Cornell University Library The original of tinis book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924032551222 Cornell University Library HJ4652.A7 N27 1921 Revenue act of 1921 complete text, refe olin 3 1924 032 551 222 Revenue Act of 1921 Complete Text, Reference Notes, Tables and Index National Bank of Commerce in Newark JANUARY, 1922 Copyright IQ22 National Bank of Commerce in New York Foreword IN this book the National Bank of Commerce in New York presents the complete text of the new act under which Federal internal revenue taxes are to be levied in lieu of those imposed under the Revenue Act of 1918. Beginning with 1922 the excess-profits tax is re- pealed and surtax rates are slightly reduced. While rates imposed on income of the calendar year 1921 have not been changed, the methods prescribed for the determination of taxable income have been altered in many particulars. Among noteworthy changes are the provision of an optional tax at a limited rate on net gain from the sale of capital assets held more than two years and the authoriza- tion of the deduction of net losses from income of subsequent years. In these and other respects the detailed provisions of the revenue law have been recast with the view of securing a greater degree of fairness, though greater clearness has not always resulted. Side notes and a complete index have been pro- vided to facilitate reference to the act, and an appendix of tables illustrates the application of the rates to incomes of varying size and composition, and their effect on the net income from various classes of securities in the hands of individual investors. James S. Alexander President CONTENTS Page I. General Definitions 5 II. Income Tax 7 III. War-Profits and Excess-Profits Tax for 1921. . . 95 IV. Estate Tax 106 V. Tax on Telegraph and Telephone Messages 121 VI. Tax on Beverages and Constituent Parts Thereof 123 VII. Tax on Cigars, Tobacco, and Manufactures Thereof 127 VIII. Tax on Admissions and Dues 134 IX. Excise Taxes 138 X. Special Taxes 145 XI. Stamp Taxes 159 XII. Tax on Employment of Child Labor 170 XIII. General Administrative Provisions 174 XIV. General Provisions 198 APPENDIX 201 Individual Tax Tables 202 Corporation Tax Tables 207 Comparison of Taxes on Income from Corpora- tions and Partnerships 210 INDEX 213 REVENUE ACT OF 1921 [Public— No. 98— 67th Congress] [H. R. 8245] (In effect November 23, 1921, except ai otherwise provided) An Act to reduce and equalize taxation, to provide revenue, and for othier purposes. Be it enacted hy the Senate and House of Representatives of the United States of America in Congress assembled, TITLE I.— GENERAL DEFINITIONS.* Section 1. That this Act may be cited as the "Revenue Act of 1921." Sec. 2. That when used in this Act — (1) The term "person" includes partnerships Person and corporations, as well as individuals ; (2) The term "corporation" includes associa- Corporation tions, joint-stock companies, and insurance com- panies ; (3) The term "domestic" when applied to a Domestic corporation or partnership means created or organ- ized in the United States; (4) The term "foreign" when applied to a cor- Foreign poration or partnership means created or organized outside the United States; (5) The term "United States" when used in a United states geographical sense includes only the States, the Territories of Alaska and Hawaii, and the District of Columbia; (6) The term "Secretary" means the Secretary Secretary of the Treasury; * Title I of the Revenue Act of 1918 is not specifically repealed by this Act. 6 Revenue Act Commissioner Collector Taxpayer Military or naval forces Government contract Informal contracts included (7) The term "Commissioner" means the Com- missioner of Internal Revenue ; (8) The term "collector" means collector of in- ternal revenue; (9) The term "taxpayer" includes any person, trust or estate subject to a tax imposed by this Act; (10) The term "military or naval forces of the United States" includes the Marine Corps, the Coast Guard, the Army Nurse Corps, Female, and the Navy Nurse Corps, Female, but this shall not be deemed to exclude other units otherwise included within such terms; and (11) The term "Government contract" means (a) a contract made with the United States, or with any department, bureau, officer, commission, board, or agency, under the United States and acting in its behalf, or with any agency controlled by any of the above if the contract is for the |?enefit of the United States, or (b) a subcontract made with a contractor performing such a contract if the prod- ucts or services to be furnished under the subcon- tract are for the benefit of the United States. The term "government contract or contracts made be- tween April 6, 1917, and November 11, 1918, both dates inclusive" when applied to a contract of the kind referred to in clause (a) of this subdivision, includes all such contracts which, although entered into during such period, were originally not en- forceable, but which have been or may become en- forceable by reason of subsequent validation in pur- suance of law. TITLE II.— INCOME TAX. Part I. — General Provisions. Definitions. Sec. 200. That when used in this title — (1) The term "taxable year" means the calen- Taxable year dar year, or the fiscal year ending during such cal- endar year, upon the basis of which the net income is computed under section 212 or section 232. The term "fiscal year" means an accounting period of F'^^'ye" twelve months ending on the last day of any month other than December. The first taxable year, to be called the taxable year 1921, shall be the calendar year 1921 or any fiscal year ending during the cal- endar year 1921; (2) The term "fiduciary" means a guardian, Fiduciary trustee, executor, administrator, receiver, conserv- ator, or any person acting in any fiduciary capacity for any person, trust or estate; (3) The term "withholding agent" means any withholding person required to deduct and withhold any tax ^sent under the provisions of section 221 or section 237; (4) The term "paid," for the purposes of the ^"^ deductions and credits under this title, means "paid or accrued" or "paid or incurred," and the terms Paid or accrued "paid or incurred" and "paid or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed under section 212; and (5) The term "personal service corporation" Personal service means a corporation whose income is to be ascribed <=<>''P"»''o'> primarily to the activities of the principal owners or stockholders who are themselves regularly en- Revenue Act Dividend Deemed to be from most recent earnings Exempt distributions Limitation on deduction (or losses gaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material income-producing factor ; but does not include any foreign corpora- tion, nor any corporation 50 per centum or more of whose gross income consists either ( 1 ) of gains, profits, or income derived from trading as a prin- cipal, or (2) of gains, profits, commissions, or other income, derived from a Government contract or contracts made between April 6, 1917, and Novem- ber 11, 1918, both dates inclusive. Dividends, Sec. 201. (a) That the term "dividend" when used in this title (except in paragraph (10) of sub- division (a) of section 234 and paragraph (4) of subdivision (a) of section 245) means any distribu- tion made by a corporation to its shareholders or members, whether in cash or in other property, out of its earnings or profits accumulated since Febru- ary 28, 1913, except a distribution made by a per- sonal service corporation out of earnings or profits accumulated since December 31, 1917, and prior to January 1, 1922. (b) For the purposes of this Act every distribu- tion is made out of earnings or profits, and from the most recently accumulated earnings or profits, to the extent of such earnings or profits accumu- lated since February 28, 1913; but any earnings or profits accumulated or increase in value of prop- erty accrued prior to March 1, 1913, may be dis- tributed exempt from the tax, after the earnings and profits accumulated since February 28, 1913, have been distributed. If any such tax-free dis- tribution has been made the distributee shall not be allowed as a deduction from gross income any loss sustained from the sale or other disposition of his stock or shares unless, and then only to the extent that, the basis provided in Section 202 exceeds the Income Tax sum of (1) the amount realized from the sale or other disposition of such stock or shares, and (2) the aggregate amount of such distributions re- ceived by him thereon. (c) Any distribution (whether in cash or other Distributions in property) made by a corporation to its share- '"qu'dat'on, etc. holders or members otherwise than out of ( 1 ) earn- ings or profits accumulated since February 28, 1913, or (2) earnings or profits accumulated or increase in value of property accrued prior to March 1, 1913, shall be applied against and reduce the basis provided in section 202 for the purpose of ascertaining the gain derived or the loss sus- tained from the sale or other disposition of the stock or shares by the distributee. (d) A stock dividend shall not be subject to tax stock dividends but if after the distribution of any such dividend the corporation proceeds to cancel or redeem its stock at such time and in such manner as to make the distribution and cancellation or redemption essentially equivalent to the distribution of a tax- able dividend, the amount received in redemption or cancellation of the stock shall be treated as a taxable dividend to the extent of the earnings or profits accumulated by such corporation after Feb- ruary 28, 1913. (e) For the purposes of this Act, a taxable dis- when income to tribution made by a corporation to its shareholders ""■"*"' or members shall be included in the gross income of the distributees as of the date when the cash or other property is unqualifiedly made subject to their demands. (f ) Any distribution made during the first sixty Earnings from which days of any taxable year shall be deemed to have ^'h-itutionismade been made from earnings or profits accumulated during preceding taxable years; but any distribu- tion made during the remainder of the taxable year shall be deemed to have been made from earn- ings or profits accumulated between the close of 10 Revenue Act Property acquired after February 28, 1913: Inventoried Acquired by gift after December 31, 1920 On or before December 31, 1920 the preceding taxable year and the date of distribu- tion, to the extent of such earnings or profits, and if the books of the corporation do not show the amount of such earnings or profits, the earnings or profits for the accounting period within which the distribution was made shall be deemed to have been accumulated ratably during such period. This sub- division shall not be in effect after December 31, 1921. Basis for Determining Gain or Loss. Sec. 202. (a) That the basis for ascertaining the gain derived or loss sustained from a sale or other disposition of property, real, personal, or mixed, acquired after February 28, 1913, shall be the cost of such property; except that — (1) In the case of such property, which should be included in the inventory, the basis shall be the last inventory value thereof ; (2) In the case of such property, acquired by gift after December 31, 1920, the basis shall be the same as that which it would have in the hands of the donor or the last preceding owner by whom it was not acquired by gift. If the facts necessary to determine such basis are unknown to the donee, the Commissioner shall, if possible, obtain such facts from such donor or last preceding owner, or any other person cognizant thereof. If the Com- missioner finds it impossible to obtain such facts, the basis shall be the value of such property as found by the Commissioner as of the date or ap- proximate date at which, according to the best in- formation the Commissioner is able to obtain, such property was acquired by such donor or last pre- ceding owner. In the case of such property ac- quired by gift on or before December 31, 1920, the basis for ascertaining gain or loss from a sale or other disposition thereof shall be the fair market price or value of such property at the time of such acquisition; IitcomeTax 11 (3) In the case of such property, acquired by inherited bequest, devise, or inheritance, the basis shall be the fair market price or value of such property at the time of such acquisition. The provisions of this paragraph shall apply to the acquisition of such property interests as are specified in subdivision (c) or (e) of section 402. (b) The basis for ascertaining the gain derived Properly acquired or loss sustained from the sale or other disposition ••efore March of property, real, personal, or mixed, acquired be- ' fore March 1, 1913, shall be the same as that pro- vided by subdivision (a) ; but — ( 1 ) If its fair market price or value as of March 1, 1913, is in excess of such basis, the gain to be included in the gross income shall be the excess of the amount realized therefor over such fair market price or value ; (2) If its fair market price or value as of March 1, 1913, is lower than such basis, the deductible loss is the excess of the fair market price or value as of March 1, 1913, over the amount realized therefor; and (3) If the amount realized therefor is more than such basis but not more than its fair market price or value as of March 1, 1913, or less than such basis but not less than such fair market price or value, no gain shall be included in and no loss de- ducted from the gross income. (c) For the purposes of this title, on an ex- Exchange of change of property, real, personal or mixed, for property: any other such property, no gain or loss shall be recognized unless the property received in ex- change has a readily realizable market value; but even if the property received in exchange has a readily realizable market value, no gain or loss shall be recognized — (1) When any such property held for invest- "eld for ment, or for productive use in trade or business '"^*''"*"' (not including stock-in-trade or other property 12 Revenue Act In reorganizations In organizing new corporations When new property substituted for old: Exchange held primarily for sale), is exchanged for property of a like kind or use; (2) When in the reorganization of one or more corporations a person receives in place of any stock or securities owned by him, stock or securities in a corporation a party to or resulting from such reor- ganization. The word "reorganization," as used in this paragraph, includes a merger or consolida- tion (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or of substantially all the properties of another corporation), recapitalization, or mere change in identity, form, or place of organization of a cor- poration, (however effected) ; or (3) When (A) a person transfers any property real, personal or mixed, to a corporation, and im- mediately after the transfer is in control of such corporation, or (B) two or more persons transfer any such property to a corporation, and imme- diately after the transfer are in control of such cor- poration, and the amounts of stock, securities, or both, received by such persons are in substantially the same proportion as their interests in the prop- erty before such transfer. For the purposes of this paragraph, a person is, or two or more persons are, "in control" of a corporation when owning at least 80 per centum of the voting stock and at least 80 per centum of the total number of shares of all other classes of stock of the corporation. (d) (1) Where property is exchanged for other property and no gain or loss is recognized under the provisions of subdivision (c), the prop- erty received shall, for the purposes of this section, be treated as taking the place of the property ex- changed therefor, except as provided in sub- division (e) ; IncomeTax is (2) Where property is compulsorily or involun- Compulsory tarily converted into cash or its equivalent in the '=»"™'»''" manner described in paragraph (12) of subdivi- sion (a) of section 214 and paragraph (14) of subdivision (a) of section 234, and the taxpayer proceeds in good faith to expend or set aside the proceeds of such conversion in the form and in the manner therein provided, the property acquired shall, for the purpose of this section, be treated as taking the place of a like proportion of the prop- erty converted. (3) Where no deduction is allowed for a loss or in case oMo8$ not a part thereof under the provisions of paragraph 'ie'i''='''»'e (5) of subdivision (a) of section 214 and para- graph (4) of subdivision (a) of section 234, that part of the property acquired with relation to which such loss is disallowed shall for the purposes of this section be treated as taking the place of the prop- erty sold or disposed of. (e) Where property is exchanged for other prop- Exchange lor mixed erty which has no readily realizable market value, '=''""^*""''" together with money or other property which has a readily realizable market value, then the money or the fair market value of the property having such readily realizable market value received in exchange shall be applied against and reduce the basis, provided in this section, of the property ex- changed, and if in excess of such basis, shall be taxable to the extent of the excess ; but when prop- erty is exchanged for property specified in para- graphs (1), (2), and (3) of subdivision (c) as received in exchange, together with money or other property of a readily realizable market value other than that specified in such paragraphs, the money or the fair market value of such other property received in exchange shall be applied against and reduce the basis, provided in this section, of the property exchanged, and if in excess of such basis, shall be taxable to the extent of the excess. 14 Installment sales Basis Compulation of net loss Revenue Act (f) Nothing in this section shall be construed to prevent (in the case of property sold under con- tract providing for payment in installments) the taxation of that portion of any installment pay- ment representing gain or profit in the year in which such payment is received. Inventories. Sec. 203. That whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any tax- payer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the ap- proval of the Secretary, may prescribe as conform- ing as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income. Net Losses. Sec. 204. (a) That as used in this section the term "net loss" means only net losses resulting from the operation of any trade or business regu- larly carried on by the taxpayer (including losses sustained from the sale or other disposition of real estate, machinery, and other capital assets, used in the conduct of such trade or business) ; and when so resulting means the excess of the deductions al- lowed by section 214 or 234, as the case may be, over the sum of the following : ( 1 ) the gross income of the taxpayer for the taxable year, (2) the amount by which the interest received free from taxation under this title exceeds so much of the interest paid or accrued within the taxable year on indebtedness as is not permitted to be deducted by paragraph (2) of subdivision (a) of section 214 or by paragraph (2) of subdivision (a) of section 234, (3) the amount by which the deductible losses not sustained in such trade or business exceed the taxable gains or profits not derived from such trade IitcomeTax 16 or business, (4) amounts received as dividends and allowed as a deduction under paragraph (6) of subdivision (a) of section 234, and (5) so much of the depletion deduction allowed with respect to any mine, oil or gas well as is based upon discovery value in lieu of cost. (b) If for any taxable year beginning after De- Deduction of cember 31, 1920, it appears upon the production "*""" of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; and if such net loss is in excess of the net income for such succeeding taxable year, the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary. (c) The benefit of this section shall be allowed to the members of a partnership and the bene- ficiaries of an estate or trust, and to insurance com- panies subject to the tax imposed by section 243 or 246, under regulations prescribed by the Com- missioner with the approval of the Secretary. (d) If it appears, upon the production of evi- Net loss for fiscal dence satisfactory to the Commissioner, that a tax- ye" ™ding in 1921 payer having a fiscal year beginning in 1920 and ending in 1921 has sustained a net loss during such fiscal year, such taxpayer shall be entitled to the benefits of this section in respect to the same pro- portion of such net loss which the portion of such fiscal year falling within the calendar year 1921 is of the entire fiscal year. Fiscal Years 1920-1921 and 1921-1922. Sec. 205. (a) That if a taxpayer makes re- Computation of ux turn for a fiscal year beginning in 1920 and ending in 1921, his tax under this title for the taxable year 16 Re VEiruE Act 1921 shall be the sum of: (1) the same proportion of a tax for the entire period computed under Title II of the Revenue Act of 1918 at the rates for the calendar year 1920 which the portion of such period falling within the calendar year 1920 is of the entire period, and (2) the same proportion of a tax for the entire period computed under this title at the rates for the calendar year 1921, which the portion of such period falling within the calendar year 1921 is of the entire period. Any amount paid before or after the passage of this Act on account of the tax imposed for such fiscal year by Title II of the Revenue Act of 1918 shall be credited toward the payment of the tax imposed for such fiscal year by this Act, and if the amount so paid exceeds the amount of such tax imposed by this Act, the excess shall be credited or refunded in accordance with the provisions of section 252. Tax for fiscal year (b) If a taxpayer makcs Tctum for a fiscal year ending in 1922 beginning in 1921 and ending in 1922, his tax under this title for the taxable year 1922 shall be the sum of: (1) the same proportion of a tax for the entire period computed under this title (as in force on December 31, 1921) at the rates for the calendar year 1921 which the portion of such period falling within the calendar year 1921 is of the entire period, and (2) the same proportion of a tax for the entire period computed under this title (as in force on January 1, 1922) at the rates for the calendar year 1922 which the portion of such period falling within the calendar year 1922 is of the entire period : Provided, That in the case of a personal service corporation the amount to be paid shall be only that specified in clause (2). Partnership's fiscal (c) If a fiscal year of a partnership begins in year ending in 1921 1920 and cuds in 1921, or begins in 1921 and ends in 1922, then (1) the rates for the calendar year during which such fiscal year begins shall apply 1922 IncomeTax 1'' '0 an amount of each partner's share of such part- nership net income (determined under the law ap- plicable to such year) equal to the proportion which the part of such fiscal year falling within such calendar year bears to the full fiscal year, and (2) the rates for the calendar year during which such fiscal year ends shall apply to an amount of each partner's share of such partnership net income (determined under the law applicable to such cal- endar year) equal to the proportion which the part of such fiscal year falling within such calendar year bears to the full fiscal year. Capital Gain. Sec. 206. (a) That for the purpose of this Definitions: title: ( 1 ) The term "capital gain" means taxable gain Capital gain from the sale or exchange of capital assets consum- mated after December 31, 1921; (2) The term "capital loss" means deductible Capital loss loss resulting from the sale or exchange of capital assets consummated after December 31, 1921; (3) The term "capital deductions" means such Capital deductions deductions as are allowed under this title for the purpose of computing net income and are properly allocable to or chargeable against items of capital gain as defined in this section ; (4) The term "capital net gain" means the ex- Capital net gain cess of the total amount of capital gain over the sum of the capital deductions and capital losses; (5) The term "ordinary net income" means the Ordinary net net income, computed in accordance with the pro- '"<=»">« visions of this title, after excluding all items of capital gain, capital loss, and capital deductions; and (6) The term "capital assets" as used in this Capital assets section means property acquired and held by the 18 Re VE KUE Act Alternative method of taxation Computation of tax Capital net gains to partnerships and trusts taxpayer for profit or investment for more than two years (whether or not connected with his trade or business) , but does not include property held for the personal use or consumption of the taxpayer or his family, or stock in trade of the taxpayer or other property of a kind which would properly be in- cluded in the inventory of the taxpayer if on hand at the close of the taxable year. (b) In the case of any taxpayer (other than a corporation) who for any taxable year derives a capital net gain, there shall (at the election of the taxpayer) be levied, collected and paid, in lieu of the taxes imposed by sections 210 and 211 of this title, a tax determined as foEows: A partial tax shall first be computed upon the basis of the ordinary net income at the rates and in the manner provided in sections 210 and 211, and the total tax shaU be this amount plus 12 J/2 per centum of the capital net gain; but if the taxpayer elects to be taxed under this section the total tax shall in no such case be less than 12^ per centum of the total net income. The total tax thus deter- mined shall be computed, collected and paid in the same manner, at the same time and subject to the same provisions of law, including penalties, as other taxes under this title. (c) In the case of a partnership or of an estate or trust, the proper part of each share of the net income which consists, respectively, of ordinary net income and capital net gain, shall be determined under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary, and shall be separately shown in the return of the partnership or estate or trust, and shall be taxed to the member or beneficiary or to the estate or trust as provided in sections 218 and 219, but at the rates and in the manner provided in subdivi- sion (b) of this section. Income Tax 19 Part II. — Individuals. Normal Tax. Sec, 210. That, in lieu of the tax imposed by Normal tax rate section 210 of the Revenue Act of 1918, there shall be levied, collected, and paid for each taxable year upon the net income of every individual a normal tax of 8 per centum of the amount of the net in- come in excess of the credits provided in section 216: Provided, That in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 4 per centum. Surtax. Sec. 211. (a) That, in lieu of the tax imposed by section 211 of the Revenue Act of 1918, but in addition to the normal tax imposed by section 210 of this Act, there shall be levied, collected, and paid for each taxable year upon the net income of every individual — (1) For the calendar year 1921, a surtax equal f"',**,,"'** to the sum of the following: 1 per centum of the amount by which the net income exceeds $5,000 and does not exceed $6,000 ; 2 per centum of the amount by which the net income exceeds $6,000 and does not exceed $8,000 ; 3 per centum of the amount by which the net in- come exceeds $8,000 and does not exceed $10,000 ; 4 per centum of the amount by which the net in- come exceeds $10,000 and does not exceed $12,000; 5 per centum of the amount by which the net in- come exceeds $12,000 and does not exceed $14,000; 6 per centum of the amount by which the net in- come exceeds $14,000 and does not exceed $16,000 ; 7 per centum of the amount by which the net in- come exceeds $16,000 and does not exceed $18,000; 8 per centum of the amount by which the net in- come exceeds $18,000 and does not exceed $20,000; for 1921 20 Revenue Act Surtax rates for 9 per centum of the amount by which the net in^ 1921, continued come cxceeds $20,000 and does not exceed $22,000 10 per centum of the amount by which the net in- come exceeds $22,000 and does hot exceed $24,000 11 per centum of the amount by which the net in- come exceeds $24,000 and does not exceed $26,000 12 per centum of the amount by which the net in- come exceeds $26,000 and does not exceed $28,000 13 per centum of the amount by which the net in- come exceeds $28,000 and does not exceed $30,000 14 per centum of the amount by which the net in- come exceeds $80,000 and does not exceed $32,000 15 per centum of the amount by which the net in- come exiceeds $32,000 and does not exceed $34,000 16 per centum of the amount by which the net in come exceeds $34,000 and does not exceed $36,000 17 per centum of the amount by which the net in come exceeds $36,000 and does not exceed $38,000 18 per centum of the amount by which the net in- come exceeds $38,000 and does not exceed $40,000 19 per centum of the amount by which the net in come exceeds $40,000 and does not exceed $42,000 20 per centum of the amount by which the net in come exceeds $42,000 and does not exceed $44,000 21 per centum of the amount by which the net in come exceeds $44,000 and does not exceed $46,000 22 per centum of the amount by which the net in- come exceeds $46,000 and does not exceed $48,000 23 per centum of the amount by which the net in come exceeds $48,000 and does not exceed $50,000 24 per centum of the amount by which the net in- come exceeds $50,000 and does not exceed $52,000 25 per centum of the amount by which the net in- come exceeds $52,000 and does not exceed $54,000 26 per centum of the amount by which the net in- come exceeds $54,000 and does not exceed $56,000 27 per centum of the amount by which the net in- come exceeds $56,000 and does not exceed $58,000 Income Tax 21 28 per centum of the amount by which the net in come exceeds $58,000 and does not exceed $60,000 29 per centum of the amount by which the net in- come exceeds $60,000 and does not exceed $62,000 30 per centum of the amount by which the net in- come exceeds $62,000 and does not exceed $64,000 31 per centum of the amount by which the net in- come exceeds $64,000 and does not exceed $66,000 32 per centum of the amount by which the net in come exceeds $66,000 and does not exceed $68,000 33 per centum of the amount by which the net in come exceeds $68,000 and does not exceed $70,000 34 per centum of the amount by which the net in come exceeds $70,000 and does not exceed $72,000 35 per centum of the amount by which the net in- come exceeds $72,000 and does not exceed $74,000 36 per centum of the amount by which the net in- come exceeds $74,000 and does not exceed $76,000 37 per centum of the amount by which the net in- come exceeds $76,000 and does not exceed $78,000 38 per centum of the amount by which the net in- come exceeds $78,000 and does not exceed $80,000 39 per centum of the amount by which the net in come exceeds $80,000 and does not exceed $82,000 40 per centum of the amount by which the net in come exceeds $82,000 and does not exceed $84,000 41 per centum of the amount by which the net in come exceeds $84,000 and does not exceed $86,000 42 per centum of the amount by which the net in- come exceeds $86,000 and does not exceed $88,000 43 per centum of the amount by which the net in- come exceeds $88,000 and does not exceed $90,000 44 per centum of the amount by which the net in- come exceeds $90,0p0 and does not exceed $92,000 45 per centum of the amount by which the net in- come exceeds $92,000 and does not exceed $94,000 46 per centum of the amount by which the net in come exceeds $94,000 and does not exceed $96,000 Surtax rates for 1921, continued 22 RevenueAct Surtax rates for 47 per centum of the amount by which the net in- 1921, continued goj^e cxceeds $96,000 and does not exceed $98,000 ; 48 per centum of the amount by which the net income exceeds $98,000 and does not exceed $100,000; 52 per centum of the amount by which the net income exceeds $100,000 and does not exceed $150,000; 56 per centum of the amount by which the net income exceeds $150,000 and does not exceed $200,000; 60 per centum of the amount by which the net income exceeds $200,000 and does not exceed $300,000; 63 per centum of the amount by which the net income exceeds $300,000 and does not exceed $500,000; 64 per centum of the amount by which the net income exceeds $500,000 and does not exceed $1,000,000; 65 per centum of the amount by which the net income exceeds $1,000,000; Surtax rates after (2) For the Calendar year 1922 and each calen- 1921 dar year thereafter, a surtax equal to the sum of the following: 1 per centum of the amount by which the net in- come exceeds $6,000 and does not exceed $10,000 2 per centum of the amount by which the net in- come exceeds $10,000 and does not exceed $12,000 3 per centum of the amount by which the net in come exceeds $12,000 and does not exceed $14,000 4 per centum of the amount by which the net in come exceeds $14,000 and does not exceed $16,000 5 per centum of the amount by which the net in- come exceeds $16,000 and does not exceed $18,000 6 per centum of the amount by which the net in- come exceeds $18,000 and does not exceed $20,000 IifCOME Tax 23 8 per centum of the amount by which the net in- come exceeds $20,000 and does not exceed $22,000 9 per centum of the amount by which the net in- come exceeds $22,000 and does not exceed $24,000 10 per centum of the amount by which the net in come exceeds $24,000 and does not exceed $26,000 11 per centum of the amount by which the net in- come exceeds $26,000 and does not exceed $28,000 12 per centum of the amount by which the net in- come exceeds $28,000 and does not exceed $30,000 13 per centum of the amount by which the net in come exceeds $30,000 and does not exceed $32,000 15 per centum of the amount by which the net in come exceeds $32,000 and does not exceed $36,000 16 per centum of the amount by which the net in- come exceeds $36,000 and does not exceed $38,000 17 per centum of the amount by which the net in- come exceeds $38,000 and does not exceed $40,000 18 per centum of the amount by which the net in- come exceeds $40,000 and does not exceed $42,000 19 per centum of the amount by which the net in- come exceeds $42,000 and does not exceed $44,000 20 per centum of the amount by which the net in- come exceeds $44,000 and does not exceed $46,000 21 per centum of the amount by which the net in- come exceeds $46,000 and does not exceed $48,000 22 per centum of the amount by which the net in come exceeds $48,000 and does not exceed $50,000 23 per centum of the amount by which the net in come exceeds $50,000 and does not exceed $52,000 24 per centum of the amount by which the net in come exceeds $52,000 and does not exceed $54,000 25 per centum of the amount by which the net in come exceeds $54,000 and does not exceed $56,000 26 per centum of the amount by which the net in come exceeds $56,000 and does not exceed $58,000 27 per centum of the amount by which the net in come exceeds $58,000 and does not exceed $60,000 Surtax rates after 1921, continued 24 RevexueAct Surtax rales after 28 per ccntum of the amount by which the net in 1921, continued coHie exceeds $60,000 and does not exceed $62,000 29 per centum of the amount by which the net in come exceeds $62,000 and does not exceed $64,000 30 per centum of the amount by which the net in- come exceeds $64,000 and does not exceed $66,000 31 per centum of the amount by which the net in- come exceeds $66,000 and does not exceed $68,000 32 per centum of the amount by which the net in- come exceeds $68,000 and does not exceed $70,000 33 per centum of the amount by which the net in come exceeds $70,000 and does not exceed $72,000 34 per centum of the amount by which the net in come exceeds $72,000 and does not exceed $74,000 35 per centum of the amount by which the net in- come exceeds $74,000 and does not exceed $76,000 36 per centum of the amount by which the net in- come exceeds $76,000 and does not exceed $78,000 37 per centum of the amount by which the net in come exceeds $78,000 and does not exceed $80,000 38 per centum of the amount by which the net in- come exceeds $80,000 and does not exceed $82,000 39 per centum of the amount by which the net in come exceeds $82,000 and does not exceed $84,000 40 per centum of the amount by which the net in come exceeds $84,000 and does not exceed $86,000 41 per centum of the amount by which the net in come exceeds $86,000 and does not exceed $88,000 42 per centum of the amount by which the net in come exceeds $88,000 and does not exceed $90,000 43 per centum of the amount by which the net in come exceeds $90,000 and does not exceed $92,000 44 per centum of the amount by which the net in come exceeds $92,000 and does not exceed $94,000 45 per centum of the amount by which the net in come exceeds $94,000 and does not exceed $96,000 46 per centum of the amount by which the net in- come exceeds $96,000 and does not exceed $98,000 and wells IncomeTax 25 47 per centum of the amount by which the net Surtax rates after income exceeds $98,000 and does not exceed i92i, continued $100,000; 48 per centum of the amount by which the net income exceeds $100,000 and does not exceed $150,000; 49 per centum of the amount by which the net income exceeds $150,000 and does not exceed $200,000; 50 per centum of the amount by which the net income exceeds $200,000. (b) In the case of a bona fide sale of mines, oil Limitation in case or gas wells, or any interest therein, where the prin- of »»'«»' m'"*' cipal value of the property has been demonstrated by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax im- posed by this section attributable to such sale shall not exceed, for the calendar year 1921, 20 per centum, and for each calendar year thereafter 16 per centum, of the selling price of such property or interest. Net Income of Individuals Defined. Sec, 212. (a) That in the case of an individual the term "net income" means the gross income as defined in section 213, less the deductions allowed by section 214. (b) The net income shall be computed upon the Accounting period basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regu- Accountmg methods larly employed in keeping the books of such tax- payer; but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made upon such basis and in such manner as in the opinion of the Commissioner does clearly reflect the income. If the taxpayer's annual accounting period is other than a fiscal year as defined in sec- 26 Revenue Act Change in accounting period Income subject to tax tion 200 or if the taxpayer has no annual account- ing period or does not keep books, the net income shall be computed on the basis of the calendar year. (c) If a taxpayer changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year, or from one fiscal year to an- other, the net income shall, with the approval of the Commissioner, be computed on the basis of such new accounting period, subject to the provisions of section 226. Gross Income Defined. Sec. 213. That for the purposes of this title (except as otherwise provided in section 233) the term "gross income" — (a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal service (including in the case of the President of the United States, the judges of the Supreme and inferior courts of the United States, and all other officers and employees, whether elected or ap- pointed, of the United States, Alaska, Hawaii, or any political subdivision thereof, or the District of Columbia, the compensation received as such) , of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, com- merce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from in- terest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. The amount of all such items (except as provided in subdivision (e) of section 201) shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under methods of accounting permitted under subdivision (b) of section 212, any such amounts are to be properly accounted for as of a different period; but IistcomeTax 27 (b) Does not include the following items, which income exempt shall be exempt from taxation under this title : '""" '"= ( 1 ) The proceeds of life insurance policies paid Proceeds of life upon the death of the insured ; insurance policies (2) The amount received by the insured as a Return of life return of premium or premiums paid by him under '"»•"■»"« Kfe insurance, endowment, or annuity contracts, p'™'""" either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract; (3) The value of property acquired by gift, be- Gifts and bequests quest, devise, or descent (but the income from such property shall be included in gross income) ; (4) Interest upon (a) the obligations of a State, interest on state, Territory, or any political subdivision thereof, or municipal, farm the District of Columbia; or (b) securities issued '"'^".^o^'™'. under the provisions of the Federal Farm Loan CorporluonTnds Act of July 17, 1916; or (c) the obligations of the United States or its possessions; or (d) bonds is- sued by the War Finance Corporation. In the case of obligations of the United States issued after September 1, 1917 (other than postal savings cer- tificates of deposit), and in the case of bonds issued by the War Finance Corporation, the interest shal] be exempt only if and to the extent provided in the respective Acts authorizing the issue thereof as amended and supplemented, and shall be excluded from gross income only if and to the extent it is wholly exempt to the taxpayer from income, war- profits and excess-profits taxes; (5) The income of foreign governments re- income of foreign ceived from investments in the United States in governments stocks, bonds, or other domestic securities, owned by such foreign governments, or from interest on deposits in banks in the United States of moneys belonging to such foreign governments, or from any other source within the United States ; (6) Amounts received, through accident or Accident insurance health insurance or under workmen's compensation receipts, etc. Reteitue Act Public income Income from public utilities; conditions of exemption Income of nonresident aliens from ships Condition Pensions and similar income acts, as compensation for personal injuries or sick- ness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness; (7) Income derived from any public utility or the exercise of any essential governmental func- tion and accruing to any State, Territory, or the District of Columbia, or any political subdivision of a State or Territory, or income accruing to the Government of any possession of the United States, or any political subdivision thereof. Whenever any State, Territory, or the District of Columbia, or any political subdivision of a State or Territory, prior to September 8, 1916, entered in good faith into a contract with any person, the object and purpose of which is to acquire, con- struct, operate, or maintain a public utility, no tax shall be levied under the provisions of this title upon the income derived from the operation of such pub- lic utility, so far as the payment thereof will impose a loss or burden upon such State, Territory, Dis- trict of Columbia, or political subdivision; but this provision is not intended and shall not be construed to confer upon such person any financial gain or exemption or to relieve such person from the pay- ment of a tax as provided for in this title upon the part or portion of such income to which such person is entitled under such contract; (8) The income of a nonresident alien or foreign corporation which consists exclusively of earnings derived from the operation of a ship or ships, docu- mented under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States; (9) Amounts received as compensation, family allotments and allowances under the provisions of the War Risk Insurance and the Vocational Re- habilitation Acts, or as pensions from the United IncomeTax 29 States for service of the beneficiary or another in the military or naval forces of the United States in time of war; (10) So much of the amount received by an indi- Building and loan vidual after December 31, 1921, and before Jan- association uary 1, 1927, as dividends or interest from domestic •''"'•*"'^» building and loan associations, operated exclusively for the purpose of making loans to members, as does not exceed $300; (11) The rental value of a dwelling house and Rental value of appurtenances thereof furnished to a minister of pafsonage the gospel as part of his compensation. (12) The receipts of shipowners' mutual pro- Receipts of tection and indemnity associations, not organized "hipowners' for profit, and no part of the net earnings of which ""''''?' . inures to the benefit of any private stockholder or member, but such corporations shall be subject as other persons to the tax upon their net income from interest, dividends, and rents. (c) In the case of a nonresident alien individual. Gross income of gross income means only the gross income from """'•e^''^™' a''™' sources within the United States, determined under the provisions of section 217. Deductions Allowed Individuals. Sec. 214. (a) That in computing net income there shall be allowed as deductions: (1) All the ordinary and necessary expenses Business expenses paid or incurred during the taxable year in carry- ing on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; traveling ex- penses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business ; and rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the tax- 80 Revenue Act Interest Taxes Losses in trade Losses not connected with trade payer has not taken or is not taking title or in which he has no equity ; (2) All interest paid or accrued within the tax- able year on indebtedness, except on indebtedness incurred or continued to purchase or carry obliga- tions or securities (other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest upon which is wholly exempt from taxation under this title ; (3) Taxes paid or accrued within the taxable year except (a) income, war-profits, and excess- profits taxes imposed by the authority of the United States, (b) so much of the income, war- profits and excess-profits taxes, imposed by the authority of any foreign country or possession of the United States, as is allowed as a credit under section 222, (c) taxes assessed against local benefits of a kind tending to increase the value of the prop- erty assessed, and (d) taxes imposed upon the tax- payer upon his interest as shareholder or member of a corporation, which are paid by the corpora- tion without reimbursement from the taxpayer. For the purpose of this paragraph estate, inherit- ance, legacy, and succession taxes accrue on the due date thereof except as otherwise provided by the law of the jurisdiction imposing such taxes; (4). Losses sustained during the taxable year and not compensated for by insurance or other- wise, if incurred in trade or business; (5) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or busi- ness ; but in the case of a nonresident alien individ- ual only if and to the extent that the profit, if such transaction had resulted in a profit, would be tax- able under this title. No deduction shall be allowed IkcomeTax 81 under this paragraph for any loss claimed to have been sustained in any sale or other disposition of shares of stock or securities made after the passage of this Act where it appears that within thirty days Limitation before or after the date of such sale or other dis- position the taxpayer has acquired (otherwise than by bequest or inheritance) substantially identical property, and the property so acquired is held by the taxpayer for any period after such sale or other disposition. If such acquisition is to the extent of part only of substantially identical property, then only a proportionate part of the loss shall be dis- allowed; (6) Losses sustained during the taxable year of Losses from fire, property not connected with the trade or business =""»"?' ""eft, etc. (but in the case of a nonresident alien individual only property within the United States) if arising from fires, storms, shipwreck, or other casualty, or from theft, and if not compensated for by insurance or otherwise. Losses allowed under paragraphs Losses deductible (4), (5), and (6) of this subdivision shall be de- for year in which ducted as of the taxable year in which sustained *"*''""«"' unless, in order to clearly reflect the income, the loss should, in the opinion of the Commissioner, be accounted for as of a different period. In case of losses arising from destruction of or damage to property, where the property so destroyed or dam- aged was acquired before March 1, 1913, the deduc- tion shall be computed upon the basis of its fair market price or value as of March 1, 1913; (7) Debts ascertained to be worthless and Bad debts charged off within the taxable year (or, in the dis- cretion of the Commissioner, a reasonable addition to a reserve for bad debts ) ; and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in part; (8) A reasonable allowance for the exhaustion, Depreciation and wear and tear of property used in the trade or obsolescence business, including a reasonable allowance for 82 RE7EirnE Act Amortization of facilities for war production Depletion of mineral resources or timber obsolescence. In the case of such property acquired before March 1, 1913, this deduction shall be com- puted upon the basis of its fair market price or value as of March 1,1913; (9) In the case of buildings, machinery, equip- ment, or other facilities, constructed, erected, in- stalled, or acquired, on or after April 6, 1917, for the production of articles contributing to the prose- cution of the war against the German Government, and in the case of vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of such war, there shall be allowed, for any taxable year ending before March 3, 1924 (if claim there- for was made at the time of filing return for the taxable year 1918, 1919, 1920, or 1921) a reason- able deduction for the amortization of such part of the cost of such facilities or vessels as has been borne by the taxpayer, but not again including any amount otherwise allowed under this title or pre- vious Acts of Congress as a deduction in comput- ing net income. At any time before March 3, 1924, the Commissioner may, and at the request of the taxpayer shall, reexamine the return, and if he then finds as a result of an appraisal or from other evidence that the deduction originally allowed was incorrect, the income, war-profits, and excess- profits taxes for the year or years affected shall be redetermined ; and the amount of tax due upon such redetermination, if any, shall be paid upon notice and demand by the collector, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of section 252; (10) In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case, based upon cost, including cost of I N C O M E T A X 88 . development not otherwise deducted: Provided, That in the case of such properties acquired prior to March 1, 1913, the fair marliet value of the property (or the taxpayer's interest therein) on that date shall be taken in lieu of cost up to that date : Provided further. That in the case of mines, oil and gas wells, discovered by the taxpayer, on or after March 1, 1913, and not acquired as the re- sult of purchase of a proven tract or lease, where the fair market value of the property is materially disproportionate to the cost, the depletion allow- ance shall be based upon the fair market value of the property at the date of the discovery, or within thirty days thereafter: And provided further. That such depletion allowance based on discovery Limitation value shall not exceed the net income, computed without allowance for depletion, from the property upon which the discovery is made, except where such net income so computed is less than the de- pletion allowance based on cost or fair market value as of March 1, 1913; such reasonable allow- ance in all the above cases to be made under rules and regulations to be prescribed by the Commis- sioner, with the approval of the Secretary. In the case of leases the deductions allowed by this para- graph shall be equitably apportioned between the lessor and lessee; (11) Contributions or gifts made within the Contributions taxable year to or for the use of: (A) The United ""Jpft* States, any State, Territory, or any political sub- division thereof, or the District of Columbia, for exclusively public purposes; (B) any corporation, or community chest, fund, or foundation, organ- ized and operated exclusively for religious, charit- able, scientific, literary, or educational purposes, including posts of the American Legion or the Women's Auxihary units thereof, or for the pre- vention of cruelty to children or animals, no part of the net earnings of which inures to the benefit 34 Revenue Act Limitation Proportion of gain on property involuntarily converted Conditions of any private stockholder or individual; or (C) the special fund for vocational rehabilitation au- thorized by section 7 of the Vocational Rehabilita- tion Act ; to an amount which in all the above cases combined does not exceed 15 per centum of the tax- payer's net income as computed without the benefit of this paragraph. In case of a nonresident alien individual this deduction shall be allowed only as to contributions or gifts made to domestic corpo- rations, or to community chests, funds, or founda- tions, created in the United States, or to such voca- tional rehabilitation fund. Such contributions or gifts shall be allowable as deductions only if veri- fied under rules and regulations prescribed by the Commissioner, with the approval of the Secretary ; (12) If property is compulsorily or involun- tarily converted into cash or its equivalent as a re- sult of (A) its destruction in whole or in part, (B) theft or seizure, or ( C ) an exercise of the power of requisition or condemnation, or the threat or immi- nence thereof; and if the taxpayer proceeds forth- with in good faith, under regulations prescribed by the Commissioner with the approval of the Secre- tary, to expend the proceeds of such conversion in the acquisition of other property of a character similar or related in service or use to the property so converted, or in the acquisition of 80 per centum or more of the stock or shares of a corporation own- ing such other property, or in the establishment of a replacement fund, then there shall be allowed as a deduction such portion of the gain derived as the portion of the proceeds so expended bears to the entire proceeds. The provisions of this paragraph prescribing the conditions under which a deduction may be taken in respect of the proceeds or gains derived from the compulsory or involuntary conver- sion of property into cash or its equivalent, shall apply so far as may be practicable to the exemption or exclusion of such proceeds or gains from gross IxcomeTax 35 income under prior income, war-profits and excess- profits tax acts. (b) In the case of a nonresident alien individual, Nonresident aliens: the deductions allowed in subdivision (a), except deductions those allowed in paragraphs (5), (6), and (11), """"'«'•"!"' shall be allowed only if and to the extent that they uX/sule's" are connected with income from sources within the " * United States; and the proper apportionment and allocation of the deductions with respect to sources of income within and without the United States shall be determined as provided in section 217 under rules and regulations prescribed by the Com- missioner with the approval of the Secretary. In Applicable to certain the case of a citizen entitled to the benefits of sec- citizens tion 262 the deductions shall be the same and shall be determined in the same manner as in the case of ,a nonresident alien individual. Items not Deductible. Sec. 215. (a) That in computing net income no deduction shall in any case be allowed in respect of— (1) Personal, living, or family expenses; Living expenses (2) Any amount paid out for new buildings or Capital investments for permanent improvements or betterments made to increase the value of any property or estate; (3) Any amount expended in restoring prop- Cost of restoring erty or in making good the exhaustion thereof for property which an allowance is or has been made ; or ( 4 ) Premiums paid on any life insurance policy Premiums on covering the life of any ofiftcer or employee, or of business any person financially interested in any trade or '"*•'""" business carried on by the taxpayer, when the tax- payer is directly or indirectly a beneficiary under such policy. (b) Amounts paid under the laws of any State, Shrinkage in value Territory, District of Columbia, possession of the of terminable United States, or foreign country as income to '"'""'' the holder of a life or terminable interest acquired 86 REVENnE Act by gift, bequest, or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time, nor by any deduction al- lowed by this Act for the purpose of computing the net income of an estate or trust but not allowed under the laws of such State, Territory, District of Columbia, possession of the United States, or foreign country for the purpose of computing the income to which such holder is entitled. Credits Allowed Individuals. For I al tax Dividends Interest on Government and War Finance Corporation bonds Personal exemption Sec. 216. That for the purpose of the normal tax only there shall be allowed the following credits : (a) The amount received as dividends (1) f^om a domestic corporation other than a corporation entitled to the benefits of section 262, or (2) from a foreign corporation when it is shown to the satis- faction of the Commissioner that more than 50 per centum of the gross income of such foreign corporation for the three-year period ending with the close of its taxable year preceding the declara- tion of such dividends (or for such part of such period as the corporation has been in existence) was derived from sources within the United States as determined under the provisions of section 217; (b) The amount received as interest upon obli- gations of the United States and bonds issued by the War Finance Corporation, which is included in gross income under section 213; (c) In the case of a single person, a personal exemption of $1,000; or in the case of the head of a family or a married person living with husband or wife, a personal exemption of $2,500, unless the net income is in excess of $5,000, in which case the personal exemption shall be $2,000. A husband and wife living together shall receive but one per- sonal exemption. The amount of such personal Income Tax exemption shall be $2,500, unless the aggregate net limii^ income of such husband and wife is in excess of $5,000, in which case the amount of such personal exemption shall be $2,000. If such husband and wife make separate returns, the personal exemption may be taken by either or divided between them. In no case shall the reduction of the personal ex- emption from $2,500 to $2,000 operate to increase the tax, which would be payable if the exemption were $2,500, by more than the amount of the net income in excess of $5,000; (d) $400 for each person (other than husband Exemption for or wife) dependent upon and receiving his chief dependents support from the taxpayer if such dependent per- son is under eighteen years of age or is incapable of self-support because mentally or physically defec- tive. (e) In the case of a nonresident alien individual Exemption to or of a citizen entitled to the benefits of section 262, nonresident «iiens the personal exemption shall be only $1,000, and '^^<'"^"" he shall not be entitled to the credit provided in subdivision (d). (f) The credits allowed by subdivisions (c). Determination of (d), and (e) of this section shall be determined by »pecific exemption the status of the taxpayer on the last day of the period for which the return of income is made ; but in the case of an individual who dies during the taxable year, such credits shall be determined by his status at the time of his death, and in such case full credits shall be allowed to the surviving spouse, if any, according to his or her status at the close of the period for which such survivor makes return of income. Net Income of Nonresident Alien Individuals. Sec. 217. (a) That in the case of a nonresident Gross income from alien individual or of a citizen entitled to the bene- souses wiiMn fits of section 262, the following items of gross in- """*'' ^*"*" come shall be treated as income from sources within the United States : d» Revenue Act Interest Exreptlons Dividends Compensation Rents and royalties Gains from sales of real property (1) Interest on bonds, notes, or other interest- bearing obligations of residents, corporate or other- wise, not including (A) interest on deposits with persons carrying on the banking business paid to persons not engaged in business within the United States and not having an office or place of business therein, or (B) interest received from a resident alien individual or a resident foreign corporation when it is shown to the satisfaction of the Com- missioner that less than 20 per centum of the gross income of such resident payor has been derived from sources within the United States, as deter- mined under the provisions of this section, for the three-year period ending with the close of the tax- able year of such payor, or for such part of such period immediately preceding the close of such taxable year as may be applicable ; (2) The amount received as dividends (A) from a domestic corporation other than a corporation entitled to the benefits of section 262, or (B) from a foreign corporation unless less than 50 per centum of the gross income of such foreign corporation for the three-year period ending with the close of its taxable year preceding the declaration of such divi- dends (or for such part of such period as the cor- poration has been in existence) was derived from sources within the United States as determined under the provisions of this section ; (3) Compensation for labor or personal services performed in the United States; (4) Rentals or royalties from property located in the United States or from any interest in such property, including rentals or royalties for the use of or for the privilege of using in the United States, patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like property; and (5) Gains, profits, and income from the sale of real property located in the United States. IncomeTax 89 (b) From the items of gross income specified in Deductions subdivision (a) there shall be deducted the ex- allocated to income penses, losses, and other deductions properly ap- u°"gj''staieV" portioned or allocated thereto and a ratable part of any expenses, losses, or other deductions which can not definitely be allocated to some item or class of gross income. The remainder, if any, shall be included in full as net income from sources within the United States. (c) The following items of gross income shall be Gross income from treated as income from sources without the United sources without States: United states (1) Interest other than that derived from interest sources within the United States as provided in paragraph (1) of subdivision (a) ; (2) Dividends other than those derived from Dividends sources within the United States as provided in paragraph (2) of subdivision (a) ; (3) Compensation for labor or personal service Compensation performed without the United States; (4) Rentals or royalties from property located Rents and royalties without the United States or from any interest in such property, including rentals or royalties for the use of or for the privilege of using without the United States, patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like property; and (5) Gains, profits, and income from the sale of Gains from sales real property located without the United States. o«'"'p'»P"'y (d) From the items of gross income specified Net income from in subdivision (c) there shall be deducted the ex- penses, losses, and other deductions properly ap- portioned or allocated thereto, and a ratable part of any expenses, losses, or other deductions which can not definitely be allocated to some item or class of gross income. The remainder, if any, shall be sources witliout United States treated in full as net income from sources without the United States. iO RevenubAct Methods of (e) Items of gross income, expenses, losses and allocation dcductions, Other than those specified in subdivi- sions (a) and (c), shall be allocated or apportioned to sources within or without the United States under rules and regulations prescribed by the Com- missioner with the approval of the Secretary. Where items of gross income are separately allo- cated to sources within the United States, there shall be deducted (for the purpose of computing the net income therefrom) the expenses, losses and other deductions properly apportioned or allocated thereto and a ratable part of other expenses, losses or other deductions which can not definitely be allo- cated to some item or class of gross income. The remainder, if any, shall be included in full as net income from sources within the United States. In the case of gross income derived from sources partly within and partly without the United States, the net income may first be computed by deducting the expenses, losses or other deductions apportioned or allocated thereto and a ratable part of any ex- penses, losses or other deductions which can not definitely be allocated to some item or class of gross income; and the portion of such net income attrib- utable to sources within the United States may be determined by processes or formulas of general apportionment prescribed by the Commissioner with the approval of the Secretary. Gains, profits and income from (1) transportation or other serv- ices rendered partly within and partly without the United States, or (2) from the sale of personal property produced (in whole or in part) by the taxpayer within and sold without the United States, or produced (in whole or in part) by the taxpayer without and sold within the United States, shall be treated as derived partly from sources within and partly from sources without the United States. Gains, profits and income derived from the pur- chase of personal property within and its sale with- IncomeTax 4fl out the United States or from the purchase of per- sonal property without and its sale within the United States, shall be treated as derived entirely from the country in which sold. (f) As used in this section the words "sale" or Definitions "sold" include "exchange" or "exchanged"; and the word "produced" includes "created," "fabri- cated," "manufactured," "extracted," "processed." "cured," or "aged." (g) A nonresident ahen individual or a citizen Deductions and entitled to the benefits of section 262 shall receive "edits dependent the benefit of the deductions and credits allowed in "■"•" ''""^ "*"'" this title only by filing or causing to be filed with the collector a true and accurate return of his total income received from all sources corporate or other- wise in the United States, in the manner prescribed in this title; including therein all the information which the Commissioner may deem necessary for the calculation of such deductions and credits : Pro- vided, That the benefit of the credit allowed in sub- division (e) of section 216 may, in the discretion of the Commissioner, be received by filing a claim therefor with the withholding agent. In case of failure to file a return, the collector shall collect the tax on such income, and all property belonging to such nonresident alien individual or foreign trader shall be liable to distraint for the tax. Partnership and Personal Service Corporations. Sec. 218. (a) That individuals carrying on Partners taxed business in partnership shall be liable for income as individuals tax only in their individual capacity. There shall be included in computing the net income of each Net income partner his distributive share, whether distributed includes or not, of the net income of the partnership for the ""J]^"^*""""^ taxable year, or, if his net income for such taxable ®""'"^* year is computed upon the basis of a period differ- ent from that upon the basis of which the net income of the partnership is computed, then his i2 Re VE NUE Act Credits allowed members Computation of net income Stockholders of personal service corporation taxed as partners For 1921 only Fiscal year ending in 1922 distributive share of the net income of the partner- ship for any accounting period of the partnership ending within the fiscal or calendar year upon the basis of which the partner's net income is computed, (b) The partner shall, for the purpose of the normal tax, be allowed as credits, in addition to the credits allowed to him under section 216, his proportionate share of such amounts specified in subdivisions (a) and (b) of section 216 as are received by the partnership. (c) The net income of the partnership shall be computed in the same manner and on the same basis as provided in section 212 except that the deduc- tion provided in paragraph (11) of subdivision (a) of section 214 shall not be allowed. (d) Personal service corporations shall not be subject to taxation under this title, but the indi- vidual stockholders thereof shall be taxed in the same manner as the members of partnerships. All the provisions of this title relating to partnerships and the members thereof shall so far as practicable apply to personal service corporations and the stockholders thereof: Provided, That for the pur- pose of this subdivision amounts distributed by a personal service corporation during its taxable year shall be accounted for by the distributees ; and any portion of the net income remaining undis- tributed at the close of its taxable year shall be accounted for by the stockholders of such corpora- tion at the close of its taxable year in proportion to their respective shares. This subdivision shall not be in effect after De- cember 31, 1921. In the case of a personal service corporation having a fiscal year beginning in 1921 and ending in 1922, amounts distributed prior to January 1, 1922, to its stockholders out of earn- ings or profits accumulated after December 31, 1920, shall be taxed to the distributees; and the stockholders of record on December 31, 1921, shall IkcomeTax 43 be taxed upon their distributive shares of the differ- ence (if any) between such distributive profits and the portion of the corporation's net income assign- able to the calendar year 1921, determined in the manner provided in clause (1) of subdivision (c) of section 205 of this Act. Estates and Trusts. Sec. 219. (a) That the tax imposed by sec- Taxable income tions 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including — ( 1 ) Income received by estates of deceased per- Received during sons during the period of administration or settle- administration ment of the estate ; (2) Income accumulated in trust for the benefit Accumulated of unborn or unascertained persons or persons with '" ''"»' contingent interests ; (3) Income held for future distribution under Held (or future the terms of the will or trust; and distribution (4) Income which is to be distributed to the Distributed beneficiaries periodically, whether or not at regular periodically intervals, and the income collected by a guardian of an infant to be held or distributed as the court may direct. (b) The fiduciary shall be responsible for mak- when fiduciary ing the return of income for the estate or trust for makes return which he acts. The net income of the estate or trust shall be computed in the same manner and on the same basis as provided in section 212, except that (in lieu of the deduction authorized by para- Deductions for graph (11) of subdivision (a) of section 214) there contributions shall also be allowed as a deduction, without limita- tion, any part of the gross income which, pursuant to the terms of the will or deed creating the trust, is during the taxable year paid or permanently set aside for the purposes and in the manner specified in paragraph (11) of subdivision (a) of section 214. In cases in which there is any income of the u Revenue Act Report of distributable Payment of tax by fiduciary Credits to estate Payment of tax by beneficiary class described in paragraph (4) of subdivision (a) of this section the fiduciary shall include in the return a statement of the income of the estate or trust which, pursuant to the instrument or order governing the distribution, is distributable to each beneficiary, whether or not distributed before the close of the taxable year for which the return is made. (c) In cases under paragraphs (1), (2), or (3) of subdivision (a) or in any other case within sub- division (a) of this section except paragraph (4) thereof the tax shall be imposed upon the net income of the estate or trust and shall be paid by the fiduciary, except that in determining the net income of the estate of any deceased person during the period of administration or settlement there may be deducted the amount of any income properly paid or credited to any legatee, heir, or other bene- ficiary. In such cases the estate or trust shall, for the purpose of the normal tax, be allowed the same credits as are allowed to single persons under sec- tion 216. (d) In cases under paragraph (4) of subdivision (a) , and in the case of any income of an estate dur- ing the period of administration or settlement per- mitted by subdivision (c) to be deducted from the net income upon which tax is to be paid by the fiduciary, the tax shall not be paid by the fiduciary, but there shall be included in computing the net income of each beneficiary that part of the income of the estate or trust for its taxable year which, "pursuant to the instrument or order governing the distribution, is distributable to such beneficiary, whether distributed or not, or, if his taxable year is different from that of the estate or trust, then there shall be included in computing his net in- come his distributive share of the income of the estate or trust for its taxable year ending within the taxable year of the beneficiary. In such IncomeTax 45 cases the beneficiary shall, for the purpose of the Credit, to normal tax, be allowed as credits, in addition to beneficiary the credits allowed to him under section 216, his proportionate share of such amounts specified in subdivisions (a) and (b) of section 216 as are received by the estate or trust. (e) In the case of an estate or trust the income Return of of which consists both of income of the class de- '"^'"'';"'/"*/"'' scribed in paragraph (4) of subdivision (a) of this section and other income, the net income of the estate or trust shall be computed and a return thereof made by the fiduciary in accordance with subdivision (b) and the tax shall be imposed, and shall be paid hy the fiduciary in accordance with subdivision (c), except that there shall be allowed income of as an additional deduction in computing the net beneficiary income of the estate or trust that part of its income of the class described in paragraph (4) of subdivi- sion (a) which, pursuant to the instrument or order governing the distribution, is distributable during its taxable year to the beneficiaries. In cases under this subdivision there shall be included, as provided in subdivision (d) of this section, in computing the net income of each beneficiary, that part of the in- come of the estate or trust, which, pursuant to the instrument or order governing the distribution, is distributable during the taxable year to such bene- ficiary. (f ) A trust created by an employer as a part of Profit sharing a stock bonus or profit-sharing plan for the exclu- '""" sive benefit of some or all of his employees, to which contributions are made by such employer, or em- ployees, or both, for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, shall not be taxable under this section, but the amount actually distributed or made avail- Tax on distributee able to any distributee shall be taxable to him in the year in which so distributed or made available 46 Revenue Act Accumulation of gains and profits Additional tax Agreed tax on stockholders Evidence of intent to evade tax to the extent that it exceeds the amounts paid in by him. Such distributees shall for the purpose of the normal tax be allowed as credits that part of the amount so distributed or made available as repre- sents the items specified in subdivisions (a) and (b) of section 216. Evasion of Surtaxes by Incorporation. Sec. 220. That if any corporation, however created or organized, is formed or availed of for the purpose of preventing the imposition of the surtax upon its stockholders or members through the medium of permitting its gains and profits to accumulate instead of being divided or distributed, there shall be levied, collected, and paid for each taxable year upon the net income of such corpora- tion a tax equal to 25 per centum of the amount thereof, which shall be in addition to the tax imposed by section 230 of this title and shall be computed, collected, and paid upon the same basis and in the same manner and subject to the same provisions of law, including penalties, as that tax: Provided, That if all the stockholders or members of such corporation agree thereto, the Commissioner may, in lieu of all income, war-profits and excess-profits taxes imposed upon the corporation for the taxable year, tax the stockholders or members of such cor- poration upon their distributive shares in the net income of the corporation for the taxable year in the same manner as provided in subdivision (a) of sec- tion 218 in the case of members of a partnership. The fact that any corporation is a mere holding company, or that the gains and profits are per- mitted to accumulate beyond the reasonable needs of the business, shall be prima facie evidence of a purpose to escape the surtax; but the fact that the gains and profits are in any case permitted to accumulate and become surplus shall not be con- strued as evidence of a purpose to escape the tax in such case unless the Commissioner certifies that IncomeTax 4p7 in his opinion such accumulation is unreasonable for the purposes of the business. When requested by the Commissioner, or any collector, every cor- poration shall forward to him a correct statement of such gains and profits and the names and ad- dresses of the individuals or shareholders who would be entitled to the same if divided or distrib- uted, and of the amounts that would be payable to each. Payment of Individual's Tax at Source. Sec. 221. (a) That all individuals, corpora- Withholding at tions, and partnerships, in whatever capacity act- source against inff, including lessees or mortgagors of real or per- !«'";*»"''"' *'■«" *", i^j-- 1 in/v! indmdualsand sonal property, nduciaries, employers, and all om- partnerships cers and employees of the United States having the control, receipt, custody, disposal, or payment of interest (except interest on deposits with persons Deposit interest carrying on the banking business paid to persons excepted not engaged in business in the United States and not having an office or place of business therein), rent, salaries, wages, premiums, annuities, com- pensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, of any nonresident alien indi- vidual or partnership composed in whole or in part of nonresident aliens (other than income received Certain dividends as dividends of the class allowed as a credit by sub- e^^pted division (a) of section 216) shall (except in the cases provided for in subdivision (b) and except as otherwise provided in regulations prescribed by the Commissioner under section 217) deduct and withhold from such annual or periodical gains, profits, and income a tax equal to 8 per centum thereof: Provided, That the Commissioner may interest of unknown authorize such tax to be deducted and withheld owners from the interest upon any securities the owners of which are not known to the withholding agent, (b) In any case where bonds, mortgages, or deeds of trust, or other similar obligations of a cor- 48 Re VE iruE Act Tax free covenant bond interest payable to individuals or partnerships To unknown owners Claim (or exemption (ram withholding Returns by withholding agents poration contain a contract or provision by which the obligor agrees to pay any portion of the tax imposed by this title upon the obligee, or to reim- burse the obligee for any portion of the tax, or to pay the interest without deduction for any tax which the obligor may be required or permitted to pay thereon, or to retain therefrom under any law of the United States, the obligor shall deduct and withhold a tax equal to 2 per centum of the interest upon such bonds, mortgages, deeds of trust, or other obligations, whether such interest is payable annu- ally or at shorter or longer periods and whether payable to a nonresident alien individual or to an individual citizen or resident of the United States or to a partnership: Provided^ That the Commis- sioner may authorize such tax to be deducted and withheld in the case of interest upon any such bonds, mortgages, deeds of trust, or other obliga- tions, the owners of which are not known to the withholding agent. Such deduction and withhold- ing shall not be required in the case of a citizen or resident entitled to receive such interest, if he files with the withholding agent on or before Feb- ruary 1 a signed- notice in writing claiming the benefit of the credits provided in subdivisions (c) and (d) of section 216; nor in the case of a non- resident alien individual if so provided for in reg- ulations prescribed by the Commissioner under subdivision (g) of section 217. (c) Every individual, corporation, or partner- ship required to deduct and withhold any tax under this section shall make return thereof on or before March 1 of each year and shall on or before June 15 pay the tax to the official of the United States government authorized to receive it. Every such individual, corporation, or partnership is hereby made liable for such tax and is hereby indemnified against the claims and demands of any individual, corporation, or partnership for the amount of any IncomeTax 49 payments made in accordance with the provisions of this section. (d) Income upon which any tax is required to Credit for tax be withheld at the source under this section shall withheld be included in the return of the recipient of such income, but any amount of tax so withheld shall be credited against the amount of income tax as com- puted in such return. (e) If any tax required under this section to be Duplication of deducted and withheld is paid by the recipient of payments the income, it shall not be re-collected from the with- holding agent; nor in cases in which the tax is so paid shall any penalty be imposed upon or collected from the recipient of the income or the withholding agent for failure to return or pay the same, unless such failure was fraudulent and for the purpose of evading payment. Credit for Taxes in Case of Individuals. Sec. 222. (a) That the tax computed under Credit for foreign Part II of this title shall be credited with: tax allowed to: ( 1 ) In the case of a citizen of the United States, Citizens the amount of any income, war-profits and excess- profits taxes paid during the taxable year to any foreign country or to any possession of the United States; and (2) In the case of a resident of the United Residents States, the amount of any such taxes paid during the taxable year to any possession of the United States; and (3) In the case of an alien resident of the Resident aliens United States, the amount of any such taxes paid during the taxable year to any foreign country, if the foreign country of which such alien resident is a citizen or subject, in imposing such taxes, allows a similar credit to citizens of the United States resid- ing in such country ; and (4) In the case of any such individual who is a Partners and member of a partnership or a beneficiary of an beneficiaries of estate or trust, his proportionate share of such e^'^'e* »■■ ""»•» 50 Revenue Act Limitation on credits Adjustment of accrued taxes Surety taxes of the partnership or the estate or trust paid during the taxable year to a foreign country or to any possession of the United States, as the case may be. (5) The above credits shall not be allowed in the case of a citizen entitled to the benefits of section 262 ; and in no other case shall the amount of credit taken under this subdivision exceed the same pro- portion of the tax, against which such credit is taken, which the taxpayer's net income (computed without deduction for any income, war-profits and excess-profits taxes imposed by any foreign coun- try or possession of the United States) from sources without the United States bears to his entire net income (computed without such deduc- tion) for the same taxable year. (b) If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the Commissioner, who shall redetermine the amount of the tax due under Part II of this title for the year or years affected, and the amount of tax due upon such redetermination, if any, shall be paid by the taxpayer upon notice and demand by the collector, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. In the case of such a tax accrued but not paid, the Commissioner as a condition prece- dent to the allowance of this credit may require the taxpayer to give a bond with sureties satisfactory to and to be approved by the Commissioner in such penal sum as the Commissioner may require, con- ditioned for the payment by the taxpayer of any amount of tax found due upon any such redeter- mination; and the bond herein prescribed shall con- tain such further conditions as the Commissioner may require. IxcomeTax 61 (c) These credits shall be allowed only if the Evidence required taxpayer furnishes evidence satisfactory to the Commissioner showing the amount of income de- rived from sources without the United States, and all other information necessary for the verification and computation of such credits. (d) If the taxpayer makes a return for a fiscal F'«»'y"' year beginning in 1920 and ending in 1921, the «"'•'"« '""2' credit for the entire fiscal year shall, notwithstand- ing any provision of this Act, be determined under the provisions of this section ; and the Commissioner is authorized to disallow, in whole or part, any such credit which he finds has already been taken by the taxpayer. Individual Returns. Sec. 223. (a) That the following individuals shall each make under oath a return stating speci- fically the items of his gross income and the deduc- tions and credits allowed under this title — (1) Every individual having a net income for single person the taxable year of $1,000 or over, if single, or if married and not living with husband or wife ; (2) Every individual having a net income for Married person the taxable year of $2,000 or over, if married and living with husband or wife ; and (3) Every individual having a gross income for Persons with gross the taxable year of $5,000 or over, regardless of income of $5,ooo the amount of his net income. (b) If a husband and wife living together have Husband and wife an aggregate net income for the taxable year of $2,000 or over, or an aggregate gross income for such year of $5,000 or over — ( 1 ) Each shall make such a return, or Separate returns (2) The income of each shall be included in a Joint returns single joint return, in which case the tax shall be computed on the aggregate income. (c) If the taxpayer is unable to make his own Return by agent return, the return shall be made by a duly author- 52 REVENtTE Act Return! required Relurna required for: Single person Married person Gross income $5,000 or over Estate or trust Joint fiduciaries ized agent or by the guardian or other person charged with the care of the person or property of such taxpayer. Partnership Returns. Sec. 224. That every partnership shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowed by this title, and shall include in the return the names and addresses of the individuals who would be entitled to share in the net income if dis- tributed and the amount of the distributive share of each individual. The return shall be sworn to by any one of the partners. Fiduciary Returns. Sec. 225. (a) That every fiduciary (except a receiver appointed by authority of law in posses- sion of part only of the property of an individual) shall make under oath a return for any of the fol- lowing individuals, estates, or trusts for which he acts, stating specifically the items of gross income thereof and the deductions and credits allowed under this title — (1) Every individual having a net income for the taxable year of $1,000 or over, if single, or if married and not living with husband or wife; (2) Every individual having a net income for the taxable year of $2,000 or over, if married and living with husband or wife; (3) Every individual having a gross income for the taxable year of $5,000 or over, regardless of the amount of his net income; (4) Every estate or trust the net income of which for the taxable year is $1,000 or over; and (5) Every estate or trust of which any bene- ficiary is a nonresident alien. (b) Under such regulations as the Commis- sioner with the approval of the Secretary may pre- IkcomeTax 58 scribe a return made by one of two or more joint fiduciaries and filed in the ofiice of the collector of the district where such fiduciary resides shall be sufficient compliance with the above requirement. Such fiduciary shall make oath (1) that he has sufficient knowledge of the affairs of the individual, estate or trust for which the return is made, to enable him to make the return, and (2) that the return is, to the best of his knowledge and belief, true and correct. Any fiduciary required to make a return under this Act shall be subject to all the provisions of this Act which apply to individuals. Returns for a Period of Less than Twelve Months, Sec. 226. (a) That if a taxpayer, with the change o( approval of the Commissioner, changes the basis «ccounting of computing net income from fiscal year to cal- ^"'°^ endar year a separate return shall be made for the period between the close of the last fiscal year for which return was made and the following Decem- ber 31. If the change is from calendar year to fiscal year, a separate return shall be made for the period between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year a separate return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. (b) In all cases where a separate return is made Computation of for a part of a taxable year the net income shall net income be computed on the basis of such period for which separate return is made, and the tax shall be paid thereon at the rate for the calendar year in which such period is included. (c) In the case of a return for a period of less Placing income on than one year the net income shall be placed on an annual basis annual basis by multiplying the amount thereof by 54 Revenue Act Date for filing returns Extension of time Place of filing Correction twelve and dividing by the number of months included in such period; and the tax shall be such part of a tax computed on such annual basis as the number of months in such period is of twelve months. Time and Place for Filing Individual, Partnership, and Fiduciary Returns. Sec. 227. (a) That returns (except in the case of nonresident aliens) shall be made on or before the fifteenth day of the third month following the close of the fiscal year, or, if the return is made on the basis of the calendar year, then the return shall be made on or before the loth day of March. In the case of a nonresident alien individual returns shall be made on or before the fifteenth day of the sixth month following the close of the fiscal year, or, if the return is made on the basis of the calendar year, then the return shall be made on or before the 15th day of June. The Commissioner may grant a reasonable extension of time for filing returns whenever in his judgment good cause exists and shall keep a record of every such extension and the reason therefor. Except in the case of taxpayers who are abroad, no such extension shall be for more than six months. (b) Returns shall be made to the collector for the district in which is located the legal residence or principal place of business of the person making the return, or, if he has no legal residence or prin- cipal place of business in the United States, then to the collector at Baltimore, Maryland. Understatement in Returns. Sec. 228. That if the collector or deputy col- lector has reason to believe that the amount of any income returned is understated, he shall give due notice to the taxpayer making the return to show cause why the amount of the return should not be IncomeTax SB increased, and upon proof of the amount under- stated, may increase the same accordingly. Such taxpayer may furnish sworn testimony to prove any relevant facts and if dissatisfied with the deci- sion of the collector may appeal to the Commis- sioner for his decision, under such rules of pro- cedure as may be prescribed by the Commissioner with the approval of the Secretary. Incorporation of Individual or Partnership Business. Sec. 229. That in the case of the organization Option of being as a corporation within four months after the pas- •»"«'• " sage of this Act of any trade or business in which "'p""""" capital is a material income-producing factor, and which was previously owned by a partnership or individual, the net income of such trade or business from January 1, 1921, to the date of such organiza- tion may at the option of the individual or part- nership be taxed as the net income of a corporation is taxed under Titles II and III; in which event the net income and invested capital of such trade or business shall be computed as if such corporation had been in existence on and after January 1, 1921, and the undistributed profits or earnings of such trade or business shall not be subject to the sur- taxes imposed in section 211, but amounts dis- tributed on and after January 1, 1921, from the earnings or profits of such trade or business accumulated after December 31, 1920, shall be taxed to the recipients as dividends; and all the provisions of Titles II and III relating to corpora- tions shall so far as practicable apply to such trade or business: Provided, That this section shall not apply to any trade or business, the net income of g ,,„„ which for the taxable year 1921 was less than 20 per centum of its invested capital for such year: Provided further. That any taxpayer who takes advantage of this section shall pay the tax imposed by section 1000 of the Revenue Act of 1918 as if Be Revenue Act Corporation income tax 1921 rate Rate for succeeding years Labor and agricultural organizations Mutual savings banks Fraternal societies Building and loan associations, etc. Cemeter; companies such taxpayer had been a corporation on and after January 1, 1921. Part III. — Corporations. Tax on Corporations. Sec. 230. That, in lieu of the tax imposed by section 230 of the Revenue Act of 1918, there shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax at the following rates : (a) For the calendar year 1921, 10 per centum of the amount of the net income in excess of the credits provided in section 236 ; and (b) For each calendar year thereafter, 12^ per centum of such excess amount. Conditional and Other Exemptions of Corporations. Sec. 231. That the following organizations shall be exempt from taxation under this title — (1) Labor, agricultural, or horticultural organ- izations ; (2) Mutual savings banks not having a capital stock represented by shares; (3) Fraternal beneficiary societies, orders, or associations, (a) operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system; and (b) providing for the payment of life, sick, accident, or other benefits to the members of such society, order, or association or their dependents ; (4) Domestic building and loan associations substantially all the business of which is confined to making loans to members; and cooperative banks without capital stock organized and operated for mutual purposes and without profit; (5) Cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit ; and any corpora- commerce IncomeTax 67 tion chartered solely for burial purposes as a ceme- tery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, no part of the net earnings of which inures to the benefit of any private stock- holder or individual; (6) Corporations, and any community chest, Educational or fund, or foundation, organized and operated exclu- =•'»"'»''[« sively for religious, charitable, scientific, literary, '='"'""''"""' or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of vphich inures to the benefit of any pri- vate stockholder or individual ; (7) Business leagues, chambers of commerce, or Chambers of boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private stocldiolder or individual; (8) Civic leagues or organizations not organ- Ci?icieagues ized for profit but operated exclusively for the promotion of social welfare; (9) Clubs organized and operated exclusively Recreation dubs for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private stockholder or member; (10) Farmers' or other mutual hail, cyclone, or Local mutual fire insurance companies, mutual ditch or irrigation organizations companies, mutual or cooperative telephone com- panies, or like organizations of a purely local char- acter, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting expenses ; (11) Farmers', fruit growers', or like associa- Cooperative tions, organized and operated as sales agents for **"'"? the purpose of marketing the products of members '**""** and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of produce furnished by them ; or organ- ized and operated as purchasing agents for the 58 Revektje Act Holding corporations for exempt organizations Federal land banks and farm-loan associations Personal service corporations Basis of computation purpose of purchasing supplies and equipment for the use of members and turning over such supplies and equipment to such members at actual cost, plus necessary expenses; (12) Corporations organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this title ; ( 13) Federal land banks and national farm-loan associations as provided in section 26 of the Act approved July 17, 1916, entitled "An Act to pro- vide capital for agricultural development, to create standard forms of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create Government depositaries and financial agents for the United States, and for other pur- poses"; (14) Personal service corporations. This sub- division shall not be in effect after December 31, 1921. Net Income of Corporations Defined. Sec. 232. That in the case of a corporation sub- ject to the tax imposed by section 230 the term "net income" means the gross income as defined in sec- tion 233 less the deductions allowed by section 234, and the net income shall be computed on the same basis as is provided in subdivision (b) of section 212 or in section 226. In the case of a foreign corporation or of a corporation entitled to the bene- fits of section 262 the computation shall also be made in the manner provided in section 217. Gross Income of Corporations Defined. Sec. 233. (a) That in the case of a corpora- tion subject to the tax imposed by section 230 the IncomeTax 69 term "gross income" means the gross income as defined in sections 213 and 217, except that mutual Mutual marine marine insurance companies shall include in gross '""u""" income the gross premiums collected and received """P""'*' by them less amounts paid for reinsurance. (b) In the case of a foreign corporation, gross F"*'?" income means only gross income from sources "'P"»"»"» within the United States, determined (except in the case of insurance companies subject to the tax imposed by section 243 or 246) in the manner pro- vided in section 217. Deductions Allowed Corporations. Sec. 234. (a) That in computing the net in- come of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: (1) All the ordinary and necessary expenses Business expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered, and including rentals or other payments required to be made as a condition to the continued use or possession of prop- erty to which the corporation has not taken or is not taking title, or in which it has no equity; (2) All interest paid or accrued within the tax- '"'•««' able year on its indebtedness, except on indebted- ness incurred or continued to purchase or carry obligations or securities (other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest upon which is wholly exempt from taxation under this title; (3) Taxes paid or accrued within the taxable Taxes year except (a) income, war-profits, and excess- profits taxes imppsed by the authority of the United States, (b) so much of the income, war-profits and excess-profits taxes imposed by the authority of any foreign country or possession of the United States 60 Revenue Act Exception: tax paid under tax-free covenant Leases Repurchase of securities as is allowed as a credit under section 238, and (c) taxes assessed against local benefits of a kind tend- ing to increase the value of the property assessed. In the case of obligors specified in subdivision (b) of section 221 no deduction for the payment of the tax imposed by this title, or any other tax paid pur- suant to the contract or provision referred to in that subdivision, shall be allowed, nor shall such tax be included in the gross income of the obligee. The deduction allowed by this paragraph shall be allowed in the case of taxes imposed upon a share- holder or member of a corporation upon his interest as shareholder or member, which are paid by the corporation without reimbursement from the share- holder or member, but in such cases no deduction shall be allowed the shareholder or member for the amount of such taxes. For the purpose of this paragraph, estate, inheritance, legacy, and succes- sion taxes accrue on the due date thereof except as otherwise provided by the law of the jurisdiction imposing such taxes; (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise ; unless, in order to clearly reflect the income, the loss should in the opinion of the Commissioner be accounted for as of a different period. No deduc- tion shall be allowed for any loss claimed to have been sustained in any sale or other disposition of shares of stock or securities made after the passage of this Act where it appears that within 30 days before or after the date of such sale or other disposi- tion the taxpayer has acquired (otherwise than by bequest or inheritance) substantially identical prop- erty, and the property so acquired is held by the taxpayer for any period after such sale or other dis- position, unless such claim is made by a dealer in stock or securities and with respect to a transaction made in the ordinary course of its business. If such acquisition is to the extent of part only of substan- IncomeTax 61 tially identical property, then only a proportionate part of the loss shall be disallowed. In case of losses arising from destruction of or damage to property, where the property so destroyed or dam- aged was acquired before March 1, 1913, the deduc- tion shall be computed upon the basis of its fair market price or value as of March 1, 1913 ; (5) Debts ascertained to be worthless and Debts charged off within the taxable year (or in the dis- cretion of the Commissioner, a reasonable addition to a reserve for bad debts) ; and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in part; (6) The amount received as dividends (A) from Dividends from a domestic corporation other than a corporation taxable entitled to the benefits of section 262, or (B) from <:"?»"'!•"» any foreign corporation when it is shown to the satisfaction of the Commissioner that more than 50 per centum of the gross income of such foreign cor- poration for the three-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such part of such period as the foreign corporation has been in existence) was derived from sources within the United States as determined under section 217; (7) A reasonable allowance for the exhaustion, Depredation and wear and tear of property used in the trade or busi- oi>»o'e«cence ness, including a reasonable allowance for obsoles- cence. In the case of such property acquired before March 1, 1913, this deduction shall be computed upon the basis of its fair market price or value as of March 1, 1913; (8) In the case of buildings, machinery, equip- Amortization ment, or other facilities, constructed, erected, in- facilities for war stalled, or acquired, on or after April 6, 1917, for p™ ^'^^ time of the original purchase of a new boat by a user, if on any other date than July 1, there shall be levied, assessed, collected, and paid, in lieu of the tax imposed by section 1003 of the Revenue Act of 1918, upon the use of yachts, pleasure boats, power boats, sailing boats, and motor boats with fixed engines, of over five net tons and over thirty- two feet in length, not used exclusively for trade, fishing, or national defense, or not built according to plans and specifications approved by the Navy Department, a special excise tax to be based on each yacht or boat, at rates as follows: Yachts, Classification pleasure boats, power boats, motor boats with fixed ^"^ "*«« engines, and sailing boats, of over five net tons, length over thirty-two feet and not over fifty feet, $1 for each foot; length over fifty feet, and not over one hundred feet, $2 for each foot; length over one hundred feet, $4 for each foot. In determining the length of such yachts, pleas- Measurement ure boats, power boats, motor boats with fixed en- of'ength gines, and sailing boats, the measurement of over- all length shall govern. In the case of a tax imposed at the time of the original purchase of a new boat on any other date 152 Revenue Act Tax for portion of one year Exemption Specific penalty Harrison Narcotic Act, Section 1, as amended Registration of drug dealers than July 1, the amount to be paid shall be the same number of twelfths of the amount of the tax as the number of calendar months (including the month of sale) remaining prior to the following July 1. This section shall not apply to vessels or boats used without profit by any benevolent, charitable, or religious organizations, exclusively for furnish- ing aid, comfort, or relief to seamen. Penalty for Nonpayment of Special Taxes. Sec. 1004. That any person who carries on any business or occupation for which a special tax is imposed by sections 1000, 1001 or 1002, without having paid the special tax therein provided, shall, besides being liable for the payment of such special tax, be subject to a penalty of not more than $1,000 or to imprisonment for not more than one year, or both. Tax on Narcotics. Sec. 1005. That section 1 of the Act entitled "An Act to provide for the registration of, with col- lectors of internal revenue, and to impose a special tax upon all persons who produce, import, manu- facture, compound, deal in, dispense, sell, distrib- ute, or give away opium or coca leaves, their salts, derivatives, or preparations, and for other pur- poses," approved December 17, 1914, as amended by section 1006 of the Revenue Act of 1918, is re-enacted without change, as follows; "Section 1. That on or before July 1 of each year every person who imports, manufactures, pro- duces, compounds, sells, deals in, dispenses, or gives away opium or qoca leaves, or any compound, manufacture, salt, derivative, or preparation there- of, shall register with the collector of internal rev- enue of the district his name or style, place of busi- Special Taxes 153 ness and place or places where such business is to be carried on, and pay the special taxes hereinafter provided ; "Every person who on January 1, 1919, is en- gaged in any of the activities above enumerajted, or who between such date and the passage of this Act first engaged in any of such activities, shall within thirty days after the passage of this Act make like registration, and shall pay the propor- tionate part of the tax for the period ending June 30, 1919; and "Every person who first engages in any of such activities after the passage of this Act shall imme- diately make like registration and pay the propor- tionate part of the tax for the period ending on the following June 30th; "Importers, manufacturers, producers, or com- Rates pounders, $24 per annum; wholesale dealers, $12 per annum; retail dealers, $6 per annum; physi- cians, dentists, veterinary surgeons, and other prac- titioners lawfully entitled to distribute, dispense, give away, or administer any of the aforesaid drugs to patients upon whom they in the course of their professional practice are in attendance, shall pay $3 per annum. "Every person who imports, manufactures, com- importer, pounds, or otherwise produces for sale or distribu- manufacturer, tion any of the aforesaid drugs shall be deemed to "" producer be an importer, manufacturer, or producer. "Every person who sells or offers for sale any wholesale dealer of said drugs in the original stamped packages, as hereinafter provided, shall be deemed a wholesale dealer. "Every person who sells or dispenses from orig- Rg,,;] jej|„ inal stamped packages, as hereinafter provided, shall be deemed a retail dealer: Provided, That the office, or if none, the residence, of any person Place of business shall be considered for the purpose of this Act his place of business; but no employee of any person Employees 154 Revenue Act Public officials Registration must precede dealing Person defined Tax on drugs Rate who has registered and paid special tax as herein required, acting within the scope of his employ- ment, shall be required to register and pay special tax provided by this section: Provided further. That officials of the United States, Territorial, Dis- trict of Columbia, or insular possessions, State or municipal governments, who in the exercise of their official duties engage in any of the business herein described, shall not be required to register, nor pay special tax, nor stamp the aforesaid drugs as here- inafter prescribed, but their right to this exemption shall be evidenced in such manner as the Commis- sioner of Internal Revenue, with the approval of the Secretary of the Treasury, may by regulations prescribe. "It shall be unlawful for any person required to register under the provisions of this Act to import, manufacture, produce, compound, sell, deal in, dis- pense, distribute, administer, or give away any of the aforesaid drugs without having registered and paid the special tax as imposed by this section. "That the word 'person' as used in this Act shall be construed to mean and include a partnership, association, company, or corporation, as well as a natural person; and all provisions of existing law relating to special taxes, as far as necessary, are hereby extended and made applicable to this sec- tion. "That there shall be levied, assessed, collected, and paid upon opium, coca leaves, any compound, salt, derivative, or preparation thereof, produced in or imported into the United States, and sold, or removed for consumption or sale, an internal-rev- enue tax at the rate of 1 cent per ounce, and any fraction of an ounce in a package shall be taxed as an ounce, such tax to be paid by the importer, manu- facturer, producer, or compounder thereof, and to be represented by appropriate stamps, to be pro- vided by the Commissioner of Internal Revenue, SrECiAL Taxes 155 with the approval of the Secretary of the Treasury; and the stamps herein provided shall be so affixed to the bottle or other container as to securely seal the stopper, covering, or wrapper thereof. "The tax imposed by this section shall be in addi- tion to any import duty imposed on the aforesaid drugs. "It shall be unlawful for any person to purchase. Original stamped sell, dispense, or distribute any of the aforesaid packages drugs except in the original stamped package qr from the original stamped package ; and the absence of appropriate tax-paid stamps from any of the aforesaid drugs shall be prima facie evidence of a violation of this section by the person in whose pos- session same may be found; and the possession of any original stamped package containing any of the aforesaid drugs by any person who has not reg- istered and paid special taxes as required by this section shall be prima facie evidence of liability to such special tax : Provided, That the provisions of Exceptions this paragraph shall not apply to any person hav- ing in his or her possession any of the aforesaid drugs which have been obtained from a registered dealer in pursuance of a prescription, written for legitimate medical uses, issued by a physician, den- tist, veterinary surgeon, or other practitioner regis- tered under this Act ; and where the bottle or other container in which such drug may be put up by the dealer upon said prescription bears the name and registry number of the druggist, serial number of prescription, name and address of the patient, and name, address, and registry number of the person writing said prescription; or to the dispensing, or administration, or giving away of any of the afore- said drugs to a patient by a registered physician, dentist, veterinary surgeon, or other practitioner in the course of his professional practice, and where said drugs are dispensed or administered to the patient for legitimate medical purposes, and the 1S6 R E VE N U E A c: Revenue stamp law Unstamped packages Records and returns Regulations Harrison Narcotic Act, Section 6, as amended Exceptions record kept as required by this Act of the drugs so dispensed, administered, distributed, or given away. "And all the provisions of existing laws relating to the engraving, issuance, sale, accountability, can- cellation, and destruction of tax-paid stamps pro- vided for in the internal-revenue laws are, in so far as necessary, hereby extended and made to apply to stamps provided by this section. "That all unstamped packages of the aforesaid drugs found in the possession of any person, except as herein provided, shall be subject to seizure and forfeiture, and all the provisions of existing inter- nal-revenue laws relating to searches, seizures, and forfeitures of unstamped articles are hereby ex- tended to and made to apply to the articles taxed under this Act and the persons upon whom these taxes are imposed. "Importers, manufacturers, and wholesale deal- ers shall keep such books and records and render such monthly returns in relation to the transactions in the aforesaid drugs as the Commissioner of In- ternal Revenue, with the approval of the Secretary of the Treasury, may by regulations require. "The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall make all needful rules and regulations for carrying the provisions of this Act into effect." Sec. 1006. That section 6 of such Act of Decem- ber 17, 1914, as amended by section 1007 of the Revenue Act of 1918, is re-enacted without change, as follows : "Sec. 6. That the provisions of this Act shall not be construed to apply to the manufacture, sale, dis- tribution, giving away, dispensing, or possession of preparations and remedies which do not contain more than two grains of opium, or more than one- fourth of a grain of morphine, or more than one- eighth of a grain of heroin, or more than one grain of codeine, or any salt or derivative of any of them Special Taxes 157 in one fluid ounce, or, if a solid or semisolid prepara- tion, in one avoirdupois ounce ; or to liniments, oint- ments, or other preparations which are prepared for external use, only, except liniments, ointments, and other preparations which contain cocaine or any of its salts or alpha or beta eucaine or any of their salts or any synthetic substitute for them: Pro- vided, That such remedies and preparations are manufactured, sold, distributed, given away, dis- pensed, or possessed as medicines and not for the purpose of evading the intentions and provisions of this Act : Provided further. That any manuf ac- Records turer, producer, compounder, or vendor (including dispensing physicians) of the preparations and remedies mentioned in this section shall keep a record of all sales, exchanges, or gifts of such prep- arations and remedies in such manner as the Com- missioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall direct. Such record shall be preserved for a period of two years in such a way as to be readily accessible to inspec- tion by any officer, agent or employee of the Treas- ury Department duly authorized for that purpose, and the State, Territorial, District, municipal, and insular officers named in section 5 of this Act, and every such person so possessing or disposing of such Registration preparations and remedies shall register as required in section 1 of this Act and, if he is not paying a tax under this Act, he shall pay a special tax of $1 ^p""*' '»" for each year, or fractional part thereof, in which he is engaged in such occupation, to the collector of internal revenue of the district in which he carries on such occupation as provided in this Act. The provisions of this Act as amended shall not apply to decocainized coca leaves or preparations made therefrom, or to other preparations of coca leaves which do not contain cocaine." Sec. 1007. That all opium, its salts, derivatives, and compounds, and coca leaves, salts, derivatives. 159 Revenue Act Confiscation of drugs and compounds thereof, which may now be under seizure or which may hereafter be seized by the United States Government from any person or per- sons charged with any violation of the Act of Octo- ber 1, 1890, as amended by the Acts of March 3, 1897, February 9, 1909, and January 17, 1914, or the Act of December 17, 1914, as amended, shall upon conviction of the person or persons from whom seized be confiscated by and forfeited to the Disposition of United States ; and the Secretary is hereby author- confiscated drugs ijrgfj to deliver for medical or scientific purposes to any department, bureau, or other agency of the United States Government, upon proper applica- tion therefor under such regulation as may be pre- scribed by the Commissioner, with the approval of the Secretary, any of the drugs so seized, confis- cated, and forfeited to the United States. The provisions of this section shall also apply to any of the aforesaid drugs seized or coming into the possession of the United States in the enforce- ment of any of the above-mentioned Acts where the owner or owners thereof are unknown. None of the aforesaid drugs coming into possession of the United States under the operation of said Acts, or the provisions of this section, shall be destroyed without certification by a committee appointed by the Commissioner, with the approval of the Secre- tary, that they are of no value for medical or scien- tific purposes. TITLE XL— STAMP TAXES. Sec, 1100. That on and after January 1, 1922, Effective date, there shall be levied, collected, and paid, for and in January i, 1922 respect of the several bonds, debentures, or certifi- cates of stocli and of indebtedness, and other docu- ments, instruments, matters, and things mentioned and described in Schedule A of this title, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, are written or printed, by any person who makes, signs, issues, sells, removes, consigns, or ships the same, or for whose use or benefit the same are made, signed, issued, sold, removed, consigned, or shipped, the several taxes specified in such sched- ule. The taxes imposed by this section shall, in the case of any article upon which a corresponding stamp tax is now imposed by law, be in lieu of such tax. Sec. 1101. That there shall not be taxed under Exemptions: this title any bond, note, or other instrument, issued Obligations of by the United States, or by any foreign Govern- governments ment, or by any State, Territory, or the District of Columbia, or local subdivision thereof, or municipal or other corporation exercising the taxing power; or any bond of indemnity required to be filed by Bonds to United any person to secure payment of any pension, allow- States ance, allotment, relief, or insurance by the United States, or to secure a duplicate for, or the payment of, any bond, note, certificate of indebtedness, war- savings certificate, warrant or check, issued by the United .States; or stocks and bonds issued by co- Securities of certain operative building and loan associations which are ™u'uai associations organized and operated exclusively for the benefit 160 Revenue Act of their members and make loans only to their shareholders, or by mutual ditch or irrigation com- panies. Sec. 1102. That whoever — Penalty for (^) Makcs, signs, issues, or accepts, or causes to non-payment be made, signed, issued, or accepted, any instru- »"»* ment, document, or paper of any kind or descrip- tion whatsoever without the fuU amount of tax thereon being duly paid; (b) Manufactures or imports and sells, or offers for sale, or causes to be manufactured or imported and sold, or offered for sale, any playing cards, package, or other article without the full amount of tax being duly paid ; (c) Makes use of any adhesive stamp to denote any tax imposed by this title without canceling or obliterating such stamp as prescribed in section 1104: Is guilty of a misdemeanor and upon conviction thereof shall pay a fine of not more than $100 for each offense. Sec. 1103. That whoever— Penalty for fradulent (&) Fraudulently cuts, tears, or removes from misuse of stamps any vellum, parchment, paper, instrument, writing, package, or article, upon which any tax is imposed by this title, any adhesive stamp or the impression of any stamp, die, plate, or other article provided, made, or used in pursuance of this title ; (b) Fraudulently uses, joins, fixes, or places to, with, or upon any vellum, parchment, paper, instru- ment, writing, package, or article, upon which any tax is imposed by this title, (1) any adhesive stamp, or the impression of any stamp, die, plate, or other article, which has been cut, torn, or re- moved from any other vellum, parchment, paper, instrument, writing, package, or article, upon which any tax is imposed by this title; or (2) any adhesive stamp or the impression of any stamp, die, plate, or other article of insufficient value; or (3) Stamp Taxes 161 any forged or counterfeited stamp, or the impres- sion of any forged or counterfeited stamp, die, plate, or other article; (c) Willfully removes, or alters the cancellation, or defacing marks of, or otherwise prepares, any adhesive stamp, with intent to use, or cause the same to be used, after it has been already used, or knowingly or willfully buys, sells, offers for sale, or gives aAvay, any such washed or restored stamp to any person for use, or knowingly uses the same ; (d) Knowingly and without lawful excuse (the burden of proof of such excuse being on the ac- cused) has in possession any washed, restored, or altered stamp, which has been removed from any vellum, parchment, paper, instrument, writing, package, or article; Is guilty of a misdemeanor, and upon conviction shall be punished by a fine of not more than $1,000, or by imprisonment for not more than five years, or both, and any such reused, canceled, or counter- feit stamp and the vellum, parchment, document, paper, package, or article upon which it is placed or impressed shall be forfeited to the United States. Sec. 11041. That whenever an adhesive stamp is CanceUaiion of used for denoting any tax imposed by this title, stamps except as hereinafter provided, the person using or affixing the same shall write or stamp or cause to be written or stamped thereupon the initials of his or its name and the date upon which the same is attached or used, so that the same may not again be used: Provided, That the Commissioner may prescribe such other method for the cancellation of such stamps as he may deem expedient. Sec. 1105. (a) That the Commissioner shall Preparation and cause to be prepared and distributed for the pay- distribution of ment of the taxes prescribed in this title suitable *'""■'* stamps denoting the tax on the document, articles, or thing to which the same may be affixed, and shall 162 Revenue Act Extension of revenue laws Sale of stamps at postoffices Sale through Treasury agencies prescribe such method for the affixing of said stamps in substitution for or in addition to the method provided in this title, as he may deena expedient. (b) All internal revenue laws relating to the as- sessment and collection of taxes are hereby extended to and made a part of this title, so far as applic- able, for the purpose of collecting stamp taxes omitted through mistake or fraud from any instru- ment, document, paper, writing, parcel, package, or article named herein. Sec. 1106. That the Commissioner shall furnish to the Postmaster General without prepayment a suitable quantity of adhesive stamps to be distrib- uted to and kept on sale by the various postmasters in the United States. The Postmaster General may require each such postmaster to give addi- tional or increased bond as postmaster for the value of the stamps so furnished, and each such postmas- ter shall deposit the receipts from the sale of such stamps to the credit of and render accounts to the Postmaster General at such times and in such form as he may by regulations prescribe. The Post- master General shall at least once monthly transfer all collections from this source to the Treasury as internal-revenue collections. Sec. 1107. (a) That each collector shall fur- nish, without prepayment, to any assistant treas- urer or designated depositary of the United States, located in the district of such collector, a suitable quantity of adhesive stamps to be kept on sale by such assistant treasurer or designated depositary. (b) Each collector shall furnish, without pre- payment, to any person who is (1) located in the district of such collector, (2) duly appointed and acting as agent of any State for the sale of stock transfer stamps of such State, and (3) designated by the Commissioner for the purpose, a suitable Stamp Taxes 163 quantity of such adhesive stamps as are required by subdivisions 2, 3, and 4 of Schedule A of this title, to be kept on sale by such person. (c) In such cases the collector may require a Surety bond bond, with sufficient sureties, in a sum to be fixed by the Commissioner, conditioned for the faithful return, whenever so required, of all quantities or amounts undisposed of, and for the payment monthly of all quantities or amounts sold or not remaining on hand. The Secretary may from time to time make such regulations as he may find nec- essary to insure the safe-keeping or prevent the illegal use of all such adhesive stamps. Schedule A. — Stamp Taxes. 1. Bonds of indebtedness: On all bonds, de- Bonds, issue, or bentures, or certificates of indebtedness issued, by renewal any person, and all instruments, however termed, issued by any corporation with interest coupons or in registered form, known generally as corporate securities, on each $100 of face value or fraction Rate, 5(5 per $ioo thereof, 5 cents: Provided, That every renewal of the foregoing shall be taxed as a new issue: Pro- vided further. That when a bond conditioned for the repayment or payment of money is given in a penal sum greater than the debt secured, the tax shall be based upon the amount secured. 2. Capital stock, issued: On each original issue ot capital stock issue, whether on organization or reorganization, of certificates of stock, or of profits, or of interest in property or accumulations, by any corporation, on each $100 of face value or fraction thereof, 5 cents: Rate, 5?! per $ioo Provided, That where a certificate is issued with- out face value, the tax shall be 5 cents per share, unless the actual value is in excess of $100 per share, in which case the tax shall be 5 cents on each $100 of actual value or fraction thereof, or unless 164 Revenue Act Stamps affixed to stock books Stock transfer tax Rate, 2^ per $100 Stock as collateral Transfer to broker Stamps, how affixed the actual value is less than $100 per share, in which case the tax shall be 1 cent on each $20 of actual value, or fraction thereof. The stamps representing the tax imposed by this subdivision shall be attached to the stock books and not to the certificates issued. 3. Capital stock, sales or transfers: On all sales, or agreements to sell, or memoranda of sales or deliveries of, or transfers of legal title to shares or certificates of stock or of profits or of interest in property or accumulations in any cor- poration, or to rights to subscribe for or to receive such shares or certificates, whether made upon or shown by the books of the corporation, or by any assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evi- dence of transfer or sale, whether entitling the holder in any manner to the benefit of such stock, interest, or rights, or not, on each $100 of face value or fraction thereof, 2 cents, and where such shares are without par or face value, the tax shall be 2 cents on the transfer or sale or agreement to sell on each share: Provided, That it is not intended by this title to impose a tax upon an agreement evi- dencing a deposit of certificates as collateral secur- ity for money loaned thereon, which certificates are not actually sold, nor upon the delivery or transfer for such purpose of certificates so deposited, nor upon mere loans of stock nor upon the return of stock so loaned: Provided further. That the tax shall not be imposed upon deliveries or transfers to a broker for sale, nor upon deliveries or transfers by a broker to a customer for whom and upon whose order he has purchased same, but such deliveries or transfers shall be accompanied by a certificate set- ting forth the facts: Provided further. That in case of sale where the evidence of transfer is shown only by the books of the corporation the stamp shall S T A M P T A X E S 1 65 be placed upon such books ; and where the change of ownership is by transfer of the certificate the stamp shall be placed upon the certificate ; and in cases of an agreement to sell or where the transfer is by delivery of the certificate assigned in blank there shall be made and delivered by the seller to the buyer a bill or memorandum of such sale, to which the stamp shall be affixed ; and every bill or memo- randum of sale or agreement to sell before men- tioned shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers. Any person liable to pay Penalties the tax as herein provided, or anyone who acts in the matter as agent or broker for such person, who makes any such sale, or who in pursuance of any such sale delivers any certificate or evidence of the sale of any stock, interest or right, or bill or memo- randum thereof, as herein required, without having the proper stamps affixed thereto with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not exceeding $1,000, or be imprisoned not more than six months, or both. 4. Produce, sales of, on exchange: Upon each Sales of futures on sale, agreement of sale, or agreement to sell (not produce exchange including so-called transferred or scratch sales), any products or merchandise at, or under the rules or usages of, any exchange, or board of trade, or other similar place, for future delivery, for each $100 in value of the merchandise covered by said Rate, 2f5 per $ioo sale or agreement of sale or agreement to sell, 2 cents, and for each additional $100 or fractional part thereof in excess of $100, 2 cents: Provided, That on every sale or agreement of sale or agree- stamps on ment to sell as aforesaid there shall be made and ™e™oranda of sale delivered by the seller to the buyer a bill, memo- randum, agreement, or other evidence of such sale, agreement of sale, or agreement to sell, to which there shall be affixed a lawful stamp or stamps in 166 Revekue Act Transfers to clearing house Penalty Cash sales exempt value equal to the amount of the tax on such sale : Provided further. That sellers of commodities de- scribed herein, having paid the tax provided by this subdivision, may transfer such contracts to a clear- ing-house corporation or association, and such transfer shall not be deemed to be a sale, or agree- ment of sale, or an agreement to sell within the pro- visions of this Act, provided that such transfer shall not vest any beneficial interest in such clearing- house association but shall be made for the sole pur- pose of enabling such clearing-house association to adjust and balance the accounts of the members of such clearing-house association on their several con- tracts. Every such bill, memorandum, or other evidence of sale or agreement to sell shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers ; and any person liable to pay the tax as herein pro- vided, or anyone who acts in the matter as agent or broker for such person, who makes any such sale or agreement of sale, or agreement to sell, or who, in pursuance of any such sale, agreement of sale, or agreement to sell, delivers any such products or merchandise without a bill, memorandum, or other evidence thereof as herein required, or who delivers such bill, memorandum, or other evidence of sale, or agreement to sell, without having the proper stamps affixed thereto, with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not exceeding $1,000 or be imprisoned not more than six months, or both. No bill, memorandum, agreement, or other evi- dence of such sale, or agreement of sale, or agree- ment to sell, in case of cash sales of products or merchandise for immediate or prompt delivery which in good faith are actually intended to be de- livered shall be subject to this tax. StampTaxes 167 This subdivision shall not affect but shall be in Future trading acts addition to the provisions of the "United States "»*»««»«'' Cotton Futures Act," approved August 11, 1916, as amended, and "The Future Trading Act," ap- proved August 24, 1921. 5. Drafts or checks (payable otherwise than at Drafts and promissory sight or on demand) upon their acceptance or n»tes delivery within the United States whichever is prior, promissory notes, except bank notes issued for circulation, and for each renewal of the same, for a sum not exceeding $100, 2 cents; and for each Rate, 2j« per $ioo additional $100, or fractional part thereof, 2 cents. This subdivision shall not apply to a promissory Security of war note secured by the pledge of bonds or obligations oWigat'ons of the United States issued after April 24, 1917, or secured by the pledge of a promissory note which itself is secured by the pledge of such bonds or obligations: Provided, That in either case the par value of such bonds or obligations shall be not less than the amount of such note. 6. Conveyances: Deed, instrument, or writing, Conveyances whereby any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or pur- chasers, or any other person or persons, by his, her, or their direction, when the consideration or value of the interest or property conveyed, exclusive of the value of any lien or encumbrance remaining thereon at the time of sale, exceeds $100 and does Rat*' not exceed $500, 50 cents; and for each additional $500 or fractional part thereof, 50 cents. This sub- division shall not apply to any instrument or writ- ing given to secure a debt. 7. Entry of any goods, wares, or merchandise at Customs entries any custom house, either for consumption or ware- housing, not exceeding $100 in value, 25 cents; exceeding $100 and not exceeding $500 in value, 50 Rates cents; exceeding $500 in value, $1. 168 Revenue Act Entries for withdrawal Foreign iteamship tickets Rates Proxies Power o( attorney Playing cards Foreign insurance policies on property 8. Entry for the withdrawal of any goods or merchandise from customs bonded warehouse, 50 cents. 9. Passage ticket, one way or round trip, for each passenger, sold or issued in the United States for passage by any vessel to a port or place not in the United States, Canada, or Mexico, if costing not exceeding $30, $1 ; costing more than $30 and not exceeding $60, $3; costing more than $60, $5. This subdivision shall not apply to passage tickets costing $10 or less. 10. Proxy for voting at any election for officers, or meeting for the transaction of business, of any corporation, except religious, educational, charit- able, fraternal, or literary societies, or public ceme- teries, 10 cents. 11. Power of attorney granting authority to do or perform some act for or in behalf of the grantor, which authority is not otherwise vested in the grantee, 25 cents. This subdivision shall not apply to any papers necessary to be used for the collec- tion of claims from the United States or from any State for pensions, back pay, bounty, or for prop- erty lost in the military or naval service, nor to powers of attorney required in bankruptcy cases nor to powers of attorney contained in the applica- tion of those who become members of or policy- holders in mutual insurance companies doing busi- ness on the inter-insurance or reciprocal indemnity plan through an attorney in fact. 12. Playing cards : Upon every pack of playing cards containing not more than fifty-four cards, manufactured or imported, and sold, or removed for consumption or sale, a tax of 8 cents per pack. 13. On each policy of insurance, or certificate, binder, covering note, memorandum, cablegram, letter, or other instrument by whatever name called whereby insurance is made or renewed upon prop- Stamp Taxes IfiO erty within the United States (including rents and profits) against peril by sea or on inland waters or in transit on land (including transshipments and storage at termini or way points) or by fire, light- ning, tornado, wind- storm, bombardment, invasion, insurrection or riot, issued to or for or in the name of a domestic corporation or partnership or an in- dividual resident of the United States by any for- eign corporation or partnership or any individual not a resident of the United States, when such policy or other instrument is not signed or counter- signed by an officer or agent of the insurer in a State, Territory, or District of the United States within which such insurer is authorized to do busi- ness, a tax of 3 cents on each dollar, or fractional Ra'e part thereof of the premium charged: Provided, That policies of reinsurance shall be exempt from the tax imposed by this subdivision. Any person to or for whom or in whose name any By whom stamp such policy or other instrument is issued, or any affixed solicitor or broker acting for or on behalf of such person in the procurement of any such policy or other instrument, shall affix the proper stamps to such policy or other instrument, and for failure to affix such stamps with intent to evade the tax shall, in addition to other penalties provided therefor, pay a fine of double the amount of the tax. Mil ines or quarries Mills or factories What constitutes child labor Rate, 10% of net profits Deductions from gross profits TITLE XIL— TAX ON EMPLOYMENT OF CHILD LABOR. Sec. 1200. That every person (other than a bona fide boys' or girls' canning club recognized by the Agricultural Department of a State and of the United States) operating (a) any mine or quarry situated in the United States in which children under the age of sixteen years have been employed or permitted to work during any portion of the tax- able year; or (b) any mill, cannery, workshop, fac- tory, or manufacturing establishment situated in the United States in which children under the age of fourteen years have been employed or permitted to work, or children between the ages of fourteen and sixteen have been employed or permitted to work more than eight hours in any day or more than six days in any week, or after the hour of seven o'clock post meridian, or before the hour of six o'clock ante meridian, during any portion of the taxable year, shall pay for each taxable year, in addition to all other taxes imposed by law (but in lieu of the tax imposed by section 1200 of the Rev- enue Act of 1918), an excise tax equivalent to 10 per centum of the entire net profits received or ac- crued for such year from the sale or disposition of the product of such mine, quarry, mill, cannery, workshop, factory, or manufacturing establishment. Sec. 1201. That in computing net profits under the provisions of this title, for the purpose of the tax there shall be allowed as deductions from the gross amount received or accrued for the taxable year from the sale or disposition of such products manufactured within the United States the fol- lowing items: Employment of Child Labob 171 (a) The cost of raw materials entering into the Raw materials production; (b) Running expenses, including rentals, cost Business expenses of repairs, and maintenance, heat, power, insur- ance, management, and a reasonable allowance for salaries or other compensations for personal serv- ices actually rendered, and for depreciation; (c) Interest paid within the taxable year on interest debts or loans contracted to meet the needs of the business, and the proceeds of which have been actu- ally used to meet such needs ; (d) Taxes of all kinds paid during the taxable Taxes year with respect to the business or property re- lating to the production ; and (e) Losses actually sustained within the taxable Usses year in connection with the business of producing such products, including losses from fire, flood, storm, or other casualties, and not compensated for by insurance or otherwise. Sec. 1202. That if any such person during any Sales computed on taxable year or part thereof, whether under any basis of fair agreement, arrangement, or understanding or """ketpnce otherwise, sells or disposes of any product of such mine, quarry, mill, cannery, workshop, factory, or manufacturing establishment at less than the fair market price obtainable therefor either (a) in such manner as directly or indirectly to benefit such person or any person directly or indirectly inter- ested in the business of such person; or (b) with intent to cause such benefit; the gross amount re- ceived or accrued for such year or part thereof from the sale or disposition of such product shall be taken to be the amount which would have been received or accrued from the sale or disposition of such product if sold at the fair market price. Sec, 1203. (a) That no person subject to the Certificates of age provisions of this title shall be liable for the tax herein imposed if the only employment or permis- sion to work which but for this section would sub- 172 Revenue Act Federal board False statement State certificates Mistakes of fact Returns ject him to the tax has been of a child as to whom such person has in good faith procured at the time of employing such child or permitting him to work, and has since in good faith relied upon and kept on file a certificate, issued in such form, under such conditions and by such persons as may be prescribed by a board consisting of the Secretary, the Com- missioner, and the Secretary of Labor, showing the child to be of such age as not to subject such person to the tax imposed by this title. Any person who knowingly makes a false statement or presents false evidence in or in relation to any such certificate or application therefor shall be punished by a fine of not less than $100, nor more than $1,000, or by imprisonment for not more than three months, or by both such fine and imprisonment, in the disci'e- tion of the court. In any State designated by such board an em- ployment certificate or other similar paper as to the age of the child, issued under the laws of that State, and not inconsistent with the provisions of this title, shall have the same force and effect as a certificate herein provided for. (b) The tax imposed by this title shall not be imposed in the case of any person who proves to the satisfaction of the Secretary that the only employ- ment or permission to work which but for this sec- tion would subject him to the tax, has been of a child employed or permitted to work under a mis- take of fact as to the age of such child, and without intention to evade the tax. Sec. 1204. That on or before the first day of the third month following the close of each taxable year, a true and accurate return imder oath shall be made by each person subject to the provisions of this title to the collector for the district in which such person has his principal office or place of business, in such form as the Commissioner, with the approval of the Secretary, shall prescribe, set- Employment of Child Labou 173 Assessment and payment of tax ting forth specifically the gross amount of income received or accrued during such year from the sale or disposition of the product of any mine, quarry, mill, cannery, workshop, factory, or manufacturing establishment, in which children have been em- ployed subjecting him to the tax imposed by this title, and from the total thereof deducting the ag- gregate items of allowance authorized by this title, and such other particulars as to the gross "receipts and items of allowance as the Commissioner, with the approval of the Secretary, may require. Sec. 1205. That all such returns shall be trans- mitted forthwith by the collector to the Commis- sioner, who shall, as soon as practicable, assess the tax found due and notify the person making such return of the amount of tax for which such person is liable, and such person shall pay the tax to the collector on or before thirty days from the date of such notice. Sec. 1206. That for the purposes of this Act inspection the Commissioner, or any person duly authorized by him, shall have authority to enter and inspect at any time any mine, quarry, mill, cannery, work- shop, factory, or manufacturing establishment. The Secretary of Labor, or any person duly author- ized by him, shall, for the purpose of complying with a request of the Commissioner to make such an inspection, have like authority, and shall make report to the Commissioner of inspections made under such authority in such form as may be pre- scribed by the Commissioner with the approval of the Secretary of the Treasury. Any person who refuses or obstructs entry or Penalty inspection authorized by this section shall be pun- ished by a fine of not more than $1,000, or by im- prisonment for not more than one year, or both. Sec. 1207. That as used in this title the term Taxable year "taxable year" shall have the same meaning as pro- vided for the purposes of income tax in section 200. Extension of existing administrative provisions Commissioner's power TITLE XIII.— GENERAL ADMINISTRATIVE PROVISIONS.* Laws Made Applicable. Sec. 1300. That all administrative, special, or stamp provisions of law, including the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this Act, and every person liable to any tax imposed by this Act, or for the collection thereof, shall keep such records and render, under oath, such statements and returns, and shall comply with such regulations as the Commissioner, with the approval of the Secretary, may from time to time prescribe. Method of Collecting Tax. Sec. 1301. That whether or not the method of collecting any tax imposed by Titles V, VI, VII, VIII, IX, or X of this Act is specifically provided therein, any such tax may, under regulations pre- scribed by the Commissioner with the approval of the Secretary, be collected by stamp, coupon, serial- numbered ticket, or such other reasonable device or method as may be necessary or helpful in securing a complete and prompt collection of the tax. All administrative and penalty provisions of Title XI, in so far as applicable, shall apply to the collection of any tax which the Commissioner determines or prescribes shall be collected in such manner. Penalties. Sec. 1302. (a) That any person required under Titles V, VI, VII, VIII, IX, X, or XII, to pay, or to collect, account for and pay over any tax, or * Sections 1300-1318 and 1818 of the Revenue Act of 1918 are not specifically repealed by this Act. Administrative Provisions 175 collect and pay tax required by law or regulations made under author- ity thereof to make a return or supply any informa- tion for the purposes of the computation, assess- ment, or collection of any such tax, who fails to Failure to make pay, collect, or truly account for and pay over any returns, give such tax, make anv such return or supply any such '"formation, or miormation at the time or times required by law or regulation shall in addition to other penalties provided by law be subject to a penalty of not more than $1,000. (b) Any person who willfully refuses to pay, wiiifui neglect collect, or truly account for and pay over any such tax, make such return or supply such information at . the time or times required by law or regulation, or who willfully attempts in any manner to evade such tax shall be guilty of a misdemeanor and in addi- tion to other penalties provided by law shall be fined not more than $10,000 or imprisoned for not more than one year, or both, together with the costs of prosecution. (c) Any person who willfully refuses to pay, Additional penalty collect, or truly account for and pay over any such tax shall in addition to other penalties provided by law be liable to a penalty of the amount of the tax evaded, or not paid, collected, or accounted for and paid over, to be assessed and collected in the same manner as taxes are assessed and collected: Pro- vided, however. That no penalty shall be assessed under this subdivision for any offense for which a penalty may be assessed under authority of section 3176 of the Revised Statutes, as amended, or for any offense for which a penalty has been recovered under section 3256 of the Revised Statutes. (d) The term "person" as used in this section Person defined includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs. 176 R E yE N UE Act Commissioner's regulations Acknowledgment of returns Rules and Regulations. Sec. 1303. That the Commissioner, with the ap- proval of the Secretary, is hereby authorized to make all needful rules and regulations for the en- forcement of the provisions of this Act. The Commissioner, with such approval may by regulation provide that any return required by Titles V, VI, VII, VIII, IX, or X to be under oath may, if the amount of the tax covered thereby is not in excess of $10, be signed or acknowledged before two witnesses instead of under oath. Credits and refunds Beverages, tobacco, and excise taxes not applicable to exports Overpayments and Overcollectlons. Sec. 1304. That in the case of any overpayment or overcollection of any tax imposed by section 602 or by Title V, Title VIII, or Title IX, the person making such overpayment or overcollection may take credit therefor against taxes due upon any monthly return, and shall make refund of any ex- cessive amount collected by him upon proper appli- cation by the person entitled thereto. Articles Exported. Sec. 1305. That under such rules and regula- tions as the Commissioner with the approval of the Secretary may prescribe, the taxes imposed under the provisions of Titles VI, VII or IX shall not apply in respect to articles sold or leased for export and in due course so exported. Under such rules and regulations the amount of any internal-revenue tax erroneously or illegally collected in respect to exported articles may be refunded to the exporter of the article, instead of to the manufacturer, if the manufacturer waives any claim for the amount so to be refunded. Fractional Parts of a Cent. Sec. 1306. That in the payment of any tax under this Act not payable by stamp a fractional Administrative Provisions 177 part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to 1 cent. Returns. Sec. 1307. That whenever in the judgment of Commissioner's the Commissioner necessary he may require any discretion person, by notice served upon him, to make a return or such statements as he deems sufficient to show whether or not such person is liable to tax. Examination of Books and Witnesses. Sec. 1308. That the Commissioner, for the pur- Commissioner's pose of ascertaining the correctness of any return authority or for the purpose of making a return where none has been made, is hereby authorized, by any revenue agent or inspector designated by him for that pur- pose, to examine any books, papers, records, or memoranda bearing upon the matters required to be included in the return, and may require the at- tendance of the person rendering the return or of any officer or employee of such person, or the at- tendance of any other person having knowledge in the premises, and may take his testimony with reference to the matter required by law to be in- cluded in such return, with power to administer oaths to such person or persons. Unnecessary Examinations. Sec. 1309. That no taxpayer shall be subjected Number of to unnecessary examinations or investigations, and examinations only one inspection of a taxpayer's books of ac- ''"''*"' count shall be made for each taxable year unless the taxpayer requests otherwise or unless the Com- missioner, after investigation, notifies the taxpayer in writing that an additional inspection is necessary. Jurisdiction of Courts. Sec. 1310. (a) That if any person is summoned District courts under this Act to appear, to testify, or to produce books, papers or other data, the district court of the United States for the district in which such person 178 Revenue Act resides shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, or other data. (b) The district courts of the United States at the instance of the United States are hereby in- vested with such jurisdiction to make and issue, both in actions at law and suits in equity, writs and orders of injunction, and of ne exeat republica, orders appointing receivers, and such other orders and process, and to render such judgments and decrees, granting in proper cases both legal and equitable relief together, as may be necessary or appropriate for the enforcement of the provisions of this Act. The remedies hereby provided are in addition to and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce such provisions. Amendment of (^). Paragraph Twentieth of section 24 of the judicial code Judicial Code is amended by adding at the end thereof the following new paragraph : "Concurrent with the Court of Claims, of any suit or proceeding, commenced after the passage of the Revenue Act of 1921, for the recovery of any internal-revenue tax alleged to have been erron- eously or illegally assessed or collected, or of any penalty claimed to have been collected without authority or any sum alleged to have been excess- ive or in any manner wrongfully collected, under the internal-revenue laws, even if the claim exceeds $10,000, if the collector of internal-revenue by whom such tax, penalty, or sum was collected is dead at the time such suit or proceeding is com- menced." Amendments to Revised Statutes, Report of violations Sec. 1311. That scctious 3164, 3165, 3167, 3172, 3173, and 3176 of the Revised Statutes, as amended, are reenacted, without change, as follows: "Sec. 3164. It shall be the duty of every collec- tor of internal revenue having knowledge of any Administrative Provisions 179 willful violation of any law of the United States relating to the revenue, within thirty days after coming into possession of such knowledge, to file with the district attorney of the district in which any fine, penalty, or forfeiture may be incurred, a statement of all the facts and circumstances of the case within his knowledge, together with the names of the witnesses, setting forth the provisions of laAv believed to be so violated on which reliance maj' be had for condemnation or conviction. "Sec. 3165. Every collector, deputy collector. Oaths and evidence internal-revenue agent, and internal-revenue officer assigned to duty under an internal-revenue agent, is authorized to administer oaths and to take evi- dence touching any part of the administration of the internal-revenue laws with which he is charged, or where such oaths and evidence are authorized by law or regulation authorized by law to be taken. "Sec. 3167. It shall be unlawful for any col- Penalty for divulging lector, deputy collector, agent, clerk, or other officer information or employee of the United States to divulge or to make known in any manner whatever not provided by law to any person the operations, style of work, or apparatus of any manufacturer or producer vis- ited by him in the discharge of his official duties, or the amount or source of income, profits, losses, ex- penditures, or any particular thereof, set forth or disclosed in any income return, or to permit any income return or copy thereof or any book contain- ing any abstract or particulars thereof to be seen or examined by any person except as provided by law ; and it shall be unlawful for any person to print or publish in any manner whatever not provided by law anj'^ income return, or any part thereof or source of income, profits, losses, or expenditures appearing in any income return; and any offense against the foregoing provision shall be a misde- meanor and be punished by a fine not exceeding $1,000 or by imprisonment not exceeding one year, 180 Revenue Act Investigations Returns, when required Collector's return for consenting taxpayer 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 or discharged from employment. "Sec. 3172. Every collector shall, from time to time, cause his deputies to proceed through every part of his district and inquire after and concern- ing all persons therein who are liable to pay any internal-revenue tax, and all persons ovraing or having the care and management of any objects liable to pay any tax, and to make a list of such persons and enumerate said objects. "Sec. 3173. It shall be the duty of any person, partnership, firm, association, or corporation, made liable to any duty, special tax, or other tax imposed by lavv^, when not otherwise provided for, (1) in case of a special tax, on or before the thirty-first day of July in each year, and (2) in other cases before the day on which the taxes accrue, to make a list or return, verified by oath, to the collector or a deputy collector of the district where located, of the articles or objects, including 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, associa- tion, or corporation is liable : 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 merchandise, article or objects liable to pay any duty, tax, or license, shall fail to make and exhibit a list or return required by law, but shall consent to disclose the particulars of any and all the property, goods, wares, and mer- chandise, articles, and objects liable to pay any duty or tax, or any business or occupation liable to pay any tax as aforesaid, then, and in that case, it Administkative Provisions 181 shall be the duty of the collector or deputy collector to make such list or return, which, being distinctly read, consented to, and signed and verified by oath by the person so owning, possessing, or having the care and management as aforesaid, may be received as the list of such person : Provided further. That in case no annual list or return has been rendered by such person to the collector or deputy collector as required by law, and the person shall be absent from his or her residence or place of business at the time the collector or a deputy collector shall call for the annual list or return, it shall be the duty of such Notice of requirement collector or deputy collector to leave at such place »'■■«'"'" of residence or business, with some one qf suitable age and discretion, if such be present, otherwise to deposit in the nearest post office, a note or memo- randum addressed to such person, requiring him or her to render to such collector or deputy collector the list or return required by law within ten days from the date of such note or memorandum, veri- fied by oath. And if any person, on being notified or required as aforesaid, shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any person who is re- quired to deliver a monthly or other return of objects subject to tax fails to do so at the time required, or delivers any return which, in the opinion of the collector, is erroneous, false or fraudulent, or contains any undervaluation or un- derstatement, or refuses to allow any regularly authorized Government officer to examine the books of such person, firm, or corporation, it shall be law- Examination of f ul for the collector to summon such person, or any '""*''* p*"""' other person having possession, custody, or care of books of account containing entries relating to the business of such person or any other person he may deem proper, to appear before him and produce such books at a time and place named in the sum- mons, and to give testimony or answer interroga- 182 Revenue Act Collector's return for taxpayer Extension of time for filing return Commissioner to assess tax tories, under oath, respecting any objects or income liable to tax or the returns thereof. The collector may summon any person residing or found within the State or Territory in which his district lies ; and when the person intended to be summoned does not reside and can not be found within such State or Territory, he may enter any collection district where such person may be found and there make the examination herein authorized. And to this end he may there exercise all the authority which he might lawfully exercise in the district for which he was commissioned: Provided, That 'person,' as used in this section, shall be construed to include any corppration, joint-stock company or associa- tion, or insurance company when such construction is necessary to carry out its provisions. "Sec. 3176. If any person, corporation, com- pany, or association fails to make and file a return or list at the time prescribed by law or by regulation made under authority of law, or makes, willfully or otherwise, a false or fraudulent return or list, the collector or deputy collector shall make the return or list from his own knowledge and from such information as he can obtain through testimony or otherwise. In any such case the Commissioner may, from his own knowledge and from such information as he can obtain through testimony or otherwise, make a return or amend any return made by a col- lector or deputy collector. Any return or list so made and subscribed by the Commissioner, or by a collector or deputy collector and approved by the Commissioner, shall be prima facie good and suffi- cient for all legal purposes. "If the failure to file a return or list is due to sickness or absence, the collector may allow such further time, not exceeding thirty days, for making and filing the return or list as he deems proper. "The Commissioner of Internal Revenue shall determine and assess all taxes, other than stamp Administrative Provisions 188 taxes, as to which returns or lists are so made under the provisions of this section. In case of any fail- Penalty for delay ure to make and file a return or list within the time '" "''"^ prescribed by law, or prescribed by the Commis- sioner of Internal Revenue or the collector in pur- suance of law, the Commissioner of Internal Revenue shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. In case a false or fraudulent return or list is will- Fraudulent return* fully made, the Commissioner of Internal Revenue shall add to the tax 50 per centum of its amount. "The amount so added to any tax shall be col- Collection ot penalties lected at the same time and in the same manner and as a part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax." Final Determinations and Assessments Sec. 1312. That if after a determination and Agreed assessments assessment in any case the taxpayer has without "oHo be reopened protest paid in whole any tax or penalty, or accepted any abatement, credit, or refund based on such de- termination and assessment, and an agreement is made in writing between the taxpayer and the Com- missioner, with the approval of the Secretary, that such determination and assessment shall be final and conclusive, then (except upon a showing of fraud or malfeasance or misrepresentation of fact materially affecting the determination or assessment thus made) (1) the case shall not be reopened or the determination and assessment modified by any oflBcer, employee, or agent of the United States, and (2) no suit, action, or proceeding to annul, 184 Revenue Act Authority rests with Commissioner Commissioner's discretion Illegal and unjust taxes and penalties modify, or set aside such determination or assess- ment shall be entertained by any court of the United States. Administrative Review. Sec. 1313. That in the absence of fraud or mis- take in mathematical calculation, the findings of facts in and the decision of the Commissioner upon (or in case the Secretary is authorized to approve the same, then after such approval) the merits of any claim presented under or authorized by the internal-revenue laws shall not be subject to review by any other administrative officer, employee, or agent of the United States. Retroactive Regulations. Sec. 1314. That in case a regulation or Treas- ury decision relating to the internal-revenue laws made by the Commissioner or the Secretarj^ or by the Commissioner with the approval of the Secre- tary, is reversed by a subsequent regulation or Treasury decision, and such reversal is not imme- diately occasioned or required by a decision of a court of competent jurisdiction, such subsequent regulation or Treasury decision may, in the discre- tion of the Commissioner, with the approval of the Secretary, be applied without retroactive effect. Refunds. Sec. 1315. That section 3220 of the Revised Statutes, as amended, is reenacted without change, as follows: "Sec. 3220. The Commissioner of Internal Revenue, subject to regulations prescribed by the Secretary of the Treasiuy, is authorized to remit, refund, and pay back all taxes erroneously or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount, or in any Administrative Provisions 185 manner wrongfully collected; also to repay to any collector or deputy collector the full amount of such sums of money as may be recovered against him in any court, for any internal revenue taxes collected by him, with the cost and expenses of suit ; also all damages and costs recovered against any assessor, assistant assessor, collector, deputy collec- tor, agent, or inspector, in any suit brought against him by reason of anything done in the due perform- ance of his official duty, and shall make report to Congress at the beginning of each regular session of Congress of all transactions under this section." Sec. 1316. That section 3228 of the Revised Statutes is amended to read as follows: "Sec. 3228. All claims for the refunding or Claims for refunds crediting of any internal revenue tax alleged to witfiin four years have been erroneously or illegally assessed or col- lected, or of any penalty alleged to have been col- lected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, must be presented to the Commissioner of Intei'nal Revenue within four years next after payment of such tax, penalty, or sum." This section, except as modified by section 2.52, Refunds under shall apply retroactively to claims for refund under '"""*■■ '"^'' the Revenue Act of 1916, the Revenue Act of 1917, and the Revenue Act of 1918. Sec. 1317. That the paragraph of section 3689 Partial repeal of of the Revised Statutes, as amended, reading as ^*''"'"^**'' follows: "Refunding taxes illegally collected (in- ternal revenue) : To refund and pay back duties erroneously or illegally assessed or collected under the internal revenue laws," is repealed from and after Jvme 30, 1920; and the Secretary of the Annual estimate of Treasury shall submit for the fiscal year 1921, and refunds annually thereafter, an estimate of appropriations to refund and pay back duties or taxes erroneously or illegally assessed or collected under the internal- 186 Revenue Act revenue laws, and to pay judgments, including interest and costs, rendered for taxes or penalties erroneously or illegally assessed or collected under the internal-revenue laws. Claim for refund must precede suit Time limit on suits Pending suits not affected Repeal of Section 3227, U. S. R. S. Suits within five yean Limitations Upon Suits and Prosecutions. Sec. 1318. That section 3226 of the Revised Statutes is amended to read as follows : "Sec. 3226. No suit or proceeding shall be maintained in any court for the recovery of any internal-revenue tax alleged to have been erron- eously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been ex- cessive or in any manner wrongfully collected, imtil a claim for refund or credit has been duly filed with the Commissioner of Internal Revenue, according to the provisions of law in that regard, and the regulations of the Secretary of the Treas- ury established in pursuance thereof. No such suit or proceeding shall be begun before the expiration of six months from the date of filing such claim unless the Commissioner renders a decision thereon within that time, nor after the expiration of five years from the date of the payment of such tax, penalty, or sum." This section shall not affect any suit or proceed- ing instituted prior to the passage of this Act, but shall apply to all suits and proceedings instituted after the passage of this Act, whether or not barred by prior Acts of Congress. Sec. 1319. That section 3227 of the Revised Statutes is hereby repealed but such repeal shall not affect any suit or proceeding instituted prior to the passage of this Act. Sec. 1320. That no suit or proceeding for the collection of any internal revenue tax shall be begun after the expiration of five years from the time such A D M I If 1 STE A TI VE P R O V I S I O If S 187 tax was due, except in the ease of fraud with intent to evade tax, or willful attempt in any manner to defeat or evade tax. This section shall not apply to suits or proceedings for the collection of taxes under section 250 of this Act, nor to suits or pro- ceedings begun at the time of the passage of this Act. Sec. 1321. (a) That the Act entitled "An Prosecution* within Act to limit the time within which prosecutions may ""■*« y®*" be instituted against persons charged with violat- ing internal-revenue laws," approved July 5, 1884, is amended to read as follows : "That no person shall be prosecuted, tried, or punished for any of the various offenses arising under the internal-revenue laws of the United • States unless the indictment is found or the infor- mation instituted within three years next after the commission of the offense: Provided, That the time during which the person committing the offense is absent from the district wherein the same is committed shall not be taken as any part of the time limited by law for the commencement of such proceedings: Provided further. That the provi- sions of this Act shall not apply to offenses com- mitted prior to its passage: Provided further. That where a complaint shall be instituted before a commissioner of the United States within the period above limited, the time shall be extended until the discharge of the grand jury at its next session within the district: And provided further, That this Act shall not apply to offenses committed by officers of the United States." (b) Any prosecution or proceeding under an Pending prosecutions indictment found or information instituted prior to not affected the passage of this Act shall not be affected in any manner by this amendment, but such prosecution or proceeding shall be subject to the limitations im- posed by law prior to the passage of this Act. 188 Revenue Act Asseisments. Wiihin four years Sec. 1322. That all internal revenue taxes, ex- cept as provided in section 250 of this Act, shall, notwithstanding the provisions of section 3182 of the Revised Statutes or any other provision of law, be assessed within four years after such taxes be- came due, but in the case of fraud with intent to evade tax or willful attempt in any manner to defeat or evade tax, such tax may be assessed at any time. Fraudulent Returns. Sec. 1323. That section 3225 of the Revised Statutes of the United States, as amended, is re- enacted without change as follows: Second assessments "Sec. 3225. When a sccond assessmcnt is made in case of any list, statement, or return, which in the opinion of the collector or deputy collector was false or fraudulent, or contained any understate- ment or undervaluation, such assessment shall not be remitted, nor shall taxes collected under such assessment be refunded, or paid back, or recovered by any suit, unless it is proved that such list, state- ment, or return was not willfully false or fraudu- lent and did not contain any willful understatement or undervaluation." Interest on Refunds and Judgments. Date from which ^EC. 1324. (a) That upon the allowance of a interest runs claim for the refund of or credit for internal rev- enue taxes paid, interest shall be allowed and paid upon the total amount of such refund or credit at the rate of one-half of 1 per centum per month to the date of such allowance, as follows : ( 1 ) if such amount was paid under a specific protest setting forth in detail the basis of and reasons for such protest, from the time when such tax was paid, or (2) if such amount was not paid under protest but pursuant to an additional assessment, from the time such additional assessment was paid, or (3) if no Administrative Pno visions 189 protest was made and the tax was not paid pur- suant to an additional assessment, from six months after the date of fihng of such claim for refund or credit. The term "additional assessment" as used in this section means a further assessment for a tax of the same character previously paid in part. (b) Section 177 of the Judicial Code is amended Judicial code to read as follows : amended "Sec. 177. No interest shall be allowed on any claim up to the time of the rendition of judgment by the Court of Claims, unless upon a contract ex- pressly stipulating for the payment of interest, except that interest may be allowed in any judg- ment of any court rendered after the passage of the Revenue Act of 1921 against the United States for any internal-revenue tax erroneously or illegally assessed or collected, or for any penalty collected without authority or any sum which was excessive or in any manner wrongfully collected, under the internal-revenue laws." Payment of Taxes by Check or United States Securities. Sec. 1325. That collectors may receive, at par Specified securities with an adjustment for accrued interest, notes or and uncertified certificates of indebtedness issued by the United "^''*''"' States and uncertified checks in payment of income, war-profits and excess-profits taxes and any other taxes payable other than by stamp, during such time and under such regulations as the Commis- sioner, with the approval of the Secretary, shall prescribe; but if a check so received is not paid by the bank on which it is drawn the person by whom such check has been tendered shall remain liable for the payment of the tax and for all legal penal- ties and additions the same as if such check had not been tendered. Frauds on Purchasers. Sec. 1326. That whoever in connection with the sale or lease, or offer for sale or lease, of any article. 190 Revenue Act Misrepresentation o( lax addition to price Penalty Members Vacancy Clerical assistance or for the purpose of making such sale or lease, makes any statement, written or oral, (1) intended or calculated to lead any person to believe that any part of the price at which such article is sold or leased, or offered for sale or lease, consists of a tax imposed under the authority of the United States, or (2) ascribing a particular part of such price to a tax imposed under the authority of the United States, knowing that such statement is false or that the tax is not so great as the portion of such price ascribed to such tax, shall be guilty of a misde- meanor and upon conviction thereof shall be pun- ished by a fine of not more than $1,000 or by imprisonment not exceeding one year, or both. Tax Simplification Board. Sec. 1327. (a) That there is hereby estab- lished in the Department of the Treasury a board to be known as the "Tax Simplification Board" (hereinafter in this section called the "Board"), to be composed as follows: ( 1 ) Three members who shall represent the pub- lic, to be appointed by the President; and (2) Three members who shall represent the Bureau of Internal Revenue and shall be officers or employees of the United States serving in such Bureau, to be appointed by the Secretary. (b) Any vacancy in the Board shall be filled in the same manner as the original appointment. The members representing the public shall serve with- out compensation except reimbursement for travel- ing, subsistence, and other necessary expenses incurred in the performance of the duties vested in them by this section. The members representing the Bureau of Internal Revenue shall serve without compensation in addition to that received for their service in such Bureau. (c) The Secretary shall furnish the Board with such clerical assistance, quarters and stationery, ADMINISTBATIVEfllOVlSIONS 191 furniture, office equipment, and other supplies as may be necessary for the performance of the duties vested in them by this section. (d) It shall be the duty of the Board to investi- Duties gate the procedure of and the forms used by the Bureau in the administration of the internal rev- enue laws, and to make recommendations in respect to the simplification thereof. The Board shall make a report to the Congress on or before the first Mon- day of December in each year. (e) The expenditures of the Board shall be Expenditures paid upon vouchers approved by the Board and signed by the chairman thereof. For the expendi- tures of the Board for the fiscal year ending June 30, 1922, there is authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $10,000. (f ) The Board shall cease to exist on December Expiration 31, 1924. Consolidation of Liberty Bond Tax Exemptions. Sec. 1328. That the various Acts authorizing the issues of Liberty bonds are amended and sup- plemented as follows: (a) On and after January 1, 1921, 4 per centum E/ieciive date and 4V4 per centum Liberty bonds shall be exempt January i, i92) from graduated additional income taxes, com- monly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter imposed by the United States upon the income or profits of indi- viduals, partnerships, corporations, or associations, in respect to the interest on aggregate principal amounts thereof as follows : Until the expiration of two years after the date $i25,ooo for two years, of the termination of the war between the United ^S"-"'"' '"■■ '•"** States and the German Government, as fixed by y*"'""''' proclamation of the President,* on $125,000 aggre- * This date was fixed as July 2, 1921, by proclamation issued November 14, 1921. 192 Revenue Act Certain exemptions unaffected Penal bond Deposit of government bonds gate principal amount; and for three years more on $50,000 aggregate principal amount. (b) The exemptions provided in subdivision (a) shall be in addition to the exemptions provided in section 7 of the Second Liberty Bond Act, and in addition to the exemption provided in subdivi- sion (3) of section 1 of the Supplement to the Second Liberty Bond Act in respect to bonds issued upon conversion of 3J^ per centum bonds, but shall be in lieu of the exemptions provided and free from the conditions and limitations imposed in subdivisions (1) and (2) of section 1 of the Sup- plement to Second Liberty Bond Act and in sec- tion 2 of the Victory Liberty Loan Act. Deposit of United States Bonds or Notes in Lieu of Surety. Sec. 1329. That wherever by the laws of the United States or regulations made pursuant thereto, any person is required to furnish any recog- nizance, stipulation, bond, guaranty, or undertak- ing, hereinafter called "penal bond," with surety or sureties, such person may, in lieu of such surety or sureties, deposit as security with the official hav- ing authority to approve such penal bond. United States Liberty bonds or other bonds or notes of the United States in a sum equal at their par value to the amount of such penal bond required to be fur- nished, together with an agreement authorizing such official to collect or sell such bonds or notes so deposited in case of any default in the performance of any of the conditions or stipulations of such penal bond. The acceptance of such United States bonds or notes in lieu of surety or sureties required by law shall have the same force and effect as indi- vidual or corporate sureties, or certified checks, bank drafts, post-office money orders, or cash, for the penalty or amount of such penal bond. The bonds or notes deposited hereunder, and such other United States bonds or notes as may be substituted Administrative Paoviaioira 198 therefor from time to time as such security, may- be deposited with the Treasurer of the United Depositary States, a Federal reserve bank, or other depositary duly designated for that purpose by the Secretary, which shall issue receipt therefor, describing such bonds or notes so deposited. As soon as security Reiurn of deposit for the performance of such penal bond is no longer necessary, such bonds or notes so deposited, shall be returned to the depositor: Provided, That in case a person or persons supplying a contractor with labor or material as provided by the Act of Congress, approved February 24, 1905 (33 Stat. 811), entitled "An Act to amend an Act approved August thirteenth, eighteen hundred and ninety- four, entitled 'An Act for the protection of per- sons furnishing materials and labor for the con- struction of pubhc works,' " shall file with the obligee, at any time after a default in the perform- ance of any contract subject to said Acts, the application and aflSdavit therein provided, the obligee shall not deliver to the obligor the deposited bonds or notes nor any surplus proceeds thereof until the expiration of the time limited by said Acts for the institution of suit by such person or persons, and, in case suit shall be instituted within such time, shall hold said bonds or notes or proceeds subject to the order of the court having jurisdic- tion thereof: Provided further. That nothing herein contained shall affect or impair the priority of the claim of the United States against the bonds or notes deposited or any right or remedy granted by said Acts or by this section to the United States for default upon any obligation of said penal bond : Provided further. That all laws inconsistent with inconsistent statutes this section are hereby so modified as to conform to modified the provisions hereof: And provided further. That nothing contained herein shall affect the authority of courts over the security, where such bonds are taken as security in judicial proceedings, or the I<)4 Revenue Act authority of any administrative officer of the United States to receive United States bonds for security Regulations in cascs authorized by existing laws. The Secre- tary may prescribe rules and regulations necessary and proper for carrying this section into effect. Lost Stamps for Tobacco, Cigars, and so forth. Sec. 1330. That section 3315 of the Revised Statutes, as amended, is re-enacted without change, as follows: Restamping of "Sec. 3315. The Commissioner of Internal packages Revenue may, under regulations prescribed by him with the approval of the Secretary of the Treasury, issue stamps for restamping packages of distilled spirits, tobacco, cigars, snuff, cigarettes, fermented liquors, and wines which have been duly stamped but from which the stamps have been lost or de- stroyed by unavoidable accident." Consolidated Returns for Year 1917. Corporations and Sec. 1331. (a) That Title II of the Revenue partnerships Act of 1917 shall be construcd to impose the taxes therein mentioned upon the basis of consolidated returns of net income and invested capital in the case of domestic corporations and domestic part- nerships that were affiliated during the calendar year 1917. Affiliation defined (b) For the purposc of this section a corpora- tion or partnership was affiliated with one or more corporations or partnerships (1) when such cor- poration or partnership owned directly or controlled through closely affiliated interests or by a nominee or nominees all or substantially all the stock of the other or others, or (2) when substantially all the stock of two or more corporations or the business of two or more partnerships was owned by the same interests: Provided, That such corporations or partnerships were engaged in the same or a closely Admiitistbaiite Pbovibions 195 related business, or one corporation or partnership bought from or sold to another corporation or part- nership products or services at prices above or below the current market, iiius effecting an arti- ficial distribution of profits, or one corporation or partnership in any way so arranged its financial re- lationships with another corporation or partnership as to assign to it a disproportionate share of net income or invested capital. For the purposes of this section, public service corporations which (1) were operated independently (2) were not physi- cally connected or merged and (3) did not receive special permission to make a consolidated return, shall not be construed to have been affiliated ; but a railroad or other public utility which was owned by Affiliated public an industrial corporation and was operated as a se"'<:e corporations plant facility or as an integral part of a group organization of affiliated corporations which were required to file a consolidated return, shall be con- strued to have been affiliated. (c) The provisions of this section are declara- Declaratory effect tory of the provisions of Title II of the Revenue Act of 1917. Alternative Tax on Personal Service Corporations. Sec. 1332. (a) That if either subdivision (e) invalidation of section 218 of the Revenue Act of 1918 or sub- '"feguarded division (d) of section 218 of this Act is by final adjudication declared invalid, there shall, in addi- tion to all other taxes, be levied, collected, and paid on the net income (as defined in section 232) re- ceived during the calendar years 1918, 1919, 1920, and 1921, by every personal service corporation (as defined in section 200) included within the pro- visions of such subdivisions, a tax equal to the taxes imposed by Titles II and III of the Revenue Act of 1918 and, in the case of income received during the calendar year 1921, by Titles II and III of this Act. 196 Revenue Act New return (b) In such cvcnt cvcry such personal service corporation shall, on or before the fifteenth day of the sixth month following the date of entry of de- cree upon such final adjudication, make a return of any income received during each of the calendar years 1918, 1919, 1920, and 1921 in the manner prescribed by the Revenue Act of 1918 (or in the manner prescribed by this Act, in the case of income received during the calendar year 1921). Such return shall be made and the net income shall be computed on the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in the manner provided for other corporations under the Revenue Act of 1918 and this Act. Claims for refund (c) If either subdivisiou (e) of section 218 of the Revenue Act of 1918 or subdivision (d) of sec- tion 218 of this Act is so declared invalid, claims for credit or refund of taxes paid under both such sections shall be allowed, if made within the time provided in subdivision (f) of this section. Claims for minority (d) In case the claims for Credit or Tcfuud, filed ownership withiu six mouths from such date of entry of decree, represent less than 30 per centum of the outstand- ing stock or shares in the corporation, the amount of taxes imposed by this section upon such corpora- tion shall be reduced to that proportion thereof which the number of stock or shares owned by the shareholders or members making such claims bears to the total number of stock or shares outstanding. Back penalties (e) The tax imposcd by this section shall be waived asscsscd, Collected, and paid upon the same basis, in the same manner, and subject to the same pro- visions of law, including penalties, as the taxes im- posed by sections 230 and 301 of the Revenue Act of 1918 (or by sections 230 and 301 of this Act, in the case of income received during the calendar year 1921), but no interest or penalties shall be Administbative Pttovisioirs 197 due or payable thereon for any period prior to the date upon which the return is by this section re- quired to be made and the first installment paid. The amount of tax paid by any shareholder or Credit of shareholder's member of a personal service corporation pursuant '»" '» corporation to the provisions of subdivision (e) of section 218 of the Revenue Act of 1918 or subdivision (d) of section 218 of this Act shall be credited against the tax due from such corporation under this section upon the joint written application of such corpora- tion and such shareholder or member or his repre- sentatives, heirs, or assigns, if such application is filed with the Commissioner within six months from such date of entry of decree. (f) Notwithstanding any other provision of claim for refund law, no claim for a credit or refund of taxes paid w'thm sw months under subdivision (e) of section 218 of the Revenue Act of 1918 or subdivision (d) of section 218 of this Act, may be filed after the expiration of six months from such date of entry of decree: Pro- vided, however. That a personal service corpora- tion of which no shareholder or member has filed such claim within such period of six months, shall not be subject to the tax imposed by this section. TITLE XIV.— GENERAL PROVISIONS.* Repeals. Varying effeciWe gEC. 1400. (a) That the followmg paits of the ■""^ Revenue Act of 1918 are repealed, to take effect (except as otherwise provided in this Act) on Jan- uary 1, 1922, subject to the limitations provided in subdivision (b) : Title II (called "Income Tax") as of January 1 1921* ' Title' III (called "War-Profits and Excess- Profits Tax") as of January 1, 1921; Title IV (called "Estate Tax") on the passage of this Act; Title V (called "Tax on Transportation and other Facilities, and on Insurance") ; Sections 628, 629, and 630 of Title VI (being the taxes on soft drinks, ice cream, and similar articles) ; Title VII (called "Tax on Cigars, Tobacco and Manufactures Thereof") ; Title VIII (called "Tax on Admissions and Dues") ; Title IX (called "Excise Taxes") ; Title X (called "Special Taxes") ; Title XI (called "Stamp Taxes") ; Title XII (called "Tax on Employment of Child Labor") as of January 1, 1921; and Sections 1314, 1315, 1316, 1317, 1319, and 1320 of Title XIII (being certain administrative pro- visions) on the passage of this Act. ♦Title XIV of the Revenue Act of 1918 is not repealed by this Act. Genebai. Provibioits 199 (b) The parts of the Revenue Act of 1918 Accrued ta«» which are repealed by this Act shall (unless other- under Revenue wise specifically provided in this Act) remain in Actofi9i8 force for the assessment and collection of all taxes which have accrued under the Revenue Act of 1918 at the time such parts cease to be in effect, and for the imposition and collection of all penalties or for- feitures which have accrued or may accrue in rela- tion to any such taxes. In the case of any tax imposed by any part of the Revenue Act of 1918 repealed by this Act, if there is a tax imposed by this Act in lieu thereof, the provision imposing such tax shall remain in force until the corresponding tax under this Act takes effect under the provi- sions of this Act. The unexpended balance of any appropriation heretofore made and now available for the administration of any such part' of the Rev- enue Act of 1918 shall be available for the admin- istration of this Act or the corresponding provision thereof. Increase in Note Authorization. ' Sec. 1401. That subdivision (a) of section 18 Pubiic debt refunding of the Second Liberty Bond Act, as amended, is amended by striking out the words and figures "for the purposes of this Act, and to meet public ex- penditures authorized by law, not exceeding in the aggregate $7,000,000,000", and inserting in lieu thereof the words and figures "for the purposes of this Act, to provide for the purchase or redemption of any notes issued hereunder, and to meet public expenditures authorized by law, not exceeding in the aggregate $7,500,000,000 at any one time out- standing." Increase in Treasury Sayings Certificate Limit. Sec. 1402. That sectioji 6 of the Second Lib- Manmumforone erty Bond Act, as amended, is amended by strik- holder ing out in the next to the last sentence thereof the 200 Revenue Act Invalidit; of any section Effective upon passage figures "$1,000" and inserting in lieu thereof the figures "$5,000." Saving Clause in Event of Unconstitutionality. Sec. 1403. That if any provision of this Act, or the application thereof to any person or circum- stances, is held invalid, the remainder of the Act, and the application of such provision to other per- sons or circumstances, shall not be affected thereby. Effective Date of Act. Sec. 1404. That except as otherwise provided, this Act shall take effect upon its passage. Approved, November 23, 1921, at 3.55 p. m. Appendix INDIVIDUAL TAX TABLES Computation Tables for Individual Income Taxes Rate of Net Income from Investments after Payment of Federal Income Taxes CORPORATION TAX TABLES Computation Tables for Taxes on Domestic Corporations Rate of Net Income from Investments after Payment of Federal Income Tax Equivalent Rates of Income from Taxable and Tax-exempt Investments under Federal Income Tax COMPARISON OF TAXES ON INCOME FROM CORPORATIONS AND PARTNERSHIPS APPENDIX Individual Tax Tables Computation Tables for Individual Income Taxes These tables provide a short method of determining the combined normal taxes and surtaxes falling on net incomes of individuals. They are based on fully taxable income and do not take into consideration income from tax-exempt secur- ities or from dividends which are subject only to surtaxes. The tables allow for the exemption from the normal tax which is accorded married men or heads of families without dependents. (The increase in the exemption on incomes not over $5,000 explains item 2 in column F.) How to Use Tables. Find in column A the largest sum less than your total net income and multiply the difference between that sum and your actual income by the rate shown on the same Une in column F. Add the result to the sum given in column E. The resulting sum constitutes the total income tax. The columns showing the amount and rate of surtax permit a ready computation of the total tax on income consisting in part of dividends or other partially exempt income. Individual' Tax Tables 203 TAX ON INCOME OF 1921 A B C D E F Surtax Combined Combined Rate Normal Rate Amount Normal Surtax on Next and on Next Net Income Tax Increment of Income Surtaxes Increment of Income $2,500 $00 $00 0% $00 4% 5,000 100 00 1 100 106 5,020 120.80 00.20 1 121 6 6,000 160 10 2 170 10 8,000 320 60 3 370 U 10,000 480 110 4 690 12 12,000 640 190 5 830 13 14,000 800 290 6 1,090 14 16,000 960 410 7 1,370 15 18,000 1,120 560 8 1,670 16 20,000 1,280 710 9 1,990 17 22,000 1,440 890 10 2,330 18 24,000 1,600 1,090 11 2,690 19 26,000 1,760 1,310 12 3,070 20 28,000 1,920 1,550 13 3,470 21 30,000 2,080 1,810 14 3,890 22 32,000 2,240 2,090 15 4,330 23 34,000 2,400 2,390 16 4,790 24 36,000 2,560 2,710 17 5,270 25 38,000 2,720 3,050 18 6,770 26 40,000 2,880 3,410 19 6,290 27 42,000 3,040 3,790 20 6,830 28 44,000 3,200 4,190 21 7,390 29 46,000 3,360 4,610 22 7,970 30 48,000 3,520 5,060 23 8,670 31 60,000 3,680 5,510 24 9,190 32 52,000 3,840 5,990 25 9,830 33 54,000 4,000 6,490 26 10,490 34 56,000 4,160 7,010 27 11,170 36 58,000 4,320 7,560 28 11,870 36 60,000 4.480 8,110 29 12,690 37 62,000 4,640 8,690 30 13,330 38 64,000 4,800 9,290 31 14,090 39 66,000 4,960 9,910 32 14,870 40 68,000 5,120 10,550 33 15,670 41 70,000 6,280 11,210 34 16,490 42 72,000 6,440 11,890 35 17,330 43 74,000 5,600 12,590 36 18,190 44 76,000 6,760 13,310 37 19,070 45 78,000 6,920 14,050 38 19,970 46 80,000 6,080 14,810 39 20,890 47 82,000 6,240 16,690 40 21,830 48 84,000 6,400 16,390 41 22,790 49 86,000 6,560 17,210 42 23,770 50 88,000 6,720 18,060 43 24,770 61 90,000 6,880 18,910 44 26,790 5i 92,000 7,040 19,790 45 26,830 63 94,000 7,200 20,690 46 27,890 54 96,000 7,360 21,610 47 28,970 55 . 98,000 7,520 22,550 48 30,070 56 100,000 7,680 23,510 62 31,190 60 150,000 11,680 49,510 66 61,190 64 200,000 15,680 77,510 60 93,190 68 300,000 23,680 137,610 63 161,190 71 500,000 39,680 263,610 64 303,190 72 1,000,000 79,680 683,610 66 663,190 73 204 Revenue Act TAX ON INCOME OF 1922 AND SUBSEQUENT YEARS Surtax Combined Combined Rate Normal Bate Amount Normal Surtax on Next and on Next Net Income Tan Increment of Income Surtaxes Increment of Income $2,500 $00 $00 0% $00 4% 5,000 100 00 100 104 5,020 120.80 00 120.80 1 4 6,000 160 00 1 160 9 10,000 480 40 2 520 10 12,000 640 80 3 720 11 14,000 800 140 4 940 12 16,000 960 220 5 1,180 13 18,000 1,120 320 6 1,440 14 20,000 1,280 440 8 1,720 16 22,000 1,440 600 9 2,040 17 24,000 1,600 780 10 2,380 18 26,000 1,760 980 11 2,740 19 28,000 1,920 1,200 12 3,120 20 30,000 2,080 1,440 13 3,520 21 32,000 2,240 1,700 15 3.940 23 36,000 2,560 2,300 16 4,860 24 38,000 2,720 2,620 17 5,340 25 40,000 2,880 2,960 18 5,840 26 42,000 3,040 3,320 19 6,360 27 44,000 3,200 3,700 20 6,900 28 46,000 3,360 4,100 21 7,460 29 48,000 3,520 4,520 22 8,040 30 50,000 3,680 4,960 23 8,640 31 52,000 3,840 5,420 24 9,260 32 54,000 4,000 5,900 25 9,900 33 56,000 4,160 6,400 26 10,560 34 58,000 4,320 6,920 27 11,240 35 60,000 4,480 7,460 28 11,940 36 62,000 4,640 8,020 29 12,660 37 64,000 4,800 8,600 30 13,400 38 66,000 4,960 9,200 31 14,160 39 68,000 5,120 9,820 32 14,940 40 70,000 5,280 10,460 33 15,740 41 72,000 5,440 11,120 34 16,560 42 74,000 5,600 11,800 35 17,400 43 76,000 5,760 12,500 36 18,260 44 78,000 5,920 13,220 37 19,140 45 80,000 6,080 13,960 38 20,040 46 82,000 6,240 14,720 39 20,960 47 84,000 6,400 15,500 40 21,900 48 86,000 6,560 16,300 41 22,860 49 88,000 6,720 17,120 42 23,840 50 90,000 6,880 17,960 43 24,840 51 92,000 7,040 18,820 44 25,860 52 94,000 7,200 19,700 45 26,900 63 96,000 7,360 20,600 46 27,960 54 98,000 7,620 21,520 47 29,040 65 100,000 7,680 22,400 48 30,140 66 150,000 11,680 46,460 49 58,140 57 200,000 15,680 70,960 50 86,640 58 500,000 39,680 220,960 50 260,640 58 1,000,000 79,680 470,960 50 550,640 68 Individual Tax Tables 205 O u C " 2 S 5 >> Sn ago >»2 '" *> s en- 's o - V X V m cS-a 3 g g-B •^^ S i =* o a 8 « I S S H rSS 6S «00CO00Q0ODt'l*»>5D®»fl>O^'*'*'*' Mt-;co«sGq<«oi>t*b-e6co®eot4»c«i'i-H-*COQO»OO^Ot*«5(«Ot-»OQOl>»q-^CW0S«0mOt^'*rHi-;OO o u s n;| M„^ g „ g-^.9 ■Sea ^t?±>S^ e -J . •5 ^ ^ •*-' <— i*; -I X *^ O J3 »H "2*S "S^o.aO'O 1^ : -§ § a OS a -s ^£.a i 3'^'a' •2K OS ■* 00 ( CO CO (M C OsCOCOi>-<«rHt*C3p00-*i-IJ>G0OseOOO»« ^COC(iO*rHOOSt-;»qO*OOqCOCOaOGO pHi-jOOOSOOt^iCGOf-HXCO-* 6? 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