, when , section 3173 pp. 22, 23 Authors: Earnings of, indelinite or irregidar, not subject to withholding at source. . 32 B. Bad debts: Corporation, ded iictible. wliea 125 Collected, are income ] 25 B.\LANCES: Outstanding tax, liow treated 199 Banks: Allowing interest on deposits, not to withliold tax from G7 Deductible status of taxes assessed against stockholder, paid hy 154 Interest paid on deposits allowable deduction P- 20, art. 149 Taking coupons for collection, originated or payable in the United States, duty of 39 Mutual s.vying.s — Having capital stock represented by shares, exempt from tax y>. ^2 Beneficiaries: Exemption from lax may be claimed by, from fiduciaries 74 Interest received by, from insurance comi:>anics on insurance contract, part of gross income 5 Bequest: Of proper! j'^ — Income from part of gross income 4 Value of, not income 4 BoAKDs- OF Trade: Exempt, when p. 13 Boxd: May ])e required of licensee for collection of foreign items 5G 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 ]>. 11 Bond and jiohtg.vges: Interest on, subject to deduction, when p. 10 Bookkeeping: Reciuisites of, for verifying ret uru J 82 Books: Of corporatioji subject to examination, by .whom, for whaf, result ISO 94 INDEX. Book vaiji;: Capilal asaots — iUticle. Chaugc in. by reappraisal, ^'aiu or loss, liov,- compuU'il Ill Shrinkage in. liow treated 134 Builoivg: Ronlo^•al of, corporation, not deductible loss, wliy 127 BuiLDIXf; AND LOAN ASSOCIATION'; Domeslic, defined; wliat necessary to exempt from (ax 87 BrsiNEss: Tiawful. carried on for gain or profit : income from part of gross income. . 4 C. Calendar yeak: To govern when notice of corporation fiscal year not gi\'en in time 108 Capital assets: Book value of corporation, shrinkage in, how treated 13 1 Corporation — Change in value of. l)y 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 ] 28 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 addllious and betterments, not dediKtible expense 118 Cemetery company: Taxable status depends on wliat 90 Certificate: Accompanying foreign items, disposition of, by licensee (i 1 Claiming deductions account partnership expense, what and how 47 Claiming exemption and deductions to accompany annual return of v*-ithholding agents G9 Claiming exemption — As nonresident alien must be illcd or tax Avithhclcl fmm juiyment coupon or registered interest 40 From tax on registered interest to be fUed at least five days before due date of interest 44 Of withholding, by foreign organization, Form 1018 40 For nonresident alien, may be executed by v.'hom 46 Exemption or deduction, disposition of 194 Form of, for foreign partnersliip composed of nonresident aliens, resident aliens, and citizens of United States 49 Of deposit, interest on, part of gro.s.s income 4 Of ownership accompanying coupons or registered orders, duty of col- lecting agency 3D Of ownership — By corporations organized in United States claiming exemption, form of, and how executed 45 Disposition of, by collecting agent 40 Of persons not subject to having tax vv-ithheld. disposition of, by debtors and withholding agent 51 Not accompanying coupons or interest orders, tax to be withlield l)y first collecting agent, disposition of cert ificale 52 INDEX. 95 Certificatjs — Continued. Of ownership — Contiuued. Of bonds— Article. By citizen or resident of United States, when and how to be nsed and to specify what 42 By corporations organized in United States and certain exempt, must be filed to prevent withholding 4o May be signed by authorized agents 43 _ Of corporations, etc., organized or doing business in United States, form of, for foreign partnership 4S Signed by agent, when verified by first williholJing agent, etc.. good in all other hands 43 Who to malvc and for what 39 Size of and paper for p. 27 Substitute by collecting agent, how to l)e treated by di'btors or witli- holding agent 51 That of collecting agent substituted when 40 Certificates, reports, returns: Arrangement and packing of, for forwarding by collector i;i4 Chambers of commerce: Exempt, when ]>. 13 Change in hook value: Capital assets, corporation, reappraisal, gain or loss, how computed Ill Citizen : Income of, from coupon or registered interest, tax to be withheld on ex- cept 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 ]>. 13 Organizations — Exempt, when p . 13 Claim : For exemption — By whom, for what, who to file 41 Paragraph C, in connection with foreign item, allowed to person enti- tled to (iO Penalty for false ]>. JO What must shoAV and how executed 42 When, and when to be filed ■. . . ] > . 10 Insurance company, amount actually paid undt-r policy contract, consti- tute deduction 147c Collecting agency: First receiving coupons or interest orders not accompanied by certificates of ownershi}) should withhold tax and attach its certificate, l'\)rm 1002, that tax withheld 52 Agent — In foreign countries to have privilege of substituting certificates for original cwnership 40 Record to be kept by, Avhat 40 Should require person presenting cou]Ktn or interest orders to estab- lish identity 52 96 I^"DEX. coLLt;!. riuN ; . AiiKcle. Oi tax from wilhholding agent 36 Collector: AdYiiuced i)reparation notice oi assessment by, i)ar ( ieulars 198 Arrangement and i)acking certificates, report'*, returns 194 Authority of, in any district, section 3173 ]). 24 Claim for deductions may be filed with, when 33c I)is]>atcli of business in offices of 1 95 Duty of — As to returns withholding agents 193 If persons refusfi or neglect to render return ]). 23 In absence from home or place of business !>. 23 In case of refusal or neglect of liable individual to make I'et urn 21 In case of undervaluation or understatement j). 23 In forAvarding— Annual individual return to commissioner 24 Return and assessment list and investigation of return 192 In making returns for persons failing to do so p. 23 Upon receiving notice of fiscal year of corporation 167 Faihu'c to find i:>ersou at home, duty of, section 3173 P- 23 Sickness or absence, may extend time for making returns, section 3176.. p. 24 Legality of returns made by, section 3176 P- 24 Make return for indi\-idual, when 20 May enter any collection district to examine witnesses, wlien, section 3173 p. 24 Method of handling and accounting for outstanding tax balances. ., 199 Must require returns to be verified by oatli or affirma tion 22 Xot satisfied with responsibility, applicant for license to collect foreign items, may recpiire 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 317G p. 24 Shall require deputies to ascertain persons liable to tax, section 3172 p. 22 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 te8tim<;>ny, may summon whom, section 3173 p. 24 To report tax due, how, forms for 187 To send notice of what, form of and time to serve 107 To send notice to delinquent and file return 190 To which, application of principal oflice made for license for branch office, to serve collector in district of branch with what 57 \Vlien claim for deductions, paragraph B, to Ijo tiled witli 33b Commissioner of Internal Revenue: Annual return of individual to be forwarded to, ]iow 24 Assessments made by p. 8 Facsimile of signature on licenses for collecting foreign items furnished collectors 55 Shall add 50 per cent or 100 per cent to tax, Avhen p. 24 Shall assess taxes, when, section 3176 p. 24 To impose additional tax, when P- 9 INDEX. 97 Commissioner op Internal Revenue — Continued. Article. To issue licenses fen* 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 of 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 ]>. J 2 Joint-stock, etc., withholding normal tax on behalf of others p. 9 Mutual cemetery, exempt when ]). \i Taxes to be assessed Ijy commissioner, when, section 317G p. 24 Compensation: For personal service, part of gross income 4 Officers and employees of State or political subdivision of, n(jt lo be included in gross income 5 Paid to employees of corporation on basis of stockholdings not deductible, why 1 19 Present President and judges of court exempt from tax, ^s•hat .5 Public-school teachers of State or political subdivision of, not ])ait of gross income 5 Consideration for supplementary contracts and appi.ieu surrender values: To be both added and deducted in return life insurance com]ianies. . . . 102 Construction of law: As to withholding at source, liberal ]>. 27 Contract : Affecting liability of a taxable ])erson as such, to be in\'alid 27 Copies of returns: IIow obtained, for what purpose 178, 180 Corpor.\tion : Additions and betterments constituting ino'ease in capital investment not deductible 118 All organized in United States subject to tax (certain exceptions) 7G Amount allowed for depreciation of property ]>. 18 Amounts paid emploj'ees — As compensation on basis of stockholdings not deducti])le. why 1 19 For pension or on account injuries, deductible expense 120 Assessment — Insurance company, reserve, definition I47d To be paid when ]) . 20 Bad debts deductible, when 125 Banks, etc. — Interest paid on deposits, etc., allowable deduction 149 Paying taxes assessed against their- stockholders, deductible status of. 1 54 Books of, subject to examination, by whom, for what, result 18(i Cemetery, taxable status depends on what 90 Certificates of ownership by claiming exemption, form of and how exe- cuted 45 Change in book value of capital assets by annual adjustment on Ixjoks, that ^alue to be carried into return Ill Change in book value of capital assets by reappraisal, gain or loss, how computed Ill Charitable, exempt, when ]>. l^J 24785—14 7 98 INDEX. CoRPORATiox— ( ontinucd. Artid?. Classes, eiiumeiatit>u of 1(52 Collector to furnish blanks for niurn of 1G3 Collect lug foreign income, to have license p. 1 1 Commissions to s;ilesmen ])aid in stock, deductible expense when 117 Complete return to he made by or will not l)e accepted iG3 Contract wilh ]>y State, etc., prior to passage income-lux a ■!, income from accruint^- to individual, suhjet-t to tax 93 ContratJt with by State, etc., j)rior to passage income-tux act, iiiconie from accruing to State, etc., exempt from tax when 93 Cost of liuildings on leased ground, deductible as rent, when 1 15 Daiiues, cooperative, not sul)ject to tax, what 92 Deductible loss defined 124 Deduction account interest on indebtedness limited to what, when 8i Deduction- Account materials and vsupplies on hand, what 123. For depletion of mines regulation and rate of, iimii of 142 For depreciation of natural deposits, basis and limit of Ill For depreciation on patent, what, how determined 137 For depreciation on timberlands, limit of, excess of, is ijicome 140 For interest i)aid at different rates, rule of api)lication 151 For obsolescence of patents, what, how determined 138 Defined 78 Depreciation tiniberland fn^ra removal of timl.er. anioiuil, liow deter- mined 139 Depreciation — Deductible, amount, how treated 1 30 Defined 129 For amortization allowed, when, how 135 How determined 129 Reserve, use of, disposition excess of 132 Diiasion of de2>reciation of reserve, correction 133 Donation for charitable purposes, deductible when 121 Duties not deductible as tax bu t item of cost 155 Educational, exempt, when p. 13 Engaged in more than one class of business, gross income ascertained iji accordance with applicable definitions of such income 112 Every, not specifically exempt, required to make return of income 80 Evidence rec[uisite for allowance of de.x deducted from, when p. 11 Dividends on stocks of, normal tax deducted when p. 11 INDEX. 99 C'uiU'oiiATiox- routiiiued. Foreign — Continued. Ariiclc. Having more than one branch ofllce in United Stales Vo tiesignale priiicijiul offiee and persoii to make re( uni S'5 Interest, on indebtedness to be deducted, what p. 20 To give amount of bonded and other indebtedness p. 18 To set fortli paid-up capital stock p. 18 Form of return i)rescribed for 1 03 General expense foreign steamship companies, how treated I !G Gifts or gral uities to employees not deductible 1 20 Good will, depreciatioji Jiot allowed in connect ioii with t:5G G ross income — Definition of [U] General definition 107 Gross value at the mines, definition of 112 In addition to deduction for depletion of mines, etc., deduction fur de- preciatio]! of plant, what, basis of 14:] Income — Excepted during the year J5 From «ale of capital assets, how determined. .-. J08 How ascertained p. ] 4 Losses from p. 14 IXSURAXCE COMPANY — '■ Deductil)le 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 ]47c Depreciation loss by shrinkage in property value, wliat and wlioi 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 retiu'n of 147c Interest paid — As rental, how treated 148 By, on mortgage on property in which C(n'p()riition has equity or is purchasing 143 Deduction, what, when 1 48 On debts secured bj' collaterfd subject to sale, deductible, when, why. 150 On deposits, etc., deductible, when 113 Inventory, purpose and use of; kinds of 101 Leased, to m;ike its own return 82 Leasing oil or gas temtory, deductions for depletion, basis of J 44 Lessee, proi)erty of, assuming indeljtedne.ss of lessor, retui'u by lessee, what 81 Lessee, not to include capital stock or debts of les.sor in return, excpl. . 82 liiFE Insurance Company — Applied surrender values and consideration for suj)p!('nuMifary contracts both added and deduct ed in return 102 Deducticms 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 wlml ; fiicil wIhmi and where 85 ' ' Lodge sysl em, ' ' defined 89 100 1^'DEX. Corporation Coutiiiuod. l-uss — Article. Actual, siisUiiiu'd ]). 14 Sustained during year ]>. IS From removal of buildins^s, not deductible, Avhy 127 From pale ol' capital assets, how ascertained j 28 Securities Ijelow par, how treated 135 Making false return, penalty for j). 12 yiay designate day to pay tax ]>. 17 Maiiiifucturiny company, gross income, definition 104 Mercantile company, gross income, definition 105 Miscellaneous, gross income, definition KX; Mutual companies milking return, definition of net income 80 Mutual fire insurance company — Gross income, definition 98 Supplementary statement attached 1o return. : . 14 From sale of capital as.sets, how determined 109 To be shown on return y. 20 No specific exemption from tax IGO Notice — Given of assessments made ]>. 20 Of fiscal year, not retroactive 1()9 Not receiving blank for making return, should make application for, to whom, when '. 1 (J?> Not to include taxes paid in foreign countries in income; see seveniii deduction p . 20 Officers of, making false relin-n, penalty p. 12 Only one return and assessment for 1913 KJO On what ta.xed; wliat, and amount of ji. 12 Operating mines, oil or gas wells, on royalty ba.sis, not allowed, deduction for depletion of de])osits 145 Oi^erations of, etc., unlawful to divulge. Section 3107 p. 22 Organized — During the year, to make return of what 84 Elsewhere than in United States, subject to lax on Avhat 77 111 United States and certain exempt, interest on bonds ]niyal)le to, tax not to be witliheld 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 i:ndex. 101 COKPOKATIOX — CoUliuUed. AUide. Paymeuts on account of tax from c'o\euaut in bonds, not dodiuniljle in ascertaining net income 113 reiuilty for — Failure to Make return p. 20, Art. J u;i Pay tax by June 30 1^. 20 Refusal to make return p. 12 Prolit or lo.ss on sale, capital assets, how determined J 10 FubUc iitUity, governmenlal function, income accruing through, to State, exempt from tax 93 Railroad whose income paid by its lessee direct to stock holders must make retiu-n of income SO Rd'ujlous, exempt 2 •J Repairs may l)e deducted, what 131 Reseive for — Insurance of own jjroperty not deduclibh' 122 Losses, not deductible ] 2G Taxes, not deductible ] 50 Return — For 1913 must l)e on new form and not on excise form heretofore used . 1 72 To be made, when 1 00 When available j). 21 When Stale officers may have access to p. 21 When to be made. Section 3173 p. 22 Shrinkage in \-alue. capital assets, how ( reated 134 Special excise tax. how computed p. 20 Status for taxation purposes to l)e established, how 88 Subject lo tax — ( 'las.ses enumerated ]>. 12 Normal only, but on entire net income 185 Special exciso, under act August 5, 190(i - ]i. 2'5 Taxtible status in donl)t. must make return and attach thereto statement showing wluil !) I Tax- Computed on net income of J59 Deduct amount paid for p. 20 Paid by- Constitute deduction, when : I.j2 When not deductible 1 53 To be assessed by Commissioner of Internal Revenue, wlien. Section 3176 p. 21 ')'o give notice, day desigiuited for return j). 1 7 Make list or return, how, when. Section 31 73 pp. 22. 23 Unearned increment, not value for depreciation piu-poses 1Kj United States, filing certificates of ownership, exempt from withholding of loi-eign items (ifl Wlicn (o make return ]>. 17 ('ost: Of buildings on h-ascd ground, deductible as rent of cor])oration, when. . . 115 102 INDEX. D. Da hues: AnKle. CooporatiAc, not suUjocI lo lax. wliat !»2 Debtor: Aumial— Ijist return by, wlioii ami wlial 50 Return by, to show totals only of monthly liat return 51 Definition of 38 How Id treat substitute I'ertifieate of collecting agent and certificate of owner not subject to luiving tax withheld 51 Interest on bonds due, corporations organized hi Uniteil 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 G8 May appoint withholding and paying agent to act for it 38 Note given in payment of income, maker of note is (kS Not to withhold against nonresident alien or foreign organization doing business in United States, when 4(i Not to withhold when receiving certificate of collecting agent Uiat tax withheld l)y same, disposition of certificate 52 Return of witliholding by, where to be filed 38 In United States (or its withholding 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 computatinu of; wliat not to be included in J t7il Deduction: Account ])artnership expense, account of and form for claiming 47 Additions and betterments constituting increase in capital in\estmeut, not lis Allowance for in computing, what, when p. 5 Amount of, to ascertain net income p. 5 At source, applies to normal tax only ]>. 12 Bad debts of corporation, when 1 25 Basis, for depletion leased oil or gas territory 144 Claims for — Filed with collector, witliholding agent tobe furnished slatemcnt of . . 33c May be filed with withholding agent, when 31)0 Not allowed unlei-s made, wlien p. 10 Commission to salesmen paid in stock of corporation is, wlien 117 Compensati(-n, officers and empl(,yoes (f State, etc., exce])l, when; judges Federal courts now in office; present President for present lorm. . ]>. (i Compensation paid employees of corporation based on stoekholding, not, why .' 119 Corporation— < Account interest paid on debt, limited to what, wlicn 81 Materials and supplies on hand , what 123 Depreciation, amount, how treated - . 130 Donations for charitable purpose, 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 IXDEX. 103 Deduction — ConliuueJ. Cori)oratiou — Continued. Reserve - Article. For insurance its own property, not 122 To meet losses insurance companies, not " i47c .Status of tax for, to bank, assessed against stockholder, paid by bank. . 1.54 And exemptions in certain cases p. ] 1 Debts due taxpayer, ascertained worthless and charged off in year p. 5 Depletion of mines, regulation of rate of, limit of 142 Depreciation- Defined 1 29 For amortization, allowed when, how 135 How determined 129 Loss by shrinkage in property value, insurance com})auy. what and when : I47d 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), vvliat, and basis of 143 On patent, what, how determined 137 Uneai-ned increment, not value for purpose of 14G Timberland — Limit of, excess of, is income 140 Removal of timber, amount, how determined 139 DiN'idends on stock, what, when p. 5 Exemption under paragraph C, not allowed nonresident alien p. (i, Art. 8 Fali^e statement in regard to, penalty p. 10 From gross income — Mutual marine insurance companies, what 99 Of nonresident alien, what 8 Tt) ascertain net income, for normal tax, paragrai^h B, what From net income to a.scertain taxable, exemption, paragraph C G From premiums, elc, by Avhom made, when p. 9 P^ir ascertaining net income, what 3 For fire, storm, .shipwreck p. 5 Foreign corporation, to ascertain net inc< une 157 For expense of business, partnership may <'l:iini, when and how 14 For restoring property, etc., none p. 5 Increase value of property, none ]). 5 Insurance company — Claims actually paid under policy contract, are 147(; Losses, what 147a Interest on obligations, State or political subdivision of, and of L^nited States or pos.scssio:i !>. 6 Interest paid by — Bank, etc., on depo.sits, etc., is 149 Coqjoration — As rental, not allowable 148 Is, what, when 148 On ijidebtedncss secured by <'ollaleral subject to sale, when, why. 150 On mortgage on |)roperty in which corporation Iks <'iiuity, is and amount of .* H8 104 INDEX. DKnucTiON- — Continued. Article. Joiiit-.^tock CDinpiuiy p]). 5,G Life insurance company — Frum gross iiiconio, ai)])li('(l s^urrendorod values and coiLsideration for supplement ary Cdnlrafls 102 i'riiin gross income, what 1 00 Loss — Duriiio; year j) . 5 Wliich e(iq)oration may make, defined 124 l-'rom removal of building not deductible, why 127 From sale — Capital a.«pets, how ascertained 128 Cor])orat ion securities below pur, how tr(uUcd 1 35 May lie claimed account tax on note given in payment of income (iS «^nly, claim for, may be filed with collector, when 33c MutiKil marine insurance company, Avhat I47d Not comi>ensated by insurance or otherwise ]>. 5 Notice to be filed for p. 10 Obsolescence of patents, what , liow determined 1 38 Paid for }iew buildings, none ]■». 5 Parayrupli B — For normal tax only, 7 and 8 included for purpose of additional tax. . 6 May be claimed in case of fixed, determinable annual income* (iG Not claimed of withholding agent, in time, only remedy, applica- tion for refund 33c ^^^len claim for (Form 1008), to be filed with withholding agent <.r collector 33b Permanent improvements or betterments, none ]). 5 Property own<'d, business carried on in United States, ])erson residing elsewhere, what p. Repairs, when 131 Reserve for losses, not 126 Single person, amount allowed p . (i Tax withheld , when ]i . 5 Taxes paid by corjioration — Are, wh Loss by skvinkage in property "\alue, insurance company, v.hat. ;)nd when deductible 147b Of good will not allowable deduction 13() Timberland — From removal timber, amount, how determined 139 Deduction for, limit of, excess of is income 140 Unearned increment, not value for ba.sis of deduction for 140 Depreciatiox reserve: Use of, disposition excess of 132 Deputy collector: Ascertain persons liable to tax and enumerate objects, .section ;5172 p. 22 Legality of returns made by, section 3176 p. 24 To make report, false or fraudulent return, how, section 3176 p. 24 De.scext: Of property — Income from, part of gi-oss income 4 Value of, not income 4 Devi.se of property: Income, part of gro..!). Ar(.. 32 Deducted from net income, when 'i Pai't of gross income "^ Stock foreign corporations, subject to withholding whcir. 1'. II Stock subject to tax— individual owning, how treated 1'. H Doctors: Fees of, indefinite or in-egular not subject to withholding :^2 Donations: By corporation for charitable purpose, deductible \vh<-i! 121 Domestic building and loan association: Definition, what necessary to exem]>t from tax ^'i Due date: Return on Sunday or legal holiday, effect of 1 - '1 Duties: Not lax and not de(luctit.l<' but ar<' item tA cost b>) lOG IJN-DEX. r,. Educational corporations: Article. Exempt, when ]>. l:> Emit-OYF-ks: State (ir ])olitical subdivisioiia, cuinjit'i^-alin'i of (iftlceiH ami (•iiii>l()yo<^s [Kuil l)y. not part of gross iucomo 5 State officers or employees, compensation pai-l l)y I'niicd States a part of gross income 5 Exuow.mext: Money paid for; rciiniKHl. nol 1o ])<■ included iu gross ineom.e 5 EviDENCK : Furnished l)y ageul oi authority to sij,ni ownershi]) cerlificate to ]>v re- tained lij- verifying agent 4.1 Cnardian, etc., served with notice for faiUirc to make return, may fur- ni.«h, what 18 Oi nonliability to payment of tax, filed with withholding ag<>nt, may l)e forwarded to collec-tor in lieu of tax p. 27 Requisite for allowaiice of deduct iy corporation 1-58 Excise axd ixcojie: Tax, corporation, 1!M.". in one n-turn 191 Excise tax: Corporation, for wlu.t ])erioil, liow coin] mi ted Kit) Executor: Is fiduciary when 70 Make return of income of deceased within taxable year, when and what . 17 Exempt: From tax — Corporations, what 87 Cooperative dairies, what 92 Income from public utility n:5 Exemption: Allowed in computing taxable income of deceased per.son. when 17 Amount allowed married person p. G Beneficiary may claim from fiduciary 74 Boards of trade, when p. 1^ And deductions p. 11 Cemetery company, depends on what 90 Certificate claiming hy corporat ion organized in United States f ornr of and how executed 4-5 Certificate claiming, what must show and how executed 42 Cliambers of commerce, when p. 13 Charilahle associations, Avhen p. 13 Civic leagues or organizations, classes of, when p. 13 Claimed" by fiduciary, forms 1015 or 10 10 70 Claimed for — By whom, with whom and when to bo fded p. 10, An . 41 How to be filed p. 10 May be filed with withholding agent when 33c Under paragraph C — Allowed to person iiermitted (o claim (iO Failure to claim, effect of 05 Corporation claiming — • To establish rights to. how 88 Whose taxable status in doubt, must make return and attach state- ment showing what 91 District of Columbia, provisions p. 13 IlsDEX. 107 Exemption- — Continued. Article. Domestic building and loan associatiojis p. 13 Educational corporation, when p. i;j False claim or statement as to, penalty lor 33a Fraternal societies p. 13 Husband and mfe^ Living together, citizen or resident alien, add incomes for purpose of, amount of 10 Separated and livuig permanently apart, citizen or resident alien, each entitled to $3,000 10 Individual — Deduction of from net income to ascertaiii taxable 3 Amount of for 1913 7 Single, or married but not living, with husband or wife, may claim $3,000 each 9, 10 ]\Iay be claimed, note given in payment of income G8 Mutual cemetery companies p. 13 None for corporations 160 Paragraph (' — Not allowed nonresident alien 8 Not claimed of withholding agent in time, only remedy application for refund 33c To be filed with witltholdiug agent when 33 Philippine Islands p. 13 Porto Rico p. 13 Public utility p. 13 Religious associations and corporations p. 13 Scientific associations when p. 13 Status of person clauning determined as of time of claim 10 To be deducted from net income to ascertain taxable under paragraph C. . 6 Expen.se: Deductible, pension or amounts paid employees account injuries are.. 120 Geueral, foreign steamship companies, how treated IIG Of operation and maintenance corporate business, what include.-; 114 Partnership may claim deduction for. whon and how 11 Extension: Time for fding return, when, what, how 23 To make return, not exceed what, how and to whom made 173 False return. s: Additional tax imposed p. 9 Or fraudulent, penalty j>. 21 Fiduciary: Annual return by, what to show and how executed 73 Definition of 70 Filing notice with other withholding agent (Form 1015), 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 71 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 Regulations as to 70-75 108 IXDEX. Fii>i.iiAK\ (.'oiitiiuied. Article. Kuturii hy imist be nuidc \\ lirii 71 l{cnirii hy Id iTichule only matter within scope of auilur.ity 72 Ketiivn of not to include iiicimic on wliicli tax ]);U(1 71 lU^turn, when to be made 190 To make annual return (Form 1041) to collector of district when, IdsIiow what 71 Firm : To make return, how, when, section 3173 ])j). 22, 23 Collecting foreign items, license re. 11 Fiscal yi:ar: Corjxiration — Duty of collc^clor upon receiving notice of 167 IIow established, what to be done 1G5 Illustration of and what to do 1G6 Making r(;tnru on basis of but not so designating, return not afccptcd and must be ma.dc for calendiu' year 171 Notice of not retroactive 1 G9 No'tice to (H)llector not given in ])rescribeeai', part of gross income, what 4 Gas or oil territory leased: Corporation, ba.sis of deduction for de))letion of 144 Gas or oil wells and mines: Operated on royalty basis, deduction for depletion of dep(»sits not allowed operating corporation 145 INDEX. 109 Gut: Article. Of property, income from part of gross income; v;ilue not income 4 To employees of corporation not deductible 120 GOVERNMEXTAL FUNCTION: Income accruing to State frcun exercise of, exempt 93 Good will: Corporation, depreciation of. not allowable deduction 136 Gratuities: To employees of corporation not deduct ibJe 120 Gross income: Corporation — Definition of 9(5 Engaged in more than one class business, ascertained in ac(^ordanotli joijitly and separately liable for return and payment of tax JO 110 INDEX. IIusuAM) AND wu'K --Ooutiiuied. • Aitide. Xot living: apart, having iscparate estates, income of both may Ix- made on one return, luu return must show income of each separately stated wii h name and address of l)ot h 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 entiiled to $3,000 exemption from r.et income 10 Husband oh vvitk: Either having net income of $3,000, return required, a'ld must include incomes of Iioth JO Identity: Pecsons i)rcsenting c'ou])ou.'^ or iuteresi orders .sliould be requiied to establish 52 1n( oM (•:: Addilionnl tax on, referred to as additional tax ]->. 3 Amount from which withholding to be had 32 Banks, interest paid on deposits by, to be deducted j). 20 Bonds or other indebtedness p. 15 But not value of property, acquired by gift, bequest, devise or descent. . . p. 5 Compensation of officers and employees of State or jiolilical snbdix'ision of, paid by United States, part of gross income 5 Corporation — Allowance for depreciation ]>y wear and tear p. 14 Amount allowed for — Depreciation ]>. 18 Taxes p. 20 Bad debts collected are 1 25 How ascertained j). 14 From sale of capital assets, how dotormiinod 108 Interest paid deductible p. 20 Losses sustained diu'ing the year ]>. 18 May designate fiscal year p . 17 Ordinary expenses of operation deductible p. 18 Penalty for failure to — Make return of ji. 21 Pay tax on after June 30 ]>. 21 To give notice of fiscal year adopted p. 1 7 Deductions from gross, mutual marine insurance company, what 99 Derived from all sources p. 13, Art. 14 Fixed determinable annual — From what derived 63 Normal tax on bonds, etc.. when deducted p. 10 Withholding from, when til Foreign corporation doing business in the United States, letuni of, particulars ]ip. 15, 17. 19 Foreign, paid in United Stales, pro\dsions for collection of tax op 54-G2 For taxable purposes — is income for calendar year 4 For 1913, how computed ]>. 17 From all sources part of gro.=s income 4 From bonds, mortgages, deeds of trust, and .similai obligations of corpora- tions, etc., subject to withholding at source regardless of amount 37 From capital invested in the United States ]>. 18 From certain professions tiot subject to withholdiiig at source 32 INDEX. Ill Income — Continiied. Article. From public utility or governiiienlal I'lmction accrnin;?; to State, clc, exempt from tax 9:5 From what, obligations not subject to tax and certificate of oiviiersliip not required .S7 Gross, defined 3,4 Corporation — Engaged in more than one class of business, ascertained in accordance with ai^plicable definition for each cla.'^s 1 12 Definition of 9fi General definition 107 Insurance company, definition of gross income 97, 10 L Life insurance company, to include applied surrender values and consideration for supplementiiry contracts 10- Maniifactnring company, definition tOt Mercantile corporation, definition 10') Miscellaneous corporation, definition 106 Mutual fire insurance company, definition 108 What to be included in computing 5 Husband and wife, wluit - 10 Individual, not subject to withholding when 32 Insurance company, to be separately stated ]>. 18 Insurance reserve, how treated p. 17 Interest — Accruing during year p. 10 a deposits p 15 On (obligations of State, etc S Joint stock companies, how ascertained and stated pp. 14, 15. 18 Life insurance companies, what included, deductions pp. 14, 19, Art. 100 Mutual fire insurance companies pp. 14, 18, 19 ^^■hat taxable 98 Mutual marine insurance companies pp. 18, 19 Net- Defined 3 Of corporatiDU engaged in nn>re than one class of business, how ascertained 113 Deductions allowed for ascertaining p. 5 Shall include what pp. 3, 4, 13, 14, 15, 16, 17, 20 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 Vv'ithhold, except, when 68 Of corporations, verified how 1 83 Returns of, filed, are public records; inspection of, who may and for what purpose P • -^ Penalty for divulging information on or exhibiting returns, section 3167 P- 22 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 -i^ Taxable- Defined "^ Persons subject to 1 For normal tax, what, how ascertained P- 3, Art. 7 112 INDEX. Income — Continued. AiMiclc. Subject to additional tax j). 3 \\liat not liable to withholding at source ;J2 Withheld, what, when, by wimm p. 9 IxniviDJAi.: 'Wlio may claim exfiri]iiiuii jiaiagraph (' !), 10 Duty of, collection interest coupons originating in United States :!9 IIasl)anni])tion 9 Normal tax, what 1 Partnership profits included in return of and tax itaid. not rc])orted as income again 14 Residing in foreign couiitry, where to lile return 15 Rettn-n — For (^alendar vear 4 Required of guardian, etc., notice of faihn-e to make, served when . . 18 "\\Tien to be made 190 Share of earnings, ])artnershi]i. property of, subject to tax chargealde to individual 94 Share of partiier.slii]> profits to be included in i)ersonal return 13 Single, allowable exemption for .• 9 Status for claiming exemption, determined as of time of claim 10 Information: From retTn'n.« to officers of State, when, what, how 1 79 I \ SA K E : \\"ho make claim I'nr deducl inns Inr 33b In.spf,ctiox: Of returns, how 1 78 Insurance company: "Deductible net addition to reserve"; definition; what Iiasis of e(jm- putation of; what not to be included in 147d Deduction, claims actually paid under policy contract 147c Depreciation loss by shrinkage in property Aalue, what and when deductible 147b Gross income, definition 97, 101 Income to be stated separately ]). 18 Losses — Actually sustained pp. 14, 19 Deduction for what 147a Making false return, penalty p. 12 Mutual marine, deduct what -• . 147d Neglecting to make return, penalty ]). 12 Net addition to reserve ]>• 18 Net income, source, time of accrual, return of pp. 1-'. 1 1, 20 Notice of assessments to V- 20 Penalty for failure to pay tax p. 21 Refusing to make re.turn, penalty p. 12 INDEX. 113 Insuraxck Companv — Coutiuued. Article. Ixescrve — Definition 147d Fund, how treated p. 17 To meet losses, how treated 147c Returns of, when availa])lc p. 21 Salvage, how treated in return ol" 147c Special excise tax, how computed, time, what p. 26 To make return of others, when p. 9 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 I'^rom what obligation not subject to tax and certificates of ownership not required 37 How treated 63 On deposits — Part of gross income 4 Subject to withholding; must be included iu personal return whether paid or not 67 ( )n obligations of State or political subdivision of, United States or pos- sessions, not part of gross income 5 Paid as rental by corporation, 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 v/hich 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 irregidar not subject to witliliolding 32 Inventory: Corporation, purpose and use of, kinds of I'jl^ Joint stock company: Assessment against, payable PP- ' > 20 Deductions allowable to ^ Income — How ascertained PP- 1"^' ^'^ To be separately stated '• - P- 1^ l^osses actually sustained P- ^ '^ Neglecting to make return, penalty P- ' 24785—14 8 o 114 INDEX. « Joint stock company — Continued. Article. Net income from all sources ]>. J4 Net income taxai)li' for preceding calendar year p. 12 Notice to be given of assessments !> . 20 Penalty for failure — To make return ]>. 20 To pay tax p. 21 Return — False, ])enalt y for p. 12 For others made by p. 9 Net income to be shown on p. 20 Refusing to make, penalty ]>. 12 When available ]>. 21 \\ Ju'u tu make p. 17 Special excise tax and how computed 1^. 26 Judges: United States courts, salaries exempt, what 5 Jurisdiction : Of courts p. 25 L. Labor organizations: Exempt p. 12 Last due date: Defined 175 Laws: Relating to assessment, remission, collection, refunding p. 25 Lawyers: Fees, indefinite or irregular, not subject to v.'ithholding 32 Lessees or mortgagors: Make return for others, when 1>. 9 Liability: To tax of a taxable person not to be released 27 License: Bond may be required on form furnished 5P Failure to obtain, penalty for 55 For branch, to be made through principal ofhce 57 Form of application for, to be made to collector of district 55 Form of; to be is.sued by collector, good until revoked 55 Required for collection of interest or other foreign items, when, b\- whom, Avhere ol^tained p. II, Art. 54 Licensee: First, recei\'ing foreign item for collection to v.'ithhold and be respon- sible 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 50 Life insurance: Proceeds of policies, when to be excluded from gross income i>. 5, Art . 5 Life insurance company: Applied suiTcnder values and consideration for supplementary con- tracts both to be added and deducted in retinn 102 Deductions from gross income, what p. 19, Art . 100 Gross income, definition pp. 14, 19, Art. 101 Supplementary statement attached to return of, showing what 103 IIS^DEX. 115 Limitation, statute of: Article. For income tax purposes, three years 177 Lodge system: Coi-poration 0]>prating under, defined 80 Loss : Corporation — • Deductible, defined ' 124 From sale capital assets, how ascertained 128 From sale securities below par, how treated 1,35 Insurance company, deduction for, what 147a Removal of building not deductible, why 127 Reserve for, not deductil^le J 2*5 M. Maker: Of note given in payment oi interest held responsible for normal tax Cti Manufacturi\'g compaxy: Gross income, definition 104 ]VL\NUFACTURERS I Returns of, accessible how, })enalty, sec. olu7 p. 22 Marixe insurance company: Deductions by ]>. ! 8 IVLiTE rials and supplies ox hand: Deduction by corporation on account of, what 123 Mercantile corporation: Gross income, definition 105 Mine : Gross value at — Defined (j Corporation, definition 142 Depreciation p. 14 Operated on royaltj^ basis, corporation, deduction fur depletion of de- posits not allowed operating corporation I4.5 Minor: Who make claim for deductions for S3b Miscellaneous corporation : Gross income of, 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 vv'hat to show 53 Of licensee for collection of foreign item, form of, what to show, v/ith whom filed, when 59 Summary of, when to be filed and what to show 50 Totals only fo bo carried into annual return 51 Mortoaoes: Interest on, when subject to witliiiokUng p. 10 Not payable in United States, when subject to withholding j*. 1 1. Paid by corporation which has equity, how treated 148 Of corporation, income from, subject to witljhrtlding, regardless of ainonnf . 37 Mutual companies : To make return of income; definition of nri income 80 t 116 I^s^DEX. MlTlAI. FIRE INSL"UANLK CtJ-MPAXY: Article. Gross income of, deliiiition 98 Premium deposits returnod, what p. ig Rotiirn of 1 .p. I 1, ] (), 18, 19 Sup])lementiuy statement atlathcd to return of, showing wlial 103 Taxable income, what 98 Mutual marine ixsurakce company: Dednclions. what p. ID. Arts. 99, 147d Gros.s income pp. 14, 18 Supplementary statement attached to return of. showino; what 103 N. Names: Arrangement of, in list liy collect or 188 Natural deposits: Deduction for depreciation of, basis and limit of Mi Net income: Defined 3 Corporation — Engaged in more than one class of bu.siness, 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: Given in payment of income; maker is debtor or soun'e and must \\ illihold on entire amount of note if in excess $3,000, except allowance exemp- tion 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 1 98 riaiming deduction account partnership expen.se, by whom filed. Avhat and how 47 Collector to give Avithholding agent, when tax withheld is adjusted in assessment 33c Form 1015 filed by fiduciary with other withholding agent, nothing with- held 70 Of assessment; failure to pay tax; make return ; form of; time 197 Of claim for exemption by foreign partnership, when, wh^it, 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 t ime 196 To taxpayer, of amount for which li:il:)l(» ns on or before June 1 25 O. Oatii or affirmation: Required in verifying retiu-ns 22 Obligations : Interest on, of State or political subdivisioii; United States or posses- sions not part of grcss income 5 INDEX. 117 ObLIOATIOKS of CORPOKATIONS, etc.: Article. Similar to bonds, mortgages, and deeds of triLst. income from, subject to withholding, regardless of amount 37 Obsolescexoe: Of patents, deduction for, Avhal, how deiermined ]38 Officers: Of State or jwlitical 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. 27 Of the United States making returns for others 9 Oil or oas territory leased : Basis of deduction for depletion of 144 Oil or gas wells axd mines: Operated on royalty basis, deduction fur depletion vi deposits not alloAved operating coii^oration 145 Omitted tax: May be assessed and with ponali y , when 184 Org A \ iz ATio X s : CiWc, exemptions p. 13 P. Paiu-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 for. 49 Owning bonds, etc., of corporations, etc., organized or doing business in the United States not subject to withh(dding on interest of, provided exemption claimed (Form 1016) 48 Individual share of profits of, to be inchided in personal return 11 Limited, is corporation and subject to corporation tax SG Liable only in individual capacity ]). 8 May claim deduction for expenses of business, Avhen and how 14 Members of, liable in individual capacity for tax on their respective shares of earnings of, whether distributed or not p. 4, Art. 94 Profits of — Once returned and tax paid, not again reported as income 14 To be included l)y individuals entitled to, in their ])ersonal return. . 13 Return of, when to be made, section 3173 p. 22 Shall forward correct statement of profits and names p. 8 Share of profit to partners p. 8 To file with withholding agent notice claimijig deduction for expense of, what and how 47 To make list or retuni, how and when, section 3173 , !>■ -2, Art. 23 When n-qiiirod (o make ref uni nnisf make complete and correct 12 Patents: Deduction for — Depreciation, what, and how determined 137 Obsolesceiice, what, how dolormined 138 118 INDEX. Taymext: Article. To officer audK-rizcd U> rect'ive j). 9 Penalty: And interctst for nonpaymcnl when due and for 10 days after notice, when . p. 9 l)<'lin(iiient lax — • Amount of, and hoAV determined, n.l assessed strainst estates, in- sane, deceased, or insolvent persc^ns 25 Penalty: For ilivulging— Information on return, what 1 81 Unlawfully, information on return, flue or imprisonment, or lK>th, with costs ^CA Failure to make retm'U in prescribed time or for fak^e or fraudulent, fine or imprisonment, or both , p. 2 1 , A ri . 1 (i4 Failure to pay tax, 5 per cent to tax plus 1 per cent per mojith 1G4 Fahe claim or statement to secure exemption p. 10, Art . r>3a False or fraudulent return \\\\ h intent to evade or defeat Uix, what 2Cy False or fraudulent return, 100 per cent to tax p. 21, Art. \CA False statement in regard to deduction P- 10, Art. 33b Making false return p. 12 Neglect or refustil to make retm'u p. 12. Art. 1C4 Person or officer of corporation required to make return, making false or fraudulent, with intent to defeat or evade a.ssessment KH Refusal or neglect to make return, liable person, corporation, etc. p. 12. An. 2(5 Refusal to make or for false return, to lie assessed and collected, what.. 21 Return made and properly mailed in time but not received in time. none '71 Pensions: Or payments on account of injuries to employees of corporations, de- ductible expense 1 20 Peksox: Whose income is not subject to withholding at K)urce, make personal return 32 Persons, firms, etc.: r'ollecting foreign items, license required p. 1 1 Whatever capacity acting, withholding agent, when, what p|). 7, it "Withholding none prior to November 1 , 1913 ]>. 8 Philippine Islands: Exemptions p. 13. Art s. 25, 20 Plant: Corporation, de<1uction for depreciation (iu addition to the deduction for depletion of mine), what and basis of 113 Political sibdivtsion of State: Interest on obligations of, not part of gross income 5 Officers and employees of, compensation not jnul of gros-s income 5 Porto Rico: Exemptions and provisions p. 13, Arts. 25, 26 Possessions: Of United States, interest on obligations of. not part of gross income. ... 5 Premiums: Deductions from, )jy whom, when p. 9 President of the United States: Salary of, exempt, what 5 IXDEX. 1 19 rROcEDCRE: Article. In case of refusal or neglect, liable individual to make retism (>r for false return made Note to Art . 21 Professional: Persons whose income indefiniie or irregular, not subject t) withholding. 32 Profit or loss: Cbrporation, on sale of capital assets, how determined 110 Profits: For taxable purposes of those arising or accruing within calendar year. . 4 From any source j^art of gross income 4 Partnersliip once return and tax paid, not rejxirted as income 14 Partnersliijj, individual entitled to include in Ida personal rc-turu 13 Share of, in partnership to be included in return of individual i I Property: Received by gift, bequest, deidse, descent, income from but not value, l^art of gross income 1 Public records: Returns are, inspection of or copies, how 1 78 Public utility: Income from accruing to State, etc., exempt from tax ();'> 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 A'endor (iS R. Rate : Deduction for depletion of mhies, 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 shov.'- 62 Refuxd: 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, lobe filed at least five days before due date of interest 44 Regulations: Designed to assist taxpayer and officer in complying with the law ]>. 27 Subjects covered and arrangement of P- -7 Removal op buildings: Not deductible loss, corporal ion , why J 27 Rent: Corporation, cost of buildings on leased ground deduclil)k', when J 15 How treated 03 Interest paid by corporation as, how treated 148 Part of gross income 4 Repairs: Deduction, when 131 120 l^'DEX. Reserve: Article. Assessment insurance company, delinition 147d J'lir depreciation — Diversion of, correction 133 Use of, disposition of excess of 132 For insurance of curjiorate lu'ojierty not deductible 122 l-"iir lii.sses Udl d( (luclil)li' 120 J-'or taxes of corporation not deductible 15G Insurance companij, deductible net addition to. delinition; what basis computation: what not to be included in ]47d To meet loss, insurance company, how treated 1 17c Re.siuknt alien: C'ertilicates of t.wner.ship of Ijuuds, when and liow io be u.->ed and lo specify what 42 Income of, from coupon or registered interest, subject to withholding except to extent exemption claimed 44 Hex u HNS : 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(Forml013), to show what, and to be filed on or before March 1. 50 Annxial, of coupon or registered interest orders not accompanied by certificates of ownershi]?; form of, and what to show; lo be filed v/hen ; to show totals only on monthly return 53 Annual, of debtors or withholding agents to show totals only on monthly list 51 Annual, fiduciary to collector of district when; show what 71 Annmil, of Avithholding 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, Avhy, delivered to whom 180 ConserA-ators to make for others 9 (~'orporation — Every, iio( specifically exempt, to make SO 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. 163 One only for 1913 160 Organized during year, to make 84 To make complete or nor accepted 163 When income paid l)y lessee direct to stockholders, must neverthe- less make 80 Copy of, unlawful to exhibit, section 3167 1>. 22 Divulging — Information from, penally 181 Unlawfully, information on, penalty 164 Due date on Simday or legal holiday, effect of 176 Duplicate, when, of whom required, disposition of 193 l^DEX. 121 Returns — Continuea. Duty of collector — Article. On failure to find person at home, section 31 73 1>. 23 In forwarding and investigation of 192 Employees to make for others p. 9 Evidence by which to verify, what 1 S3 Executors to make for others p. 9 Extension of lime — For filing, when, what, how 23 To make, not to exceed what, how, to whom made '. . . . 173 Faihu'e of corporation to receive blank for, not excused from making return or penalties for failure ! (;3 Failure — Of fiduciary to file, notice of, served 71 To make by guardian, agent, or other person acting in trust capacity, notice to, served on 18 To make in prescribed time, of a false or fraudulent, penalty 1(54 To make — Notice of, fonn and tim.e to serve 197 Legal provisions as to p. 23 False or fraudulent — Penalty p. 12, Art. I(i4 Duty of collector in matter of 1 92 With intent to defeat or evade tax, penalty 2G Fiduciary — Having income not distributed ; what to be shown ; tax to be A\-itliheld and paid when 24 Must be made when 71 Not to include income on which tax paid 71 To include only matter Vidthin scoj^e of authority 72 What to show, and how executed 73 For 1913, must be on new form and not on excise fonn heretofore used.. 172 Foreign corporation having more than one brancli office in United States to designate principal office and person to niiake reiurn 83 Form of for corporation prescribed J 63 For persons incapacitated, by whom made 1>. 10 For persons absent from United States, by whom made ]>. 1 Fraudulent — Duty of collector I'- '■^•'> Extra tax because of P- 9 Time limitation for paying after notice V- ^ Husband and wife, net income both exceeds $4,000, of comljincd in- come, required "* Husband and vvife not li\dng apart, separate income from separate estate may be made on one; separately stated and with names and addresses of both I*' Husband should make for liimself and wiie- ' " Husband or wife, either having net income $3,000 or over, required, and mu.st include income of both "* 1 ndivddual— To be made when ""^ For calendar year ' Made by collector when -'' 122 IXDEX. Retukn.s - Colli iiuicd. Individual — Continued. Article. Not required to make, when made by otli.er [or liini, wlien 19 To include share of partnership profits in 13 Information ov copies from, to oflleei-s of Stale, wlien, wliat, how; orig- inal not removed execpt 179 Last due date defined 175 Leased corporations make their own 82 • Legality of, made by collector of deputy, sec. 317G p. 24 Lessee corporation assuming debts of lessor to iu( ludc in lessee return all receij^ts of lessor SI Lessee corpoiation 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 coiiiiideraliou fur supplemcnlary con- tracts both added and deducted 102 Supplementary statement attached to return of, showing what 103 Made and properly mailed in time, no ])enal(y 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 nuisl be made for calendar year 171 Made to collector p. 9 Montiily, 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 ccmpon or interest ordere not accompanied by certificates of ownership, form of, and what to show 53 Must be made, when, section 3173 p. 22 Mutual companies to make; definition not income 80 Mutual fire insurance companies, supplementary statement attached to. slif)V.'ing what 1 03 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. 12 Nonresident alien, agent or rei^resentative to make fi^r, when, what to be included in 8 Not required, income not exceeding §3,000 p. 8 Not filed in time, notice sent to delinquent 196 Officers and employees of the United Sta4es. having control salaries, rents, etc. , to make when p. 9 Of income — \Mien required, where filed 15 persons deceased within taxable year, made by executor or admini.><- trator 17 On basis ot calendar year or fiscal year, time of assessment and payment of tax 177 One deduction only of exemption p. 8 One to cover both sjiecial excise and income tax for 1913 for corporat ion . . p. 26 Open to inspection, when p. 21 INDEX. 123 Reiurxs — Continued. Article. Partnership profits included by individual and tax paid, nut again re- ported as income 14 Partnership, requisite of 12 Penalty — • Against corpomtion for failure to make 163 For failure to make at time specified p. 2 1 For refusal to make j) . 12 Personal, Form 1040; fiduciary may be appointed agent or attorney to make for benefician,- 72 Personal not required, when 8 Person or officer of corporation required to m.ake, making false or fraudu- lent with intent to defeat or evade; penalty 104 Person residing in foreign country, provision for 7 Public records, inspection or copies, how ?■ 21, Art. 178 Receivers to make for others 9 Refusal or neglect of liable individual, duty of collector p. 23, Art. 21 Refusal to make, extra tax p. 9 Requisite of bookkeeping for verifying 182 State officer may have access to p . 21 To be filed, when. p. 7 To be made on Form 1040 for individuals 10 To be made to collector pp. 7, 9 To include — Personal income not subject to withholding 32 Share of i:)rofits in partnership whether divided or not 11 To be verified, how, before whom p. 7, 22 Trustees to make for others p. 9 Understatement of incom.e, cause to be shown why amount not in- creased ^. p. 8 Undervaluation or understatement p. 23 Unlawful to exhibit or divulge information from, section 3107 p. 22 Wiie having income of $3,000 from separate estate managed by herself may make her own 10 "VMiat must be shown on 16 When to be made; where filed, section 3173 ])p. 21, 22 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, jnoxiding duties and penalties, sections 3167, 3172, 31 73 pp. 22, 23, 24 Royalties: IIow treated 03 Royalty basls: Klines, oil or gas wells, operated on, deductioji for depletion of deposits not allcnvpd operating corporation 145 S. Salaries: How treated 1 , 03 Sale of capital a.'.set.s: Corporation—- Income from, how doteiniincd 108, 109 Loss from, h(»v,- ascertained 128 Profit or loss on 110 124 INDEX. Sai.ksmkn: Aiticlo. Commission in, paid in slu<-k, ck'dutiibl'-- (.'xponsr- when 117 Salvage: How treated in return of insiu'ance company 1 470 Scientific associatiox: Exemptions p. i;{ Securities: Income from; sale of, })elow par; loss 1, 135 Shhixkace: In hook Aalue capital assets, how treated 134 In property value insurance company, depreciation loss by, whal and when dedn<(i1)l(! 1 171) Size: I'^oreign items too small for notation on, statement may he alhuh< <1 to. . 58 Society: Operating under the ''lodge system," defined; exemptions ]>. 1:5, art. 89 Source: Defined 31 Example of wltere and where not witldiolding at 32 Fiduciary is, when 70 Note given in payment vi income, maker of note is 68 Persons, firms, etc., acting as, designated ''debtors" or ■wilhliolding agents " 31 Tax withheld at , to he paid to collector 34 "Withholding at, applies only to normal tax imposed on individuals 29 Who required to act as; liahle for tax withheld 30 Si'KCiAL tax: See sections 3173, 3176 ]ip. 22-26 State: Information from return, 'when, how : 179 Officers and employees, 'paid hy United States; compensation part of gross income 5 Political subdivision of, compensation of ofticers 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 l.p.13,21 Status : For claiming exemption )a' individuals 10 Statute of limitation: For income-tax purposes, three years 177 Stock: Paid-up capital , definitii ai 95 Substitute certificates 40 Summary op monthly list return 50 Summons, section 3173 p. 24 Sunday or legal holiday 176 Supple.mentary statement attached to return 103 Supplies o.v hand 123 T. Tax: Additional, on individuals only, rates and cla.«ses 2 Amounts added as penalty, section 3170 ]). 24 Assessment and collection 25 From withholding agent 36 INDEX. 125 Tax — Coutiiiued. Assessment — Artiiic. Against income withheld at source 38 Of, against withholding agent deferred 189 Claim for abatement of 33c Cooperative dairies exemjit 92 Corporations — 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 I)e])uty collectors, duties, section 3172 ' p. 22 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. 27 Evidence of payment of, by coii'>oration for deduction purposes 158 Excise on corporation Arts. 100, 191 Extra p. 9 Failure lo pay 164, 177, 197 Fixed determinable annual income, subject lo withholding 65, 66 Fraternal societies, exempt p. 13 Individual — Net income over $^>,000 annually, liable to P- 12, Art. 9 Income from jjublic utility taxable when 93 Income of corporations organized elsewhere than in the United States, liability 79 Normal — Computation of Art. 1, 7 Deductions in cdnnectidn with pp. 10-12, Art. 41 Agricultural, horticultural, and labor organizations, certain mutual savings banks, exempt p . 12 Not to be withheld against partnership profits 47 Nn filing certifi- cate (Form 1006) 34 Oji excess of income over exemption 10 Paid by coqioratidu, when not deductible 153 Partnership limited is corjioration and subject to c(irp(irati<;n lax 86 Penally on delinquent 25 On income — From bunds, etc. , corporal ions, etc 37 Paid by note 68 On interest on bonds owned by corporations organized in United States. 45 On net income of foreign corporation; definition; deduction 157 On net income of cf)rporation— Compulation of 159 Distributable to owners 79 Receipts to be given by collector p. 25 Returns of, to be made, section 3173 P- 22 Special excise X). 20 Taxable person not to be relieved from liability 27 To be paid 177 126 IMDEX. Tax — Coutiuucd. Article. To be wilhh 'Ul -11, G4 Withhold— At source, to be paid lo 30 By fir^st licensee, fad {>i withhoUUni^ noted 58 Collector to adjust in ^issessment against willihokling jigent 33c l''roin what (j4, 75 To be paid \n ((.Ueetor 33c, 34 Taxahle IX com k: Deliuition; liability 3, 7 Tax DTK 187 Taxks: Paid Ijy corporation couslilutc deduciiou 152 Reserve for, by corporation not deductible 156 Taxpayeu: Piep;ulalions designed to assist p. 27 Tax .statements 19;t Tax year 1913 7 Trustee: As fiduciary 70 Duties of 1>. 'J Teacher: Public school 5 Timbeuland: Deduction for depreciation — Account removal of timber 139 Limit of, excess of, is income 1 40 Time: Extension of, for making and filing return 2;!, 173 F. Unearned increment: Not value for depreciation purposes 146 "UxiTEt) States"' oh "State": Construction p. 21 Interest upon obligations of 5 V. Valie: 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 fur depreciation 140 W. Wages 4, 63 Wife: Having income of $3,000 from separate estate managed by herself may make returu of her own iiu-ome 10 Wife and Hu.snAXD: Combined net income of exceeds §4,000, retuin reciuired, both jointly and separately liable for return and tax 10 Wife or nr.sBAXD: Either having inrome $3,000 or over, return rerpiired and must include incomes of bot h 10 iiS:DEx. . 127 Withholdixg: Article. A t sourte 30 Example of where and vfhore liot 32 On and after November 1, 191:5 29 By first liscensee; notation by; rei>ponsibility of 58 From what G4 Withholding ACiEXT: Annual return by — By, when, to show what 50, 51 Of (Form 1042), when to be filed, to Ite accompanied by what 35, C9 Not to be filed until 33c Assessment of tax against, deferred until 189 Claim for exemption and dediictions filed with (par. B and C). p. 10, Arts. :"!3ac Definition of, as source 31 Disposition of returns of 1 93 Duty in matter of certificates of ownership ]). 9, Art. 43 Duty of, in matter of claims for deduction (par. B) 33c Duty of, in case of foreign partnership 48 E\'idence of nonliability to tax filed with, disposition of ]>. 27 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 ^vith, claim for deduction, account partnership expense 47 Not to -withhold against nonresident alien or foreign organization doing business in United States, when 40 Return of, when to be made 190 Eelieved from necessity of withholding, when p. 27 To file monthly list return, form of, and what to contain 50 To forrt^ard to collector tax withheld, when 33c To furnish statement of claim for deductions filed -with collector 33c To pay to collector tax withheld 64 To withhold from, what, amount of 32, 65 When claim for deductions, paragraph B, to be filed with, duty of 331), CG When so authorized, may file return of withholding in district of his location 38 Who to l>e, in cases cited G4 WlTHHfJLDIXa AXD PAYIXG AG EXT: Of debtor in United States, charged wiili duty of withhohling, v.'hcn 39 WiTx esses: Jurisdiction for coiujielling attendance p. 25 Y. Year: •ar 4 For taxable purjw.ses for individual, is calendar yea! (See fiscal year for corporation.) o UC SOUTHERN REGIONAL LIBRARY FACILITY A A 000 348 793 i