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'TWO SECTIONS-SECTION 'INN° 1th V,\ 1_ 1 TUrv 4 OPT OF 1932 A SECTION OF THE COMMERCIAL 8c FINANCIAL CHRONICLE Copy righted in 1932, according to Act of Congress, by WILLIAM B. DANA COMPANY, in office of Librarian of Congress, Washington, D. C. NEW YORK, JUNE 111932. VOL. 134. REVENUE ACT OF 1932 / • .4 • 0 s. • FULL TEXT OF LAW APPROVED JUNE 6 1932 INDEX TO TITLES Page TITLE I-Income Tax Subtitle A-Introductory.Provisions Subtitle B-General Provisions Part I-Rates of Tax 4 Part II-Computation of Net Income 5 Part III-Credits Against Tax 5 Part IV-Account Periods and Methods of Accounting_ 6 Part V-Returns and Payment of Tax 7 Part VI-Miscellaneous Provisions 7 Subtitle C-Supplemental Provisions 7 Supplement A-Rates of Tax Supplement B-Computation of Net Income 8 11 Supplement C-Credits Against Tax 12 Supplement D-Returns and Payment of Tax 13 Supplement E-Estates and Trusts 14 Supplement F-Partnerships 14 Supplement G-Insurance Companies 15 Supplement H-Non-resident Alien individuals 16 Supplement 1-Foreign Corporations 16 Supplement J-P ions of the United States 16 Supplement K-China Trade Act Corporations 16 Supplement L-Assessment and Collection of Deficiencies TITLE (Conctudo//Supplement M-Interes tan c Additions to Tax Page 18 Supplement N-Claims Against Transferees and Fidu• ciaries 18 Supplement 0-Overpayments 19 TITLE II-Additiona lEstate Tax 19 TITLE III-Gift Tax 19 TITLE IV-Manufacturers Excise Taxes 23 TITLE V-Miscellaneous Taxes 25 Part 1-Tax on Telegraph, Telephone, Radio, and Cable Facilities 25 Part II-Admissions Tax 25 Part III-Stamp Taxes 26 Part IV-Tax on Transportation of Oil by Pipe Lines_ ___ 26 Part V-Tax on Leases of Safe Deposit Boxes 26 Part VI-Tax on Checks, &c 27 Part VII-Tax on Boats 27 Part VIII-Administrative Provisions 27 TITLE VI-Estate Tax Amendments 27 TITLE VII-Tax on Transfers to Avoid Income Tax 28 TITLE VIII-Postal Rates 2) TITLE IX-Administrative and General Provisions 29 AN ACT TO PROVIDE REVENUE, EQUALIZE TAXATION, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the United States of America in Congress Assembled, That this Act, divided into titles and •ections according to the following Table of Contents. may be cited as the "Revenue Act of 1932": TABLE OF CONTENTS. TITLE I.-INCOME TAX. Sec. 1. Soc. 2. Sec. 3. Sec. 4. SUBTITLE A.-1NTRODUCTORY PROVISIONS. Application of title. Cross references. Classification of previsions. Special classes of taxpayers. SUBTITLE B.-GENERAL PROVISIONS. Sec. 11. Sec. 12 Sec. 13. Sec. 14. Part I.-Rates of Tax. Normal tax on individuals. Surtax on individuals. Tax on corporations. Taxable period embracing years with different laws. Part II.-Computation of Net Income. Sec. 21. Net income. Sec. 22. Gross income. Sec. 23. Deductions from gross income. Sec. 24. Items not deductible. Sec. 25. Credits of individual against net income. Sec. 26. Credits of corporation against net income. Part III.-Credits Against Tax. Sec. 31. Taxes of foreign countries and possosions of United States. Sec. 32. Taxes withheld at source. Sec. 33. Erroneous payments. Part IV.-Accounting Periods and Methods of Accounting. Sec. 41. General rule. Sec. 42. Period in which items of gross income included. Sec. 43. Period for which deductions and credits taken. Sac. 44. Installment basis. Sec. 45. Allocation of income and deductions. Sec. 46. Change of accounting period. Sec. 47. Returns for a period of less than 12 months. Sec. 48. Definitions. Part V.-Returns and Payment of Tax. Sec. 51. Individual returns. Sec. 52. Corporation returns. Sec. 53. Time and place for filing returns. Sec. 54. Records and special returns. Sec. 55. Publicity of returns. Sec. 56. Payment of tax. Sec. 57. Examination of return and determination of tax. Sec. 58. Additions to tax and penalties. Sec. 59. Administrative proceedings. Part VI.-Miscellaneous Provisions. Sec. 61. Laws made applicable. Sec. 62. Rules and regulations Sec. 63. Taxes in lieu of taxes under 1928 Act. Sec. 64. Short title. Sec. 65. Effective date of title. SUBTITLE C.--SUPPLEMENTAL PROVISIONS. Supplement A.-Rates of Tax. Sec. 101. Capital net gains and losses. Sec. 102. Sale of mines and oil or gas wells. Sec. 103. Exemptions from tax on corporations. Sec. 104. Accumulation of surplus to evade surtaxes. Sec. 105. Taxable period embracing years with different lams. Supplement B.-Computation of Net Income. Sec. 111. Determination of amount of gain or loss. Sec. 112. Recognition of gain or loss. Sec. 113. Adjusted basis for determining gain or loss. Sec. 114. Basis for depreciation and depletion. Sec. 115. Distributions by corporations. Sec. 116. Exclusions from gross income. Sec. 117. Net losses. Sec. 118. Loss from wash sales of stock or securities. Sec. 119. Income from sources within United States. Sec. 120. Unlimited deduction for charitable and other contributions. Supplement C.-Credits Against Tax. Soc. 131. Taxes of foreign countries and pogasesions of United States. Sec. 132. Payments under 1928 Act. Supplement D.-Returns and Payment of Tax. Sec. 141. Consolidated returns of corporations. Sec. 142. Fiduciary returns. Sec. 143. Withholding of tax at source. Sec. 144. Payment of corporation income tax at source. Sec. 145. Penalties. Sec. 146. Closing by Commissioner of taxable year. Sec. 147. Information at source. Sec. 148. Information by corporations Sec 149. Returns of brokers. Sec. 150. Collection of foreign items • THE REVENUE ACT OF 1932 9 Supplement E.-Estees and Trusts. Soc. 161. Imposition of tax. Sec. 162. Net income Sec. 163. Credits against net income. Sec. 164. Different taxable years. Sec. 165. Employees trusts. Sec. 166. Revocable trusts. Sec. 167. Income for benefit of grantor. Sec. 168. Capital net gains and losses. Sec. 169. Net losses. Sec. 170. Taxes of foreign countries and possessions of United States. Supplement F.-Partnerships. Partnership not taxable. Tax of partners. Computation of partnership income. Credits against net income. Earned income. Capital net gains and losses. Net losses. Taxes of foreign countries and possessions of United States. Partnership returns. Supplement G.-lnsurance Companies. Sec. 201. Tax on life insurance companies. Sec. 202. Gross income of life insurance companies. Sec. 203. Net income of life insurance companies. Sec. 204. Insurance companies other than life or mutual. Sec. 205. Net losses. Sec. 206. Taxes of foreign countries and possessions of the United States. Sec. 207. Computation of gross income. Sec. 208. Mutual insurance companies other than life. Sec. 181. Sec. 182. Sec. 183. Sec. 184. Sec. 185. Sec. 186. Sec. 187. Sec. 188. Sec. 189. Sec. 211. Sec. 212. Sec. 213. Sec. 214. Sec. 215. Sec. 216. Sec. 217. Sec. 218. Supplement H.-Nonresident Alien Individuals. Normal,tax. Gross income. Deductions. Credits against net income. Allowance of deductions and credits. Credits against tax. Returns. Payment of tax. Supplement I.-Foreign Corporations. Grws income. Deductions. Allowance of deductions and credits. Credits against tax. Returns. Payment of tax. Foreign insurance companies. Affiliation. Supplement J.-Possessions of the United States. Sec. 251. Income from sources within possessions of United States. Sec. 252. Citizens of possessions of United States. Supplement K.-China Trade Act Corporations. Sec. 261. Credit against net income. Sec. 262. Credits against the tax. Sec. 263. Affiliation. Sec. 264. Income of shareholders. Sec. 231. Sec. 232. Sec. 233. Sec. 234. Sec. 235. Sec. 236. Sec. 237. Sec. 238. Supplement L.-Assessment and Collection of Deficiencies. Sec. 271. Definition of deficiency. Sec. 272. Procedure in general. Sec. 273. Jeopardy assessments. Sec. 274. Bankruptcy and receiverships. Sec. 275. Period of limitation upon assessment and collection. Sec. 276. Same-Exceptions. Sec. 277. Suspension of running of statute. Supplement M.-Interest and Additions to Tax. Sec. 291. Failure to file return. Sec. 292. Interest on deficiencies. Sec. 293. Additions to the tax in case of deficiency. Sec. 294. Additions to the tax in case of non-payment. Sec. 295. Time extended for payment of tax shown on return. Sec. 296. Time extended for payment of deficiency. Sec. 297. Interest in case of jeopardy assessments. Sec. 298. Bankruptcy and receiverships. Sec. 299. Removal of property or departure from United States. Supplement N.-Claims Against Trend Sec. 311. Transferred assets. Sec. 312. Notice of fiduciary relationship. and Fiduciaries. Supplement 0.-Overpayments. Sec. 321. Overpayment of installment. Sec. 322. Refunds and credits. TITLE II.-ADDITIONAL ESTATE TAX. Sec. 401. Imposition of tax. Sec. 402. Credits against tax. Sec. 403. Assessment, collection, and payment of tax. TITLE 111.-GIFT TAX. Sec. 501. Imposition of tax. Sec. 502. Computation of tax. Sec. 503. Transfer for less than adequate and full consideration. Sec. 504. Net gifts. Sec. 505. Deductions. Sec. 506. Gifts made in property. Sec. 507. Returns. Sec. 508. Records and special returns. Sec. 509. Payment of tax. Sec. 510. Lien for tax. Sec. 511. Examination of return and determination of tax. Sec. 512. Definition of deficiency. Sec. 513. Assessment and collection of deficiencies. 'Sec. 514. Jeopardy assessments. Sec. 515. Claims in abatement. Sec. 516. Bankruptcy and receiverships. Sec. 517. Period of limitation upon assessment and collection Sec. 518. Suspension of running of statute. Sec. 519. Additions to the tax in case of failure to file return. Sec. 520. Additions to the tax in case of deficiency. Sec 521. Interest on extended payments. Sec 522. Interest on deficiencies. 1 Sec. 523. Interest on jeopardy assessments. nonpayment. , Sec. 524. Additions to the tax in case of ! Sec. 525. Penalties. . s--" I Sec. 526. Transfemd assetsSec. 527. Notice of fiduciary relationship. credits. and Sec. 528. Refunds Sec. 529. Laws made applicable. Sec. 530. Rules and regulations. Sec. 531. Definitions. Sec. 532. Short title. TITLE IV.-MANUFACTURERS' EXCISE TAXES . Sec. 601. Excise taxes on certain articles. Sec. 602. Tax on tires and inner tubes. Sec. 603. Tax on toilet preparations, &c. Sec. 604. Tax on furs. Sec. 605. Tax on jewelry, &c. Sec. 606. Tax on automobiles, &c. Sec. 607. Tax on radio receiving sets, &c. Sec. 608. Tax on mechanical refrigerators. Sec. 609. Tax on sporting goods. Sec. 610. Tax on firearms, shells, and cartridges. Sec. 611. Tax on cameras. Sec. 612. Tax on matches. Sec. 613. Tax on candy. Sec. 614. Tax on chewing gum. Sec. 615. Tax on soft drinks. Sec. 616. Tax on electrical energy. Sec. 617. Tax on gasoline. Sec. 618. Definition of sale. Sec. 619. Sale price. Sec. 620. Sale of articles for further manufacture. Sec. 621. Credits and refunds. Sec. 622. Use by manufacturer, producer, or importer. Sec. 623. Sales by others than manufacturer, producer, or importer. Sec. 624. Exemption of articles manufactured or produced by Indians. Sec. 625. Contracts prior to May 11932. Sec. 626. Return and payment of manufacturers' taxes. Sec. 627. Applicability of administrative provisions. Sec. 628. Rules and regulations. Sec. 629. Effective date. TITLE V.-MISCELLANEOUS TAXES. Part I.-Tax on Telegraph, Telephone, Radio, and Cable Facilities. Sec. 701. Imposition. Sec. 702. Returns and payments of tax. Part II.-Admissions Tax. Sec. 711. Admissions tax. Sec. 721. Sec. 722. Sec. 723. Sec. 724. Sec. 725. Sec. 726. Part 111.-Stamp Taxes. Stamp tax on issues of bonds, &c. Stamp tax on issues of stock, &c. Stamp tax on transfer of stocks, &c. Stamp tax on transfer of bonds, &e. Stamp tax on conveyances. Stamp tax on sales of produce for future delivery. Part IV.-Tax on Transportation of 011 by Pipe Line. Sec. 731. Tax on transportation of oil by pipe line. Part V.-Tax on Leases of Safe Deposit Boxes. Sec. 741. Tax on leases of safe deposit boxes. Part VI.-Tax on Checks, &c. Sec. 751. Tax on checks, &c. Part VII.-Tax on Boats. Sec. 761. Tax on use of boats. Part VIII.-Administrative Provisions. Sec. 771. Sec. 772. Sec. 773. Sec. 774. Payment of taxes. Refunds and credits. Regulations. Applicability of administrative provisions. TITLE VI.-ESTATE TAX AMENDMENTS. Sec. 801. Credit of gift tax on estate tax. Sec. 802. 80 per centum credit. Sec. 803. Future interests. Sec. 804. Relinquishment of dower, &c., as consideration. Sec. 805. Deductions. Sec. 806. Prior taxed property. Sec. 807. Deduction of bequests, &c., to charity. Sec. 808. Extension of time for payment. Sec. 809. Lien for taxes. Sec. 810. Refunds. Sec. 811. Future interests-Extension of time for payment of tax. TITLE VII.-TAX ON TRANSFERS TO AVOID INCOME TAX. Sec. 901. Imposition of tax. Sec. 902. Nontaxable transfers. Sec. 903. Definition of "Foreign Trust." Sec. 904. Payment and collection. TITLE V111.-POSTAL RATES. Sec. 1001. Postal rates. TITLE IX.-ADMINISTRATIVE AND GENERAL PROVISIONS. Review of decisions of Board of Tax Appeals. Board of Tax Appeals-Fees. Limitations on suits by taxpayer. Date of allowance of refund or credit. Jeopardy assessment. Refunds of miscellaneous taxes. Adjustments of carriers' liabilities to conform to recapture payments. Sec. 1108. Limitation on prosecutions for internal revenue offenses. Sec. 1109. Special disbursing agents of Treasury. Sec. 1110. Refund of taxes for taxable year 1918. Sec. 1111. Definitions. Sec. 1112. Separability clause. Sec. 1113. Effective date of Act. Sec. 1101. Sec. 1102. Sec. 1103. Sec. 1104. Sec. 1105. Sec. 1106. Sec. 1107. THE REVENUE ACT OF 1932 TITLE I.-INCOME TAX. SUBTITLE A-INTRODUCTORY PROVISIONS. Sec. 1. Application of Title. The provisions of this title shall apply only to the taxable year 1932 and succeeding taxable years. Income, war-profits, and excess-profits taxes for taxable years preceding the taxable year 1932 shall not be affected by the provisions of this title, but shall remain subject to the applicable provisions of prior revenue Acts, except as such provisions are modified by Title IX of this Act or by legislation enacted subsequent to this Act. Sec. S. Cross References. The cross references in this title to other portions of the title, where the word "see" is used, are made only for convenience, and shall be given no legal effect. Sec. S. Classification of Provisions. The provisions of this title are herein classified and designated as Subtitle A-Introductory provisions, Subtitle B-General provisions, divided into Parts and sections, Subtitle G-Supplemental provisions, divided into supplements and sections. Sec. 4. Special Classes of Taxpayers. The application of the General Provisions and of Supplements A to D, inclusive, to each of the following special classes of taxpayers, shall be subject to the exceptions and additional provisions found in the Supplement applicable to such class, as follows: (a) Estates and trusts and the beneficiaries thereof.-Supplement E. (b) Members of partnerships,-Supplement F. (c) Insurance companies,-Supplement (1. (d) Non-resident alien individuals,-Supplement (e) Foreign corporations.-Supplement I. (f) Individual citizens of any possession of the United States who are not otherwise citizens of the United States and who are not residents of the United States,-Supplement J. (g) Individual citizens of the United States or domestic corporations, satisfying the conditions of Section 251 by reason of deriving a large portion of their gross income from sources within a possession of the United States. -Supplement J. (h) China Trade Act corporations,-Supplement K. SUBTITLE B-GENERAL PROVISIONS. PART I-RATES OF TAX. Sec. 11. Normal Tax on Individuals. There shall be levied collected. and paid for each taxable year upon the net income of every individual a normal tax equal to the sum of the following: (s) 4 per contain of the first $4,000 of the amount of the net income In excess of the credits against net income provided in Section 25; and (b) $ per centum of the remainder of such excess amount. Sec. 12. Surtax on Individuals. (a) RATES OF SURTAX.-There shall be levied, collected, and paid for each taxable year upon the net income of every Individual a surtax as follows: Upon a net income of $6.000 there shall be no surtax; upon net incomes in excess of $6,000 and not in excess of $10,000. 1 per centum of such excess. $40 upon net incomes of $10.000; and upon net incomes in excess of $10,000 and not in excess of $12,000, 2 per centum In addition of such excess. $80 upon net incomes of $12,000; and upon net incomes in excess of $12,000 and not in excess of $14,000, 3 per centum in addition of such MCCOSS. $140 upon net incomes of $14.000; and upon net incomes in excess of $14.000 and not in excess of $16,000,4 per centum in addition ofsuch excess. $220 upon net incomes of $16,000; and upon net Incomes in excess of $16,000 and not in excess of $18,000. 5 per centum in addition of such excess. 8320 upon net incomes of $18,000; and upon net incomes in excess of $18,000 and not in excess of $20,000,6 per centum in addition ofsuch excess. $440 upon net incomes of $20,000; and upon net incomes in excess of $20,000 and not in excess of $22,000,8 per centum in addition ofsuch excess. $600 upon net incomes of $22,000: and upon net incomes in excess of $22,000 and not in excess of $24,000, 9 per centum in addition of such excess. $780 upon net incomes of $24,000; and upon net incomes in eXCOES of $24.000 and not in excess of $26,000, 10 per centum in addition of such excess. $980 upon net incomes of $26,000; and upon net incomes in excess of $26,000 and not in excess of $28,000, 11 per centum in addition of such excess. $1,200 upon net incomes of S28.000; and upon net incomes in excess of $28,000 and not in excess of $30,000, 12 per centum in addition of such excess. $1.440 upon net Incomes of $30.000: and upon net incomes in excess of $30.000 and not in excess of $32,000, 13 per centum in addition of such CAMS. 81,700 upon net incomes of $32,000; and upon net incomes in excess of $32,000 and not in excess of $36,000, 15 per centum in addition of such excess. $2,300 upon net incomes of $36,000; and upon net Incomes in excess of $36.000 and not in excess of $38,000. 16 Per centum in addition of such excess. $2,620 upon net incomes of $38,000; and upon net incomes in excess of $38,000 and not in excess of $40,000, 17 per centum in addition of such eXCOSS. $2.960 upon net incomes of $40,000; and upon net incomes in excess of $40,000 and not in excess of $42,000, 18 per contum in addition of such excess. $3,320 upon net incomes of $42,000; and upon net incomes in excess of $42.000 and not in excess of $44.000, 19 per centum in addition of such OXCESS. 83.700 upon net incomes of $44,000; and upon net incomes in excess of $44,000 and not in excess of $46,000, 20 per cent= in addition of such excess. $4.100 upon net incomes of $46,000; and upon net incomes in excess of $46.000 and not in excess of $48,000. 21 per centum in addition of such excess. $4.520 upon net incomes of $48.000; and upon net incomes in excess of $48,000 and not in excess of $50,000, 22 per centum in addition of such excess. 3 $4.960 upon net incomes of $50,000; and upon net incomes in excess of $50,000 and not in excess of $52,000. 23 per centum in addition of such excess. $5,420 upon net incomes of $52,000; and upon net incomes in excess of $52,000 and not in excess of $54,000. 24 per centum in addition of such excess. $5,900 upon net incomes of $54,000; and upon net incomes in excess of $54,000 and not in excess of $56,000, 25 per centum in addition of such excess. $6,400 upon net incomes of $56,000; and upon net incomes in excess of $56.000 and not in excess of $58,000. 26 per centum in addition of such excess. $6,920 upon net incomes of $58,000; and upon net incomes in excess of $58,000 and not in excess of $60,000, 27 per centum in addition of such excess. $7,460 upon net incomes of $60,000; and upon net incomes in excess of $60,000 and not in excess of $62,000, 28 per centum in addition of such excess. $8,020 upon net incomes of $62,000; and upon net Incomes in excess of $62,000 and not in excess of $64,000. 29 per centum In addition of such excess. $8,600 upon net incomes of $64,000; and upon net incomes in excess of $64,000 and not in excess of $66.000, 30 per centum in addition of such excess. $9,200 upon net incomes of $66,000; and upon net incomes in excess of $66,000 and not in excess of $68.000. 31 per centum in addition of such excess. $9,820 upon net incomes of $68,000; and upon net incomes in excess of $68,000 and not in excess of $70,000. 32 per centum in addition of such excess. $10.460 upon net incomes of $70,000: dnd upon net incomes in excess of $70,000 and not in excess of $72,000, 33 per centum in addition of such excess. $11,120 upon net incomes of $72,000; and upon net incomes in excess of $72,000 and not in excess of $74.000. 34 per centum in addition of such excess. $11,800 upon net incomes of $74,000; and upon net incomes in excess of $74.000 and not in excess of 376,000. 35 per centum in addition of such OECOSS. $12,500 upon net incomes of $76.000; and upon net incomes in excess of $76,000 and not in excess of $78.000. 36 per centum in addition of such excess. $13.220 upon net incomes of 378,000: and upon net incomes in excess of $78,000 and not in excess of $80,000. 37 per centum in addition of such CRCESS. $13,960 upon net incomes of $80.000; and upon net incomes in excess of $80,000 and not in excess of $82,000, 38 per centum 'n addition of such CACCES. $14,720 upon net incomes of $82.000; and upon net incomes in excess of $82.000 and not in excess of $84.000, 39 per centum In addition of such excess. $15,500 upon net incomes of $84,000; and upon net incomes in excess of $84,000 and not in excess of 886,000. 40 per centum in addition of such excess. 316.300 upon net incomes of $86,000; and upon net incomes in excess of $86,000 and not in excess of $88,000 41 per centum in addition of such excess. $17.120 upon net incomes or $88,000; and upon net incomes in excess of $88.000 and not in excess of $90.000, 42 per centum in addition of such excess. 817.960 upon net incomes of $90,000; and upon net incomes in excess of 590.000 and not in excess of $92,000. 43 per centum in addition of such MIMS. $18,820 upon net incomes of $92,000; and upon net incomes in excess of $92,000 and not in excess of $94.000. 44 per centum in addition of such excess. $19,700 upon net incomes of $94,000; and upon net incomes in excess of $94,000 and not in excess of $96,000, 45 pew centum in addition of such exCCS.S. $20,600 upon net incomes of $96,000; and upon net incomes In excess of $96,000 and not in excess of $98,000, 46 per centum in addition of such excess. $21,520 upon net incomes of $98,000: and upon net incomes in excess of $98,000 and not in excess of $100,000, 47 per centum in addition of such excess. $22,460 upon net incomes of $100,000; and upon net incomes in excess of $100,000 and not in excess of $150,000, 48 per centum in addition ofsuch excess. $46,460 upon net incomes of $150,000; and upon net incomes in excess of $150.000 and not in excess of $200,000. 49 per centum in addition ofsuch excess. $70,960 upon net Incomes of $200,000; and upon net incomes in excess. of $200,000 and not in excess of $300,000. 50 per centum in addition of such excess. $120.960 upon net incomes of $300,000; and upon net incomes in excess of $300,000 and not in excess of 3400,000, 51 per centum in addition of such excess. $171.960 upon net incomes of $400,000; and upon net incomes in excess of $400,000 and not in excess of $500.000. 52 per centum In addition of such excess. $223,960 upon net incomes of $500,000; and upon net incomes in excess of $500,000 and not in excess of $750,000, 53 per centum in addition of such excess. $356,460 upon net incomes of $750.000; and upon net incomes in excess of $750.000 and not in excess of 51.000,000. 54 per centum in addition of such excess. $491.460 upon net incomes of $1,000,000; and upon net Incomes in excess of $1,000,000, 55 per centum in addition of such excess. (b) Sale of Mines and Oil or Gas Wells.-For limitation of surtax attributable to sale of mines and oil or gas well, see section 102. (c) Capital Net Gains and Losses.-For rate and computation of tax in lieu of normal and surtax in case of net incomes of not less than $16,000. approximately, or in case of net incomes, excluding items of capital gain, capital loss, and capital deductions, of not less than $16,000, approximately, see section 101. (d) Evasion of Surtaxes by Incorporation.-For tax on corporations which accumulate surplus to evade surtax on stockholders,see section 104. Sec. 13. Tax on Corporations. (a) Rate of Tax.-There shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax of 13% Per centum of the amount of the net income in excess of the credit against net Income provided in section 26. .b) Exempt Corporations.-For corporations exempt from tax, see section 103. THE REVENUE ACT OF 1932 4 (c) Improper Accumulation of Surplus.—For tax on corporations which accumulate surplus to evade surtax on stockholders, see section 104. Sec. 14. Taxable Period Embracing Years with Different Laws. If a taxable period embraces portions of two calendar years for which the laws are different, the tax shall be computed as provided in section 105. PART II—COMPUTATION OF NET INCOME. Sec. 21. Net Income. "Net income" means the gross income computed under section 22, less the deductions allowed by section 23. Sec. 22. Gross Income. (a) General Definition.—"Gross income" includes gains, profits, and income derived from salaries, wages, or compensation for personal service, of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, 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 interest, rent, dividends,securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. In the case of Presidents of the United States and judges of courts of the United States taking office after the date of the enactment of this Act, the compensation received as such shall beincluded in gross income; and all Acts fixing the compensation of such Presidents and judges are hereby amended accordingly. (b) Exclusions from Gross Income.—The following items shall not be Included in gross income and shall be exempt from taxation under this title; (1) Life Insurance.—Amounts received under a life insurance contract paid by reason of the death of the insured, whether in a single sum or in installments (but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income); (2) Annuities, Etc.—Amounts received (other than amounts paid by reason of the death of the Insured and interest payments on such amounts) under a life insurance, endowment, or annuity contract, but if such amounts (when added to amounts received before the taxable year under such contract) exceed the aggregate premiums or consideration paid (whether or not paid during the taxable year) then the excess shall be included in gross income. In the case of a transfer for a valuable consideration, by assignment or otherwise, of a life insurance, endowment, or annuity contract, or any interest therein, only the actual value or such consideration and the amount ot the premiums and other sums subsequently paid by the transferee shall be exempt from taxation under paragraph (1) or this paragraph: (3) Gifts. Bequests, and Devises.—The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in gross income); (4) Tax-free Interest.—Interest upon (A) the obligations of a State, Territory, or any political subdivision thereof, or the District of Columbia; or (B) securities issued under the provisions of the Federal Farm Loan Act, or under the provisions of such Act as amended; or (0) the obligations of the United States or its possessions. Every person owning any of the obligations or securities enumerated in clause (A), (B), or (0) shall, in the return required by this title submit a statement showing the number and amount of such obligations and securities owned by him and the income received thererrom. in such form and with such information as the Commissioner may require. In the case of obligations of the United States issued after Sept. 1 1917 (other than postal savings certificates of deposit), the interest shall 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 irom the taxes imposed by this title; (5) Compensation for Injuries or Sickness.—Amounts received, through accident or health insurance or under workmen's compensation acts, as compensation for personal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness; (6) Ministers.—The rental vane of a dwelling house and appurtenances thereof furnished to a minister of the gospel as part of his compensation; (7) Miscellaneous Items.—The following items, to the extent provided in section 110: Earned income from sources without the United States; Salaries of certain Territorial employees; The income of foreign Governments; Income of States, municipalities and other political subdivisions; Receipts of shipowners' mutual protection and indemnity associations; Dividends from China Trade Act corporations. (c) Inventories—Whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as ,the Commissioner, with the approval of the Secretary. may prescribe as conforming as nearly as may be to the bent accounting practice in the trade or business and as most clearly reflecting the income. (d) Distributions by Corporations—Distributions by corporations shall be taxable to the shareholders as provided in section 115. (e) Determination of Gain or Loss.—In the case of a sale or other disposition of property, the gain or loss shall be computed as provided in sections 111. 112 and 113. (f) Gross Income from Sources Within and Without United States.— For computation of gross income from sources within and without the United States, see section 119. Sec. 23. Deductions from Gross Income. In computing net income there shall be allowed as deductions: (a) Expenses.—All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered, traveling expenses (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 taxpayer has not taken or is not taking title or in which he has no equity. (b) Interest.—All interest paid or accrued within the taxable year on indebtedness, except (1) on indebtedness incurred or continued to purchase or carry obligations or securities (other than obligations of the United States issued after Sept. 24 1917. and originally subscribed for by the taxpayer) the interest, upon which is wholly exempt from the taxes imposed by this title, or (2) on indebtedness incurred or continued in connection with the purchasing or carrying of an annuity. (c) Taxes Generally.—Taxes paid or accrued within the taxable year, except— (1) Inceme, war-profits, and excess-profits taxes imposed by the authority of the United States; (2) Income, war-profits,and excess-profits taxes imposed by the authority of any foreign country or possession of the United States; but this deduction shall be allowed in the case of a taxpayer who does not signify in his return his desire to have to any extent the benefits of Section 131 (relating to credit for taxes offoreign countries and pos.su3sions of the United States);and (3) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not exclude the allowance as a deduction of so much of such taxes as is properly allocable to maintenance or interest charges. For the purpose of this subsection, estate, inheritance, legacy, and succession taxes accrue on the due date thereof, except as otherwise provided by the law of the jurisdiction imposing such taxes, and shall be allowed as a deduction only to the estate. (d) Taxes of Shareholder Paid by Corporation.—The deduction for taxes allowed by subsection (c) shall be allowed to a corporation in the case of taxes imposed upon a shareholder of the corporation upon his interest as shareholder which are paid by the corporation without reimbursement from the shareholder, but in such cases no deduction shall be allowed the shareholder for the amount of such taxes. (e) Losses by Individuals.—Subject to the limitations provided in subsection (r) of this section, in the case of an individual, losses sustained during the taxable year and not compensated for by insurance or otherwise— (1) If incurred in trade or business; or (2) If incurred in any transaction entered into for profit, though not connected with the trade or business; or (3) Of property not connected with the trade or business, if the loss arises from fires, storms, shipwreck, or other casualty, or from theft. No loss shall be allowed as a deduction under this paragraph if at the time of the filing of the return such loss has been claimed as a deduction for estate tax purposes in the estate tax return. (f) Losses by Corporations.—Subject to the limitations provided in subsection (r) of this section, in the case of a corporation, losses sustained during the taxable year and not compensated for by insurance or otherwise. (g) Basis for Determining Less.—The basis for determining the amount of deduction for losses sustained, to be allowed under subsection (e) or (O. shall be the adjusted basis provided in section 113 (b) for determining the gain or loss from the sale or other disposition of property. (h) Loss on Wash Sales of Stock or Securities.—For disallowance of loss deduction in the case of sales of stock or securities where within 30 days before or after the date of the sale the taxpayer has acquired substantially identical property, see section 118. (i) Net Losses.—The special deduction for net losses of a prior year, to the extent provided in section 117. (j) Bad Debts.—Debts ascertained to be worthless and charged off within the taxable year (or, in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts); and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt, in an amount not in excess of the part charged off within the taxable year. as a deduction. (k) Depreciation.—A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence. In the case of property held by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. In the case of property held in trust the allowable deduction shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each. (I) Depletion.—In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case; such reasonable allowance in all cases to be made under rules and regulations to be prescribed by the Commissioner, with the approval of the Secretary. In any case in which it is ascertained as a result of operations or of development work that the recoverable units are greater or less than the prior estimate thereof, then such prior estimate (but not the basis for depletion) shall be revised and the allowance under this subsection for subsequent taxable years shall be based upon such revised astimate. In the case of bases the deductions shall be equitably apportioned between the lessor and lessee. In the case of property held by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. In the case of property held in trust the allowable deduction shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each. (For percentage depletion, see section 114 (b) (3) and (4).) (m) Basis for Depreciation and Depletion.—The basis upon which depletion, exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be as provided in section 114. (n) Charitable and Other Contributions.—In the case of an individuall contributions or gifts made within the taxable year to or for the use of (1) The United States, any State. Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes; (2) A corporation, or trust, or community chest, fund, or foundation. organized and operated exclusively 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 which inures to the benefit of any private shareholder or individual; (3) The special fund for vocational rehabilitation authorized by section 12 of the World War Veterans' Act, 1924: (4) Posts or organizations of war veterans, or auxiliary unite or societies of any such posts or organizations, if such posts, organizations, units, or societies, are organized in the United States or any of its possessions, and If no part of their net earnings inures to the benefit of any private shareholder or individual; or (5) A fraternal society, order, or association, operating under the lodge system, but only if such contributions or gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals; to an amount which in all the above cases combined does not exceed 15% of the taxpayer's net income as computed without the benefit of this subsection. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Commissioner, with the approval of the Secretary. (For unlimited deduction if contributions and gifts exceed 90 per centum.of the net income, see section 120.) (o) Future Expenses in Case of Casual Sales of Real Property.—In the case of a casual sale or other casual disposition of real property by an individual, a reasonable allowance for future expense liabilities, incurred under the provisions of the contract under which such sale or other disposition was made, under such regulations as the Commissioner, with the approval of the Secretary, may prescribe, including the giving of a bond, with such sureties and in such sum (not less than the estimated tax liability THE REVENUE ACT OF 1932 5 computed without the benefit of this subsection) as the Commissioner may Act, 1922, or from a corporation which under section 251 is taxable only require, conditioned upon the payment (notwithstanding any statute of on its gross income from sources within the United States by reason of its limitations) of the tax, computed without the benefit of this subsection, receiving a large percentage of its gross income from sources within a possesin respect of any amounts allowed as a deduction under this subsection and sion of the United States. not actually expended in carrying out the provisions of such contract. (b) Interest on United States Obligations.—The amount received as (p) Dividends Received by Corporations.—In the case of a corporation, interest upon obligations of tne United States which is included in gross the amount received as dividends— income under section 22. (1) From a domestic corporation which is subject to taxation under this (c) Personal Exemption.—In the case of a single person, a personal extitle, or emption of $1,000; or in the case of the head of a family or a married person (2) From any foreign corporation when it is shown to the satisfaction of living witn husband or wife, a personal exemption of $2,500. A husband the Commissioner that more than 50 per centum of the gross income of and wife living together shall receive but one personal exemption. The such foreign corporation for the three-year period ending with the dogtrot amount of such personal exemption shall be 22,500. If such husband and its taxable year preceding the declaration of such dividends (or for such wife make separate returns, the personal exemption may be taken by either part of such period as the foreign corporation has been in existence) was or divided between them. derived from sources within the United States as determined under sec(d) Credit for Dependents.—$400 for each person (other than husband or tion 119. wife) dependent upon and receiving his chief support from the taxpayer if The deduction allowed by this subsection shall not be allowed in respect such dependent person is under 18 years of age or is incapable of self-support of dividends received from a corporation organized under the China Trade because mentally or physically defective. Act, 1922, or from a corporation which under section 251 is taxable only te) Change of Status.—If the status of the taxpayer,in so far as It affects on its gross income from sources within the United States by reason of its the personal exemption or er edit for dependents, changes during the taxreceiving a large percentage of its gross inctime from sources within a posses- able year, the personal exemption and credit shall oe apportioned under sion of the United States. rules and regulations praicribed by the Commissioner with the approval (q) Pension Trusts.—An employer establishing or maintaining a pension of the Secretary, in accordance with the number of months before and trust to provide for the payment of reasonable pensions to his employees after such change. For the purpose of such apportionment a fractional (if such trust Is exempt from tax under section 165, relating to trusts part of a month shall be disregarded unless it amounts to more than half a created for the exclusive benefit of employees) shall be allowed as a de- month in which case it shall be considered as a month. duction (in addition to the contributions to such trust during the taxable Sec. 26. Credits of Corporation Against Net Income. year to cover the pension liability accruing during the year, allowed as a deduction under subsection (a) of this section) a reasonable amount transFor tit purpose only of the tax imposed by section 13 there shall be allowed ferred or paid into such trust during the taxable year in excess of such as a credit against net income the amount tem ived as interest upon obligacontributions, but only ifsuch amount(1) has not theretofore been allowable tions of the United States which is included in gross income under section 22. as a deduction, and (2) is apportioned in equal parts over a period of 10 consecutive years beginning with the year in which the transfer or payment PART III—CREDITS AGAINST TAX. is made. Any deduction allowable under section 23 (q) of the Revenue Act of 1928 which under such section was apportioned to any taxable years Sec. 31. Taxes of Foreign Countries and Po ions of United States subsequent to the taxable year 1931 shall be allowed as a deduction in the The amount of Income, war profits, and excess profits taxes imposed by years to which so apportioned to the extent allowable under such section foreign countries or possessions of the United States shall be allowed as a It It had remained in force with respect to such year. credit against the tax, to the extent provided in section 131. (r) Limitation on Stock Losses.— (1) Losses from sales or exchanges of Stocks and bonds (as defined in Sec. 32. Taxes Withheld at Source. subsection (t) of this section) which are not capital assets (as defined in The amount of tax withheld at the source under section 143 shall be section 101) shall be allowed only to the extent of the gains from such alsales lowed as a credit against the tax. or exchanges (Including gains which may be derived by a taxpayer from the retirement of his own obligations). Sec. 33. Erroneous Payments. (2) Losses disallowed as a deduction by paragraph (1), computed without (a) Credit for Overpayments.—For credit against the tax of overpayregard to any losses sustained during the preceding taxable year,shall, to an amount not in excess of the taxpayer's net income for the taxable year, be ments of taxes imposed by this title for other taxable years, see section 322. (b) Fiscal Year Ending in 1932.—For credit against the tax of amounts considered for the purposes of this title as losses sustained in the succeeding taxable year from sales or exchanges ofstocks or bonds which are not capital of tax paid for a fiscal year beginning in 1931 and ending in 1932, see section 132. assets. (3) This subsection shall not apply to a dealer in securities (as to stocks PART IV—ACCOUNTING PERIODS AND METHODS OF and bonds acquired for resale to customers) in respect of transactions in the ordinary course of his business, nor to a bank or trust company incorporated ACCOUNTING. under the laws of the United States or of any State or Territory, nor to Sec. 41. General Rule. persons carrying on the banking business (where the receipt of deposits constitutes a major part of such business) in respect of transactions in The net income shall be computed upon the basis of the taxpayer's annual the ordinary course of such banking business. accounting period (fiscal year or calendar year,as the case may be)in accord(s) Same—Short Sales.—For the purposes of this title, gains or losses (A) ance with the method of accounting regularly employed in keeping the books from short sales of stocks and bonds, or (B) attributable to privileges or ofsuch taxpayer; but if no such method of accounting has been so employed. options to buy or sell such stocks and bonds, or (0)from sales or exchanges or if the method employed does not clearly reflect the income, the compuofsuch privileges or options, shall oe considered as gains or losses from sales tation shall be made in accordance with such method as in the opinion of or exchanges of stocks or bonds which are not capital assets. the Commissioner does clearly reflect the income. If the taxpayer's annual (t) Definition of Stocks and Bonds—As used in subsections (r) and (s) accounting period is other than a fiscal year as defined in section 48 or if the term "stocks and bonds" means (1) shares of stock in any corporation, the taxpayer has no annual accounting period or does not keep books, the or (2) rights to subscribe for or to receive such shares, or (3) bonds, deben- net income shall be computed on the basis of the calendar year. (For use tures, notes or certificates or other evidences of indebtedness, issued by of inventories, see section 22 (c).) any corporation (other than a Government or political subdivision thereof), Sec. 42. Period in Which Items of Gross Income Included. with Interest coupons or In registered form, or (4) certificates of profit, or of interest in property accumulations,in any The amount of all items of gross income shall be included in the gross or investment trust or similar organization holding or dealing in any of the Instruments mentioned or de- income for the taxable year in which received by the taxpayer, unless, scribed In this subsection,regardless of whether or not such investment trust under methods of accounting permitted under section 41, any such amounts or similar organization constitutes a corporation within the meaning of this are to be properly accounted for as of a different period. Act. Sec. 43. Period for Which Deductions and Credits Taken. Sec. 24. Items Not Deductible. The deductions and credits provided for in this title shall be taken for (a) General Rule.—In computing net income no deduction shall in any the taxable year in which "paid or accrued" or "paid or incurred." decase be allowed in respect of— pendent upon the method of accounting upon the basis of which the net (1) Pexsonal, living, or family expenses; (2) Any amount paid out for new buildings or for permanent improve- income is computed, unless in order to clearly reflect the income the deductions or credits should be taken as of a different period. ments or betterments made to increase tne value of any property or estate; (3) Any amount expended in restoring property or in Sec. 44. Installment Basis. making good the exhaustion thereof for which an allowance is or has been made: or (a) Dealers in Personal Property.—Under regulations prescribed by the t4) Premiums paid on any life insurance policy covering tne life of any Commissioner with the approval of the Secretary, a person who regularly officer, or employee, or of any person financially interested in any trade sells or otherwise disposes of personal property on the installment plan or business carried on by the taxpayer, when the taxpayer is directly or may return as income therefrom in any taxable year that proportion of the indirectly a beneficiary under such Policy. installment payments actually received in that year which the gross profit (b) Holders of Life or Terminable Intetest.—Amounts paid under the laws of any State, Territory, District of Columbia. possession of the United realized or to be realized when payment is completed, bears to the total contract price. States, or foreign country as income to the holder of a life or terminable (b) Sales of Realty and Casual Sales of Personalty.—In the case (1) of a interest acquired by gift, bequest, or inheritance shall not be reduced or casual sale or other casual disposition of personal property (other than diminished by any deduction for shrinkage tby whatever name called) in property of a kind which would properly be included in the inventory elf tile value of such interest due to the lapse of time, nor by arty deduction althe taxpayer if on hand at the close of the taxable year), for a price exceedlowed by this Act (except the deductions provided for hi subsections (k) ing $1,000, or (2) of a sale or other disposition of real property, if in either and (I) of section 23) for the purpose of computing the net income of an case the initial payments do not exceed 40 per centum of the selling price, estate or trust out not allowed under the laws of such State, Territory, the income may, under regulations prescribed by the Commissioner with District of Columbia. Possession of the United States, or foreign country the approval of the Secretary, be returned on the basis and in the manner for the purpose of computing the income to which such holder is entitled. (c) Tax Withheld on Tax-free Covenant Bonds—For tax withheld on above prescribed in this section. As used in this section the term "initial payments" means the payments received in cash or property other than Lax-free covenant bonds,see section 143 (a)(3)• evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. Sec. 25. Credits of Individual Against Net Income. (c) Change from Accrual to Installment Basis.—If a taxpayer entitled There shall be allowed for the purpose of the normal tax, but not for the to the benefits of subsection (a) elects for any taxable year to report.his net surtax, tile following credits against tne net income: income on the installment basis, then in computing his income for the year (a) Dividends.—The amount received as dividends— of change or any subsequent year, amounts actually received during any tl) From a domestic corporation which is subject to taxation under this such year on account of sales or other dispositions of property made in any title, or prior year shall not be excluded. (2) From a foreign corporation when it is shown to the satisfaction of the (d) Gain or Loss Upon Disposition of Installment Obligations.—If an Commissioner that more than o0 per centum of tne gross income of such installment obligation is satisfied at other than its face value or distributed, foreign corporation for the three-year period ending with the close of its transmitted, sold, or otherwise disposed of, gain or less shall result to the taxable year preceding the declaration of sucn dividends (or for such part extent of the difference between the basis of the obligation and (1) in the of such period as the corporation has been in existence) was derived from case of satisfaction at other than face value or a sale or exchange—the sources within the United States as determined under the provisions of amount realized. or (2) in case of a distribution, transmission, or disposition section 119. otherwise than by sale or exchange—the fair market value of the obligation The credit allowed by this subsection shall not be allowed in respect of at the time of such distribution, transmission, or disposition. The basis dividends received from a commotion organized under the China Trade of the obligation shall be the excess of the face value of the obligation ores 6 THE REVENUE ACT OF 1932 an amount equal to the income which would be returnable were the obligation satisfied in full. This subsection shall not apply to the transmission at death of installment obligations if there is filed with the Commissioner, at such time as he may by regulation prescribe, a bond in such amount and with such sureties as he may deem necessary, conditioned upon the return as income, by the person receiving any payment on such obligations, of the same proportion of such payment as would be returnable as income by the decedent if he had lived and had received such payment. Sec. 45. Allocation of Income and Deductions. In any case of two or more trades or businesses (whether or not incorporated, whether or not organized in the United States and whether or not affiliated) owned or controlled directly or indirectly by the same interests, the Commissioner is authorized to distribute, apportion, or allocate gross Income or deductions between or among such trades or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such trades or businesses. sworn to by the President, Vice-President, or other principal officer and by the Treasurer or Assistant Treasurer. In cases where receivers, trustees in bankruptcy, or assignees are operating the property or business of corporations such receivers, trustees, or assignees shall make returns for such corporations in the same manner and form as corporations are required to make returns. Any tax due on the basis of such returns made by receivers. trustees, or assignees shall be collected in the same manner as if collected from the corporations of whose business or property they have custody and control. (b) Consolidated Returns.—For provision as to consolidated returns of affiliated corporations, see section 141. Sec. 53. Time and Place for Filing Returns. (a) Time for filing.— (1) General Rule.—Returns made on the basis of the calendar year shall be made on or before the 15th day of March following the close of the calendar year. Returns made on the basis of a fiscal year shall be made on or before the 15th day of the third month following the close of the fiscal year. (2) Extension of Time.—The Commissioner may grant a reasonable Sec. 46. Change of Accounting Period. extension of time for filing returns, under such rules and regulations as he If a taxpayer changes his accounting period from fiscal year to calendar shall prescribe with the approval of the Secretary. Except in the case of Year, from calendar year to fiscal year, or from one fiscal year to another, taxpayers who are abroad, no such extension shall be for more than six the net income shall, with the approval of the Commissioner, be computed months. on the basis of such new accounting period, subject to the provisions of (h) To Whom Return Made.— section 47. (1) Individuals.—Returns (other than corporation returns) shall be made to the collector for the district in which is located the legal residence Sec. 47. Returns for a Period of Less Than Twelve Months. or principal place of business of the person making the return, or, if he has (a) Returns for Short Period Resulting From Change of Accounting no legal residence or principal place of business in the United States, then Period.—If a taxpayer, with the approval of the Commissioner,changes the to the collector at Baltimore, Md. basis of computing net income from fiscal year to calendar year a separate (2) Corporations.—Returns of corporations shall be made to the collector return shall be made for the period between the close of the last fiscal year of the district in which is located the principal place of business or principal for which return was made and the following December 31. If the change office or agency of the corporation, or, if it has no principal place of business is from calendar year to fiscal year, a separate return shall be made for the or principal office or agency in the United States, then to the collector at period between the close of the last calendar year for which return was made Baltimore, Md. and the date designed as the close of the fiscal year. If the change is from Sec. 54. Records and Special Returns. 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 (a) By Taxpayer.—Every person liable to any tax imposed by this title as the close of tne new fiscal year. or for the collection thereof, shall keep such records, render under oath such (b) Income Computed on Basis of Short Period.—Wnere a separate statements, make such returns, and comply with such rules and regulations. return is made under subsection (a) on account of a change in the accounting as the Commissioner, with the approval of the Secretary, may from time period, and in all other cases where a separate return is required or per- to time prescribe. mitted, by regulations prescribed by tne Commissioner with tne approval of (b) To Determine Liability to Tax.—Whenever in the judgment of the tne Secretary, to be made for a fractional part of a year, then the income Commissioner necessary he may require any person, by notice served upon snail be computed on the basis of the period for which separate return is him, to make a return render under oath such statements, or keep such made. records, as the Commissioner deems sufficient to show whether or not (c) Income Placed on Annual Basis.—If a separate return is made under such person is liable to tax under this title. subsection (a) on account of a change in the accounting period, tne net (c) Information at the Source.—For requirement of statements and income, computed on the basis of the period for which separate return is returns by one person to assist in determining the tax liability of another made,shall be placed on an annual basis by multiplying the amount thereof person, see sections 147 to 150. by 12 and dividing by tne number of months included in the period for Sec. 55. Publicity of Returns. which the separate return is made. The tax shall be such part of the tax computed on such annual basis as the number of months in such period is Returns made under this title shall be open to inspection in the same of 12 months. manner, to the same extent, and subject to the same provisions of lzw, (d) Capital Net Gains and Losses—Earned Income.—The Com- including penalties, as returns made under Title II of the Revenue Act of missioner with the approval of the Secretary shall by regulations prescribe 1928. the method of applying the provisions of subscections (b) and (c) (relating Sec. 56. Payment of Tax. to computing income on the basis of a short period, and placing such income on an annual basis) to cases where the taxpayer makes a separate (a) Time of Payment.—The total amount of tax imposed by this title return under subsection (a) on account of a change in the accounting shall be paid on the fifteenth day ix March following the close of the calendar period, and it appears that for the period for which the return is so made he year, or, if the return should be made on the basis of a fiscal year, then on has derived a capital net gain, or sustained a capital net loss, or received the fifteenth day of the third month following the close of the fiscal year. earned income. (b) Installment Payments.—The taxpayer may elect to pay the tax In ke) Reduction of Credits Against Net Income.—In tne case of a return four equal installments, in which case the first installment shall be paid on made for a fractional part of a year, except a return made under subsection the date prescribed for the payment of the tax by the taxpayer, the second (a), on account of a change in the accounting period, the personal exemp- installment shall be paid on the fifteenth day of the third month, the third tion and credit for dependents shall be reduced respectively to amounts Installment on the fifteenth day of the sixth month, and the fourth installwhich bear the same ratio to the full credits provided as the number of ment on the fifteenth day of the minth month, after such date. If any months in the period for which return is made bears to 12 months. installment is not paid on or before the date fixed for its payment, the (f) Closing of Taxable Year in Case of Jeopardy.—For closing of taxable whole amount of the tax unpaid shall be paid upon notice and demand from year in case of jeopardy, see section 146. the collector. (c) Extension ot Time for Payment.—At the request of the taxpayer. Sec. 48. Definitions. the Commissioner may extend the time for payment of the amount deterWhen used in this title— mined as the tax by the taxpayer, or any installment thereof, for a period (a) Taxable Year.—"Taxable year" means the calendar year, or the not to exceed six months from the date prescribed for the payment of the fiscal year ending during such calendar year, upon the basis of which the tax or an installment thereof. In such case the amount in respect of which net income is computed under this Part. "Taxable year" includes, in the the extension is granted shall be paid on or before the date of the expiration case of a return made for a fractional part of a year under the provisions of of the period of the extension. this title or under regulations prescribed by the Commissioner with the (d) Voluntary Advance Payment.—A tax imposed by this title, or any approval of the Secretary, the period for which such return is made. Tne Installment thereof. may be paid, at the election of the taxpayer, prior to first taxable year, to be called the taxable year 1932, shall be the calendar the dais prescribed for its payment. year 1932 or any fiscal yea' ending during the calendar year 1932. (3) Advance Payment in Case of Jeopardy.—For advance payment in (b) Fiscal Year.—"Fiscal year" means an accounting period of 12 months case of jeopardy, see section 146. ending on the last day of any month other than December. (f) Tax Withheld at Source.—For requirement of withholding tax at (c) Paid, Incurred, Accrued.—The terms "paid or incurred" and "paid the source in the case of nonresident aliens and foreign corporations, and or accrued" snail be construed according to the method of accounting upon In the case of so-called "tax-free covenant bonds," see sections 143 and 144. tne basis of which the net income is computed under this Part. (g) Fractional Parts of Cent.—In the payment of any tax under this title a fractional part of a cent shall be disregarded unless it amounts to PART V—RETURNS AND PAYMENT OF TAX. one-half cent or more, in which case it shall be increased to 1 cent. Sec. 51, Individual Returns. (h) Receipts.—Every collector to whom any payment of any income tax such payment a full (a) Requirement.—The following individuals shall each make under oath is made shall upon request give to the person making the particular a return stating specifically the items of his gross income and the deductions written or printed receipt, stating the amount paid and whenever any debtor pays and made; payment was such account for which and credits allowed under tnis title— made by him to separate credi(1) Every individual having a net income for the taxable year of $1,000 taxes on account of payments made or to be tors the collector shall, if requested by such debtor, give a separate receipt or over, if single, or if married and not living witn husband or wife: or the tax paid on account of each creditor in such form that the debtor (2) Every individual having a net income for tne taxable yeas of $2,500 can conveniently produce such receipts separately to his several creditors or over, if married and living with husband or wife; and (3) Every individual having a gross income for the taxable year of $5,000 In satisfaction of their respective demands up to the amounts stated in the receipts; and such receipt shall be sufficient evidence in favor ofsuch debtor or over, regardless of the amount of his net income. (b) Husband and Wife.—If a nusband and wife living together have an to justify him in withholding from his next payment to his creditor the aggregate net income for the taxable year of $2,500 or over, or an aggregate amount therein stated; but the creditor may, upon giving to his debtor a full written receipt acknowledging the payment to him of any sum actually gross income for such year of $5,000 or over— paid and accepting the amount of tax paid as aforesaid (specifying the (1) Each shall make such a return, or the sur(2) The income of each shall be included in a single joint return, in which same) as a further satisfaction of the debt to that amount, require render to him of such collector's receipt. case tne tax shall be computed on the aggregate income. (c) Persons Under Disability.—If the taxpayer is unable to make his Sec. 57. Examination of Return and Determination of Tax. own return, the return shall be made by a duly authorized agent or by As soon as practicable after the return is filed the Commissioner shall the guardian or other person charged with the care of the person or property examine it and shall determine the correct amount of the tax. of such taxpayer. (d) Fiduciaries.—For returns to be made by fiduciaries, see section 142. Sec. 58. Additions to Tax and Penalties. Sec. 52. Corporation Returns. (a) For additions to the tax in case of negligence or fraud in the nonpay(a) Requirement.—Every corporation subject to taxation under this ment of tax or failure to file return therefor, see Supplement M. title shall make a return, stating specifically the items of its gross income (b) For criminal penalties for nonpayment of tax or failure to file return and the deductions and credits allowed by this title. The return shall be therefor,see section 145. THE REVENUE ACT OF 1932 Sec. 59. Administrative Proceedings. For administrative proceedings in respect of the nonpayment or overpayment of a tax imposed by this title, see as follows: (a) Supplement L,relating to a.ssessmeat and collection of deficiencies. (b) Supplement M,relating to interest and additions to tax. (c) Supplement N. relating to claims against transferees and fiduciaries. (d) Supplement 0,relatirig to over-payments. PART VI—MISCELLANEOUS PROVISIONS, Sec. 61. Laws Made Applicable. 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 title. Sec. 62. Rules and Regulations. The Commissioner, with the approval of the Secretary, shall prescribe and publish all needful rules and regulations for the enforcement of this itle. Sec. 62. Taxes in Lieu of Taxes Under 1928 Act. The taxes imposed by this title shall be in lieu of the corresponding taxes imposed by the sections of the Revenue Act of 1928 bearing the same numbers. Sec. 64. Short Title. This title may be cited as the "Income Tax Act of 1932.'' Sec.65. Effective Date of Title. This title shall take effect as of Jan. 1 1932, except that sections 145 and 150, and this section, shall take effect on the enactment of this Act. SUBTITLE C—SUPPLEMENTAL PROVISIONS. Supplement A—Rates of Tax. (Supplementary to Subtitle B, Part I] Sec. 101. Capital Net Gains and Losses. (a) Tax in Case of Capital Net Gain.—In the case of any taxpayer, other than a corporation, who for any taxable year derives a capital net gain (as hereinafter defined in this section), there shall, at the election of the taxpayer, be levied, collected, and paid, in lieu of all other taxes imposed by this title, a tax determined as follows: A partial tax shall first be computed upon the basis of the ordinary net income at the rates and in the manner as if this section had not been enacted and the total tax shall be this amount plus 1214 per centum of the capital net gain. (b) Tax in Case of Capital Net Loss.—In the case of any taxpayer, other than a corporation, who for any taxable year sustains a capital net loss (as hereinafter defined in this section), there shall be levied, collected, and paid, in lieu of all other taxes imposed by this title, a tax determined as follows: A partial tax shall first be computed upon the basis of the ordinary net income at the rates and in the manner as if this section had not been enacted, and the total tax shall be this amount minus 12;5 per centum of the capital net loss; but in no case shall the tax of a taxpayer who has sustained a capital net loss be less than the tax computed without regard to the provisions of this section. (c) Definitions.—For the purpose of this title— (1) "Capital gain" means taxable gain from the sale or exchange of capital assets consummated after Dec. 31 1921. (2) "Capital loss" means deductible loss resulting from the sale or exchange of capital assets. (3) "Capital deductions" means such deductions as are allowed by section 23 for the purpose of computing net income, and are properly allocable to or chargeable against capital assets sold or exchanged during the taxable year. (4) "Ordinary deductions" means the deductions allowed by section 23 other than capital losses and capital deductions. (5) "Capital net gain" means the excess of the total amount of capital gain over the sum of(A) the capital deductions and capital losses, plus (B) the amount, if any, by which the ordinary deductions exceed the gross income computed without including capital gains. (6) "Capital net loss" means the excess of the sum of the capital losses plus the capital deductions over the total amount of capital gain. (7) "Ordinary net income" means the.net income, computed in accordance with the provisions of this title, after excluding all items of capital gain, capital loss, and capital deductions. (8) "Capital assets" means property held by the taxpayer for more than two years (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale in the course of his trade or business. For the purposes of this definition— (A) In determining the period for which the taxpayer has held property received on an exchange there shall be included the period for which he held the property exchanged, if under the provisions of section 113, the property received has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as the property exchanged. (B) In determining the period for which the taxpayer has held property, however acquired, there shall be included the period for which such property was held by any other person, if under the provisions of section 113 such property has, for the purpose of determining'gain or loss from a sale or exchange, the same basis in whole or in part in his hands as it would have in the hands of such other person. (0) In determining the period for which the taxpayer has held stock or securities received upon a distribution where no gain is recognized to the distributes under the provisions of section 112(g) of this Act or the Revenue Act of 1928, there shall be included the period for which he held the stock or securities in the distributing corporation prior to the receipt of the stock or securities upon such distribution. (D) In determining the period for which the taxpayer has held stock or securities the acquisition of which (or the contract or option to acquire resulted in the nondeductibility (under section 118 of this Act or e Revenue Act of 1928,relating to wash sales) of the loss from the sale or other disposition of substantially identical stock or securities, there shall be included the period for which he held the stock or securities the loss from the sale or other disposition of which was not deductible. (d) Collection and Payment of Tax.—The total tax determined under subsection (a) or (b) shall be collected and paid in the same manner, at the same time, and subject to the same provisions of law, including penalties, other taxes under this title. . as 7 by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax imposed by section 12 of this title attributable to such sale shall not exceed 16 per centum of the selling price of such property or interest. (b) For limitation to 1234 per centum rate of tax, see section 101. Sec. 103. Exemptions from Tax on Corporations. le— following organizations shall be exempt from taxation under this title— (1) Labor, agricultural, or horticultural organizations; (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 corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, no part of the net earnings of which inures to the benefit of any private shareholder or individual; (6) Corporations, and any community chest, fund, or foundation, organized and operated exclusively 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 which inures to the benefit of any private shareholder or individual; (7) Business leagues, chambers of commerce, real estate boards, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual; (8) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes; (9) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder; (10) Benevolent life insurance associations of a purely local character, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations; but only if 85 per centum or more of the income consists of amounts collected from members for the sole purpose of meeting losses and expenses; (11) Farmers' or other mutual hail, cyclone, cadualty, or fire insurance Companies or associations (including interinsurers and reciprocal underpseluses; ietxer writers) o tne income of which is used or held for the purpose of paying losses (12) Farmers', fruit growers', or like associations organized and operated on a co-operative basis (a) for the purpose of marketing the products of members or other producers.- and turning back to them tne proceeds of sales, less the necessary marketing expenses, on the basis of either the quantity or the value of the products furnished by them, or (b) for the purpose of purchasing supplies and equipment for the use of members or other persons, and turning over such supplies and equipment to them at actual cost, plus necessary expenses. Exemption shall not be denied any such association because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in tne State of incorporation or 8 per centum per annum, whichever is greater, on the value of the consideration for which tne stock was issued, and if substantially all sucn stock (other tnan nonvoting preferred stock, the owners of which are not entitled or permitted to participate, directly or indirectly, in the profits of the association,upon dissolution or otherwise, oeyond the fixed dividends) is owned by Producers who market their products or purchase tneir supplied and equipment through the association; nor snail exemption be denied any such association because there is accumulated and maintained by it a reserve required by State law or a reasonaele reserve for any necessary Purpose. Such an association may market the products of nonmembers in an amount the value of wnich does not exceed the value of the products marketed for members, and may purchase supplies and equipment fot nonmembers in an amount the value of which does not exceed the value of the supplies and equipment purchased for members, provided the value of the purchases made for persons woo are neither members nor producers does not exceed 15 per centum of tne value of all its purchases; (13) Corporations organized by an association exempt under the provisions of paragraph (12), or members thereof,for the purpose offinancing the ordinary crop operations of such members or other producers, and operated in conjunction witn such association. Exemption shall not be denied any such corporation because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the State of incorporation or 8 per centum per annum, whichever is greater, on the value of the consideration for which the stock was issued, and if substantially all such stock (other than nonvoting preferred stock, the owners of which are not entitled or permitted to participate, directly or indirectly, in the profits of the corporation, upon dissolution or otherwise, beyond tne fixed dividends) is owned by such association, or members thereof; nor snail exemption be denied any such corporation because tnere is accumulated and maintained by it a reserve required by State law or a reasonable reserve for any necessary purpose; (1) Corporations organized for the exclusive purpose of holding title to pro erte, collecting income tnerefrom, and turning over tne entire amount tbfteof, less expenses, to an organization which itself is exempt from the x imposed by this title; (15) Federal land banks, national farm-loan associations, and Federal intermediate credit banks, as provided in the Federal Farm Loan Act, as amended; (16) Voluntary employees' beneficiary associations providing for the payment of life, sick, accident, or other benefits to the members of such association or their dependents, if (A) no part of their net earnings inures (other than through such payments) to the benefit of any private shareholder or individual, and (B) 85 per centum or more of the income consists of amounts collected from members for the sole purpose of making such payments and meeting expenses; (17) Teachers' retirement fund associations of a purely local character if (A) no part of their net earnings inures (other than through payment of retirement benefits) to the benefit of any private shareholder or individual, Sec. 102. Sale of Mines and Oil or Gas Wells. and (B)the income consists solely of amounts received from public taxation, (a) In the case of a bona fide sale of mines, oil or gas wells, or any interest amounts received from assessments upon tne teaching salaries of members, therein, whore the principal value of the property has been demonstrated and income in respect of investments. N h) t 8 THE REVENUE ACT OF 1932 Sec. 104. Accumulation of Surplus to Evade Surtaxes. (a) If any corporation, however created or organized, is formed or availed of for the purpose of preventing the Imposition of toe surtax upon its shareholders througn tne medium of permitting its gains and profits to accumulate instead of being divided or distributed, tnere shall be levied, collected, and paid for each taxable year upon the net income of such corporation a tax equal to 50 per centtun of the amount thereof, which shall be in addition to the tax imposed by section 13 and shall be computed, collected, and paid upon the same basis and in the same manner and subject to the same provisions of law, including penalties, as that tax. (b) The fact that any corporation is a mere holding or investment company, or that the gains or profits are permitted to accumulate beyond the reasonable needs of the business, shall be prima facie evidence of a purpose to escape the surtax. (c) As used in this section tne term "net income" means the net income as defined in section 21, increased by toe sum of the amount of the dividend deduction allowed under section 23 (P) and the amount of the interest on obligations of the United States issued after Sept. 1 1917 which would be subject to tax in whole or an part in the hands of an individual owner. (d) The tax imposed by this section sh ill not apply if all the shareholders of the corporation include (at the time of filing their returns) in their gross income their entire distributive shares, whether distributed or not of the net income of the corporation for such year. Any amount so included in the gross ircome of a shareholder shall be treated as a dividend received. Any subsequent distribution made by the corporation out of the earnings or profits for such taxable year shall, if distributed to any shareholder who has so included in his gross income his distributive share, be exempt from tax in the amount of the share so included. Sec. 105. Taxable Period Embracing Years with Different Laws. If it is necessary to compute th tax for a period beginning in one calendar year (hereinafter in this section called "first calendar year") and ending in the following calendar year (hereinafter in this section called "second calendar year") and the law applicable to the second calendar year is different from the law applicaole to the first calendar year, then the tax under this title for the period ending during the second calendar year shall be in the sum of: (1) the same proportion of a tax for the entire period, determined under the law applicable to the first calendar sear and at the rates for such year, which the portion of such period falling within the first calendar year is of the entire period; and (2) the same proportion of a tax for the entire period, determined under the law applicable to the second calendar year and at the rates for such year, which the portion of such period falling within the second calendar year is of the entire period. SUPPLEMENT B—COMPUTATION OF NET INCOME. [Supplementary to Subtitle 11, Part 11.1 Sec. 111. Determination of Amount of Gain or Loss. (a) Computation of Gain or Loss.—Except as hereinefter provided in this section, the gain from the sale or other disposition of property shall be the excess of the amount realized tie(refrom over the adjusted basis provided in section 113 (b), and the loss shall be the excess of such basis over the amount realized. (b) Amount Realized.—The amount realized from tha sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. (c) Recognition of Gain or Loss.—In the case of a sale or exchange, the extent to which the gain or loss determined under this section shall be recognized for the purposes of this title, shall be determined under the provisions et section 112. (d) Installment Sales.—Nothing in this section shall be construed to prevent (in the case of property sold under contract providing for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which such payment is received. Sec. 112. Recognition of Gain or Loss. (a) General Rule.—Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 111, shall be recognized, except as hereinafter provided in this section. (b) Exchanges Solely in Kind.— (1) Property Held for Productive Use or Investment.—No gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, choses in action. certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be hold either for productive use in trade or business or for investment. (2) Stock,for Stock of Same Corporation.—No gain or loss shall be recognized if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corporation. (3) Stock for Stock on Roorganization.—No gain or loss shall be recognized h stock or securities in a corporation a party to a reorganization are in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization. (4) Same—Gain of Corporation.—No gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, In pursuance of the plan of reorganization,solely for stock or securities in another corporation a party to the reorganization. (5) Transfer to Corporation Controlled by Transferor.—No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock or securities in such corporation, and immediately after the exchange such person or persons are in control of the corporation; but in the case of an exchange by two or more persons this paragraph shall apply only if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange. (c) Gain from Exchanges Not Solely in Kind.— (1) If an exchange would be within the provisions of subsection (b) (1), (2). (3). or (5) of this section if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then the gain, if any to the recipient shall be recognized, but in an amount not in excess of the sum ofsuch money and the fair market value of such other property. (2) If a distribution made in pursuance of a plan of reorganization is within the provisions of paragraph (I) of this subsection, but has the effect of the distribution of a taxable dividend, then there shall be taxed as a dividend to each distribute° such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after Feb. 28 1913. The remainder, if any, of the gain recognized under paragraph (1) shall be taxed as a gain from the exchange of property. (d) Same—Gain of Corporation.—If an exchange would be within the provisions of subsection (b) (4) of this section if it were not for the fact that the property received in exchange consists not only of stock or securities permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then— (1) If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization e no gain to the corporation shall be recognized from the exchange, but (2) If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed. (e) Loss from Exchanges Not Solely in Kind.—If an exchange would be within the provisions of subsection (b) (1) to (5), inclusive, of this section if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. (f) Involuntary Conversions.—If property (as a result of its destruction In whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation, or the threat or imminence thereof) is compulsorily or involuntarily converted into property similar or related in service or use to the property so converted, or into money which is forthwith in good faith, under regulations prescribed by the Commissioner with the approval of the Secretary, expended in the acquisition of other property similar or related in service or use to the property so converted, or in the acquisition of control of a corporation owning such other property, or in the establishment of a replacement fund, no gain or loss shall be recognized. If any part of the money is not so expended, the gain, if any, shall be recognized, but in an amount not in excess of the money which is not so expended. (g) Distribution of Stock on Reorganization.—Ie there is distributed, in pursuance of a plan of reorganization, to a shareholder in a corporation a party to the reorganization, stock or securities in such corporation or in another corporation a party to the reorganization, without the surrender by such shareholder of stock or securities in such a corporation, no gain to the distributesfrom the receipt ofsuch stock or securities shall be recognized. (h) Same—Effect on Future Distributions.—The distribution, in pursuance of a plan of reorganization, by or on behalf of a corporation a party to the reorganization, of its stock or securities or stock or securities in a corporation a party to the reorganization, if no gain to the distributes from the receipt of such stock or securities was recognized by law, shall not be. considered a distribution of earnings or profits within the meaning of section 115 (b) for the purpose of determining the taxability of subsequent distributions by the corporation. (I) Definition of Reorganization.—As used in this section and sections 113 and 115— (1) The term "reorganization" means (A) a merger or consolidation (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 substantially all the properties of another corporation), or (B) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor or its stockholders or both are in control of the corporation to which the assets are transferred, or (0) a recapitalization or (D) a mere change in identity, form. or place of organization, however effected. (2) The term "a party to a reorganization" includes a corporation resulting from a reorganization and includes both corporations in the case of an 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. (j) Definition of Control.—As used in this section the tern, "control" means the ownership of at least 80 per centum of the voting stock and at least 80 per centtun of the total number of shares of all other classes of stock of the corporation. (k) Foreign Corporations.—In determining the extent to which gain shall be recognized in the case of any of the exchanges or distributions (made after the date of the enactment of this Act) described in subsection (b) (3), (4), or (5), or described in so much of subsection (c) as refers to subsection (b) (3) or (5). or described in subsection (d) or (g), a foreign corporation shall not be considered as a corporation unless, prior to such exchange or distribution, it has been established to the satisfaction of the Commissioner that such exchange or distribution is not in pursuance of a plan having as one of its principal'purposes the avoidance of Federal income taxes. Sec. 113. Adjusted Basis for Determining Gain or Loss. (a) Basis (Unadjusted) of Property —The basis of property shall be the cost of such property; except that.-(1) Inventory Value.—If the property should have been included in the last Inventory, the basis shall be the last inventory value thereof. (2) Gifts After Dec. 311920.—If the property was acquired by gift after Dec. 311920. the basis shall be the same as it would be 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 Commissioner finds it impossible to obtain such facts, the basis shall be the fair market value of such property as found by the Commissioner as of the date or approximate date at which, according to the best information that the Commissioner is able to obtain, such property was acquired by such donor or last preceding owner. (3) Transfer in Trust After Dec. 31 1920.—If the property was acquired after Dec. 31 1920 by a transfer in trust (other than by a transfer in trust by a bequest or devise) the basis shall be the same as it would be in the bands of the grantor, increased in the amount of gain or decreased in the amount of loss recognized to the grantor upon such transfer under the law applicable to the year in which the transfer was made. (4) Gift or Transfer in Trust Before Jan. 1 1921.—If the property was acquired by gift or transfer in trust on or before Dec. 31 1920, the basis shall be the fair market 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 section 402 (e) of the Revenue Act of 1921, or in section 302 (f) of the Revenue Act of 1924 or the Revenue Act of 1928 (relating to property passing under power of appointment) regardless of the time of acquisition. (5) Property Transmitted at Death.—If personal property was acquired by specific bequest, or if real property was acquired by general or specific devise or by intestacy, the basis shall be the fair market value of the property at the time of the death of the decedent. If the property was acquired by the decedent's estate from the decedent, the basis in the hands of the estate shall be the fair market value of the property at the time of the death of the decedent. In all other cases if the property was acquired either by will or by intestacy, the basis shall be the fair market value of the property at the time of the distribution to the taxpayer. In the case of property THE REVENUE ACT OF 1932 9 transferred in trust to pay the income for he to or upon the order or direc- (but not less than the amount allowable) under this Act or prior income tax tion of the grantor, with the right reserved to the grantor at all times prior laws. Where for any taxable year prior to the taxable year 1932 the deto his death to revoke the trust, the basis of such property in the hands depletion allowance was based on discovery value or a percentage ofincome, of the persons entitled under the terms of the trust instrument to the prop- then the adjustment for depletion for such year shall be based on the deerty after the grantor's death shall, after such death, be the same as if the pletion which would have been allowable for such year if computed without trust instrument had been a will executed on the day of the grantor's death. reference to discovery value or a percentage of income; (6) Tax-free Exchanges Generally.—If the property was acquired upon (0) In respect of any period prior to March 1 1913, for exhaustion, wear an exchange described in section 112 (b) to (e), inclusive, the basis shall and tear, obsolescence, amortization, and depletion, to the extent sustained; be the same as in the case of the property exchanged,decreased in the amount (D) In the case of stock (to the extent not provided for in the foregoing of any money received by the taxpayer and increased in the amount of gain subparagraphs) for the amount of distributions previously made which, or decreased in the amount of loss to the taxpayer that was recognized under the law applicable to the year in which the distribution was made, upon such exchange under the law appllcable to the year in which the ex- either were tax-free or were applicable in reduction of basis (not including change was made. If the property so acquired consisted in part of the type distributions made by a corporation, which was classified as a personal of property permitted by section 112 (b) to be received without the recog- service corporation under the provisions of the Revenue Act of 1918 or nition of gain or loss, and in part of other property, the basis provided in 1921, out of its earnings or profits which were taxable in accordance with the this paragraph shall be allocated between the properties (other than money) provisions of section 218 of the Revenue Act of 1918 or 1921). received, and for the purpose of the allocation there shall be assigned to (2) Substituted Basis—The term "substituted basis" as used in this such other property an amount equivalent to its fair market value at the subsection means a basis determined under any provision of subsection (a) date of the exchange. This paragraph shall not apply to property acquired of this section or under any corresponding provision of a prior income tax by a corporation by the issuance of its stock or securities as the consideration law, providing that the basis shall be determined— In whole or in part for the transfer of the property to it. (A) By reference to the basis in the hands of a transferor, donor, or (7) Transfers to Corporation Where Control of Property Remains in grantor, or Same Persons.—If the property was acquired after Dec. 31 1917 by a cor(B) By reference to other property held at any time by the person for poration in connection with a reorganization, and immediately after the whom the basis is to be determined. transfer an interest or control in such property of 50 per centum or more Whenever it appears that the basis of property in the hands of the taxremained in the same persons or any of them, then the basis shall be the payer is a substitued basis, then the adjustments provided in paragraph same as it would be in the hands of the transferor, increased in the amount (1) of this subsection shall be made after first making in respect of such of gain or decreased in the amount of loss recognized to the transferor substituted basis proper adjustments of a similar nature in respect of the upon such transfer under the law applicable to the year in which the trans- period during which the property was held by the transferor, donor, or fer was made. This paragraph shall not apply if the property acquired grantor, or during which the other property was held by the person for consists of stock or securities in a corporation a party to the reorganization, whom the basis is to be determined. A similar rule shall be applied in unless acquired by the issuance of stock or securities of the transferee as the case of a series of substituted bases. the consideration in whole or in part for the transfer. (8) Property Acquired by Issuance of Stock or as Paid-in Surplus.— Sec. 114. Basis for Depreciation and Depletion. If the property was acquired after Dec. 31 1920 by a corporation— Basis for Depreciation.—The basis upon which exhaustion, wear and (a) (A) By the issuance of its stock or securities in connection with a transtear and obsolescence are to be allowed in respect of any property shall be action described in section 112 (b) (5) (including, also, cases where part of the consideration for the transfer of such property to the corporation the adjusted oasis provided in section 113(b) for the purpose of determining the gain or loss upon the sale or other disposition of such property. was property or money, in addition to such stock or securities), or (b) Basis for Depletion.— (B) as paid-in surplus or as a contribution to capital, then the basis shall be the same as it would be in the hands of the transferor, Increased in the (1) General Rule.—The basis upon which depletion is to be allowed in amount of gain or decreased in the amount of loss recognized to the respect of any property shall be the adjusted basis provided in section 113 Rd transferor upon such transfer under the law applicable to the year in for the purpose of determining the gain or loss upon the sale or other disposition of such property, except as provided in paragraphs (2), (3), which the transfer was made. and (9) Tax-free Distributions.—If the property consists of stock or securities (4) of this subsection. distributed after Dec. 31 1923 to a taxpayer in connection with a trans(2) Discovery Value in Case of Mlnes.—In the case of mines (other than action described in section 112 (g), the basis in the case of the stock in re- metal,coal,or sulphur mines) discovered by the taxpayer after Feb. 28 1913, spect of which the distribution was made'shall be apportioned, under rules the basis for depletion shall be the fair market value of the property at the and regulations prescribed by the Commissioner with the approval of the date of discovery or within 30 days thereafter, if such mines were not Secretary, between such stock and the stock or securities distributed. acquired as the result of purchase of a proven tract or lease, and if the fair (10) Involuntary Conversion.—If the property was acquired as the result market value of the property is materially disproportionate to the cost. of a compulsory or involuntary conversion described in section 112 (f), the The depletion allowance based on discovery value provided in this parabasis shall be the same as in the case of the property so converted. decreased graph shall not exceed 50 per centum of the net income of the taxpayer in the amount of any money received by the taxpayer which was not ex- (computed without allowance for depletion) from the property upon which pended in accordance with the provisions of law (applicable to the year in the discovery was made, except that in no case shall the depletion allowance which such conversion was made) determining the taxable status of the be less than it would be if computed without reference to discovery value. gain or loss upon such conversion, and increased in the amount of gain or Discoveries shall include minerals in commercial quantities contained within decreased in the amount of loss to the taxpayer recognized upon such con- a vein or deposit discovered in an existing mine or mining tract by the taxversion under the law applicable to the year in which such conversion was payer after Feb. 28 1913, if the vein or deposit thus discovered was not made. merely the uninterrupted extension of a continuing commercial vein or (11) Wash Sales of Stock.—If the property consists of stock or securities deposit already known to exist, and if the discovered minerals are of suffithe acquisition of which (or the contract or option to acquire which) resulted cient value and quantity that they could be separately mined and marin the nondeductibility (under section 118 of this Act or corresponding keted at a profit. provisions of prior income tax laws, relating to wash sales) of the loss from (3) Percentage Depletion for Oil and Gas Wells.—In the case of oil and the sale or other disposition of substantially identical stock or securities, gas wells the allowance for depletion shall be 2734 per centum of the gross then the basis shall be the basis of the stock or securities so sold Or disposed Income from the property during the taxable year, excluding from such of, increased or decreased, as the case may be, by the difference, if any, gross Income an amount equal to any rents or royalties paid or incurred between the price at which the property was acquired and the price at by the taxpayer in respect of the property. Such allowance shall not which such substantially identical stock or securities were sold or otherwise exceed 50 per centum of the net income of the taxpayer (computed without disposed of. allowance for depletion) from the property, except that in no case shall (12) Property Acquired During Affillation.—In the case of property the depletion allowance be less than it would be if computed without referacquired by a corporation, during a period of affiliation, from a corporation ence to this paragraph. with which it was affiliated, the basis of such property, after such period (4) Percentage of Depletion for Coal and Metal Mines and Sulphur.— affiliation, shall be determined, in accordance with regulations prescribed The allowance for depletion shall be, in the case of coal mines,5 per centum, by the Commissioner with the approval of the Secretary, without regard in the case of metal mines, 15 per centum, and,in the case of sulphur mines to inter-company transactions in respect of which gain or loss was not or deposits, 23 per centum, of the gross income from the property during recognized. For the purposes of this paragraph, the term "period of affilia- the taxable year. excluding from such gross income an amount equal to tion" means the period during which such corporations were affiliated any rents or royalties paid or incurred by the taxpayer in respect of the (determined in accordance with the law applicable thereto) but does not property. Such allowance shall not exceed 50 per centum of the net income Include any taxable year beginning on or after Jan. 1 1922, unless a con- of the taxpayer (computed without allowance for depletion) from the propsolidated return was made, nor any taxable year after the taxable year erty, except that in no case shall the depletion allowance for the taxable 1928. The basis in case of property acquired by a corporation during any year 1932 or 1933 be less than it would be if computed without reference period, in the taxable year 1929 or any subsequent taxable year, in respect to this paragraph. A taxpayer making return for the taxable year 1933 oftrhich a consolidated return is made by such corporation under section 141 shall state in such return, as to each property (or, if he first makes return of this Act or the Revenue Act of 1928, shall be determined in accordance in respect of a property for any taxable year after the taxable year 1933, with regulations prescribed under section 141 (b) of this Act or the Revenue then in such first return), whether he elects to have the depletion allowance Act of 1928. The basis in the case of property held by a corporation during for such property for succeeding taxable years computed with or without any period, in the taxable year 1929 or any subsequent taxable year, in reference to percentage depletion. The depletion allowance respect of which a consolidated return is made by such in respect of corporation under such property for all succeeding taxable years shall be computed accordsection 141 of this Act or the Revenue Act of 1928, shall be adjusted in ing to the election thus made. If the taxpayer fails to make such state-. respect of any items relating to such period, in accordance with regulations ment in the return, the depletion allowance for such property for succeedprescribed under section 141 (b) of this Act or the Revenue Act of 1928. ing taxable years shall be computed without reference to percentage deapplicable to such period. pletion. During the period for which property acquired after Dec. 31, (13) Property Acquired Before March 1 1913.—In the case of property 1933, is held by the taxpayer— acquired before March 11913, if the basis otherwise determined under this (A) if the basis of the property in the hands of the taxpayer is, under subsection, adjusted as provided in subsection 03), is less than the fair section 113 (a), determined by reference to the basis in the hands of the market value of the property as of March 1 1913, then the basis shall be transferor, donor, or grantor, then the depletion allowance in respect of such fair market value. In determining the fair market value of stock in a the property shall be computed with or without reference to percentage corporation as of March 1 1913, due regard shall be given to the fair market depletion, according to the method of computation value of the assets of the corporation as of that date. which would have been appllcable if the transferor, donor, or grantor had continued to hold (b) Adjusted Basis.—The adjusted basis for the determining the gain or property, or loss from the sale or other disposition of property, whenever acquired, shall • (B) if the basis be the basis determined under subsection (a). adjusted of the property is, under section 113 (a), determined by as hereinafter reference to the basis of other property previously held by the taxpayer, provided. then the depletion allowance in respect of the property shall be (1) General Rule.—Proper adjustment in respect of computed the property shall with or without reference to percentage depletion, according to the method in all cases be made— of computation which would have been applicable in respect of the (A) For expenditures, receipts, losses, or other items, property properly chargeable previously held if the taxpayer had continued to hold such property. to capital account, including taxes and other carrying charges on unimproved and unproductive real property, but no such adjustment shall be Sec. 115. Distributions by Corporations. made for taxes or other carrying charges for which deductions have been (a) Definition of Dividend.—The term "dividend" when used taken by the taxpayer in determining net income for in this the taxable year or title (except in section 203 (a) (4) and section 208 prior taxable years; (c) (1), relating to insurance companies) means any distribution made by a (B) In respect of any period since Feb. 28 1913, corporation to its for exhaustion wear shareholders, whether in money or in other property, out of its earnings and tear, obsolescence, amortization, and depletion, to the extent allowed or profits accumulated after Feb. 28 1913. THE REVENUE ACT OF 1932 10 (b) Source of Distributions.—For tne purposes of this Act every distribution is made out of earnings or profits to the extent thereof, and from the most recently accumulated earnings or profits. Any earnings or profits accumulated, or increase in value of property accrued, before Marcn 1 1913. may be distributed exempt from tax,after the earnings and profits accumulated after Feb. 28 1913, nave been distributed, but any such tax-free distrioution oral] be applied against and reduce the basis of tne stock provided in section 113. (c) Distributions in Liquidation.—Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for tne stock,and amounts distributed in partial liquidation of a corporation shall be treated as in part or full payment in excnange for the stock. The gain or loss to the distributee resulting from such exchange snail be determined under section 111, but snail be recognized only to the extent provided in section 112. In the case of amounts distributed in partial liquidation (otner tnan a distribution within the provisions of section 112(h) of stock or securities in connection with a reorganization) the part of such distribution which is Properly cnargeable to capital account snail not be considered a distribution of earnings or profits within the meaning of subsection (b) of this section for the purpose of determining tne taxability of subsequent distributions by the corporation. (d) Other Distributions from Capital.—If any distribution (not in partial or complete liquidation) made by a corporation to its sharenolders is not out of increase in value of property accrued before March 1 1913, and is not out of earnings or profits, then the amount of such distribution shall be applied against and reduce the basis of tne stock provided in section 113, and if in excess ofsuch basis,such excess shall be taxable in tne same manner as a gain from the sale or exchange of property. (e) Distributions by Personal Service Corporations.—Any distribution made by a corporation, which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 or tne Revenue Act of 1921. out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918 or section 218 of the Revenue Act of 1921, shall be exempt from tax to tne distributees. (0 Stock Dividends.—A stock dividend shall not be subject to tax. (g) Redemption of Stock.—If a corporation cancels or redeems its stock ,ahetner or not sucn stock was issued as a stock dividend) at such time and in sucn manner as to make the distribution and cancellation or redemption in whole or in part essentially equivalent to the distribution of a taxable dividend, the amount so distributed in redemption or cancellation of the stock, to the extent that it represents a distribution of earnings or profits accumulated after Feb. 28 1913, snail be treated as a taxable dividend. (n) Definition of Partial Liquidation.—As used in this section the term "amounts distributed in partial liquidation" means a distribution by a corporation in complete cancellation or redemption of a part of its stock, or one of a series of distributions in complete cancellation or redemption of all or a portion of its stock. Sec. 116. Exclusions From Gross Income. District of Columbia, bears to the amount of the net income from the operation of such public utility for such taxable year. (2) If by the terms ofsuch contract no part of the proceedsfrom the operation of the public utility for the taxable year would, irrespective of the tax Imposed by this title, accrue directly to or for the use of such State, Territory, political subdivision, or the District of Columbia, then the tax upon the net income of such person from the operation of such public utility shall be levied, assessed, collected, and paid in the manner and at the rates prescribed in this title. (e) Bridges to Be Acquired by State or Political Subdivision.—Whenever any State or political subdivision thereof, in pursuance of a contract to which it is not a party entered into before the enactment of the Revenue Act of 1928, is to acquire a bridge— (1) If by the terms of such contract the tax imposed by this title is to be paid out of the proceeds from the operation of such bridge prior to any division of such proceeds, and if, but for the imposition of the tax imposed by this title, a part of such proceeds for the taxable year would accrue directly to or for the use of or would be applied for the benefit of such State or political subdivision, then a tax upon the net income from the operation of such bridge shall be levied, assessed, collected, and paid in the manner and at the rates prescribed in this title, but there shall be refunded to such State or political subdivision (under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary) an amount which bears the same relation to the amount of the tax as the amount which (but for the imposition of the tax imposed by this title) would have accrued directly to or for the use of or would be applied for the benefit of such State or political subdivision, bears to the amount of the net Income from the operation of such bridge for such taxable year. No such refund shall be made unless the entire amount of the refund is to be applied In part payment for the acquisition of such bridge. (2) If by the terms of such contract no part of the proceeds from the operation of the bridge for the taxable year would, irrespective of the tax Imposed by this title, accrue directly to or for the use of or be applied for the benefit of such State or political subdivision, then the tax upon the net income from the operation ofsuch bridge shall be levied, assessed, collected. and paid in the manner and at the rates prescribed in this (f) Dividends from "China Trade Act" Corporation.—In the case of a person, amounts distributed as dividends to or for his benefit by a corporation organized under the China Trade Act, 1922. if, at the time of such distribution, he is a resident of China, and the equitable right to the income of the shares of stock of the corporation is in good faith vested in him. (g) Shipowners' Protection and Indemnity Associations.—The receipts organized of shipowners' mutual protection and indemnity associations not of for profit, and no part of the net earnings of which inures to the benefit as other subject be shall any private shareholder; but such corporations rents. persons to the tax upon their net income from interest, dividends, and Sec. 117. Net Losses. (a) Definition of "Net Loss."—As used in this section the term "net the deductions allowed by this title over the gross In addition to the Items specified in section 22 (b), the following items loss" means the excess of following exceptions and limitations: snall not be included in gross income and shall be exempt from taxation income, with the (1) Non-business Deductions.—Deductions otherwise allowed by law not under tots title: attributable to the operation of a trade or business regularly carried on by (a) Earned Income from Sources Without United States.—In tne case taxpayer shall be allowed only to the extent of the amount of the gross of an individual citizen of the United States, a bona fide nonresident of the the not derived from such trade or business; United States for more tnan six months during the tastable year, amounts Income (2) Capital Losses.—In the case of a taxpayer other than a corporation. received from sources without the United States (except amounts paid by for capital losses otherwise allowed by law shall be allowed only the United States or any agency thereof) if such amounts constitute earned deductions of the capital gains; extent the to nis from deduction a as allowed income; but such individual snail not be (3) Depletion.—The deduction for depletion shall not exceed the amount gross income any deductions properly allocable to or chargeable against allowable if computed without reference to discovery value, be would which amounts excluded from gross income under this subsection. As used in this depletion under section 114 (b) (3) or (4); subsection the term "earned income" means wages, salaries, professional or to percentage (4) Dividends.—The deduction provided for in section 23 (P) of amounts fees, and other amounts received as compensation for personal services as dividends shall not be allowed; actually rendered, but does not include that part of the compensation received (5) Interest.—There shall be included in computing gross income the derived by tne taxpayer for personal services rendered by him to a corporaof interest received free from tax under this title, decreased by the tion which represents a distribution of earnings or profits rather than a amount of interest paid or accrued whicn is not allowed as a deduction by reasonable allowance as compensation for the personal services actually amount 23 (b); section which in business or a in trade engaged In taxpayer a of the case rendered. (6) Net Loss Not to Produce Net Lass.—In computing the net loss for both personal services and capital are material income producing factors, a taxable year a net loss for a prior year shall not be allowed as a dereasonable allowance as compensation for the personal services actually any duction. rendered by the taxpayer, not in excess of 20 per centum of his share of (b) Net Lose as a Deduction.—If, for any taxable year it appears upon the net Profits of such trade or business, shall be considered as earned the production of evidence satisfactory to the Commissioner that any tax Income, has sustained a net loss, the amount thereof shall be allowed as a (b) Teachers in Alaska and Hawaii.—In tne case of an individual payer deduction in computing the net income of the taxpayer for the succeeding employed by Alaska or Hawaii or any political subdivision thereof as a year (hereinafter in this section called "second year"); the deducteacher in any educational institution, the compensation received as such. taxable cases to be made under regulations prescribed by the CommisThis suosection shall not exempt compensation paid dieectly or indirectly tion in all the approval of the Secr-tary. by the Government of the United States.' Subsection (b) of section 5 of sioner with (c) Capital Net Gain in Second Year.—If in the second year the taxpayer the Act entitled "An Act to provide a government for the Territory of than a corporation) has a capital net gain, the deduction allowed Hawaii," approved April 30 1900, as amended by the Act entitled "An (other of this section shall first be applied as a deduction in Act to amend section 5 of the Act entitled 'An Act to provide a government by subsection (b) the ordinary net income for such year. If the deduction is in for the Territory of Hawaii,' approved April 30 1900," approved April computing tho ordinary net income (computed without such deduction) the 12 1930 [U. S. C., Sup. V., title 48, sec. 495 WI, is repealed as of Jan. 1 excess of amount of such excess shall then be applied against the capital net gain 1932. for such year. (c) Income of Foreign Governments.—The income of foreign govern(d) Net Losses for 1930 or 1931.—If for the taxable year 1930 a taxpayer ments received from investments in the United States in stocks, bonds, or suet tined a net less within the provisions of the Revenue Act of 1928, the other domestic securities, owned by such foreign governments, or from amount of such net loss shall not be allowed as a deduction in computing interest on deposits In banks in the United States of moneys belonging to net income under this title. If for the taxable year 1931 a taxpayer sustained the United within source other such foreign governments, or from any a net loss within the provisions of the Revenue Act of 1928, the amount States. for such net loss shall be allowed as a deduction in computing net income (d) Income of States, Municipalities, etc.—Income derived from any of taxable year 1932 to the same extent and in the same mariner as a net public utility or the exercise of any essential governmental function and the sustained for one taxable year is, under this Act, allowed as a deducloss accruing to any State, Territory, or the District of Columbia, or any tion for the succeeding taxable year. political subdivision of a State or Territory, or income accruing to the (e) Fiscal Year Returns.—If a taxpayer makes return for a period beginGovernment of any possession of the United States, or any political sub"first calendar ning in one calendar year (hereinafter in this subsection called division thereof. in the following calendar year (hereinafter in this subending and year") any or Columbia, of Whenever any State. Territory, or the District section called "second calendar year") and the law applicable to the second political subdivision of a State or Territory, prior to Sept. 8 1916, entered calendar year is different from the law applicable to the first calendar year. in good faith into a contract with any person, the object and purpose of shall then his net loss for the period ending during the second calendar year which is to acquire, construct, operate, or maintain a public utility— be the sum of: (1) The same proportion of a net loss for the entire period, (1) If by the terms of such contract the tax imposed by this title is to be the which year, calendar first the determined under the law applicable to paid out of the proceeds from the operation of such public utility, prior to portion of such period falling within such calendar year is of the entire any division of such proceeds between the person and the State, Territory,• period; and (2) the same proportion of a net loss for the entire period. political subdivision, or the District of Columbia, and if, but for the imposiunder the law applicable to the second calendar year, which tion of the tax imposed by this title, a part of such proceeds for the taxable determined such period tailing within such calendar year is of the entire of portion the political Territory, State. such of year would accrue directly to or for the use period. income net the upon tax a then Columbia, of District the subdivision, or from the operation of such public utility shall be levied, assessed. collected, Sec. 118. Loss from Wash Sales of Stock or Securities. ' and paid in the manner and at the rates prescribed in this title, but there the case of any loss claimed to have been sustained from any sale In (a) the or subdivision, political shall be refunded to such State, Territory, disposition of shares of stock or securities where it appears that, other or the by prescribed be to regulations and rules District of Columbia (under period beginning 30 days before the date of such sale or disposition Commissioner with the approval of the Secretary) an amount which bears within a 30 days after such date, the taxpayer has acquired (by purchase the same relation to the amount of the tax as the amount which (but for and ending exchange upon which the entire amount of gain or loss was recogthe imposition of the tax imposed by this title) would have accrued directly or by an law), or has entered into a contract or option so to acquire. subto or for the use of such State, Territory, political subdivisions, or the nized by THE REVENUE ACT OF 1932 stantially identical stock or securities, then no deductio n for the loss shall be allowed under section 23 (e) (2); nor shall such deductio n be allowed undor section 23 (f) unless the claim is made by a corporat ion, 1 dealer in stocks or securities, and with respect to a transact ion made in the ordinary course of its business. (b) If the amount of stock or securities acquired (or covered by the contract or option to acquire) is less than the amount of stock or securities sold or otherwise disposed of, then the particul ar shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be determined under rules and regulations prescrib ed by the Commissioner with the approv li of the Secretary. (c) If the amount of stock or securities acquired (or covered by the conktract or option to acquire) is not less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the acquisition of which (or the contract or option to acquire which) resulted in the non-deductibility of the loss shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary. 11 (2) from the sale of personal property produce d (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 purchase of personal property within and its sale without the United States or from the purchase of personal property without and its sale within the United States, shall be treated as derived entirely from sources within the country in which sold, except that gains, profits, and income derived from the purchase of personal property within the United States and its sale within a possession of the United States or from the purchase of personal property within a possession of the United States and its sale within the United States shall be treated as derived partly from sources within and partly from sources without the United States. (f) Definitions.—As used in this section the words "sale- or "sold" include "exchange" or "exchanged"; and the word "produced" includes "created," "fabricated," "manufactured," "extracted," "processed." "cured," or "aged." Sec. 119. Income from Sources Within United States. (a) Gross Income from Sources in United States.—The following items Sec. 120. Unlimited Deduction for Charitable of gross income shall be treated as income from sources and Other within the United States: Contributions. (1) Interest.—Interest on bonds. notes, or other interestIn the case of an individual if in the taxable bearing obligeyear and in each of the 10 dons of residents, corporate or otherwise, not includi preceding taxable years the amount of ng— tne contributions or gifts described (A) interest on deposits with persons carrying on the banking in section 23 (n) plus the amount of income, business war-profits, or excess-profits paid to persons not engaged in business within the United States and not taxes paid during such year in respect of preceding taxable years, exceeds having an office or place of business therein, or 90 per centum of the taxpayer's net income for each such year, as computed (3) interest received from a resident alien individual, resident a foreign without the benefit of section 23 Cu). then the 15 per centum limit imposed corporation, or a domestic corporation, when it is shown to the satisfaction by such section shall not be applicable. of the Commissioner that lees than 20 per centum of the gross income of such resident payer or domestic corporation has been SUPPLEMENT C—CREDITS AGAINST TAX. derived from sources within the United States,as determined under the provisio ns of this section, [Supplementary to Subtitle B, Part ELI for the three-year period ending with the close of the taxable year of such payer preceding the payment of such interest, Sec. 131. Taxes of Foreign Countries or for such part of such and Po ions of period as may be applicable, or United States. (C) income derived by a foreign central bank of issue from bankers (a) Allowance of Credit.—If the taxpayer signifies acceptances; in his return his desire to nave the benefits of this section, the tax (2) Dividends.—The amount received as dividen imposed by this title shall be ds— credited with: (A) from a domestic corporation other than a corporation entitled to (1) Citizen and Domestic Corpora the benefits of section 251, and other than tion.—In the case of a citizen of the a corporation less than 20 per United States and of a domestic corporation, the amount of any centum of whose gross Income is shown to the income, satisfaction of the Com- war-profits, and excess-pr ofits taxes paid or accrued during the taxable missioner to have been derived from sources within the United States, as year to any foreign country or to any Possession of the United States; determined under the provisions of this section, for and the three-year period (2) Resident of United States.—In ending with the close of the taxable year of such the case of a resident of the United corporation preceding the States, the amount of any sucn taxes paid or accrued during the taxable declaration of such dividends (or for such part of'such period as the corpo- year to any possession of the United States; and ration has been in existence), or (3) Alien Resident of United States.—In the (13) from a foreign corporation unless less than 50 case of an alien resident per centum of the gross of the United States, the amount income of such foreign corporation for the three-ye of any such taxes paid or accrued during ar period ending with the the taxable year to any foreign country, if the foreign country of which close of Its taxable year preceding the declarat ion of such dividends (or for such alien resident is a citizen or subject, in imposing such taxes, allows a such part ofsuch period as the corporation has been in existence) was derived similar credit to citizens of the United States residing in such country; and from sources 'within the United States as determined under the provisions (4) Partners hips and Estates.—In the case of any such individual who Is a of this section; member of a partnership or a beneficiary of (3) Personal Services.—Compensation for labor an estate or trust, his proor personal services Portionate share of such taxes performed in the United States; of the partnersnip or the estate or trust paid or accrued during the taxable year to (4) Rentals and Royalties.—Rentals or royalties a foreign country or to any possession from property located of the United States, as the case in the United States or from any interest in such may be. property, including rentals (b) Limit on Credit.—The amount of the or royalties for the use of or for the privilege of credit taken under tnis section using in the United States, shall be subject to each of the following limitations: patents, copyrights, secret processes and formulas , good-will, trade-marks, (1) The amount of the credit in respect trade-brands, franchises, and other like property of the tax paid oi accrued to any ; and country snail not exceed tne same proporti (5) Sale of Real Property.—Gains, profits, and on of the tax against which such income from the sale of credit is taken, which the real property located in the United States. taxpayer's net Income from sources within such country bears to his entire net income (b) Net Income from Sources in United States. for the same taxable year; and —From the items of gross (2) The total amount of the credit income specified in subsection (a) of this shall not exceed the same proportion section there shall be deducted of the tax against whicn such credit is taken, whicn the taxpayer's the expenses, losses, and other deductions net properly apportioned or allo- income from sources without the United States bears to his entire net cated thereto and a ratable part of any expenses , losses, or other deductions income for the same which can not definitely be allocated to taxable year. some item or class of gross income. (c) Adjustments on Payment of Accrued The remainder, if any, shall be included Taxes.—If accrued taxes when in full as net income from sources paid differ from the amounts claimed as credits by the taxpayer, or if any within the United States. tax paid is refunded in whole or in part, the taxpayer snall notify the (c) Gross Income from Sources Without United States.—The following Commissioner, who shall redetermine the amount of tne tax for the year items of gross income shall be treated as income from sources without the or years affected, and the amount of tax due upon sucn redetermination, if United States any,ahall be paid by the taxpayer upon (1) Interest other than that derived from sources notice and demand bi.4he collector, within the United States or the amount of tax overpaid , if any, shall be credited or n.funded to the as provided in subsection (a)(1) of this section; taxpayer in accordance with the provisions of section 322. In the case of (2) Dividends other than those derived from sources within the United such a tax accrued but not paid. the Commissioner as a coudition precedent States as provided in subsection (a) (2) of this section; to the allowance of tnis credit may requite (3) Compensation for labor or personal services perform tne taxpayer to gives bond with ed without the sureties satisfactory to and to be approved by the Commissioner in such United States; sum as the Commiss ioner may require, (4) Rentals or royalties from property located without conditioned upon the payment by the United States the taxpayer ofany amount of tax or from any interest in such property, including rentals, found due upon any sucn redetermination; or royalties for the and the bond herein prescrib use of or for the privilege of using without ed snail contain such further conditions as the the United States, patents. Conunissioner may require. copyrights, secret processes and formulas, good-wil l, trade-marks, trade (d) Year in Which Credit Taken. brands, franchises, and other like properti —The credits provided for in this es; and section may, at the option of the taxpayer (5) Gains, profits, and income from the sale and irrespective of the method of real property located of accounting employed in keeping his books, be taken in the year in which o ithout the United States. tne taxes of tne foreign country or the (d) Net Income from Sources Without United States. possession of the United States —From the items accrued, subject, however, to the conditions prescribed in subsection of gross income specified in subsection (c) of this (c) section there shall be of this section. If the taxpayer deducted the expenses, losses, and other deductio elects to take sucn credits in tne year in ns properly apportioned which the taxes of the or allocated thereto, and a ratable part of foreign country or tne possessi on of tne United States any expenses, losses, or other accrued, the credits for all subsequent years anal be taken upon deductions which can not definitely be allocate d to some item or class of basis, and no the same portion of any such taxes shall be allowed gross Income. The remainder, If any, shall as a deduction) n be treated in full as net in- the same or any succeeding year come from sources without the United States. (e) Proof of Credits.—The credits provided (e) Income from Sources Partly Within and in this section shah be allowed Partly Without United only if the taxpayer establishes to the satisfaction of the Commiss states.—Items of gross income, expenses, losses ioner (I) and deductions, other than the total amount of income derived from sources without the United States, those specified in subsections (a) and (c) of this section, shall be allocated determined as provided in section 119, (2) tne amount of income derived or apportioned to sources within or without the United States, under rules from each country, tne tax paid or accrued to whicn Is claimed as a credit and regulations prescribed by the Commissioner with the approval of the under this section, such amount to be determined under rules and regulaSecretary. Where items of gross income are separate ly allocated to sources tions Prescribed by the Commiss within the United States, there shall be deducte ioner with the approval of tne Secretar d (for the purpose of com- and (3) all other informat y. ion necessary for the verification and computation puting the net income therefrom) the expenses, losses, and other deductions ofsuch credits. Properly apportioned or allocated thereto and a ratable part of other (f) Taxes of Foreign Subsidiary.—For the purposes expenses, losses or other deductions which can of this section not definitely be allocated domestic corporation which owns a majority of the voting stock of a foreign to some item or class of gross income. The remainder, if any, shall be corporation from which it receives dividends (not deductible under section included in full as net income from sources within the United States. In 23 (p)) in any taxable year shall be deemed to have paid thesame proportion the case of gross income derived from sources partly within and partly of any income, war-profits, without the United States, the net income may or excess-profits taxes paid by such foreign first be computed by de- corporation to any foreign country or to any possession of the United States, ducting the expenses, losses, or other deductions apportioned or allocated upon or with respect to the accumulated profits of such foreign corporathereto and a ratable part of any expenses, losses, or other deductions tion from which such dividends were paid, which the amount of such diviwhich can not definitely be allocated to some items or class of gross income; dends bears to the amount ofsuch accumulated profits: Provided, That the and the portion of such net income attributable to sources within the amount of tax deemed to have been paid under this sub-section shall in United States may be determined by processe s or formulas of general ap- no case exceed the same proportion of the tax against which credit is taken portionment prescribed by the Commissioner with the approval of the which the amount of such dividends bears to the amount of the Secretary. Gains, profits, and income from— entire netincome of the domestic corporation in which (1) transportation or other services rendered partly such dividends are included. within and partly The term "accumulated profits" without the United States, or when used in this subsection in reference to a foreign corporation, means the amount of its gains, profits, or income 12 THE REVENUE ACT OF 1932 in excess of the income, war-profits, and excess-profits taxes imposed upon or with respect to such profits or income; and the Commissioner with the approval of the Secretary shall have full power to determine from the accumulated profits of what year or years such dividends were paid; treating dividends paid in the first 60 days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown otherwise), and in other respects treating dividends as having been paid from the most recently accumulated gains, profits, or earnings. In the case of a foreign corporation, the income, war-profits, and excess-profits taxes of which are determined on the basis of an accounting period of less than one year, the word "year" as used in this subsection shall be construed to mean such accounting period. OD Corporations Treated as Foreign.—For the purposes of this section the following corporations shall be treated as foreign corporations: (1) A corporation entitled to the benefits of section 251, by reason of receiving a large percentage of its gross income from sources within a possession of the United States; (2) A corporation organized under the China Trade Act, 1922, and entitled to the credit provided for in section 261. Sec. 132. Payments Under 1928 Act. Any amount paid before or after the enactment of this Act on account of the tax imposed for a fiscal year beginning in 1931 and ending in 1932 by Title II of the Revenue Act of 1928 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 322. (2) Every individual having a net income for the taxable year of $2,500 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; (5) Every estate or trust the gross income of which for the taxable year 18 55,000 or over,regardless of the amount of the net income;and (6) Every estate or trust of which any beneficiary is a nonresident alien. (b) Joint Fiduciaries.—Under such regulations as the Commissioner with the approval of the Secretary may prescribe a return made by one of two or more joint fiduciaries and filed in the office of the collector of the district where such fiduciary resides shall be sufficient compliance with the aboverequirement. 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. (c) Law Applicable to Fiduciaries.—Any fiduciary required to make a return under this title shall be subject to all the provisions of law which apply to individuals. Sec. 143. Withholding of Tax at Source. (a) Tax-free Covenant Bonds.— (1) Requirement of Withholding.—In any case where bonds, mortgages, or deeds of trust, or other similar obligations of a corporation 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 reimburse 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 TAX. OF AND PAYMENT D—RETURNS SUPPLEMENT 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 [Supplementary to Subtitle B, Part V] bonds, mortgages, deeds of trust, or other obligations, whether such of Returns Corporations. Sec. 141. Consolidated interest is payable annually or at shorter or longer periods, if payable to trade (a) Privilege to File Consolidated Returns.—An affiliated group of an individual, a partnership, or a foreign corporation not engaged in place of corporations shall,subject to the provisions of this section, have the privilege or business within the United States and not having any office or the obligor of making a consolidated return for the taxable year in lieu of separate re- business therein: Provided, That if the liability assumed by and withdeduction turns. The making of a consolidated return shall be upon the condition does not exceed 2 per centum of the interest, then the rates: following the at be shall that all the corporations which have been members of the affiliated group holding (A) 8 per centum in the case of a nonresident alien individual, or of at any time during the taxable year for which the return is made consent the United States to all the regulations under subsection (b) (or, in case such regulations are any partnership not engaged in trade or business within therein and composed in not prescribed prior to the making of the return, then the regulations pre- and not having any office or place of business in the case of centum per scribed under section 141 (b) of the Revenue Act of 1928 in so far as not whole or in part of nonresident aliens, (B) 13U in the case of other inconsistent with this Act) prescribed prior to the making of such return; such a foreign corporation, and (C) 2 per centum That if the owners of such and the making of a consolidated return shall be considered as such consent. Individuals and partnerships: Provided further, Commissioner may In the case of a corporation which is a member of the affiliated group for a obligations are not known to the withholding agent the rate of 2 per centum. fractional part of the year the consolidated return shall include the income authorize such deduction and withholding to be at the centurn of ofsuch corporation for such part of the year as it is a member of the affiliated or, if the liability assumed by the obligor does not exceed 2 per the interest, then at the rate of8 per centum. group. (2) Benefit of Credits Against Net Income.—Such deduction and with(b) Regulations.—The Commissioner, with the approval of the Secreresident entitled to tary, shall prescribe such regulations as he may deem necessary in order holding shall not be required in the case of a citizen or agent on or before that the tax liability of an affiliated group of corporations making a con- receive such interest, if he files with the withholding benefit of the credits solidated return and of each corporation in the group, both during and February 1 a signed notice in writing claiming tho case of a nonresident alien after the period of affiliation, may be determined, computed assessed, col- provided in section 25 (c) and (d); nor in the by the Commissioner lected, and adjusted in such manner as clearly to reflect the income and to individual if so provided for in regulations prescribed under section 215. prevent avoidance of tax liability. (3) Income of Obligor and Obligee.—The obligor shall not be allowed a (c) Computation and Payment of Tax.—In any case in which a consolthis title, or any other tax idated return is made the tax shall be determined, computed, assessed, deduction for the payment of the tax imposed by shall such tax be included collected, and adjusted in accordance with the regulations under subsec- paid pursuant to the tax-free covenant clause, nor tion (b) (or, in case such regulations are not prescribed prior to the making In the gross income of the obligee. (b) Nonresident Aliens—All persons, in whatever capacity acting. of the return, then the regulations prescribed under section 141 (b) of property, fiduciaries. the Revenue Act of 1928 in so far as not inconsistent with this Act) pre- including lessees or mortgagors of real or personal States, having the scribed prior to the date on which such return is made; except that for the employers, and all officers and employees of the United Interest (except interest taxable years 1932 and 1933 there shall be added to the rate of tax pre- control, receipt, custody, disposal, or payment of paid to persons business banking the on persons with carrying scribed by sections 13 (a), 201 (b), and 204 (a), a rate of three-fourths of on deposits not engaged in business in the United States and not having an office or 1 per centum; premiums, annuities, (d) Definition of "Affiliated Group."—As used in this section an "affili- place of business therein), rent, salaries, wages, or determinable ated group" means one or more chains of corporations connected through compensations, remunerations, emoluments, or other fixed nonresident alien any of profits, income, and gains, annual or periodical stock ownership with a common parent corporation if— engaged in trade or business within (1) Atleast 95 per centum of the stock of each of the corporations (except individual, or of any partnership not any office or place of business therein and the common parent corporation) is owned directly by one or more of the the United States and not having composed in whole or in part of nonresident aliens, (other than income other corporations; and of the class allowed as a credit by section 25 (a) shall (2) The common parent corporation owns directly at least 95 per centum received as dividends (except in the cases provided for in subsection (a) of this section and except of the stock of at least one of the other corporations. as otherwise provided in regulations prescribed by the Commissioner under As used in this subsection the term "stock" does not include nonvoting section 215) deduct and withhold from such annual or periodical gains. stock which is limited and preferred as to dividends. centum thereof: Prorided, That (e) A consolidated return shall be made only for the domestic corpora- profits, and income a tax equal to 8 per deducted and withheld tions within the affiliated group. An insurance company subject to the the Commissioner may authorize such tax to be are not known tax imposed by section 201 or 204 shall not be included in the same con- from the interest upon any securities the owners of which solidated return with a corporation subject to the tax imposed by section to the withholding agent. (c) Return and Payment.—.Every person required to deduct and withhold 13, and an insurance company subject to the tax imposed by section 201 March 15 shall not be included in the same consolidated return with an insurance any tax under this section shall make return thereof on or before of each year and shall on or before June 15, in lieu of the time prescribed in company subject to the tax imposed by section 204. States Government (f) China Trade Act Corporations.—A corporation organized under the section 56, pay the tax to the official of the United made liable for such China Trade Act, 1922, shall not be deemed to be affiliated with any other authorized to receive it. Every such person is hereby of any person demands and claims the against tax and is hereby indemnified corporation within the meaning of this section. the amount of any payments made in accordance with the provisions (g) Corporations Deriving Income from Possessions of United States. for —For the purposes of this section a corporation entitled to the benefits of of this section. (d) Income of Recipient.—Income upon which any tax is required to be section 251, by reason of receiving a large percentage of its income from be included in the return possessions of the United States, shall be treated as a foreign corporation. withheld at the source under this section shall amount of tax so withheld shall be (h) Subsidiary Formed to Comply with Foreign Law.—In the case of a of the recipient ofsuch income, but any tax as computed in such return. domestic corporation owning or controlling, directly or indirectly, 100 per credited against the amount of income (e) Tax Paid by Recipient.-1,any tax required under this section to centum of the capital stock (exclusive or directors' qualifying shares) of a by the recipient of the income. It shall not corporation organized under the laws of a contiguous foreign country and be deducted and withhold Is paid agent; nor in cases in which the tax maintained solely for the purpose of complying with laws of such country be re-collected from the withholding imposed upon or collected from the recipient as to title and operation of property, such foreign corporation may, at the is so paid shall any penalty be agent for failure to return or pay the same. option of the domestic corporation, be treated for the purpose of this title of the income or the withholding unless such failure was fraudulent and for the purpose of evading payment. as a domestic corporation. (f) Refunds and Credits.—Where there has been an overpayment of tax (i) Suspension of Running of Statute of Limitations.—If a notice under credit made under the provisions of section section 272 (a) in respect of a deficiency for any taxable year is mailed to a under this section any refund or unless the amount of such tax corporation, the suspension of the running of the statute of limitations 322 shall be made to the withholding agent provided in section 277, shall apply in the case of corporations with which was actually withheld by the withholding agent. (g) Notwithstanding the provisions of subsections' (a) and (b). the such corporation made a consolidated return for such taxable year. the date of the enactment (j) Allocation of Income and Deductions.—For allocation of income and deduction and withholding for any period prior to of this Act shall be at the rates of 12 per centum and 5 per centum in lieu deductions of related trades or business, see section 45. of the rates of 133‘ per centum and 8 per centum prescribed in such subSec. 142. Fiduciary Returns. sections. (a) Requirement of Return.—Every fiduciary (except a receiver apSec. 144. Payment of Corporation Income Tax at Source. pointed by authority of law in possession of part only of the property of an In the case of foreign corporations subject to taxation under this title not Individual) shall make under oath a return for any of the following indiviStates and not having any duals, estates, or trusts for which he acts, stating specifically the items of engaged in trade or business within the United deducted and withheld at gross income thereof and the deductions and credits allowed under this office or place of business therein, there shall be items of income as is same the the source in the same manner and upon title— thereof in respect of centum per 12 to equal tax a 143 section in (1) Every individual having a net income for the taxable year of $1,000 provided all payments of income made before the enactment of this Act, and equal or over, if single, or if married and not livinz with husband or wife: THE REVENUE ACT OF 1932 to 13%* per centum thereof in respect of all payments of income made after the enactment of this Act, and such tax shall be returned and paid in the same manner and subject to the same conditions as provided in that section: Provided. That in the case of interest described in subsectio n (a) of that section (relating to tax-free covenant bonds) the deduction and withholding shall be at the rate specified in such subsection. Sec. 145. Penalties. (a) Any person required under this title to pay any tax, or required by law or regulations made under authority thereof to make a return, keep any records, or supply any information, for the purposes of the computation, assessment, or collection of any tax imposed by this title. who wilfully fails to pay such tax, make such return, keep such records, or supply such infermotion, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemea nor and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than one year, or both, together with the costs of prosecution. (b) Any person required under this title to collect, account for, and pay over any tax imposed by this title, who wilfully fails to collect or truthfully account for and pay over such tax, and any person who wilfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution. (c) The term "person" as used in this section includes an officer or employee of a corporation or a member or employee of a partnersh ip who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs. Sec. 146. Closing by Commissioner of Taxable Year. 13 return, duly verified under oath, of its payments of dividends, stating the name and address of each shareholder, the number of shares owned by him, and the amount of dividends paid to him. (b) Profits of Taxable Year Declared as Dividends.—There shall be included in the return or appended thereto a statement of such facts as will enaole the Commissioner to determine the portion of the earnings or profits of the corporation (including gains, profits, and income not taxed) accumulated during the taxable year for which the return is made, which have been distributed or ordered to be distribute d, respectively, to its shareholders during such year. (c) Accumulated Gains and Profits.—When requested by the Commis. sioner, or any collector, every corporation shall forward to him a correct statement of accumulated gains and profits and the names and addresses of the individuals or shareholders who would be entitled to the same if divided or distributed, and of the amounts that would be payable to each. Sec. 149. Returns of Brokers. Every person doing business as a broker shall, when required by the Commissioner, render a correct return duly verified under oath, under such rules and regulations as the Commissioner, with the approval of the Secretary, may prescribe, showing the names of customers for whom such person has transacted any business, with such details as to the profits, losses, or other information which the Commissioner may require, as to each of such customers, as will enable the Commissioner to determine whether all income tax due on profits or gains of such customers has been paid. Sec. 160. Collection of Foreign Items. All persons undertaking as a matter of business or for profit the collection of foreign payments of interest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner and shall be suoject to such regulations enabling the (a) Tax in Jeopardy.—If the Commissioner finds that a Government to obtain taxpayer dethe information required under this title as the signs quickly to depart from the United States or to remove Commissioner, with the his property approval of the Secretary, shall prescribe; and therefrom, or to conceal himself or his property therein, or whoever knowingly underto do any other takes to collect such payments without having obtained act tending to prejudice or to render wholly or partly ineffectual a license therefor, proceedings or without complying with such regulations, shall to collect the tax for the taxable year then last past or the be guilty of a misdetaxable year then current unless such proceedings be brought without delay, meanor and shall be fined not more than 85,000 or imprisoned for not more the Commissioner than one year, or both. shall declare the taxable period for such taxpayer immediate ly terminated and shall cause notice of such finding and declaration to be given the taxpayer, together with a demand for immediate payment SUPPLEMENT E—ESTATES AND TRUSTS. of the tax for the taxable period so declared terminated and of the tax for the preceding Sec. 161. Imposition of Tax. taxable year or so much of such tax as is unpaid whether or not the time otherwise allowed by law for filing return and paying the (a) Application of Tax.—The taxes imposed by tax has expired; this title upon individuals shall apply to the income of estates or of any kind and such taxes shall thereupon become immediately due and of property held in trust, payable. In including— any proceeding in court brought to enforce payment of taxes made due (1) Income accumulated in trust for the benefit and payable by virtue of the provisions of this section the of unborn or unascerfinding of the tained persons or persons with contingent interests, Commissioner, made as herein provided, whether made and income accumuafter notice to the lated or held for future distribution under the terms taxpayer or not, shall be for all purposes presumptive evidence of the will or trust; of the tax(2) Income which is to be distributed currently by payer's design. . the fiduciary to the beneficiaries, and income collected by a guardian (b) Security for Payment.—A taxpayer who is not in default of an infant which is to in making any return or paying income, war-profits, or excess-profits be held or distributed as the court may direct; tax under any Act of Congress may furnish to the United States, under (3) Income received by estates of deceased persons regulations to be during the period of prescribed by the Commissioner, with the approval of the Secretary, security administration or settlement of the estate; and approved by the Commissioner that he will duly make the (4) Income which, in the discretion of the fiduciary. may be either return next theredisafter required to be filed and pay the tax next thereafter tributed to the beneficiaries or accumulated. required to be paid. The Commissioner may approve and accept in (b) Computation and Payment.—The tax shall be computed like manner security upon the for return and payment of taxes made due and payable by virtue of the net income of the estate or trust, and shall be paid by the fiduciary, except provisions of this section. provided the taxpayer has paid in full all other as provided in section 166 (relating to revocable trusts) and section 167 Income, war-profits, or excess-profits taxes, due from him under any Act (relating to income for benefit of the grantor). For return made by beneof Congress. ficiary, see section 142. (c) Same—Exemption from Section.—If security is approved and acSec. 162. Net Income. cepted pursuant to the provisions of this section and such further or other The net income of the estate or trust shall be computed security with respect to the tax or taxes covered thereby is given as the in the same Commissioner shall from time to time find necessary manner and on the same basis as in the case of an individual and require, payment , except that— (a) There shall be allowed as a deduction (in lieu of of such taxes shall not be enforced by any proceedings the deduction for under the provisions charitable, kc., contributions authorized by section 23 of this section prior to the expiration of the time (n) any part of the otherwise allowed for paying such respective taxes. gross income, without limitation, which pursuant to the terms of the will or deed creating the trust, is during the taxaole year (d) Citizens.—In the case of a citizen of the United paid or permanently States or of a possession of the United States about to depart from the set aside for the purposes and in the manner specified United States the Comin section 23 (n), missioner may. at his discretion, waive any or all of the requirements or is to be used exclusively for religious, charitable, scientific, literary, or placed on the taxpayer by this section. educational purposes, or for the prevention of cruelty to children or animals or for the establishment, acquisition, maintenance or (e) Departure of Allen.—No alien shall depart from operation of a men' the United States cemetery not operated for profit; unless he first procures from the collector or agent in charge a certificate (b) There shall be allowed as an additional deduction that he has compiled with all the obligations imposed in cementing the upon him by the net income of the estate or trust the amount of the income Income, war-profits, and excess-profits tax laws. of the estate (f) Addition to Tax.—If a taxpayer violates or attempts to violate this or trust for its taxable year which is to be distributed currently by the fiduciary to the beneficiaries, and the amount of the Income section there shall. in addition to all other penalties, be added collected by a as part of guardian of an infant which is to be held or distribute the tax 25 per centum of the total amount of the tax or deficiency d as the court may in the direct, tax, together with interest at the rate of 1 per centum a month but the amount so allowed as a deduction shall be included from in comthe time the tax became due, puting the net income of the beneficiaries whether distribute d to them or not. Any amount allowed as a deduction under this paragraph shall not Sec. 147. Information at Source. be allowed as a deduction under subsection (c) of this section in the same or (a) Payments of $1,000 or More.—All persons. In whatever capacity act- any succeeding taxaole year ing, Including lessees or mortgagors of real or personal (c) In the case of income received by estates of decelsed persons during property, fiduciaries. and employers, making payment to another person, ofinterest, rent,salaries, the period of administration or settlement ot the estate, and in the case wages, premiums, annuities, compensations, remunerat ions, emoluments, oft ncome which. in the discretion of the fiduelary, may be either distributed or other fixed or determinable gains, profits, and income (other than to the beneficiary or accumulated, there shall be allowed as an additional payments described in section 148 (a) or 149), of $1,000 or more in any tax- deduction in computing the net income of the estate or trust the amount able year. or, in the case of such payments made by of the income of the officers or employees of the United States havingthe United States, paid or credited the estate or trust for its taxable year which is properly during such year to any legatee, heir, or beneficiar information as to y, but such payments and required to make returns in regard the amount so allowed as a deduction shall be thereto by the included in computing the regulations hereinafter provided for, shall render a net income of the legatee, heir, or beneficiary true and accurate return to the Commissioner, under such regulations and in such form and manner and to such extent as may be prescribed by Sec. 163. Credits Against Net Income. him with the approval of the Secretary, setting forth the amount of such gains, (a) Credits of Estate or Trust.—For tee purpose profits, and Income. of the normal tax the and the name and address of the recipient of such payment. estate or trust shall be allowed the same personal exemption as is allowed to (b) Returns Regardless of Amount of Payment.—Such returns may be a single person under section 25 (c), and, if no part of the income required, regardless of amounts. (1) in the case of the of payments of Interest estate or trust is included in computing the net income of any legatee, heir. upon bonds, mortgages, deeds of trust, or other similar obligations of corpo- or beneficiary, tnen in addition the same credits against net income for rations, and (2) in the case of collections of items (not payable In the dividends and interest as are allowed by section 25(a) and (b). United States) of interest upon the bonds of foreign countries (b) Credits of Beneficiary.—If any part of the income and interest of an estate or upon the bonds of and dividends from foreign corporati ons by persons trust is included in computing the net income of any legatee, undertaking as a matter of business or for profit the heir, or collection of foreign beneficiary, such legatee, heir, or beneficiary snail, for the purpose of the payments of such interest or dividends by means of coupons, checks, or normal tax, be allowed as credits against net income, in addition to the bills of exchange. credits allowed to him under section 25, nis proportionate share of such (c) Recipient to Furnish Name and Address.—When necessary to make amounts of dividends and interest specified in section 25 (a) and (b) as are, effective the provisions of this section the name and address of the re- under this Supplement, required to be included in computing his net Inciplent of Income shall be furnished upon demand of the person paying the come. Any remaining portion of such amounts specified in section 25 (a) Income. and (b) shall, for the purpose of the normal tax, be allowed as credits to (d) Obligations of United States.—The provisions of this section shall the estate or trust. not apply to the payment of interest on obligations of the United States. Sec. 164. Different Taxable Years. Sec. 148. Information by Corporations. • If the taxable year of a beneficiary is different from that (a) Dividend Payments.—Every corporation subject to of toe estate or the tax imposed trust, toe amount which he is required, under section 162 (b), to include In by this title shall, when required by the Commissioner, render a correct computing nis net income, shall be based upon the income of the estate THE REVENUE ACT OF 1932 14 or trust for any taxable year of the estate or trust ending within his taxable year. Sec. 165. Employees' Trusts. A trust created by an employer as a part of a stock bonus, pension, or profit-sharing plan for the exclusive benefit ofsome or al, of his employees, to whicn contributions are made by such employer, or employees, or both. for the purpose of distributing to such employees the earnings and principal of the fund accumulated by tne trust in accordance with sucn plan, shall not be taxable under section 101, but the amount actually distributed or made available to any distritratee snall be taxable to him in tne year in whim so distributed or made available to tne extent that it exceeds the amounts paid in by him. Such distributees shall for the purpose of tne normal tax be allowed as credits against net income such part of the amount so distributed or made available as represents the items of dividends and interest specified in section 25 .a) and (b). Sec. 166. Revocable Trusts. n he Where at any time during tne taxable year the power to reve grantor title to any part of the corpus of tne trust is vested— in or alone conjunction with either any Person not (1) in the grantor, having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, or (2) in any person not having a substantial adverse interest in the disposition ofsum part of the corpus or tne income tnerefrom then the income of such part of the trust for such taxable year shall be included in computing the net income of the grantor. Sec. 167. Income for Benefit of Grantor. (a) Where any part of the income of a trust— (1) is, or in tne discretion of the grantor or of any person not naving a substantial adverse interest in the dispo.,ition of such part of the income may be, held or accumulated for future distribution to the grantor; or (2) may, in tne discretion of tne grantor or of any person not having a substantial adverse interest in the disposition of such part of the income, be distributed to the grantor:or (3) is, or in the discretion of the grantor or of any person not having a substantial adverse interest in the disposition ofsucn part of the income may be applied to the payment of premiums upon policies of insurance OD the life of tne grantor (except policies of insurance irrevoCably payable for the purposes and in the manner specified in section 23 (n), relating to the socalled "charitable contribution" deduction); then such part of the income of the trust shall oe included in computing tne net income of tne grantor. (o) As used in this section, tne term "in the discretion of the grantor" means 'in tne discretion of the grantor, eitner alone or in conjunction with any person not having a substantial adverse interest in the disposition of the part of the income in question." Sec. 168. Capital Net Gains and Losses. In the case of an estate or trust, or of a beneficiary of an estate or trust, the proper part of each share of tne net income which consists, respectively. of ordinary net income, capital net gain, or caphal net loss, shall be determined under rules and regulations to be prescribed by tne Conunisstoner with the approval of the Secretary, and shall be separately shown in the return of the estate or trust, and shall be taxed to the beneficiary or to the estate or trust as provided in this Supplement, but at the rates and in toe manner provided in section 101 (a) and (b), relating to capital net gains and losses. Sec. 169. Net Losses. The benefit of the special deduction for net losses allowed by section 117 shall be allowed to an estate or trust under regulations prescribed by the Commissioner with the approval of the Secretary. Sec. 170. Taxes of Foreign Countries and Possession: ofjUnited States. The amount of income, war-profits, and excess-profits taxes imposed by foreign countries or possessions of the United States shall be allowed as credit against the tax of tne beneficiary of an estate or trust to the extent provided in section 131. SUPPLEMENT F—PARTNERSHIPS. Sec. 181. Partnership Not Taxable. Individuals carrying on business in partnership shall be liable for income tax only in their individual capacity. Sec. 182. Tax of Partners. (a) General Rule.—There shall be included in computing the net income of each partner his distributive share, whether distributed or not, of the net income of the partnership for the taxable year. If the taxable year of a partner Is different from that of the partnership, the amount so included shall be based upon the income of the partnership for any taxable year of the partnership ending within his taxable year. (b) Partnership Year Embracing Calendar Years with Different Laws. —If a fiscal year of a partnership begins in one calendar year and ends in another calendar year, and the law applicable to the second calendar year Is different from the law applicable to the first calendar year then (1) the rates for the calendar year during which such fiscal year begins shall apply to an amount of each partner's share of such partnership net income (dote:bmined under the law applicable to such calendar 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 rate: 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 calendar year) equal to the proportion which the part of such fiscal year falling within such calendar year bears to the full fiscal year. In such cases the part of such income subject to the rates in effect for the most recent calendar year shall be added to the other income of the taxpayer subject to such rates and the resulting amount shall be placed in the lower brackets of the rate schedule applicable to such year, and the part of such income subject to the rates in effect for the next preceding calendar year shall be placed in the next higher brackets of the rate schedule applicable to such year. Sec. 183. Computation of Partnership Income. The net income of the partnership shall be computed in the same manner and on the same basis as in the case of an individual, except that the so-called "charitable contribution" deduction provided in section 23(n) shall not be allowed. Sec. 184. Credits Against Net Income. The partner shall, for the purpose of the normal tax, be allowed as a credit against his net income, in addition to the credits allowed to him under section 25, his proportionate share of such amounts of dividends and interest specified in section 25(a) and (b) as are received by the partnership. Sec. 185. Earned Income. In the case of the members of a partnership the proper part of each share of the net income which consists of earned income 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 and shall be taxed to the member as provided in this Supplement. Sec. 186. Capital Net Gains and Losses. In the case of the members of a partnership the proper part of each share of the net income which consists, respectively, of ordinary net income, capital net gain, or capital net loss, 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 and shall be taxed to the member as provided In this Supplement, but at the rates and in the manner provided in section 101 (a) and (b), relating to capital net gains and losses. Sec. 187. Net Losses. The benefit of the special deduction for net losses allowed by section 117 shall be allowed to the members of a partnership under regulations prescribed by the Commissioner with the approval of the Secretary. Sec. 188. Taxes of Foreign Countries and Possessions of United States. The amount of income, war-profits, and excess-profhs taxes imposed by foreign countries or possessions of the United States shall be allowed as a credit against the tax of the member of a partnership to the extent provided in section 131. Sec. 189. Partnership Returns. 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 distributed and the amount of the distributive share of each individual. The return shall be sworn to by any one of the partners. SUPPLEMENT G—INSURANCE COMPANIES. Sec. 201. Tax on Life Insurance Companies. (a) Definition.—When used in this title the term "life insurance company" means an insurance company engaged in the business of issuing life insurance and annuity contracts (including contracts of combined life, health, and accident insurance), the reserve funds of which held for the fulfillment of such contracts comprise more than 50 per centum of its total reserve funds. (b) Rate of Tax.—In lieu of the tax imposed by section 13, there shall be levied, collected, and paid for each taxable year upon the net income of every life insurance company a tax as follows: (1) In the case of a domestic life insurance company, 133 per centum of its net income; (2) In the case of a foreign life insurance company, 13 per centum of its net income from sources within the United States. Sec. 202. Gross Income of Life Insurance Companies. (a) In the case of a life insurance company the term "gross income" moans the gross amount of income received during the taxable year from interest, dividends, and rents. (b) The term "reserve funds required by law" includes, in the ease of assessment insurance, sums actually deposited by any company or association with State or Territorial officers pursuant to law as guaranty or reserve funds, and any funds maintained under the charter or articles of incorporation of the company or association exclusively for the payment of claims arising under certificates of membership or policies issued upon the assessment plan and not subject to any other use. Sec. 203. Net income of Life Insurance Companies. (a) General Rule—In the case of a life insurance company the term "net income" means the gross income less— (1) Tax-free Interest.—The amount of interest received during the taxable year which under section 22 (b) is exempt from the taxes imposed by this title; (2) Reserve Funds—An amount equal to 4 per centum of the mean of the reserve funds required by law and held at the beginning and end of the taxable year, except that in the case of any such reserve fund which is per centum computed at a lower interest assumption rate, the rate of shall be substituted for 4 per centum. Life insurance companies issuing policies covering life, health, and accident insurance combined in one policy Issued on the weekly premium payment plan, continuing for life and not subject to cancellation, shall be allowed. In addition to the above, a deduction of 34 per centum of the mean of such reserve funds (not required by law) hold at the beginning and end of the taxable year, as the Commissioner finds to be necessary for the protection of the holders of such policies only; (3) Dividends.—The amount received as dividends (A) from a domestic corporation which is subject to taxation under this title, other than a corporation entitled to the benefits of section 251, and other than a corporation organized under the China Trade Act, 1922, 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 ofsuch foreign corporation for the three-year period ending with the close of Its taxable year preceding the declaration ofsuch 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 119; (4) Reserve for Dividends.—An amount equal to 2 per centum of any sums held at the end of the taxable year as a reserve for dividends (other than dividends payable during the year following the taxable year) the payment of which is deferred for a period of not less than five yearsfrom the date of the policy contract; (5) Investment Expenses.—Investment expenses paid during the taxable year: Provided, That if any general expenses are in part assigned to or Included in the investment expenses, the total deduction under this paragraph shall not exceed one-fourth of 1 per centum of the book value of the mean of the invested assets held at the beginning and end of the taxable year; (0) Real Estate Expenses.—Taxes and other expenses paid during the taxable year exclusively upon or with respect to the real estate °wind by THE REVENUE ACT OF 1932 the company, not including taxes assessed against local benefits of a kind tending to increase the value of the property assessed, and not including any amount paid out for new buildings, or for permanent improvements or betterments made to increase the value of any property. The deduction allowed by this paragraph shall be allowed in the case of taxes imposed upon a shareholder of a company upon his interest as shareholder, which are paid by the company without reimbursement from the shareholder, but in such cases no deduction shall be allowed the shareholder for the amount of such taxes; (7) Depreciation.—A reasonable allowance for the exhaustion, wear and tear of property, including a reasonable allowance for obsolescence; and (8) Interest.—All interest paid or accrued within the taxable year on its indebtedness, except on indebtedness incurred or continued to purchase or carry obligations or securities (other than obligations of the United States issued after Sept. 24 1917, and originally subscribed for by the taxpayer) the interest upon which is wholly exempt from taxation under this title. (b) Rental Value of Real Estate.—The deduction under subsection (a) (6) or (7) of this section on account of any real estate owned and occupied in whole or in part by a life insurance company,shall be limited to an amount which bears the same ratio to such deduction (computed without regard to this subsection) as the rental value of the space not so occupied bears to the rental value of the entire property. (c) Foreign Life Insurance Companies.—In the case of a foreign life insurance company the amount of its net income for any taxable year from sources within the United States shall be the same proportion of its net income for the taxable year from sources within and without the United States, which the reserve funds required by law and held by it at the end of the taxable year upon business transacted within the United States is of the reserve funds held by it at the end of the taxable year upon all business transacted. Sec. 204. Insurance Companies Other Than Life or Mutual. (a) Imposition of Tax.—In lieu of the tax imposed by section 13 of this title, there shall be levied, collected, and paid for each taxable year upon the net income of every insurance company (other than a life or mutual insurance company) a tax as follows: . (1) In the case of such a domestic insurance company, 13% per centum of its net income; (2) In the case of such a foreign insurance company, 13% per centum of its net income from sources within the United States. (b) Definition of Income, &c.—In the case of an insurance company subject to the tax imposed by this section— (1) Gross Income.—"Gross income" means the sum of (A) the combined gross amount earned during the taxable year, from investment income and from underwriting income as provided in this subsection, computed on the basis of the underwriting and investment exhibit of the annual statement approved by the National Convention of Insurance Commissioners, and (B) gain during the taxable year from the sale or other disposition of property, and (C) all other items constituting gross Income under section 22; (2) Net Income.—"Net income" means the gross income as defined In paragraph (1) of this subsection less the deductions allowed by subsection (c) of this section; (3) Investment Income.—"Investment income" means the gross amount of income earned during the taxable year from interest, dividends, and rents computed as follows: To all interest, dividends and rents received during the taxable year, add interest, dividends and rents due and accrued at the end of the taxable year. and deduct all interest, dividends and rents due and accrued at the end of the preceding taxable year; (4) Underwriting Income.—"Underwriting income" means the premiums earned on insurance contracts during the taxable year less losses incurred and expenses incurred; (5) Premiums • Earned.—"Premiums earned on insurance contracts during the taxable year" means an amount cOmputed as follows: From the amount of gross premiums written on insurance contracts during the taxable year, deduct return premiums and premiums paid for reinsurance. To the result so obtained add unearned premiums on outstanding business at the end of the preceding taxable year and deduct unearned premiums on outstanding business at the end of the taxable year; (6) Losses Incurred.—"Losses incurred" means losses incurred during the taxable year on insurance contracts, computed as follows: To losses paid during the taxable year, add salvage and reinsurance recoverable outstanding at the end of the preceding taxable year, and deduct salvage and reinsurance recoverable outstanding at the end of the taxable year. To the result so obtained add all unpaid losses outstanding at the end of the taxable year and deduct unpaid losses outstanding at the end of the preceding taxable year. (7) Expenses Incurred.—"Expenses incurred" means all expenses shown on the annual statement approved by the National Convention of Insurance Commissioners, and shall be computed as follows: To all expenses paid during the taxable year add expenses unpaid at the end of the taxable year and deduct expenses unpaid at the end of the preceding taxable year. For the purpose of computing the net income subject to the tax imposed by this section there shall be deducted from expenses incurred as defined in this paragraph all expenses incurred which are not allowed as deductions by subsection (c) of this section. (c) Deductions Allowed.—In computing the not income of an insurance company subject to the tax imposed by this section there shall be allowed as deductions: (1) All ordinary and necessary expenses incurred, as provided in section 23 (a); (2) All Interest as provided in section 23 (b); (3) Taxes as provided in section 23 (c); (4) Losses incurred as defined in subsection (b)(6) of this section; (5) Losses sustained during the taxable year from the sale or other disposition of property; (6) Bad debts in the nature of agency balances and bills receivable ascertained to be worthless and charged off within the taxable year; (7) The amount received as dividends from corporations as provided in section 23 (P); (8) The amount of interest earned during the taxable year which under section 22 (b) (4) is exempt from the taxes imposed by this title, and the amount of interest allowed as a credit under section 26; (9) A reasonable allowance for the exhaustion, wear and tear of property, as provided in section 23 (k); (d) Deductions of Foreign Corporations.—In the case of a foreign corporation the deductions allowed in this section shall be allowed to the extent provided in Supplement I. (e) Double Deductions.—Nothing in this section shall be construed to permit the same item to be twice deducted. Sec. 205. Net Losses. The benefit of the special deduction for net losses allowed by section 117 shall be allowed to insurance companies subject to the tax imposed by 15 section 201 or 204, under regulations prescribed by the Commissioner with the approval of the Secretary. Sec. 206. Taxes of Foreign Countries and Possessions of United States. The amount of income, war-profits, and excess-profits taxes imposed by foreign countries or possessions of the United States shall be allowed as a credit against the tax of a domestic insurance company subject to the tax imposed by section 201 or 204, to the extent provided in the case of a domestic corporation in section 131, and in such cases "net income" as used in that section means the net income as defined in this Supplement. Sec. 207. Computation of Gross Income. The gross income of insurance companies subject to the tax imposed by section 201 or 204 shall not be determined in the manner provided in section 119. Sec. 208. Mutual Insurance Companies Other Than Life. (a) Application of Title.—Mutual insurance companies, other than life insurance companies, shall be taxable in the same manner as other corporations, except as hereinafter provided in this section. (b) Gross Income.—Mutual marine-insurance companies shall include in gross income the gross premiums collected and received by them less amounts p aid for re-insurance. (c) Deductions.—In addition to the deductions allowed to corporations by section 23 the following deductions to insurance companies shall also be allowed, unless otherwise allowed— (1) Mutual Insurance Companies Other Than Life Insurance.—In the case of mutual insurance companies other than life insurance companies— (A) the net addition required by law to be made within the taxable year to reserve funds (including in the case of assessment insurance companies the actual deposit of sums with State or Territorial officers pursuant to law as additions to guarantee or reserve funds); and (B) The sums other than dividends paid within the taxable year on policy and annuity contracts. (2) Mutual Marine Insurance Companies.—Ln the case of mutual marine Insurance companies, in addition to the deductions allowed in paragraph (1) of this subsection. unless otherwise allowed, amounts repaid to policyholders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertainment and the payment thereof; (3) Mutual Insurance Companies Other Than Life and Marine.—In the case of mutual insurance companies (including interinsurers and reciprocal underwriters, but not including mutual life or mutual marine insurance companies) requiring their members to make premium deposits to provide for losses and expenses, the amount of premium deposits returned to their policyholders and the amount of premium deposits retained for the payment of losses, expenses, and reinsurance reserves. SUPPLEMENT H—NONRESIDENT ALIEN INDIVIDUALS Sec. 211. Normal Tax. (a) General Rule.—In the case of a nonresident alien individual who is not a resident of a contiguous country, the normal tax shall be 8 per centum of the amount tf the net income in excess of the credits against net income allowed to such individual. (b) Aliens Resident in Contiguous Countries.—In the case of an alien individual resident in a contiguous country, the normal tax shall be an amount equal to the sum of the following: (1) Four per centum of the amount by which the part of the net income attributable to wages, salaries, professional fees, or other amounts received as compensation for personal services actually performed in the United States, exceeds the personal exemption and credit for dependents; but the amount taxable at such 4 per centum rate shall not exceed $4,000; and (2) Eight per centum of the amount of the net income in excess of the sum of (A) the amount taxed under paragraph (1) of this subsection plus (B) the total credits against net income allowed tc such individual. (c) In Lieu of Normal Tax Under Section 11.—The tax imposed by this section shall be in lieu of the normal tax Imposed by section 11. Section 212. Gross Income. (a) General Rule.—In the case of a nonresident alien individual gross Income includes only the gross income from sources within the United States. (b) Ships Under Foreign Flag.—The income of 4 nonresident lien Individual which consists exclusively of earnings derived from the oper diem of a ship or ships documented 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, shall not be included in gross ncome and shall be exempt from taxation under this title. Sec. 213. Deductions. (a) General Rule.—In the case of a nonresident alien individual the deductions shall be allowed only if and to the extent that they 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 119, under rules and regulations prescribed by the Commissioner with the approval of the Secretary. (b) Losses.— (1) The deduction, for losses not connected with the trade or business if Incurred in transactions entered into for profit, allowed by section 23 (e) (2) shall be allowed whether or not connected with income from sources within the United States, but only ii the profit, if such transaction had resulted in a prafit, would be taxable under this title. (2) The deduction for losses of property not connected with the trade or business if arising from certain casualties or theft, allowed by section 23 (e) (3), shall be allowed whether or not connected with income from sources within the United States, but only if the loss is of property within the United States. (c) Charitable Etc., Contributions.—The so-called "charitable contribution" deduction allowed by section 23 (n) shall be allowed whether or not connected with income sources within the United States, but only as to contributions or gifts made to domestic corporations, or to community chests, funds, or foundations, created in the United States, or to the vocational rehabilitation fund. Sec. 214. Credits Against Net Income. In t e case of a non-resident alien individual the personal exemption allowed by section 25 (c) of this title shall be only $1,000. The credit for dependents allowed by section 25 (d) shall not be allowed in the case of a non-resident alien individual:unless he is a resident of a contiguous country. Sec. 215. Allowance or Deductions and Credits. (a) Return to Contain Information.—A non-resident alien individual shall receive the benefit of the deductions and credits allowed to him in THE REVENUE ACT OF 1932 16 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 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. (b) Tax Withheld at Source.-The benefit of the personal exemption and credit for dependents, and of the reduced rate of tax provided for in section 211 (b), may, in the discretion of the Commissioner and under regulations prescribed by him with the approval of the Secretary, be received by a non-resident alien individual entitled thereto, by filing a claim therefor with the withholding agent. Sec. 216. Credits Against Tax. A non-resident alien individual shall not be allowed the credits against the tax for taxes of foreign countries and possessions of the United States allowed by section 131. Sec. 217. Returns. In the case of a non-resident alien individual the return, in lieu of the time prescribed in section 53 (a) (1). shall be made on or before the 15th 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 on or before the 15th day of June. Sec. 213. Payment of Tax. (a) Time of Payment.-In the case of a non-resident alien individual the total amount of tax imposed by this title shall be paid, in lieu of the time prescribed in section 56 (a), on the 15th day of June following the close of the calendar year, or. if the return should be made on the basis of a fiscal year, then on the 15th day of the sixth month following the close of the fiscal year. (b) Withholding at Source.-For withholding at source of tax on income of non-resident aliens, see section 143. SUPPLEMENT I-FOREIGN CORPORATIONS. Sec. 231. Gross Income. (a) General Rule -In the case of a foreign corporation gross Income includes only the gross income from sources within the United States. (b) Ships Under Foreign Flag.-The income of a foreign corporation, which consists exclusively of earnings derived from the operation of a ship or ships documented 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, shall not be included in gross income and shall be exempt from taxation under this title. Sec. 232. Deductions. In the case of a foreign corporation the deductions shall be allowed only if and to the extent that they are connected with Income from sources within the United States; and the proper apportionment and allocation of the deductions with respect to sources within and without the United States shall be determined as provided in section 119, under rules and regulations prescribed by the Commissioner with the approval of the Secretary. Sec. 233. Allowance of Deductions and Credits. A foreign corporation shall receive the benefit of the deductions and credits allowed to it in this title only by filing or causing to be filed with the true and accurate return of its total income received from all collector sources in the United States, in the manner prescribed in this title; including therein all the information which the Commissioneronay deem necessary for the calculation of such deductions and credits. Sec. 234. Credits Against Tax. Foreign corporations shall not be allowed the credits against the tax for taxes of foreign countries and possessions of the United States allowed by section 131. Sec. 235. Returns. (b) Amounts Received in United States.-Norwithstanding the provisions of subsection (a) there shall be included in gross income all amounts received by such citizens or corporations within the United States, whether derived from sources within or without the United States. (c) Definition.-As used in this section the term "possession of the United States" does not include the Virgin Islands of the United States. (d) Deductions. (1) Citizens of the United States entitled to the benefits of this section shall have the same deductions as are allowed by Supplement II in the case of a nonresident alien individual. (2) Domestic corporations entitled to the benefits of this section shall have the same reductions as are allowed by Supplement I in the case of a foreign corporation. (o) Credits Against Net Income.-A citizen of the United States entitled to the benefits of this section shall be allowed a personal exemption of only $1,000 and shall not be allowed the credit for dependents provided in section 25 (d). (f) Allowance of Deductions and Credits -Citizens of the United States and Domestic corporations entitled to the benefits of this section shall receive the benefit of the deductions and credits allowed to them in this title only by filing or causing to be filed with the collector a true and accurate return of their income received from all sources 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. (g) Credits Against Tax.-Persons entitled to the benefits of this section shall not be allowed the credits against the tax for taxes of foreign countries and possessions of the United States allowed by section 131. (h) Affiliation.-A corporation entitled to the benefits of this section shall not be deemed to be affiliated with any other corporation within the meaning of section 141. Sec. 252. Citizens of Possessions of United States. (a) Any individual who is a Citizen of any possession of the United States (but not otherwise a citizen of the United States) and who is not a resident of the United States, shall be subject to taxation under this title only as to income derived from sources within the United States, and in such case the tax shall be computed and paid in the same manner and subject to the same conditions as in the case of other persons who are taxable only as to income derived from such sources. (b) Nothing in this section shall be construed to alter or amend the provisions of the Act entitled "An Act making appropriations for the naval service for the fiscal year ending June 30 1922, and for other purposes," approved July 12 1921, relating to the imposition of income taxes in the Virgin Islands of the United States. SUPPLEMENT K-CHINA TRADE ACT CORPORATIONS. Sec. 261, Credit Against Net Income. (a) Allowance of Credit.-For the purposo only of the tax imposed by section 13 there shall be allowed, in the case of a corporation organized under the China Trade Act, 1922, in addition to the credit provided in section 26. a credit against the net income of an amount equal to the proportion of the net income derived from sources within China (determined in a similar manner to that provided in section 119) which the par value of the shares ofstock of the corporation owned on the last day of the taxable Year by (1) persons resident in China, the United States, or possessions of the United States, and (2) individual citizens of the United States or China wherever resident, bears to the par value of the whole number of shares of stock of the corporation outstanding on such date: Provided, That in no case shall the amount by which the tax imposed by section 13 is diminished by reason of such credit exceed the amount of the special dividend certified under subsection (b) of this section. (b) Special Dividend.-Such credit shall not be allowed unless the Secretary of Commerce has certified to the Commissioner- (1) The amount which, during tne year ending on the date fixed by law for filing the return, the corporation has distributed as a special dividend to or for the benefit of such persons as on the last day of the taxable year In the case of a foreign corporation not having any office or place of were resident in Coins, the United Status, or possessions of toe United business in the United States the return, in lieu of the time prescribed in States, or were individual citizens of the United States or China and owned section 53 (a) (1). shall be made on or before the 15th day of the sixth shares of stock of the corporation; month following the close of the fiscal year. or, if the return is made on the (2) That such special dividend was in addition to all otner amounts, basis of the calendar year then on or before the 15th day of June. If any payable or to be payable to such persons or for their benefit, by reason foreign corporation has no office or place of business in the United States of their interest In the corporation; and but has an agent in the United States, the return shall be made by the agent. (3) That such distribution has been made to or for the benefit of such persons in proportion to the par value of the shares of stock of the corporaSec. 236. Payment of Tax. tion owned by each; except that if tne corporation has more than one class (a) Time of Payment.-In the case of a foreign corporation-not having of stock, the certificates shall contain a statement that the articles of inany office or place of business in the United States the total amount of tax corporation provide a method for the apportionment of such special diviimposed by this title shall be paid, in lieu of the time prescribed in section dend among such persons, and that the amount certified has been dis56 (a), on the 15th day of June following the close of the calendar year, tributed in accordance with the method so provided. or, if the return should be made on the basis of a fiscal year, then of the (c) Ownership of Stock.-For the purposes of this section shares of stock 15th day of the sixth month following the close of the fiscal year. of a corporation shall be considered to be owned by the person in whom (b) Withholding at Source.-For withholding at source of tax on income the equitable right to the income from such shares is in good faith vested. of foreign corporations, see section 143. (d) Definition of China.-As used In this section the term "China" shall have the same meaning as when used In the China Trade Act, 1022. Sec. 237. Foreign Insurance Companies. Sec. 262. Credits Against the Tax. For special provisions relating to foreign Insurance companies, see SuppleA corporation organized under the China Trade Act, 1922, snail not be ment G. allowed the credits against the tax for taxis of foreign countries and posSec. 238. Affiliation. sessions of the United States allowed by section 131. A foreign corporation shall not be deemed to be affiliated:with any other Sec. 263. Affiliation. corporation within the meaning of section 141. SUPPLEMENT .1-POSSESSIONS OF THE UNITED STATES, Sec. 251. Income from Sources Within Possessions of United States. (a) General Rule.-In the case of citizens of the United States or domestic corporations, satisfying the following conditions, gross income means only gross income from sources within the United States(1) If 80 per centum or more of the gross income of such citizen or domestic corporation (computed without the benefit of this section), for the three-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable) was derived from sources within a possession of the United States; and (2) If, in the case of such corporation, 50 per centum or more of its gross income (computed without the benefit of this section) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States; or (3) If, in case of such citizen, .50 per centum or more of his gross income (computed without the benefit of this section) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States either on his own account or as a employee or agent of another. A corporation organized under the China Trade Act, 1922, shall not be deemed to be affiliated with any other corporation within the meaning of section 141. Sec. 264. Income of Shareholders. For exclusion of dividends from gross income, see section 116. SUPPLEMENT L-ASSESSMENT AND COLLECTION OF DEFICIENCIES. Sec. 271. Definition of Deficiency. As used in this title in respect of a tax imposed by this titio "deficiency" means(a) Tne amount by which the tax imposed by this title exceeds the amount shown as the tax by toe taxpayer upon his return; but the amount so shown on the return shall first to increased by the amounts previously assessed (or collected witnout assessment) as a deficiency, and decreased by the amounts previously abated, credited, refunded, or otherwise repaid In respect of such tax; or (b) If no amount is shown as the tax by the taxpayer upon nisi return, or if no return is made by the taxpayer, then the amount by wnich the tax exceeds toe amounts previously assessed (or collected without assessment) THE REVENUE ACT OF 1932 as a deficiency; but such amounts previously assessed, or collected without assessments, shall first be decreased by the amounts previously abated, credited, refunded, or otherwise repaid in respect of such tax. 17 amounts, or additions to the tax provided for by law) and notice and demand shall be made by the collector for the payment thereof. (b) Deficiency Letters.—If the jeopardy assessment is made before any notice in repsect of the tax to which the jeopardy assessment relates has Sec. 272. Procedure in General. been mailed under section 272(a), then the Commissioner shall mail a notice (a) Petition to Board of Tax Appeals.—If in the case of any taxpayer, under such subsection within 60 days after the making of the assessment. (c) Amount Assessable Before Decision of Board.—The jeopardy assessthe Commissioner determines that there is a deficiency in respect of the tax imposed by this title, the Commissioner is authorized to send notice ment may be made in respect of a deficiency greater or less than that notice of which has been mailed to the taxpayer, despite the provisions of section of such deficiency to the taxpayer by registered mail. Within 60 days after such notice Is mailed (not counting Sunday as the sixtieth day), the 272(f) prohibiting the determination of additional deficiencies, and whether taxpayer may file a petition with the Board of Tax Appeals for a redeter- or not the taxpayer has theretofore filed a petition with the Board of Tax mination of the deficiency. No assessment of a deficiency in respect of tee Appeals. The Commissioner shall notify the Board of the amount of such tax imposed by this title and no distraint or proceeding in court for its. assessment, if the petition is filed with the Board before the making of the collection shall be made, begun, or prosecuted until such notice nas been assessment or is subsequently filed, and the Board shall have jurisdiction to malted to toe taxpayer, nor until the expiration of such 60-day period, nor, redetermine the entire amount of the deficiency and of all amounts assessed ifs petition has been filed with the Board,until the decision of toe Board has at the same time in connection therewith. (d) Amount Assessable After Decision of Board.—If the jeopardy assessbecome final. Notwithstanding the provisions of section 3224 of the Revised Statutes the making of such assessment or the beginning of such ment is made after the decision of the Board is rendered such assessment may be made only in respect of the deficiency determined by the Board in proceeding or distraint during the time such prohibition is in force may be its decision. enjoined by a proceeding in the proper court. (e) Expiration of Right to Assess.—A jeopardy assessment may not be For exceptions to the restrictions imposed by this subsection, see— (1) Subsection (d) of this section, relating to waivers by tne taxpayer; made tfter the decision of the Board has become final or after the taxpayer has filed a petition for review of the decision of the Board. (2) Subsection (f) of this section,relating to notifications of mathematical (f) Bond to Stay Collection.—When a jeopardy assessment has been errors appearing upon the face of the return; made the taxpayer. within 10 days after notice and demand from the (3) Section 273, relating to jeopardy assessments; collector for the payment or the amount of the assessment, may obtain a (4) Section 274, relating to bankruptcy and receiverships; and stay of collection cf the whole or any part of the amount of the assessment (5) Section 1001 of the Revenue Act of 1926, as amended, relating to assessment or collection of the amount of the deficiency determined by the by filing with the collect'•r a bond in such amount, not exceeding double the amount as to which the stay is desired, and with such sureties, as the Board pending court review. (b) Collection of Deficiency Found by Board.—If the taxpayer files a collector deems necessary. conditioned upon the payment of sa much of the amount, the eAlection of which is stayed by the bond, as is not abated by a Petition with toe Board, tne entire amount redetermined as the deficiency by the decision of the Board which ma become final shall be assessed and decision of the Board which has become final, together with interest thereon shall be paid upon notice and demand from toe collector. No part of tne as provided in section 297. (g) Same—Further Conditions.—If the bond is given before the taxamount determined as a deficiency by the Commissioner but disallowed as sucn by the decision of tne Board which has become final shall be assessed payer has filed his petition with the Board under section 272 (a). the bond or be collected by distraint or by proceeding in court with or witnout shall contain a further condition that if a petition is not filed within the period provided in such subsection, then the amount the collection of which assessment. (c) Failure to File Petition.—If the taxpayer does not file a petition with ia stayed by the bond will be paid on notice and demand at any time after the Board within the time prescribed in subsection (a) of this section, the the expiration of such period, together with interest thereon at the rate of deficiency, notice of which has been mailed to the taxpayer shall be assessed 6 per contum per annum from the date of the jeopardy notice and demand to the date of notice and demand under this subsection. and shall be paid upon notice and demand from the collector. (h) Waiver of Stay.—Upon the filing of the bond the collection of so (d) Waiver of Restrictions.—The taxpayer shall at any time have the right, by a signed notice in writing filed with the Commissioner, to waive much of the amount assessed as is covered by the bond shall be stayed. the restrictions provided in subsection (a) of this section on the assessment The taxpayer shall have the right to waive such stay at any time in respect of the whole or any part of the amount covered by the bond, and if as a and collection of the whole or any part of the deficiency. (e) Increase of Deficiency After Notice Mailed—The Board shall have result of such waiver any part of the amount covered by the bond is paid, jurisdiction to redetermine the correct amount of the deficiency even if the then the bond shall, at the request or the taxpayer, be proportionately amount so redetermined is greater than the amount of the deficiency, reduced. If the Board determines that the amount assessed is greater than notice of which has seen mailed to the taxpayer, and to determine whether the amount which should have been assessed, then when the decision of the any penalty, additional amount or addition to the tax should be assessed— Board is rendered the bond shall, at the request of the taxpayer, be proif claim thereto- is asserted by the Commissioner at or before the hearing portionately reduced. (i) Collection of Unpaid Amounts.—When the petition has been filed or a rehearing. (f) Further Deficiency Letters Restricted.—If the Commissioner has with the Board and when the amount which should have been assessed has mailed to the taxpayer notice of a deficiency as provided in subsection (a) been determined by a decision of the Board which has become final, then of this section, and the taxpayer files a petition with the Board within the any unpaid portion, the collection of which has been stayed by the bond, time prescribed in such subsection, the Commissioner shall have no right shall be collected as part of the tax upon notice and demand from the to determine any additional deficiency in respect of the same taxable collector, and any remaining portion of the assessment shall be aoated. year, except in the case of fraud, and except as provided in subsection (e) If the amount already collected exceeds the amount determined as the of this section, relating to assertion of greater deficiencies before the Board, amount which should have been assessed, such excess shall be credited or or in section 273 (c), relating to the making of jeopardy assessments. If refunded to the taxpayer as provided in section 322, without the filing of the taxpayer is notified that, on account of a mathematical error appearing Claim therefor. If the amount determined as the amount which should have upon the face of the return, an amount of tax in excess of that shown upon been assessed is greater than the amount actually assessed, then the differthe return is due, and that an assessment of the tax has been or will be ence shall be assessed and shall be collected as part of the tax upon notice made on the basis of what would have been the correct amount of tax but and demand from the collector. (j) Claims in Abatement.—No claim in abatement shall be filed in respect for the mathematical error, such notice shall not be considered (for the purposes of this subsection, or of subsection (a) of this section, prohibiting of any assessment in respect of any tax imposed by this title. assessment and collection until notice of deficiency has been mailed, or of Sec. 274. Bankruptcy and Receiverships. section 322 (c), prohibiting credits or refunds after petition to the Board of Tax Appeals) as a notice of a deficiency, and the taxpayer shall have no (a) Immediate Assessment.—Upon the adjudication of bankruptcy o right to file a petition with the Board based on such notice, nor shall such assessment or collection be prohibited by the provisions of subsection (a) any taxpayer in any bankruptcy proceeding or the appointment of a receiver for any taxpayer in any receivership proceedings before any court of the of this section. (g) Jurisdiction Over Other Taxable Years.—The Board in redetermining United States or of any State of Territory or of the District of Columola, a deficiency in respect of any taxable year shall consider such facts with any deficiency (together with all interest, additional amounts, or additions relation to the taxes for other taxable years as may be necessary correctly to the tax provided for by law) determined by the Commissioner in respect to redetermine the amount of such deficiency, but in so doing shall have no of a tax imposed by this title upon such taxpayer shall, despite the restricjurisdiction to determine whether or not the tax for any other taxable year tions imposed by section 272 (a) upon assessments be immediately assessed if such deficiency has not theretofore been assessed in accordance with law. has been overpaid or underpaid. (h) Final Decisions of Board.—For the purposes of this title the date on Claims for the deficiency and such interest, additional amounts and additions to the tax may be presented, for adjudication in accordance with which a decision of the Board becomes final shall be determined according law, to the court before which the bankruptcy or receivership proceeding is to the provisions of section 1005 of the Revenue Act of 1926. (I) Prorating of Deficiency to Installments.—If the taxpayer has elected pending, despite the pendency of proceedings for the redetermination of the to pay the tax in installments and a deficiency has been assessed, the deficiency in pursuance of a petition to the Board; but no petition for any deficiency shall be prorated to the four installments. Except as provided in such redetermination shall be filed with the Board after the adjudication of section 273 (relating to jeopardy assessments), that part of the deficiency bankruptcy or the appointment of the receiver. (b) Unpaid Claims.—Any portion of the claim allowed in such bankruptcy so prorated to any installment the date for payment of which has not arrived, shall be collected at the same time as and as part of such install- or receivership proceeding which is unpaid shall be paid by the taxpayer ment. That part of the deficiency so prorated to any installment the date upon notice and demand from the collector after the termination of such for payment of which has arrived, shall be paid upon notice and demand proceeding, and may be collected by distraint or proceeding in court within six years after termination of such proceeding. Extension. of time for such from the collector. (j) Extension of Time for Payment of Deficiencies.—Where It is shown to payment may be had in the same manner and subject to the same provisions the satisfaction of the Commissioner that the payment of a deficiency and limitations as are provided In section 272 (J) and section 296 in the upon the date prescribed for the payment thereof will result in undue hard- case of a deficiency in a tax imposed by this title. ship to the taxpayer the Commissioner, with the approval of the Secretary (except where the deficiency is due to negligence, to intentional disregard Sec. 275. Period of Limitation Upon Assessment and Collection. of rules and regulations, or to fraud with intent to evade tax), may grant Except as provided in section 276— an extention for the payment of such deficiency or any part thereof for a (a) General Rule.—The amount of income taxes imposed by this title period not in excess of 18 menthe, and, in exceptional cases, for a further shall be assessed within two years after the return was filed, and no properiod not in excess of 12 months. If an extension is granted, the Com- ceeding In court without assessment for the collection of such taxes shall be missioner may require the taxpayer to furnish a bond in such amount, begun after the expiration of such period. not exceeding double the amount of the deficiency, and with such sureties (b) Request for Prompt Assessment.—In the case of income received as tho Commissioner deems necessary, conditioned upon the payment of during the lifetime of a decedent, or by his estate during the period of the deficiency in accordance with the terms of the extension. administration, or by a corporation, the tax shall be assessed, and any (k) Address for Notice of Deficiency.—In the absence of notice to the proceeding in court without assessment for the collection of such tax shall Commissioner under section 312(a) of the existence of a fiduciary relation- be begun, within one year after written request therefor (filed tfter the ship, notice of a deficiency in respect of a tax imposed by this title, if mailed return is made) by the executor, administrator, or other fiduciary repreto the taxpayer at his last known address, shall be sufficient for the purposes senting the estate of such decedent, or by the corporation, but not after the of this title even if such taxpayer is deceased, or is under a legal disability, expiration of two years after the return was filed. This subsection shall or, in the case of a corporation, has terminated its existence. not apply in the case of a corporation unless— (1) Such written request notifies the Commissioner that the corporation Sec. 273. Jeopardy Asssssments. contemplates dissolution at or before the expiration of such year; and • (a) Authority for Making.—If the Commissioner believes that the assess(2) The dissolution is in good faith begun before the expiration of such ment or collection of a deficiency will be jeopardized by delay, he shall year; and immediately assess such deficiency (together with all interest, additional (3) The dissolution is completed. 18 THE REVENUE ACT OF 1932 Sec. 295. Time Extended for Payment of Tax Shown on Return. (c) Corporation and Shareholder.—If a corporation makes no return of the tax imposed by this title, but each of the shareholders includes in his If the time for payment of the amount determined as tne tax by the taxreturn his distributive share of the net income of the corporation, then the payer, or any installment thereof, is extended under the authority of tax of the corporation shall be assessed within four years after the last section 56 (c), there shall be collected as a part of such amount, interest date on which any such shareholder's return was filed. thereon at the rate of 6 per centum per annum from the date when such payment snould have been made if no extension had been granted, until Sec. 276. Same—Exceptions. the expiration of tne period of the extension. (a) False Return or No Return.—In the case of a false or fraudulent Sec. 296. Time Extended for Payment of Deficiency. return with intent to evade tax or of a failure to file a return the tax may be assessed, or a proceeding in court for the collection of such tax may be If the time for the payment of any part of a deficiency is extended, there be un without assessment, at any time. shall be collected, as a part of the tax, interest on the part of the deficiency (b) Waivers.—Where before the expiration of the time prescribed in the time for payment of wnich is so extended, at the rate of 6 per centum section 275 for the assessment of the tax, both the Commissioner and the per annum for tne period of the extension, and no other interest shall be taxpayer have consented in writing to its assessment after such time, the collected on such part of the deficiency for sucn period. If tne part of the tax may be assessed at any time prior to the expiration of the period agreed deficiency the time for payment of wnich is so extended is not paid in upoa. The period so agreed upon may be extended by subsequent agree- accordance with the terms of tne extension, tnere shall be collected, as a ments in writing made before the expiration of the period previously agreed Part of the tax, interest on sucn unpaid amount at the rate of 1 per centum upon. a month for tne period from tne time fixed by the terms of the extension (c) Collection After Assessment.—Where the assessment of any income for its payment until it is paid, and no other interest snail be collected on tax imposed by this title has been made within the period of limitation such unpaid amount for such period. properly applicable thereto, such tax may be collected by distraint or by a ents. Sec. 297. Interest in Case of Jeopardy A proceeding in court, but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection In the case of the amount collected under section 273 (i) tnere snail be agreed upon in writing by the Commissioner and the taxpayer before the collected at the same time as such amount, and as a part of the tax,interest expiration of such six-year period. The period so agreed upon may be at the rate of 6 Per centum per annum upon sucn amount from tne date of extended by subsequent agreements in writing made before the expiration the jeopardy notice and demand to the date of notice and demand under of the period previously agreA upon. section 273 (i), or,in the case of tne amount collected in excess of the amount of the jeopardy assessment, interest as provided in section 292. If tne Sec. 277. Suspension of Running of Statute. amount included in the notice and demand from the collector under section The running of the statute of limitations provided in section 275 or 276 on 273 (i) is not paid in full within 10 days after such notice and demand,then the making of assessments and the beginning of distraint or a proceeding in there shall be collected, as part of the tax,interest upon the unpaid amount court for collection, in respect of any deficiency, shall (after the mailing of a at the rate of 1 per centum a montn (or, for any period the estate of the notice under section 272 (a), be suspended for the period during which the taxpayer is held by a fiduciary appointed by any court of competent jurisCommissioner is prohibited from maidng the assessment or beginning dis- diction or by will, at the rate of 6 per centum per annum)from the date of traint or a proceeding in court (and in any event. if a proceeding in respect such notice and demand until it is paid. of the deficiency is placed on the docket of the Board, until the decision of Sec. 298. Bankruptcy and Receiverships. the Board becomes final), and for 60 days thereafter. If the unpaid portion of the claim allowed in a bankruptcy or receivership proceeding, as provided in section 274, is not paid in full within 10 days the date of notice and demand from tne collector, then there shall from Sec. 291. Failure to File Return. be collected as a part of sucn amount interest upon tne unpaid portion I case of any failure to make and file a return required by this title. tnereof at the rate of 1 per centum a month from the date of such notice within the time prescribed by law or prescribed by the Commissioner in and demand until payment. pursuance of law, 25 per centum of the tax shall be added to the tax except Sec. 299. Removal of Property or Departure from United States. that when a return is filed after such time and it is shown that the failure to file it was due to reasonable cause and not due to willful neglect no such For additions to tax in case of leaving the United States or concealing be shall tax any to added so amount The tax. the addition shall be made to Property in such manner as to hinder collection of the tax, see section 146. collected at the same time and in the same manner and as a part of the tax unless t e tax has been paid before the discovery of the neglect, in which SUPPLEMENT N—CLAIMS AGAINST TRANSFEREES AND case the amount so added shall be collected in the same manner as the tax. FIDUCIARIES. The amount added to the tax under this section shall be in lieu of the 25 per centum addition to the tax provided in section 3176 of the Revised Statutes, Sec. 311. Transferred Assets. as amended. (a) Method of Collection.—The amounts of the following liabilities shall, Sec. 292. Interest on Deficiencies. except as hereinafter in this section provided, be assessed, collected, and Interest upon the amount determined as a deficiency shall be assessed at Paid in the same manner and subject to tne same provisions and limitathe same time as the deficiency, shall be paid upon notice and demand from tions as in the case of a deficiency in a tax imposed by this title (including the collector, and shall be collected as a part of the tax, at the rate of 6 per the provisions in case of delinquency in payment after notice and demand. centum per annum from the date prescribed for the payment of the tax the provisions autnorizing distraint and proceedings in court for collection, (or, if the tax is paid in installments), from the date prescribed for the and tne provisions prohibiting claims and suits for refunds): payment of the first installment to the date the deficiency is assessed, (1) Transferees.—The liability, at law or in equity, of a transferee of or, in the case of a waiver under section 272 (d), to the thirtieth day after property of a taxpayer, in respect of the tax (including interest, additional whichever assessed is deficiency the date the to or waiver such of amounts, and additions to the tax provided by law) imposed upon the taxthe filing payer by this title. is the earlier. (2) Fiduciaries.—The liability of a fiduciary under section 3967 of the Sec. 293. Additions to the Tax in Case of Deficiency Revised Statutes in respect of the payment of any such tax from the estate or negligence, to of the taxpayer. Any such liability may be either as to the amount of tax (a) Negligence.—If any part of any deficiency is due Intentional disregard of rules and regulations b t without intent to defraud. shown on the return or as to any deficiency in tax. (b) Period of Limitation.—The period of limitation for assessment of any 5 per centum of the total amount of the deficiency (in addition to such deficiency) shall be assessed, collected, and paid in the same manner as if such liability of a transferee or fiduciary shall be as follows: (1) In the case of the liability of an initial transferee of the property of t were a deficiency, except that the provisions of section 272 (1), relating to the prorating of a deficiency, and of section 292, relating to interest on the taxpayer—within one year after the expiration of the period of limitation for assessment against the taxpayer: deficiencies, shall not be applicable. (b) Fraud.-11 any part of any deficiency is due to fraud with intent to (2) In the case of the liability of a transferee of a transferee of the evade tax, then 50 per centum of the total amount of the deficiency (in property of the taxpayer—within one year after the expiration of the in paid, and collected, assessed, so be period of limitation for assessment against the preceding transferee, but addition to such deficiency) shall only if within throe years after the expiration of the period ot limitation lieu of the 50 per sentum addition to tie tax provided in section 3176 of the for assessment against the taxpayer:— Revised Statutes, as amended. except that if before the expiration of the period of limitation for the assessSec. 294. Additions to the Tax in Case of Nonpayment. ment of the liability of the transferee, a court proceeding for the collection of the tax or liability in respect thereof has been begun against the taxpayer (a) Tax Shown on Return.— of limitation (1) General Rule.—Where the amount determined by the taxpayer as the or last preceding transferee, respectively—then the period expire one year after tax imposed by this title, or any installment thereof, or any part of such for assessment of the liability of the transferee shall proceeding. amount r installment, is not paid on or before the date prescribed for its the return of execution in the court (3) In the case of the liability of a fiduciary—not later than one year payment, there shall be collected as a part of the tax, interest upon such expiration of the period for unpaid amount at the rate of 1 per centum a month from the date pre- after the liability arises or not later than theliability arises, whichever is collection of the tax in respect of which such scribed for its payment until it is paid. later. the (2) If Extension Granted.—Where an extension of time for payment of of this purposes the Taxpayer.—For Against Assessment for Period (c) the amount so determined as the tax by the taxpayer, or any installment or in the case of a corporation, has terthereof, has been granted, and the amount the time for payment of which section, if the taxpayer Is deceased, period of limitation for assessment against the has been extended, and the interest thereon determined under section 295, minated its existence, the that would be in effect had the death or terIs not paid in full prior to the expiration of the period of the extension, taxpayer shall be the period occurred. not existence of mination tnen, in lieu of the interest provided for in paragraph (1) of this subsection, (d) Suspension of Running of Statute of Limitations —The running of interest at the rate of 1 per centum a month shall be collected on such the assessment of the liability of a transferee unpaid amount from the date of the expiration of the period of the exten- the statute oflimitations upon or fiduciary shall, after the mailing to the transferee or fiduciary of the notice sion until it is paid. in for section 272 (a), be suspended for the period during which (b) Deficiency.—Where a deficiency, or any interest or additional provided from making the assessment in respect amounts assessed in connection tnerewith under section 292, or under the Commissioner is prohibited or fiduciary (and in any event, if a proceedsection 293. or any addition to the tax in Cage of delinquency provided for of the liability of the transferee placed on the docket of the Board, until the In section 291, is not paid in full within 10 days from the date of notice and ing in respect of the liability is final), and for 60 days thereafter. demand from the collector, there shall be collected as part of the tax. decision of the Board becomes the absence of notice to the Liability.—In of Notice for Address (e) Interest upon tne unpaid amount at the rate of] per centum a month from (b) of the existence of a fiduciary relationthe date of such notice and demand until it is paid. If any part of a defi- Commissioner under section 312 this section in respect of a tax ciency prorated to any unpaid installment under section 272 (I) is not paid ship, notice of liability enforceable under subject to the liability at his In full on or before tne date prescribed for the payment of such installment, Imposed by this title, if mailed to the person purposes of this title even if the for sufficient be shall there shall be collected as part of the tax interest upon the unpaid amount last known address, such person is deceased, or is under a legal disability, or, in the case of a at the rate of 1 per centum a month from such date until it is paid. (c) Fiduciaries.—For any period an estate is neld by a fiduciary appointed corporation, has terminated its existence. (f) Definition of "Transferee."—As used in this section, the term "transoy order of any court of competent jurisdiction or by will, there shall be distributee. collected interest at tne rate of6 per centum per annum in lieu of the interest feree" includes heir, legatee, devisee, and provided in subsections (a) and (b) of this section. Relationship. Fiduciary of Notice 312. Sec. (d) Filing of Jeopardy Bond.—If a bond is filed, as provided in section (a) Fiduciary of Taxpayer.—Upon notice to the Commissioner that any 273, the provisions of subsections (b) and (c) of this section snail not apply person is acting in a fiduciary capacity, such fiduciary shall assume the to the amount covered by the bond. SUPPLEMENT M—INTEREST AND ADDITIONS TO THE TAX THE REVENUE ACT OF 1932 19 powers, rights, duties, and privileges of the taxpayer in respect of a tax $326,000 upon net estates of $2,000,000; and upon net estates in excess imposed by this title (except as otherwise specifically provided and except of $2,000,000 and not in excess of $2,500,000, 23 per centum in addition that the tax shall be collected from the estate of the taxpayer), until notice of such excess. is given that the fiduciary capacity has terminated. $141,000 upon net estates of $2.500,000; and upon net estates in excess (b) Fiduciary of Transferee.—Upon notice to the Commissioner that any of 52,500.000 and not in excess of $3,000.000, 25 per cent= in addition to person is acting in a fiduciary capacity for a person subject to the liability such excess. specified in section 311, the fiduciary shill assume, on behalf or such person, $566,000 upon net estates of $3,000,000; and upon net estates in excess of the powers, rights,duties, and privileges of such person under such ection 33,000.000 and not in excess of 33,500,000, 27 per centum in addition of (except that the liability shall be collected from the estate of such person), such excess. until notice is given that the fiduciary capacity has terminated. 3701.000 upon net estates of 13,500,000; and upon net estates in excess (c) Manner of Notice.—Notice under subsection (a) or (b) shall be given of $3.500,000 and not in excess of $4,000,000, 29 per centum in addition in accordance with regulations prescribed by the Commissioner with the of such excess. approval of the Secretary. $846,000 upon net estates of $4,000,000; and upon net estates in excess of $4,000,000 and not in excess of 34,500.000 31 per cent= in addition SUPPLEMENT 0—OVERPAYMENTS. ofsuch excess. $1,001,000 upon net estates of $1,500,000; and upon net estates in excess Sec. 321. Overpayment of Installment. of $4,500,000 and not in excess of 55,000.000, 33 per centum in addition If the taxpayer has paid as an installment of the tax more than the of such excess. amount determined to be the correct amount of such installment, the over$1,166,000 upon net estates of $5,000,000; and upon net estates in excess payment shall be credited against the unpaid installments, if any. If the of $5,000,000 and net in excess of $6,000,000, 35 per centum in addition amount already paid, whether or not on the basis of installments, exceeds ofsuch excess. the amount determined to be the correct amount of the tax, the overpayment $1,516,000 upon net estates of $6,000,000; and upon net estates in excess shall be credited or refunded as provided in section 322. of $6,000,000 and not in excess of 37,000,000, 37 per centum in addition of such excess. Sec. 322. Refunds and Credits. 51,886.000 upon net estates of $7,000,000; and upon net estates in excess (a) Authorization.—Where there has been an overpayment of any tax of $7,000,000 and not in excess of 58,000,000, 39 per centwn in addition imposed by this title, the amount of such overpayment shall be credited of such excess. against any income, war-profits, or excess-profits tax or installment thereof 52.276,000 upon net estates of $8,000,000; and upon net estates in excess then due from the taxpayer, and any balance shall be refunded immediately of 38,000,000 and not in excess of 39.000,000, 41 per centum in addition to the taxpayer. of such excess. (b) Limitation on Allowance— $2,686,000 upon net estates of $9,000,000; and upon net estates in excess (I) Period of Limitation.—No such credit or refund shall be allowed or of $9,000,000 and not in excess of $10,000.000, 43 per centum in addition made after two years from the time the tax was paid, unless before the ex- of such excess. piration of such period a claim therefor is filed by the taxpayer. $3,116,000 upon net estates of $10,000,000: and upon net estates in excess (2) Limit on Amount of Credit or Refund.—The amount of the credit of $10,000,000, 45 per cent= in addition of such excess. or refund shall not exceed the portion of the tax paid during the two years (c) For the purposes of this section the value of the net estate shall be immediately preceding the filing of the claim, or if no claim was filed, then determined as provided in Title III of the Revenue Act of 1926, as amended, during the two years immediately preceding the allowance of the credit except that in lieu of the exemption of 5100,000 provided in section 303 (a) or refund. (4) of such Act, the exemption shall be $50.000. (e) Effect of Petition to Board.—If the Commissioner has mailed to the Sec. 402. Credits Against Tax. taxpayer a notice of deficiency under section 272 (a) and if the taxpayer files a petition with the Board of Tax Appeals within the time prescribed (a) The credit provided in section 301 (c) of the Revenue Act of 1926, as in such subsection, no credit or refund in respect of the tax for the taxable amended (80 per centum credit) shall not be allowed in respect of such year in respect of which the Commissioner has determined the deficiency additional tax. shall be allowed or made and no suit by the taxpayer for the recovery of (b) (1) If a tax has been paid under Title III of this Act on a gift, and any part ofsuch tax shall be instituted in any court except— thereafter upon the death of the donor any amount in respect of such (1) As to overpayments determined by a decision of the Board which gift is required to be included in the value of the gross estate of the decedent has become final; and for the purposes of this title, then there shall be credited against the tax (2) As to any'amount collected in excess of an amount computed in imposed by section 401 of this Act the amount of the tax paid under such accordance with the decision of the Board which has become final; and Title III with respect to so much of the property which constituted the gift (3) As to any amount collected after the period of limitation upon the as is included in the gross estate, except that the amount of such credit beginning of distraint or a proceeding in court for collection has expired (A) shall not exceed an amount which bears the same ratio to the tax but in any such claim for credit or refund or in any such suit for refund imposed by section 401 of this Act as the value (at the time of the gift or at the decision of the Board which has become final, as to whether such period the time of the death, whichever is lower) of so much of the property which has expired before the notice of deficiency was mailed, shall be conclusive. constituted the gift as is included in the gross estate bears to the value (d) Overpayment Found by Board.—If the Board finds that there is of the entire gross estate, and (B) shall not exceed the amount by which no deficiency and further finds that the taxpayer has made an overpayment the gift tax paid under Title III of this Act with respect to so much of tax in respect of the taxable year in respect of which the Commissioner of the property as constituted the gift as is included in the gross estate, determined the deficiency, the Board shall have jurisdiction to determine exceeds the amount of the credit under section 301 (b) of the Revenue Act the amount ofsuch overpayment, and such amount shall, when the decision of 1926, as amended by this Act. of the Board has become final, be credited or refunded to the taxpayer. (2) For the purposes of paragraph (1), the amount of tax paid for ally No such credit or refund shall be made of any portion of the tax paid more year under Title III of this Act with respect to any property shall be an than two years before the filing of the claim or the filing of the petition, amount which bears the same ratio to the total tax paid for such year as whichever is earlier. the value of such property bears to the total amount of net gifts (computed (e) Tax Withheld at Source.—For refund or credit in case of excessive without deduction of the specific exemption) for such year. withholding at the source, see section 143 (f)• Sec. 403. Assessment, Collection, and Payment of Tax. Except as provided in section 402, the tax imposed by section TITLE II.—ADDITIONAL ESTATE TAX. 401 of'this Act shall be assessed, collected, and paid, in the same manner, and shall be subject to the same provisions of law (including penalties), as Sec. 401. Imposition of Tax. the tax imposed by section 301 (a) of the Revenue Act of 1926, except that in the (a) In addition to the estate tax imposed by section 301 (a)of the Revenue Act of 1926, there is hereby imposed upon the transfer of the net estate of case of a resident decedent a return shall be required if the value of the gross estate at the time of the decedent's death exceeds $50,000. every decedent dying after the enactment of this Act, whether a resident or nonresident of the United States, a tax equal to the excess of— TITLE III.—GIFT TAX. (1) The amount of a tentative tax computed under subsection (b) of this section, over Sec, 501. Imposition of Tax. (2) The amount of the tax imposed by section 301 (a) of the Revenue (a) For the calendar year 1932 and each calendar year thereafter Act of 1926, computed without regard to the provisions of this title. a tax, (b) The tentative tax referred to in subsection (a) (1) of this section computed as provided in section 502. shall be imposed upon the transfer during such calendar year by any individual, resident or shall equal the sum of the following percentages of the value of the nonresident, of net property by gift. estate: (b) The tax shall apply whether the transfer is in trust or Upon net estates not in excess of$10,000, 1 per centum. otherwise, whether the gift is direct or indirect, and whether the $100 upon net estates of$10,000; and upon net estates in excess of property is real or $10,000 personal,tangible or intangible, but,in the case of a nonresident not a citizen and not in excess of $20,000, 2 per centum in addition of such excess. of the United States,shall apply to a transfer only if the property $300 upon net estates of$20,000;and upon net estates in excess is situated of $20,000; within the United States. The tax shall not apply to a transfer made on I and not in excess of $30,000, 3 per centum in addition of such excess. before or the date of the enactment of this Act. $600 upon net estates of $30,000; and upon net estates in excess of $30,000 (c) The tax shall not apply to a transfer of property in trust where the and not in excess of $40,000.4 per centum in addition ofsuch excess. 111,000 upon net estates of $40.000; and upon net estates in excess of power to revest in the donor title to such property is vested in the donor, either alone or in conjunction with any person not having $40,000 and not in excess of$50,000,5 per centum in addition ofsuch a substantial excess. $1.500 upon net estates of $50,000; and upon net estates in excess of adverse interest in the disposition of such property or the income therefrom, 350.000 and not in excess of 3100,000, 7 per contum in addition of such but the relinquishment or termination of such power (other than by the donor's death) shall be considered to be a transfer by the donor by gift'of the property subject to such power, and any payment of the $5,000 upon net estates of $100,000; and upon net estates in excess income thereof from to a beneficiary other than the donor shall be considered to be a $100,000 and not in excess of $200,000, 9 per cent= in addition of such transfer by the donor of such income by gift. eXCCSa. $14,000 upon net estates of $200,000; and upon net estates in Sec. 502. Computation of Tax. excess of $200,000 and not in excess of $400,000, 11 per centum in addition of such The tax for each calendar year shall be an amount equal to the excess. excess of— (1) A tax,computed in accordance with the Rate Schedule hereinafter $336,000 upon net estates of $400,000 and upon net estates set in excess of forth, on the aggregate sum of the net gifts for such calendar year and for $400,000 and not in excess of $600,000, 13 per centum in addition of such each of the preceding calendar years, over excess. (2) A tax, computed in accordance with the Rate Schedule, on $62,000 upon not estates of $600,000; and upon net estates in excess of aggregate sum of the net gifts for each of the preceding calendar years. the $600.000 and not in excess of $800,000 15 per centum in addition of such excess. Gift Tax Rate Schedule. $92,000 upon not estates of $800,000; and upon net estates in excess of Upon net gifts not in excess of $10,000, three-fourths of 1 per centum. $800,000 and not in excess of 31,000.000, 17 per per cent= in addition $75 upon net gifts of 310.000; and upon net gifts in excess of 310.000 of such excess. not in excess of $20,000, 1M per centum hi addition of such excess. and $126,000 upon net estates of $1,000,000; and upon net estates in excess of $225 upon net gifts of $20,000; and upon net gifts in excess of $1,000,000 and not in excess of 51,500,000, 19 per centum in addition 320,000 of and not in excess of$30,000, 234 per centum in addition ofsuch excess. such excess. $450 upon net gifts of $30,000; and upon net gifts in excess of $221.000 upon net estates of $1,500.000; and upon net estates in excess $30,000 and not in excess of $40,000, 3 per centum in addition of such excess. of $1,500,000 and not in excess of $2,000,000 21 per centum in addition $750 upon net gifts of $40.000; and upon net gifts in excess of of such excess. $440,000 and not in excess of $50,000. 33f per centum in addition of such excess. 20 THE REVENUE ACT OF 1932 $1,125 upon net gifts of $50.000; and upon net gifts in excess of $50,000 and not in excess of $100,000, 5 per centum in addition of such excess. $3,625 upon net gifts of $100,000; and upon net gifts in excess of $100.000 and not in excess of $200,000, 634 per centum in addition of such excess. $10.125 upon net gifts of$200,000;and upon net gifts in excess of$200,000 and not in excess of $400,000. 8 per centum in addition of such excess. $26,125 upon net gifts of $400.000; and upon net gifts in excess of$400.000 and not in excess of $600,000, 934 per centum in addition of such excess. $45,125 upon net gifts of 5600.000; and upon net gifts in excess of$600,000 and not in excess of $800,000, 11 per centum in addition of such excess. $67,125 upon net gifts of $800,000; and upon net gifts in excess of8800,000 and not in excess of $1,000,000, 1234 per centum in addition of such excess. $92.125 upon net gifts of $1,000.000; and upon net gifts in excess of $1,000,000 and not in excess of $1,500,000, 14 per centum in addition of such excess. $162,12 upon net gifts of $1,500,000; and upon net gifts in excess of $1,500,000 and not in excess of $2,000,000, 1534 per centum in addition of such excess. $239,625 upon net gifts of $2,000,000; and upon net gifts in excess of $2,000,000 and not in excess of 82,500,000. 17 per centum in addition of such excess. $324,625 upon r et gifts of $2,500,000; and upon net gifts in excess of $2,500,000 and not in excess of $3,000,000. 1834 per centum in addition of such excess. $417.125 upon net gifts of $3,000,000; and upon net gifts in excess of $3,000,000 and not in excess of $3,500,000. 20 per centum in addition of such excess. $517.125 upon net gifts of $3,500,000; and upon net gifts in excess of $3,500,000 and not in excess of $4,000,000, 2134 per centum In addition of such excess. $624,625 upon net gifts of $4,000,000; and upon net gifts in excess of $4,000,000 and not in excess of $4,500,000. 23 per centum in addition of such excess. $739,625 upon net gifts of $4,500.000; and upon net gifts in excess of $4,500,000 and not in excess of $5,00',000, 2434 per centum in addition of such excess. $862.1 5 upon net gifts of $5,000,000; and upon net gifts in excess of $5,000.000 and not in excess of $6.000,000, 26 per centum in addition of such excess. $1.122.125 upon net gifts of 86,000,000; and upon net gifts in excess of $6,000,000 and not in excess of $7,000,000, 2734 per centum in addition of such excess. 81,397.125 upon net gifts of $7,000,000; and upon net gifts in excess of $7.000.000 and not in excess of $8,00 .000. 29 per centum in addition of such excess. $1.687.125 upon net gifts of $8,000,000; and upon net gifts in excess of $S,000,000 and not in excess of $9,000.000, 3034 per centum in addition ofsuch excess. $1.99'325 upon net gifts of $9,000,000; and upon net gifts in excess of $9,000,000 and not in excess of $10,000,000. 32 per centum in addition of such excess. $2,312,125 upon net gifts of $10,000,000; and upon net gifts in excess of $10.000.000,3334 per centum in addition ofsuch excess. exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; (5) Posts or organizations of w .r veterans, or auxiliary units or societies of any such pasts, or organizations, of such posts, organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual; (6) The special fund for vocational rehabilitation authorized by section 12 of the World War Veterans' Act, 1924. (c) The deductions provided in subsection (a) (2) or (b) shall be allowed only to the extent that the gifts therein specified are included in the amount of gifts against which such deductions are applied. Sec. 506. Gifts Made in Property. If the gilt is made in property, the value thereof at the date of the gift shall be considered the amount of the gift. Sec. 507. Returns. (a) Requirement.—Any individual who within the calendar year 1932 or any calendar year thereafter makes any transfers by gift (except those which under section 504 are not to be included in the total amount of gifts I'm such year) shall make a return under oath in duplicate. The return shall set forth (1) each gift made during the calendar year which under section 504 is to be included in computing net gifts; (2) the deductions claimed and allowable under section 505; (3) the net gifts for each of the preceding calendar years; and (4) such further information as may be required by regulations made pursuant to law. (b) Time and Place for Filing.—The return shall be filed on or before the 15th day of March following the close of the calendar year with the collector for the district in which is located the legal residence of the donor, or if he has no legal residence in the United States, then (unless the Commissioner designates another district) with the collector at Baltimore, Md.) Sec. 508. Records and Special Returns. (a) By Donor.—Every person liable to any tax imposed by this title or for the collection thereof, shall keep such records, render under oath such statements, Make such returns, and comply with such rules and regulations, as the Commissioner, with the approval of the Secretary, may from time to time prescribe. (b) To Determine Liability to Tax.—Whenever in the Judgment of the Commissioner necessary he may require any persons, by notice served upon him, to make a return, render under oath, such statements, or keep such records, as the Commissioner deems sufficient to show whether or not such person is liable to tax under this title. Sec. 509. Payment of Tax. (a) Time of Payment.—The tax imposed by this title shall be paid by the donor on or before the 15th day of March following the close of the calendar year. (b) Extension of Time for Payment.—At the request of the donor, the Commissioner may extend the time for payment of the amount determined as the tax by the donor, for a period not to exceed six months from the Sec. 503. Transfer for Less Than Adequate and Full Consideration. date prescribed for the payment of the tax. In such case the amount in respect of which the extension is granted shall be paid on or before the Wh re property is transferred for less than an adequate and full condate of the expiration of the period of the extension. sideration in money or money's worth, then the amou t by which the value (c) Voluntary Advance Payment.—A tax imposed by this title, may be of the property exceeded the value of the consideration shall, for the purpose paid, at the election of the donor, prior to the date prescribed for its of the tax imposed by this title, be deemed a gift, and shall be included in payment. computing the amount of gifts made during the calendar year. (d) Fractional Parts of Cent.—In the payment of any tax under this title a fractional part of a cent shall be disregarded unless it amounts to Sec. 504. Net Gifts. one-half cent or more, in which case it shall be increased to one cent. (a) General Definition.—The term "net gifts" means the total amount (e) Receipts.—The collector to whom any payment of any gift tax is of gifts made during the calendar year, less the deductions provided in made shall, upon request, grant to the person making such payment a section 505. receipt therefor. (b) Gifts Less Than $5,000.—In the case of gifts (other than of future Sec. 510. Lien for Tax. Interests in property) made to any person by the donor during the calendar year, the first $5,000 of such gifts to such person shall not, for the purposes The tax imposed by this title shall be a lien upon all gifts made during of subsection (a), be included in the total amount of gifts made during such the calendar year, for 10 years from the time the gifts are made. If the year. tax Is not paid when due, the donee of any gift shall be personally liable Sec. 505. Deductions. for such tax to the extent of the value of such gift. Any part of the property In computing net gifts for any calendar year there shall be allowed as comprised In the gift sold by the donee to a bona fide purchaser for an adequate and full consideration in money or money's worth shall be dideductions: vested of the lien herein imposed and the lien to the extent of the value of (a) Residents.—In the case of a citizen or resident— donee (including afterV " (1) Specific Exemption.—An exemption of $50.000, less the aggregate such gift, shall attach to all the property of the of the amounts claimed and allowed as specific exemption for preceding acquired property) except any part sold to a bona fide purchaser for any worth. If the money's money or adequate and full consideration in calendar years. (2) Charitable, &c., Gifts.—The amount of all gifts made during such Commissioner is satisfied that the tax liability has been fully discharged or provided for, he may, under regulations prescribed by him with the year to or for the use of— (A) The United States, any State, Territory, or any political subdivision approval of the Secretary. Issue his certificate, releasing any or all of the property from the lien herein imposed. thereof, or the District of Columbia, for exclusively public purposes; (B) A corporation, or trust, or community chest, fund, or foundation, Sec. 511. Examination of Return and Determination of Tax. • for exclusively religious, charitable, scientific organized and operated As soon as practicable after the return is filed the Commissioner shall literary, or educational purposes. Including the encouragement of art and the prevention of cruelty to children or animals; no part of the net earnings examine it and shall determine the correct amount of the tax. of which inures to the benefit of any private shareholder or individual; Sec. 512. Definition of Deficiency. (C) A fraternal scoeity. order, or association, operating under the lodge As used In this title In respect of the tax imposed by this title the term system, but only if such gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, Including the encourage- "deficiency" means— (1) The amount by which the tax imposed by this title exceeds the ment of art and the prevention of cruelty to children or animals; (D) Posts or organizations of war veterans, or auxiliary units or societies amount shown as the tax by the donor upon his return; but the amount so shown on the return shall first be increased by the amounts previously or organizations, if such posts, organizations, units, or posts such of any societies are organized in the United States or any of its possessions, and assessed (or collected without assessment) as a deficiency, and decreased by if no part of their net earnings inures to the benefit of any private share- the amounts previously abated, refunded, or otherwise repaid in respect of such tax; or bolder or individual; (2) If no amount is shown as the tax by the donor upon his return, or if (E) The special fund for vocational rehabilitation authorized by secno return is made by the donor, then the amount by which the tax exceeds tion 12 of the World War Veterans' Act, 1924. (b) Nonresidents.—In the case of a nonresident not a citizen of the the amounts previously assessed (or collected without assessment) as a United States, the amount of all gifts made during such year to or for the deficiency; but such amounts previously assessed, or collected without assessment, shall first be decreased by the amounts previously abated, use of— (1) The United States, any State, Territory, or any political subdivision refunded, or otherwise repaid in respect of such tax. therefor, or the District of Columbia, for exclusively public purposes; Sec. 518. Assessment and Collection of Deficiencies. (2) A domestic corporation organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, including (a) Petition to Board of Tax Appeals.—If the Commissioner determines the encouragement of art and the prevention of cruelty to children or that there is a deficiency in respect of the tax imposed by this title, the animals; no part of the net earnings of which inures to the benefit of any Commissioner is authorized to send notice of such deficiency to the donor by registered mall. Within 60 days after such notice is mailed (not counting private shareholder or individual; (3) A trust, or community chest, fund, or foundation, organized and Sunday as the sixtieth day), the donor may file a petition with the Board literary, or educacharitable, scientific, exclusively for religious, of Tax Appeals for a redetermination of the deficiency. No assessment of operated tional purposes, including the encouragement of art and the prevention a deficiency In respect of the tax imposed by this title and no distriant or of cruelty to children or animals; but only if such gifts are to be used proceeding in court for its collection shall be made. begun, or prosecuted until such notice has been mailed to the donor, nor until the expiration of within the United States exclusively for such purposes; (4) A fraternal society, order, or association, operating under the lodge such 60-day period, nor, if a petition has been filed with the Board, until system, but only if such gifts are to be used within the United States the decision of the Board has become final. Notwithstanding the provisions THE REVENUE ACT OF 1932 of section 3224 of the Revised Statutes the making ofsuch assessment or the beginning of such proceeding or distraint during the time such prohibition Is in force may be enjoined by a proceeding in the proper court. For exceptions to the restrictions imposed by this subsection see— (1) Subsection (d) of this section, relating to waivers by the donor; mathematical (2) Subsection (f) of this section, relating to notifications of errors appearing upon the face of the return; (3) Section 514. relating to jeopardy assessments; (4) Section 516, relating to bankruptcy and receiverships; and (5) Section 1001 of the Revenue Act of 1926, as amended, relating to assessment or collection of the amount of the deficiency determined by the Board pending court review. (b) Collection of Deficiency Found by Board.—If the donor files a petition with the Board, the entire amount redetermined as the deficiency by the decision of the Board which has become final shall be assessed and shall be paid upon notice and demand from the collector. No part of the amount determined as a deficiency by the Commissioner but disallowed as such by the decision of the Board which has become final shall be assessed or be collected by distraint or by proceedings in court with or without assessment. (c) Failure to File Petition.—If the donor does not file a petition with the Board within the time prescribed in subsection (a) the deficiency, notice of which has been mailed to the donor, shall be assessed, and shall be paid upon notice and demand from the collector. (d) Waiver of Restrictions.—The donor shall at any time have the right, by a signed notice in writing filed with the Commissioner, to waive the restrictions provided in subsection (a) on the assessment and collection of the whole or any part of the deficiency. (e) Increase of Deficiency After Notice Mailed.—The Board shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the donor, and to determine whether any additional amount or addition to the tax should be assessed if claim therefor Is asserted by the Commissioner at or before the hearing or rehearing. (f) Further Deficiency Letters Restricted.—If the Commissioner has mailed to the donor notice of a deficiency as provided in subsection (a) of this section, and the donor files a petition with the Board within the time prescribed in such subsection, the Commissioner shall have no right to determine any additional deficiency in respect of the same calendar year, except in the case of fraud, and except as provided in subsection (e) of this section, relating to assertion of greater deficiencies before the Board, or in section 514 (c) relating to the making of jeopardy assessments. If the donor the is notified that, on account of a mathematical error appearing upon face of the return, an amount of tax in excess of that shown upon the return Is due, and that an assessment of the tax has been or will be made on the basis of what would have been the correct amount of tax but for the mathematical error, such notice shall not be considered (for the purposes of this subsection, or of subsection (a) of this section, prohibiting assessment and collection until notice of deficiency has been mailed, or of section 528 (c), prohibiting credits or refunds after petition to the Board of Tax Appeals) as a notice of a deficiency, and the donor shall have no right to file a petition with the Board based on such notice, nor shall such assessment or collection be prohibited by the provisions of subsection (a) of this section. (g) Jurisdiction Over Other Calendar Years.—The Board in redetermining a deficiency in respect of any calendar year shall consider such facts with relation to the taxes for other calendar years as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other calendar year has been overpaid or underpaid. (h) Final Decisions of Board.—For the purposes of this title the date on which a decision of the Board becomes final shall be determined according to the provisions of section 1005 of the Revenue Act of 1926. (I) Extension of Time for Payment of Deficiencies.—Where it is shown to the satisfaction of the Commissioner that the payment of a deficiency upon the date prescribed for the payment thereof will result in undue hardship to the donor the Commissioner, with the approval of the Secretary (except where the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax), may grant an extension for the payment of such deficiency or any part thereof for a period not in excess of 18 months, and, in exceptional cases, for a further period not in excess of 12 months. If an extension is granted, the Commissioner may require the donor to furnish a bond in such amount, not exceeding double the amount of the deficiency, and with such sureties, as the Commissioner deems necessary, conditioned upon the payment of the deficiency in accordance with the terms of the extension. (j) Address for Notice of Deficiency.—In the absence of notice to the Commissioner under section 527 (a) of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by this title, if mailed to the donor at his last known address, shall be sufficient for the purposes of this title even if such donor is decreased, or is under a legal disability. 21 as to which the stay is desired, and with such sureties, as the eollector deems necessary, conditioned upon the payment of so much of the amount, the collection of which is stayed by the bond, as is not abated by a decision of the Board which has become final, together with interest thereon as provided in section 523 or 524 (b) (4). (g) Same—Further Conditions.—If the bond is given before the donor has filed his petition with the Board under section 513 (a), the bond shall contain a further condition that if a petition is not filed within the period provided in such subsection, then the amount the collection of which is stayed by the bond will be paid on notice and demand at any time after the expiration of such period, together with interest thereon at the rate of6 per centum per annum from the date of the jeopardy notice and demand to the date of notice and demand under this subsection. (h) Waiver of Stay.—Upon the filing of the bond the collection of so much of the amount assessed as is covered by the bond shall be stayed. The donor shall have the right to waive such stay at any time in respect of the whole or any part of the amount covered by the bond, and if as a result of such waiver any part of the amount covered by the bond is paid, then the bond shall, at the request of the donor, be proportionately reduced. If the Board determines that the amount assessed is greater than the amount which should have been assessed, then when the decision of the Board is rendered the bond shall, at the request of the donor, be proportionately reduced. (1) Collection of Unpaid Amounts.—When the petition has been filed with the Board and when the amount which should have been assessed has been determined by a decision of the Board which has become final, then any unpaid portion, the collection of which has been stayed by the bond, shall be collected as part of the tax upon notice and demand from the collector, and any remaining portion of the assessment shall be abated. If the amount already collected exceeds the amount determined as the amount which should have been assessed, such excess shall be credited or refunded as provided in section 528, without the filing of claim therefor. If the amount determined as the amount which should have been assessed is greater than the amount actually assessed, then the difference shall be assessed and shall be collected as part of the tax upon notice and demand from the collector. Sec. 515. Claims in Abatement. No claim in abatement shall be filed in respect of any assessment in respect of any tax imposed by this title. Sec. 516. Bankruptcy and Receiverships. (a) Immediate Assessment.—Upon the adjudication of bankruptcy of any donor in any bankruptcy proceeding or the appointment of a receiver for any donor in any receivership proceeding before any court of the United States or of any State or Territory or of the District of Columbia, any deficiency (together with all interest, additional amounts, or additions to the tax provided for by law) determined by the Commissioner in respect of a tax imposed by this title upon such donor shall, despite the retsrictions imposed by section 513 (a) upon assessments be immediately assessed if such deficiency has not theretofore been assessed in accordance with law. Claims for toe deficiency and sucn interest, additional amounts and additions to the tax may be presented for adjudication in accordance with law, to the court before which the bankruptcy or receivership proceeding is pending, despite the pendency of proceedings for the redetermination of the deficiency in pursuance of a petition to the Board; but no petition for any such redetermination shall be filed with the Board after the adjudication of bankruptcy or the appointment of the receiver. (b) Unpaid Claims.—Any portion ofthe claim allowed in such bankruptcy or receivership proceeding whim is unpaid shall be paid by the donor upon notice and demand from the collector after the termination of suco proceeding, and may be collected by distraint or proceeding in court within six years after the termination of such proceeding. Extensions of time for such payment may be had in the same manner and subject to toe same provisions and limitations as are provided in sections 513 (1), 521 (r). and 524 (b) (3) in the case of a deficiency in a tax imposed by this title. Sec. 517. Period of Limitation Upon Assessment and Collection. (a) General Rule.—Except as provided in subsection (b), the amount of taxes imposed by this title shall be assessed within three years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of three years after the return was filed. (b) Exceptions— (1) False Return or No Return.—In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return the tax may be assessed, or a proceeding in court for the collection ofsucn tax may be begun without assessment, at any time. (2) Collection After Assessment.—Where the assessment of any tax imposed by this title has been made within the statutory period of limitation properly applicable tnereto, such tax may be collected by distraint or by a proceeding in court, but only if begun (1) within six years after the assessants. Sec. 514. Jeopardy A ment of the tax, or (2) prior to the expiration of any period for collection (a) Authority for Making.—If the Commissioner believes that the assess- agreed upon in writing by the Commissioner and the donor. ment or collection of a deficiency will be jeopardized by delay, he shall Sec. 518. Suspension of Running of Statute. immediately assess such deficiency (together with all interest, additional amounts, or additions to the tax provided for by law) and notice and running of the statute of limitations provided in section 517 on The demand shall be made by the collector for the payment thereof. the making of assessments and the beginning of distraint or a proceeding (b) Deficiency Letters.—if the jeopardy assessment is made before any in court for collection, in respect of any deficiency, snail (after the mailing notice in respect of the tax to which the jeopardy assessment relates has of a notice under section 513 (a), be suspended for the period during wnich been mailed under section 513 (a), then the Commissioner shall mall a the Commissioner is prohibited from making the assessment or oeginning notice under such subsection within 60 dayri after the making of the distraint or a proceeding in court (and in any event, if a proceeding in reassessment. spect of toe deficiency is placed on the docket of the Board, until the dc• (c) Amount Assessable Before Decision of Board.—The jeopardy assess- cislon of the Board becomes final), and for 60 days thereafter. ment may be made in respect of a deficiency greater or less than that notice of which has been mailed to the donor, despite the provisions of section Sec. 519. Additions to the Tax in Case of Failure to File Return. 513 (f) prohibiting the determination of additional deficiencies, and whether In case of any failure to make and file a return required by this title, or not the donor has theretofore filed a petition with the Board of Tax the Commissioner in Appeals. The Commissioner shall notify the Board of the amount of such Within the time prescribed by law or prescribed by be added to the tax except assessment, if the petition is filed with the Board before the making of the pursuance of law, 25 per centum of the tax shall shown that the failure to assessment or is subsequently filed, and the Board shall have jurisdiction that when a return is filed after such time and it is willful neglect no such to redetermine the entire amount of the deficiency and of all amounts as- file it was due to reasonable cause and not due to addition shall be made to tne tax. The amount so added to any tax shall sessed at the same time in connection therewith. collected at the same time and in the same manner and as a part of the (d) Amount Assessable After Decision of Board.—If the jeopardy be discovery of the neglect,in which assessment is made after the decision of the Board is rendered such assess- tax unless the tax has been paid before tne collected in the same manner as the tax. ment may be made only in respect of the deficiency determined by the case the amount so added shall be Tne amount added to the tax under this section shall be in lieu of the 25 Board in its decision. 3176 of the Revised Stat(e) Expiration of Right to Assess.—A jeopardy assessment may not be per centum addition to the tax provided in section made after the decision of the Board has become final or after the donor utes, as amended. has filed a petition for review of the decision of the Board. Sec. 520. Additions to the Tax in Case of Deficiency. (f) Bond to Stay Collection.—When a jeopardy assessment has been Negligence.—If any part of any deficiency is due to negligence, or (a) the from ocllector demand and made the donor, within 10 days after notice for the payment of the amount of the assessment, may obtain a stay of intentional disregard of rules and regulations but witnout intent to defraud. (in addition to such collection of the whole or any part of the amount of the assessment by filing 5 per centum of the total amount of the deficiency with the collector a bond in such amount, not exceeding double the amount deficiency) shall be assessed, collected, and paid in the same manner as if 22 THE REVENUE ACT OF 1932 it were a deficiency, except that the provisions of section 522, relating to (2) Fiduciaries.—The liability of a fiduciary under section 3467 of the interest on deficiencies, shall not be applicable. Revised Statutes U. S. C., title 31, sec. 1921 in respect of the payment of (b) Fraud.—If any part of any deficiency is due to fraud witn intent to any such tax from the estate of the donor. evade tax, then 50 per centum of the total amount of the deficiency (in I Any such liability may be either as to the amount of tax shown on the addition to such deficiency) shall be so assessed, collected, and paid, in lieu of the 50 per centum addition to tne tax provided in section 3176 of the return or as to any deficiency in tax. (b) Period of Limitation.—The period of limitation for assessment of Revised Statutes as amended. any such liability of a transferee or fiduciary shall be as follows: (1) Within one year after the expiration of the period of limitation Sec. 521. Interest on Extended Payments. for assessment against the donor. (a) Tax Shown on Return.—If the time for payment of tne amount de(2) If a court proceeding against the donor for the collection of the tax termined as tne tax by tne donor is extended under tne authority of section has been begun within the period provided in paragraph (1),—then within 509 (b) there shall be collected as a Part of such amount, interest thereon one year after return of execution in such proceeding. at tne rate of 6 per centum per annum from the date when such payment (c) Period for Assessment Against Donor.—For the purposes of this should have been made if no extension had been Eh anted until the expira- section, if the donor is deceased, the period of limitation for assessment tion of the period of the extension, against the donor shall be the period that would be in effect had the death (b) Deficiency.—In case an extension for the payment of a deficiency not occurred. is granted, as provided in section 513 (i), there shall be collected, as a part (d) Suspension of Running of Statute of Limitations.—The running of of the tax, interest on the part of the deficiency the time for payment of the statute oflimitations upon the assessment of the liability of a transferee wnich is so extended, at the rate of 6 per centum per annum for the period or fiduciary shall, after the mailing of the notice under section 513 (a) to of tne extension, and no other interest shall be collected on such part of the the transferee or fiduciary, be suspended for the period during which the deficiency for such period. Commissioner is prohibited from making the assessment in respect of the liability of the transferee or fiduciary (and in any event, if a proceeding in Sec. 522. Interest on Deficiencies. respect of the liability is placed on the docket ofthe Board, until the decision Interest upon the amount determined as a deficiency shall be assessed of the Board becomes final), and for 60 days thereafter. at the same time as the deficiency, shall be paid upon notice and demand (e) Prohibition of Suits to Restrain Enforcement of Liability of Transfrom the collector, and shall be collected as a part of the tax, at the rate feree or Fiduciary.—No suit shall be maintained in any court for the purpose of 6 per centum per annum from the due date of the tax to the date the of restraining the assessment or collection of (1) the amount of the liability. deficiency is assessed, or, in the case of a waiver under section 513 (d), at law or in equity, of a transferee of property of a donor in respect of any to the thirtieth day after the filing of such waiver or to the date the de- gift tax, or (2) the amount ofliability ofa fiduciary under section 3467 of the ficianey is assessed, whichever is the earlier. Revised Statutes M. S. C., title 31, sec. 1921 in respect of any such tax. Definition of "Transferee".—As used in this section, the term Sec. 523. Interest on Jeopardy Asssssraents. "transferee" includes donee, heir, legatee, devisee. and distribute°. (g) Address for Notice of Liability.—In the absence of notice to the In the case of the amount collected under section 514 (f) there snail be collected at the same time as such amount,and as a part of the tax, interest Commissioner under section 527 (b) of the existence of a fiduciary relationship, notice of liability enforceable under this section in respect of a tax at the rate of 6 per centum per annum upon such amount from the date of the jeopardy notice and demand to the date of notice and demand under imposed by this title, if mailed to the person subject to the liability at section 514 (1), or, in the case of the amount collected in excess of the his last known address, shall be sufficient for the purposes of this title even if such person is deceased, or is under a legal disability, or, in the case of a amount of the jeopardy assessment, interest as provided in section 522.• corporation, has terminated its existence. Sec. 524. Additions to the Tax in Case of Nonpayment. See. 527. Notice of Fiduc iary Relationship. (a) Tax Shown on Return— (1) Payment Not Extended.—Where the amount determined by the (a) Fiduciary of Donor.—Upon notice to the Commissioner that any donor as tne tax imposed by this title, or any part of such amount, is not person is acting in a fiduciary capacity such fiduciary shall assume the paid on the due date of the tax, there shall be collected as a part of the tax. powers,rights, duties,and privileges of the donor in respect ef a tax imposed interest upon such unpaid amount at the rate of 1 per centurn a month by this title (except as otherwise specifically provided and except that the from the due date until it is paid. tax shall be collected from the estate of the donor), until notice is given (2) Payment Extended.—Where an extension of time for payment of the that the fiduciary capacity has terminated. amount so determined as the tax by the donor has been granted, and the (b) Fiduciary of Transferee.—Upon notice to the Commissioner that amount the time for payment of which has been extended, and the interest any person is acting in a fiduciary capacity for a person subject to the thereon determined under section 521 (a), is not paid in full prior to the liability specified in section 526, the fiduciary shall assume, on behalf of expiration of the period of the extension, then, in lieu of the interest pro- such person, the powers, rights, duties, and privileges of such person under vided for in paragraph (1) of this subsection, interest at the rate of 1 per such section (except that the liability shall be collected from the estate of centum a month shall be collected on such unpaid amount from the date such person), until notice is given that the fiduciary capacity has terminated. of the expiration of the period of the extension until it is paid. (c) Manner of Notice.—Notice under subsection (a) or (b) shall be given (b) Deficiency— in accordance with regulations prescribed by the Commissioner with the (1) Payment Not Extended.—Where a deficiency,or any interest assessed approval of the Secretary. In connection therewith under section 522, or any addition to tne tax provided for in section 3176 of the Revised Statutes, is not paid in full within Sec. 528. Refunds and Credits. ten days from tne date of notice and demand from the collector, there (a) Authorization.—Where there has been an overpayment of any tax shall be collected as part of tne tax, interest upon the unpaid amount at imposed by this title, the amount of such overpayment shall be credited the rate of 1 per centum a month from tne date of such notice and demand against any gift tax then due from the taxpayer, and any balance shall be until It is paid. refunded immediately to the taxpayer. (2) Filing of Jeopardy Bond.--If a bond is filed, as provided in section (b) Limitation on Allowance— 514, the provisions of paragraph (1) of this subsection shall not apply to (1) Period of Limitation.—No such credit or refund shall be allowed or the amount covered by the bond. (3) Payment Extended.—If the part of the deficiency the time for pay- made after three years from the time the tax was paid, unless before the ment of which Is extended as provided in section 513 (I) is not paid in accord- expiration ofsuch period a claim therefor is filed by the taxpayer. (2) Limit on Amount of Credit or Refund.—The amount of the credit or ance witn the terms of the extension,there snail be collected, as a part of the tax. Interest on such unpaid amount at the rate of 1 per centum a month refund shall not exceed the portion of the tax paid during the three years immediately preceding the filing of the claim, or if no claim was filed then for the period from the time fixed by the terms of the extension for its payment until it is paid, and no other interest shall be collected on sucn unpaid during the three years immediately preceding the allowance of the credit or refund. amount for such period. (c) Effect of Petition to Board.—If the Commissioner has mailed to the (4) Jeopardy Assessment—Payment Stayed by Bond.—If the amount taxpayer a notice of deficiency under section 513 (a) and if the taxpayer included in the notice and demand from toe collector under section 514 (1) files a petition with the Board of Tax Appeals within the time presti ibed is not paid in full within ten days after such notice and demand,then there shall be collected, as part of the tax, interest upon the unpaid amount at in such subsection, no credit or refund in respect of the tax for the calendar the rate of 1 per centum a month from the date of such notice and demand year in respect of which the Commissioner has determined the deficiency shall be allowed or made and no suit by the taxpayer for the recovery of any until it is paid. (5) Interest in Case of Bankruptcy and Receiverships.—If the unpaid part ofsuch tax shall be instituted in any court except— (1) As to overpayments determined by a decision of the Board which Portion orthe claim allowed in a bankruptcy or receivership proceeding, as provided in section 516, is not paid in full within ten days from the date has become final; and (2) As to any amount collected in excess of an amount computed in acof notice and demand from the collector, then there shall be collected as a part ofsuch amount interest upon tne unpaid portion thereof at the rate of cordance with the decision of the Board which has become final; and (3) As to any amount collected after the period of limitation upon the 1 per centum a month from the date of sucn notice and demand until paybeginning of distraint or a proceeding in court for collection has expired; ment. but in any such claim for credit or refund or in any such suit for refund the Sec. 525. Penalties. decision of the Board which has become final, as to whether such period has (a) Any person required under this title to pay any tax, or required by expired before the notice of deficiency was mailed, shall be conclusive. law or regulations made under authority thereof to make a return, keep any (d) Overpayment Found by Board.—If the Board finds that there is records, or supply any information, for the purposes of the computation, no deficiency and further finds that the taxpayer has made an overpayment assessment, or collection of any tax imposed by this title, who willfully fails of tax in respect of the taxable year in respect of which the Commissioner to pay such tax, make such return, keep such records, or supply such in- determined the deficiency, the Board shall have jurisdiction to determine formation, at the time or times required by law or regulations, shall, in the amount ofsuch overpayment, and such amount shall, when the decision addition to otner penalties provided by law, be guilty of a misdemeanor of the Board has become final, he credited or refunded to the taxpayer. and, upon conviction thereof, be fined not more than $10,000, or lin- No such credit or refund shall be made of any portion of the tax paid more Prisoned for not more than one year, or both, together with the costs than three years before the filing of the claim or the filing of the petition. whichever is earlier. of prosecution. (b) Any person who willfully attempts in any manner to evade or defeat Sec. 529. Laws Made Applicable. any tax imposed by this title or tne payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, on conviction All administrative, special, or stamp provisions of law, Including the law thereof, be fined not more than $10,000, or imprisoned for not more than relating to the assessment of taxes, so far as applicable, are hereby extended five years, or botn, togetner witn the costs of prosecution. to and made a part of this title. Sec. 526, Transferred Assets. Sec. 530. Rules and Regulations. (a) Method of Collection.—The amounts of the following liabilities shall. The Commissioner, with the approval of the Secretary, shall prescribe except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions, and limitations and publish all needful rules and regulations for the enforcement of this as in the case of a deficiency in the tax imposed by this title (including the title. Sec. 531. Definitions. provisions in case of delinquency in payment after notice and demand, the provisions authorising distraint and proceedings in court for collection, For the purposes of this title— and the provisions prohibiting claims and suits for refunds): (a) Calendar Year—The term "calendar year" includes only the calendar (1) Transferees.—The liability, at law or in equity, of a transferee of year 1932 and succeeding calendar years, and, in the case of the calendar property of a donor, in respect of the tax (including interest, additional year 1932, includes only the portion ofsuch year after the date of the enactamounts, and additions to the tax provided by law) imposed by this title. ment of this Act. THE REVENUE A.CT OF 1932 (b) Property Within United States.—Stock in a domestic corporation owned and held by a nonresident shall be deemed property situated within the United States. Sec. 532. Short Title. This title may be cited as the "Gift Tax Act of 1932." TITLE IV.--MANUFACTURERS' EXCISE TAXES. 23 tives, hair dyes, tooth and mouth washes (except that the rate shall be 5 per centum), dentrifices (except that the rate shall be 5 per centum), tooth pastes (except that the rate shall be 5 per centum), aromatic cachous. toilet soaps (except that the rate shall be 5 per centum), toilet powders, and any similar substance, article or preparation, by whatsoever name known or distinguished; any of the above which are used or applied or intended to be used or applied for toilet purposes. Sec. 604. Tax on Furs. There is hereby imposed upon the following articles, sold by the manu(a) In addition to any other tax or duty imposed by law, there shall be facturer, producer, or importer, a tax equivalent to 10 per centum of the imposed a tax as provided in subsection (c) on every article imported into .price for which so sold: Articles made of fur on the hide or pelt or of which the United States unless treaty provisions of the United States otherwise any such fur is the component material of chief value. provide. Sec. 605. Tax on Jewelry, Etc. (b) The tax imposed under subsection (a) shall be levied, assessed, collected, and paid in the same manner as a duty imposed by the Tariff Act There is hereby imposed upon the following articles, sold by the manuof 1930, and shall be treated for the purposes of all provisions oflaw relating facturer, producer, or importer, a tax equivalent to 10 per centum of the to the customs revenue as a duty imposed by such act, except that— price for which so sold: All articles commonly or commercially known as (1) the value on which such such tax shall be based shall be the sum jewelry, whether real or imitation; pearls, precious and semi-precious stones. (A)the dutiable value (under section 503 of such Act) of the article, plus and imitations thereof; articles made of, or ornamented, mounted or fitted (B)the customs duties, if any,imposed thereon under any provision of law; with, precious metals or imitations thereof Or ivory (not including surgical (2) for the purposes of section 489 of such Act (relating to additional instruments or silver-plated ware, or frames or mountings for spectacles or duties in certain cases of undervaluation) such tax shall not be considered eyeglasses); watches, clocks, parts for watches or clocks sold for more than an ad valorem rate of duty or a duty based upon or regulated in any manner 9 cents each; opera glasses; lorgnettes; marine glasses; field glasses; and by the value of the article, and for the purposes of section 336 of such Act binoculars. No tax shall be imposed under this section on any article used (the so-called flexible tariff provision)such tax shall not be considered a duty; for religious purposes or any article (other than watch parts or clock parts) (3) such tax shall not be imposed upon any article imported prior to the sold for less than $3. date on which this title takes effect; Sec. 606. Tax on Automobiles, Etc. (4) no drawback of such tax (except tax paid upon the importation of an article described in subsection (c) (4), (5). (6), or (7). shall be allowed There is hereby imposed upon the following articles sold by the manuunder section 313 (a), (b), or (f) of the Tariff Act of 1930 or any provision facturer, producer, or importer, a tax equivalent to the following percentages of law allowing a drawback of customs duties on articles manufactured or of the price for which so sold: produced with the use of duty-paid materials; (a) Automobile truck chassis and automobile truck bodies (including in (5) such tax (except tax under subsection (c) (4) to (7), inclusive) shall both cases parts or accessories therefor sold on or in connection therewith or be imposed in full notwithstanding any provisoin of law granting exemption with the sale thereof), 2 per centum. A sale of an automobile truck shall, from or reduction of duties to products of any possession of the United for the purposes of this subsection, be considered to be a sale of the chassis States; and for the purposes of taxes under subsection (c) (4) to (7), in- and of the body. clusive, the term "United States" includes Puerto Rico. (b) Other automobile chassis and bodies and motor cycles (including in (c) There is hereby imposed upon the following articles sold in the each case parts or accessories therefor sold on or in connection therewith or United States by the manufacturer or producer, or imported into the United with the sale thereof), except tractors, 3 per centum. A sale of an autoStates, a tax at the rates hereinafter set forth, to be paid by the manu- mobile shall, for the purposes of this subsection, be considered to be a sale facturer, producer, or importer: of the chassis and of the body. (1) Lubricating oils, 4 cents a gallon; but the tax on articles described in (c) Parts or accessories (other than tires and inner tubes) for any of the this paragraph shall not apply with respect to the importation of such articles enumerated in subsection (a) or (b), 2 per centum. For the purarticles. poses of this subsection and subsections (a) and (b), spark plugs, storage (2) Brewer's'wort, 15 cents a gallon. Liquid malt, malt syrup, and malt batteries, leaf springs, coils, timers, and tire chains, which are suitable for extract, fluid, solid, or condensed, made from malted cereal grains in whole use on or in connection with, or as component parts of, any of the articles or in part, unless sold to a baker for use in baking or to a manufacturer or enumerated in subsection (a) or (b), shall be considered parts or accessories producer of malted milk, medicinal products, foods, cereal beverages, or for such articles, whether or not primarily adapted for such use. This subtextiles, for use in the manufacture or production of such products, 3 cents section shall not apply to chassis or bodies for automobile trucks or other a pound. For the purposes of this paragraph liquid malt containing less automobiles. Under regulations prescribed by the Commissioner, with the than 15 per centum of solids by weight shall be taxable as brewer's wort. approval of the Secretary, the tax under this subsection shall not apply in (3) Grape concentrate, evaporated grape juice, and grape syrup (other the case of sales of parts or accessories by the manufacturer, producer, or than finished or fountain syrup), if containing more than 35 per centum importer to a manufacturer or producer of any of the articles enumerated of sugars by weight, 20 cents a gallon. No tax shall be imposed under in subsection (a) or (b). If any such parts or accessories are resold by such t his paragraph (A)upon any article which contains preservative sufficient to vendee otherwise than on or in connection with, or with the sale of, an prevent fermentation when diluted, or (D) upon any article sold to a manu- article enumerated in subsection (a) or (b)and manufactured or produced by facturer or producer of food products or soft drinks for use in the manu- such vendee, then for the purposes of this section the vendee shall be confacture or production of such products. sidered the manufacturer or producer of the parts or accessories so resold. (4) Crude petroleum, yi cent per gallon; fuel oil derived from petroleum, (d) Under regulations prescribed by the Commissioner, with the approval gas oil derived from petroleum, and all liquid derivatives of crude petroleum, of the Secretary, the tax under subsection (a) or (b) shall not apply in the except lubricating oil and gasoline or other motor fuel, M cent per gallon; case of sales of bodies by the manufacturer, producer, or importer to a gasoline or other motor fuel, 234 cents per gallon; lubricating oil, 4 cents manufacturer or producer of automobile trucks or other automobiles to be per gallon; paraffin and other petroleum wax products, 1 cent per pound. sold by such vendee. For the purposes of subsection (a) or (b) such vendee The tax on the articles described in this paragraph shall apply only with shall be considered the manufacturer or producer of such bodies. respect to the importation of such articles. (e) If tires or inner tubes on which tax has been imposed under this title (5) Coal of all sizes, grades, and classifications (except culm and duff), are sold on or in connection with, or with the sale of, a chassis, body, or coke manufactured therefrom: and coal or coke briquettes, 10 cents per motorcycle, there shall (under regulations prescribed by the Commissioner, 100 pounds. The tax on the articles described in this paragraph shall with the approval of the Secretary) be credited against the tax under this apply only with respect to the importation of such articles, and shall not section an amount equal to, in the case of an automobile truck chassis or be imposed upon any such article if during the preceding calendar year body, 2 per centum, and in the case of any other automobile chassis or the exports of the articles described in this paragraph from the United body or motorcycle, 3 per centum— States to the country from which such article is imported have been (1) Of the purchase price (less, in the case of tires, the part of such price greater in quantity than the imports into the United States from such attributable to the metal rim or rim base) if such tires or inner tubes were country of the articles described in this paragraph. taxable under section 602 (relating to tax on tires and inner tubes); or (2) if (6) Lumber, rough, or planed or dressed on one or more sides, except such tires or inner tubes were taxable under section 622 (relating to use by flooring made of maple (except Japanese maple), birch, and beech, $3 per manufacturer, producer, or importer) then of the price (less, in the case of thousand feet, board measure; but the tax on the articles described in this tires, the part of such price attributable to the metal rim or rim base) at paragraph shall apply only with respect to the importation of such articles. which such or similar tires or inner tubes are sold, in the ordinary course (7) Copper-bearing ores and concentrates and articles provided for in of trade, by manufacturers, producers, or inporters thereof, as determined paragraph 316, 380, 381. 387, 1620, 1634, 1657, 1658, or 1659 of the by the Commissioner. Tariff Act of 1930, 4 cents per pound on the copper contained therein: (f) (1) Where prior to Aug. 1 1934 any article subject to the tax imposed Provided, That no tax under this paragraph shall be imposed on copper by this section or section 602, relating to tax on tires and inner tubes, has in any of the foregoing which is lost in metallurgical processes: Provided been sold by the manufacturer, producer, or importer, and is on such date further. That ores or concentrates usable as a flux or sulphur reagent in held by a dealer and intended for sale, there shall be refunded to the manucopper smelting and (or) converting and having a copper content of not facturer, producer. or importer the amount of the tax, or if the tax has not more than 15 per centum, when imported for fluxing purposes, shall be been paid, the tax shall be abated. admitted free of said tax in an aggregate amount of not to exceed In any (2) As used in this subsection the term "dealer" includes a wholesaler, one year 15,000 tons of copper content. All articles dutiable under the jobber, or distributor. For the purposes of this subsection, an article shall Tariff Act of 1930, not provided for heretofore in this paragraph, in which be considered as "held by a dealer" if title thereto has passed to such dealer copper (including copper in alloys) is the component material of chief (whether or not delivery to him has been made), and if for purposes of value, 3 cents per pound. All articles dutiable under the Tariff Act of consumption title to such article or possession thereof has not at any timd 1930, not provided for heretofore in this paragraph, containing 4 per been transferred to any person other than a dealer. centum or more of copper by weight, 3 per centum ad valorem or WI, of (3) Under regulations prescribed by the Commissioner, with the approval 1 cent per pound, whichever is the lower. The tax on the articles de- of the Secretary, the refund provided by this subsection—CA) may be applied scribed in this paragraph shall apply only with respect to the importation as a credit against the tax shown by subsequent returns of the manufacturer. of such articles. The Secretary is authorized to prescribe all necessary producer, or importer, and (D) may be made to the dealer instead of to the regulations for the enforcement of the provisions of this paragraph. manufacturer, producer, or importer, if the manufacturer, producer, or importer waives any claim for the amount so to be refunded. Sec. 602. Tax on Tires and Inner Tubes. (4) When the refund, credit, or abatement provided for in this subsection There is hereby imposed upon the following articles sold by the manu- has been allowed to the manufacturer, producer, or importer, he shall emit facturer, producer, or importer, a tax at the following rates: to the dealer to whom was sold the article in respect of which the refund. (1) Tires wholly or in part of rubber, 234 cents a pound on total weight credit, or abatement was allowed, so much of that amount of the tax corres(exclusive of metal rims or rim bases), to be determined under regulations ponding to the refund, credit, or abatement, as was included in or added to prescribed by the Commissioner with the approval of the Secretary. the price paid or agreed to be paid by the dealer. Upon the failure of the (2) Inner tubes (for tires) wholly or in part of rubber, 4 cents a pound manufacturer, producer, or importer to make such remission he shall be on total weight, to be determined under regulations prescribed by the liable to the dealer for damages in the amount of three times the amount Commissioner with the approval of the Secretary. thereof, and the court shall include in any judgment in favor of the dealer in any suit for the recovery of such damages, costa of the suit and a reasonSec. 603. Tax on Toilet Preparations, &c. able attorney's fee to be fixed by the court. There is hereby imposed upon the following articles, sold by the manuSec. 607. Tax on Radio Receiving Sets, &c. facturer. producer, or importer, a tax equivalent to 10 per centum of the There is hereby imposed upon the following articles, sold by the manuprice for which so sold: Perfumes, essences, extracts, toilet waters, c-smetics, petroleum jellies, hair oils, pomades, hair dressings, hair restora- facturer, producer, or importer, a tax equivalent to 5 per centum of the Sec. 601. Excise Taxes on Certain Articles. 24 THE REVENUE ACT OF 1932 price for which so sold: Chassis, cabinets, tubes, reproducing units, power packs, and phonograph mechanisms, suitable for use in connection with or as part of radio receiving sets or combination radio and phonograph sets (including in each case parts or accessories therefor sold on or in connection therewith or with the sale thereof), and records for phonographs. A sale of any two or more of the above articles shall, for the purpose of this section, be considered a sale of each separately. Sec. 608. Tax on Mechanical Refrigerators.' There is hereby imposed upon the following articles, sold by the manufacturer, producer, or importer, a tax equivalent to 5 per centum of the price for which so sold: (a) Household type refrigerators (for single or multiple cabinet installations) operated with electricity, gas, kerosene, or other means (including parts or accessories therefor sold on or in connection therewith or with the sale thereof.) (b) Cabinets, compressors, condensers, expansion units, absorbers, and controls (hereinafter referred to as "refrigerator components") for, or suitable for use as part of or with, any of the articles enumerated in subsection (a) (including in each case parts or accessories for such refrigerator components sold on or in connection therewith or with the sale thereof) except when sold as component parts of complete refrigerators or refrigerating or cooling apparatus. Under regulations prescribed by the Commissioner, with the approval of the Secretary, the tax under this subsection shall not apply in the case of sales of any such refrigerator components by the manufacturer, producer, or importer to a manufacturer or producer of refrigerators or refrigerating or cooling apparatus. If any such refrigerator components are resold by such vendee otherwise than on or in connection with, or with the sale of, complete refrigerators or refrigerating or cooling apparatus, manufactured or produced by such vendee,then for the purposes of this section the vendee shall be considered the manufacturer or producer of the refrigerator components so resold. any such syrups in the manufacture of carbonated beverages sold in bottles or other closed containers there shall be levied, assessed, collected, and paid on each gallon of such syrups a tax of five cents per gallon. The taxes imposed by this paragraph shall not apply to finished or fountain syrups sold for use in the manufacture of a beverage subject to tax under paragraph (1) or (4), nor to any article enumerated in section 601 (c) (3). (7) Upon all carbonic acid gas sold by the manufacturer, producer, or importer, or by a dealer in such gas, to a manufacturer of any carbonated beverages, or to any person conducting a soda fountain, ice cream parlor, or other similar place of business, and upon all carbonic acid gas used by the manufacturer, producer, or importer thereof in the preparation of soft drinks, a tax of four cents per pound. (b) Each manufacturer, producer, or importer of any of the articles enumerated in subsection (a) and each person who sells carbonic acid gas to a manufacturer of carbonated beverages or to a person conducting a soda fountain,ice cream parlor, or other similar place of business,shall make make monthly returns under oath in duplicate and pay the tax imposed in respect of the articles enumerated in subsection (a) to the collector for the district in which is located his principal place of business, or, if he has no principal place of business in the United States, then to the collector at Baltimore, Md. Such returns shall contain such information and be made at such times and in such manner as the Commissioner, with the approval of the Secretary, may by regulations prescribe. The tax shall, without assessment by the Commissioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax interest at the rate of 1 per centum a month from the time the tax became due until paid. (c) Each person required to pay any tax imposed by subsection (a) shall procure and keep posted a certificate of registry in accordance with regulations to be prescribed by the Commissioner, with the approval of the Secretary. Any person who fails to register or keep posted any certificate of registry in accordance with such regulations shall be subject to a penalty of not more than $1,000 for each such offense. Sec. 609. Tax on Sporting Goods. There is hereby imposed upon the following articles, sold by the manufacturer, producer, or importer, a tax equivalent to 10 per centum of the Sec. 616. Tax on Electrical Energy. price for which so sold: Tennis rackets, tennis racket frames and strings, (a) There is hereby imposed a tax equivalent to three per centum of nets, racket covers and presses, skates, snowshoes, skis, toboggans, canoe the amount paid on or after the 15th day after the date of the enactment paddles, polo mallets, baseball bats, gloves, masks, protectors, shoes and of tills Act, for electrical energy for domestic or commercial consumption uniforms, football helmets, harness and uniforms, basketball goals and furnished after such date and before July 1 1934 to be paid by the person uniforms, golf bags and clubs, lacrosse sticks, balls of all kinds, including paying for such electrical energy and to be collected by the vendor. baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing (b) Each vendor receiving any payments specified in subsection (a) rods and reels, billiard and pool tables, chess and checker boards and shall collect the amount of the tax imposed by such subsection from the pieces, dice, games and parts of games (except playing cards and children's person making such payments, and shall on or before the last day of each toys and games); and all similar articles commonly or commercially known month make a return, under oath, for the preceding month, and pay the as sporting goods. taxes so collected, to the collector of the district in which his principal place of business is located, or if lie has no principal place of business in Sec. 610. Tax on Firearms, Shells, and Cartridges. the United States, to the collector at Baltimore, Md. Such returns shall There is hereby imposed upon firearms, shells, and cartridges, sold by contain such information and be made in such manner as the Commissioner the manufacturer, producer, or importer, a tax equivalent to 10 Per cent= with the approval of the Secretary may by regulation prescribe. The of the price for which so sold. The tax imposed by this section shall not Commissioner may extend the time for making returns and paying the apply (1) to articles sold for the use of the United States, any State, taxes collected, under such rules and regulations as he shall prescribe Territory, or possession of the United States, any political subdivision with the approval of the Secretary, but no such extension shall be for more thereof, or the District of Columbia, or (2) to pistols and revolvers. than 90 days. The provisions of sections 771 to 774, inclusive, shall, in lieu of the provisions of sections 619 to 629, inclusive, be applicable in Sec. 611. Tax on Cameras. respect of the tax imposed by this section. There is hereby imposed upon cameras (except aerial cameras), weighing (c) No tax shall be imposed under this section upon any payment renot more than 100 pounds, and lenses for such cameras, sold by the manu- ceived for electrical energy furnished to the United States or to any State facturer, producer, or importer, a tax equivalent to 10 per centum of the or Territory, or political subdivision thereof, or the District of Columbia. price for which so sold. The right to exemption under this subsection shall "be evidenced in such manner as the Commissioner with the approval of the Secretary may Sec. 612. Tax on Matches. by regulation prescribe. There is hereby imposed upon matches, sold by the manufacturer, proSec. 617. Tax on Gasoline. ducer, or importer, a tax of 2 cents per 1,000 matches, except that in the case of paper matches in books the tax shall be 34 of 1 cent per (a) There is hereby imposed on gasoline sold by the importer thereof or 1,000 matches. by a producer of gasoline, a tax of 1 cent a gallon, except that under regulations prescribed by the Commissioner with the approval of the Secretary Sec. 613. Tax on Candy. the tax shall nat apply in the case of sales to a producer of gasoline. There is hereby imposed upon candy,sold by the manufacturer, producer, (b) If a producer or importer uses (otherwise than in the production of or importer, a tax equivalent to 2 per centum of the price for which so sold. gasoline) gasoline sold to him free of tax, or produced or imported by him. such use shall for the purposes of this title be considered a sale. Sec 614. Tax on Chewing Gum. (c) As used in this section— There is hereby imposed upon chewing gum or substitutes therefor, sold (1) The term "producer" includes a refiner, compounder, cr blender. by the manufacturer, producer, or importer, a tax equivalent to 2 Per and a dealer selling gasoline exclusively to producers of gasoline, as well centum of the price for which so sold. as a producer. Sec. 615. Tax on Soft Drinks. (2) The term "gasoline" means gasoline, benzol, and any other liquid the chief use of which is as a fuel for the propulsion of motor vehicles, motor (a) There is hereby imposed— boats, or aeroplanes. Upon (1) all beverages derived wholly or in part from cereals or substitutes therefor, containing less than one-half of 1 per centum of Sec. 618. Definition of Sale. alcohol by volume, sold by the manufacturer, producer, or importer, a tax of For the purposes of this title, the lease of an article shall be considered 1X cents per gallon. (2) Upon unfermented grape Juice, in natural or concentrated form the sale of such article. (whether or not sugar has been added), containing 35 per centum Sec. 619. Sale Price. or less of sugars by weight, sold by the manufacturer, producer or importer, a (a) In determining, for the purposes of this title, the price for which an tax of 5 cents per gallon. article is sold, there shall be included any charge for coverings and con(3) Upon all unfermented fruit juices (except grape Juice), in natural or tainers of whatever nature, and any charge incident to placing the article slightly concentrated form, or such fruit Juices to which sugar has been in condition packed ready for shipment, but there shall be excluded the added (as distinguished from finished or fountain syrups), intended for amount of tax imposed by this title, whether or not stated as a separate consumption as beverages with the addition of water or water and sugar, charge. A transportation, delivery, insurance, installation, or other and upon all imitations of any such fruit juices, and upon all carbonated charge (not required by the foregoing sentence to be included) shall be exbeverages, commonly known as soft drinks (except those described in cluded from the price only if the amount thereof Is established to the satisparagraph (I)), manufactured, compounded or mixed by the use of concen- faction of the Commissioner, In accordance with the regulations. trate, essence, or extract, instead of a finished or fountain syrup, sold by (b) If an article is— the manufacturer, producer, or importer, a tax of 2 cents per gallon. (1) Sold at retail; (4) Upon all still drinks (except grape juice), containing less than one(2) Sold on consignment; or half of 1 per centum of alcohol by volume, intended for consumption as (3) Sold (otherwise than through an arm's-length transaction) at less beverages in the form in which sold (except natural or artificial mineral than the fair market price; the tax under this title shall (if based on the and table waters and imitations thereof, and pure apple cider) sold by price for which the article is sold) be computed oa the price for which such the manufacturer, producer, or importer, a tax of two cents per gallon. articles are sold, in the ordinary course of trade, by manufacturers or pro(5) Upon all natural or artificial mineral waters or table waters, whether ducers thereof, as determined by the Commissioner. carbonated or not, and all imitations thereof, sold by the producer, bottler, (c) In the case of (1) a lease, (2) a contract for the sale of an article or importer thereof, in bottles or other closed containers, at over 12A wherein It is provided that the price shall be paid by instalhnents and title cents per gallon, a tax of two cents per gallon. to the article sold does not pass until a future date notwithstanding partial (6) Upon all finished or fountain syrups of the kinds used in manufactur- payment by installments, (3) conditional sale, there shall be paid upon a or ing, compounding, or mixing drinks commonly known as soft drinks, sold each payment with respect to the article that portion of the total tax which by the manufacturer, producer, or importer, a tax of six cents per gallon; is proportionate to the portion of the total tmount to be paid repressoted except that in the case of any such syrups intended to be used in the manu- by such payment. facture of carbonated beverages sold in bottles or other closed containers the rate shall be five cents per gallon. Where any person conducting a Sec. 620. Sale of Articles for Further Manufacture. 'soda fountain, ice cream parlor, or other similar place of business manuUnder regulations prescribed by the Commissianer with the approval of factures any syrups of the kinds described in this paragraph, there shall the Secretary, no tax under this title shall be imposed upon any article be levied, assessed, collected, and paid on each gallon manufactured and (other than a tire or inner tube, or an article taxable under section 604 used in the preparation of soft drinks a tax of six cents per gallon; and where relating to the tax on furs) sold for use as material in the manufacture or any person manufacturing carbonated beverages manufactures and uses production of, or for use as a component part of an article to be menu- THE REVENUE ACT OF 1932 factured or produced by the vendee which will be taxable under this title or sold free of tax by virtue of this section. If the vendee resells an article sold to him free of tax under this section, then for the purposes of this title he shall De considered the manufacturer or producer of such article. Sec. 621. Credits and Refunds. (a) A credit against tax under this title,.or a refund, may be allowed or made— (1) To a manufacturer or producer, in the amount of any tax under this title which has been paid with respect to the sale of any article (other than a tire or inner tube) purchased by him and used by him as material in the manufacture or production of, or as a component part of, an article with respect to which tax under this title has been paid, or which has been sold free of tax by virtue of section 620. relating to sales of articles for further manufacture. (2) To any person who has paid tax under this title with respect to an article, when the price on which the tax was based is readjusted by reason of return or repossession of the article or a covering or container, or by a bona fide discount, rebate or allowance; in the amount of that part of the tax proportionate to the part of the price which is refunded or credited. (b) Credit or refund under subsection (a) shall be allowed or made only upon compliance with regulations prescribed by the Commissioner with the approval of the Secretary. (c) In no case shall interest be allowed with respect to any amount of tax under this title credited or refunded. (d) No overpayment of tax under this title shall be credited or refunded (otherwise than under subsection (a) ), in pursuance of a court decision or otherwise, unless the person who paid the tax establishes, in accordance with regulations prescribed by the Commissioner with the approval of the Secretary, (1) That he has not included the tax in the price of the article with respect to which it was imposed, or collected the amount of tax from the vendee, or (2) that he has repaid the amount of the tax to the ultimate Purchaser of the article, or unless he files with the Commissioner written consent of such ultimate purchaser to the allowance of the credit or refund. Sec. 622. Use by Manufacturer, Producer or Importer. If— (1) Any person manufactures, produces, or imports an article (other than a tire or inner tube) and uses it (otherwise, than as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by him which will be taxable under this title or sold free of tax by virtue of section 620, relating to sale of articles for further manufacture): or (2) Any person manufactures, produces, or imports a tire or inner tube and sells it on or in connection with, or with the sale of, an article taxable under section 606 (a) or (b), relating to the tax on automobiles, or uses it: he shall be liable for tax under this title in the same manner as if such article was gold by him, and the tax (if based on the price for which the article is sold) shall be computed on the price at which such or similar articles are sold, in the ordinary course of trade, by manufacturers, producers, or importers thereof, as determined by the Commissioner. 25 or importer. The Secretary shall prescribe and publish all needful rules and regul dims for the enforcement of this title in so far as it relates to the taxes which under the provisions cf section 601 (b) are to be levied, assessed, collected, and paid in the same manner as duties imposed by the Tariff Act of 1930. Sec. 629. Effective Date. This title shall take eftect on the 15th day after the date of the enactment of this Act, except that section 628, re,ating to rules and regulations, and this section, shall take effect on the date of the enactment of this Act. No sale or importation after June 30 1934 (or after Jul, 311934, in the case or articles taxable under section 606. relating to the tax on automobiles, &c., or section 602, relating to the tax on tires and inner tubes, or after June 30 1933, in the case of articles taxable under section 617. relating t,the tax on gasoline), shall be taxaole under this title. TITLE V.—MISCELLANEOUS TAXES. PART I.—TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. Sec. 701. Imposition. (a) On and after the 15th day after the date of the enactment of this Act, there shall be imposed— (1) In the case of each telegraph telephone, cable, or radio dispatch, message, or conversation, which originates on or after such date and before July 1 1934, within the United States, a tax at the following rates: (A) Telephone conversations for which the charge is 50 cents or more and lees than $1, 10 cents; for which the charge is $1 or more and less than $2, 15 cents; for which the charge is $2 or more. 20 cents; (B) Telegraph dispatches and messages, 5 per centum of the amount charged therefor; and (C) Cable and radio dispatches and messages, 10 cents; but only one payment of such tax shall be required, notwithstanding the lines or stations of one or more persons are used for the transmission of such dispatch, message, or conversation; and (2) A tax equivalent to 5 per centum of the amount paid on or after the 15th day after the date of the enactment of this Act to any telegraph or telephone company for any leased wire or talking circuit special service furnished on or after such date and before July 1 1934. This paragraph shall not apply to the amount paid for so much of such service as is utilized in the conduct, by a common carrier or telephone or telegraph company or radio broadcasting station or net work of its business as such. (b) No tax shall be imposed under this section upon any payment received for services or facilities furnished to the United States or to any State or Territory, or political subdivision thereof, or the District of Columbia, nor upon any payment received from any person for services or facilities utilized in the collection of news for the public press or in the dissemination of news through the public press, if the charge for such services or facilities is billed n writing to such person. The right to exemption under this subsection shall be evidenced in such manner as the Commissioner with the approval of the Secretary may by regulation prescribe. Sec. 623. Sales by Others than Manufacturer, Producer, or Importer. In case any person acquires from the manufacturer, producer, or imSec. 702. Returns and Payment of Tax. porter of an article, by operation of law or as a result of any transaction not taxable under this title, the right to sell such article, the sale of (a) The taxes imposed by section 701 shall be paid by the person paying such article by such person shall be taxable under this title as if made by the for the services or facilities. manufacturer, producer, or importer, and such person shall be liable (b) Each person receiving any payments specified in section 701 shall for the tax. collect the amount of the tax imposed by such section from the person making such payments, and shall on or before the last day of each month make a Sec. 624. Exemption of Articles Manufactured or Produced by return, under oath, for the preceding month, and pay the taxes so collected, to the collector of the district in which his principal place of business is Indians. located, or if he has no principal place of business in the United States, to No tax shall be impoiied under this title on any article of native Indian the collector at Baltimore. Maryland. Such returns shall contain such inhandicraft manufactured or produced by Indians on Indian reservations, formation and be made in such manner as the Commissioner with the or in Indian schools, or by Indians under the jurisdiction of the United approval of the Secretary may by regulation prescribe. The Commissioner States Government in Alaska. may extend the time for making returns and paying the taxes collected. under such rules and regulations as he shall prescribe with the approval of Sec. 625. Contracts Prior to May 1 1932. the Secretary, but not such extension shall be for more than 90 days. (a) If (1) any person has, prior to May 1 1932, made a bona fide contract for the sale, after the tax takes effect, of any article in respect of the sale PART II—ADMISSIONS TAX. of which a tax is imposed under this title, or in respect cf which a tax is imposed under this subsection, and (2) such contract does not permit the Sec. 711. Admissions Tax. adding to the amount to be paid under such contract, of the whole -if such (a) Paragraph (1) of section 500 (a) of the Revenue Act of 1926. fig tax, then (unless the contract prohibits such addition) the vendee shall. in lieu of the vendor, pay so much of the tax as is not so permitted to be amended, is amended to read as follows: (1) A tax of one cent for each ten cents or fraction thereof of the amount added to the contract price. If a contract of the character above described VMS made with the United States or with any person other than a dealer, paid for admission to any place, including admission by season ticket or subscription, to be paid by the person paying for such admission; except no tax shall be collected under this title. that in case the amount paid for admission is less than 41 cents, no tax shall (b) The taxes payable by the vendee shall be paid to the vendor at the be imposed. In the case of persons (except bona fide employees, municipal time the sale is consummated, and shall be collected, returned, and paid officers on official business, and children under 12 years of age) admitted to the United States by such vendor in the same manner as provided in free or at reduced rates to any place at a time when and under circumstances section 702. In case of failure or refusal by the vendee to pay such taxes under which an admission charge is made to other persons, an equivalent to the vendor, the vendor shall report the facts to the Commissioner, who tax shall be collected based on the price so charged to such other persons for shall cause collection of such taxes to be made from the vendee. the same similar accommodations, to be paid by the person so admitted. Amounts paid for admission by season ticket or subscription shall be exempt Sec. 6213. Return and Payment of Manufacturers' Taxes. only If the amount which would he charged to the holder or subscribed for (a) Every person liable for any tax imposed by this title other than a single admission is less than 41 cents;" taxes on importation (except tax under section 615, relating to tax on (b) Paragraph (2) of section 500 (a) of the Revenue Act of 1926, soft as drinks) shall make monthly returns under oath in duplicate and pay the amended, is amended to read as follows: taxes imposed by this title to the collector for the district in which is located -(2) Upon tickets or cards of admission to theaters, operas, and other his principal place of business or, if he has no principal place of business in places of amusement, sold at news stands, hotels, and places other than the the United States, then to the collector at Baltimore, Maryland. Such ticket offices of such theaters, operas, or other places of amusement, at a returns shall contain such information and be made at such times and in price in excess of the sum of the established price therefor at such ticket such manner as the Commissioner with the approval of the Secretary , may offices plus the amount of any tax imposed under paragraph (1). a tax by regulations prescribe. equivalent to ten per centum of the amount of such excess; such tax to be (0) The tax shall, without assessment by the Commissioner or trate° returned and paid, in the manner and subject to the interest provided in from the collector, be due and payable to the collector at the time so fixed section 502, by the person selling such tickets:" for filing the return. If the tax is not paid when due, there (c) Section 500 of the Revenue Act of 1926. as amended, is amended by shall be added as part of the tax interest at the rate of 1 per centum a month from the time adding at the end thereof the following subdivision: when the tax became due until paid. " (e) The exemption from tax provided by subdivision (b) (1) (A) shall not be allowed in the case of admissions to wrestling matches, prize fights, Sec. 627. Applicability of Administrative Provisions. or boxing, sparring, or other pugilistic matches or exhibitions. The exemption from tax provided by subdivision (b)(1) shall not be allowed in the case All provisions oflaw (including penalties) applicable in respect ot the taxes of admissions to any athletic game or exhibition the proceeds of which Inure imposed by section 600 of the Revenue Act of 1026, shall, in so far as applic- wholly or partly to the benefit of any college or university (including any able and not inconsistent with this Act, be applicable in respect of the taxes academy of the military or naval forces of the United States." imposed by this title. (d) Subsections (a) and (c) shall take effect on the fifteenth day after the date of the enactment of this Act. Sec. 628. Rules and Regulations. (e) Effective July 11934. section 500 (a) (I) of the Revenue Act of 1926. The Commissioner, with the approval of the Secretary shall prescribe and as amended by subsection (a) of this section, is amended by striking out publish all needful rules and regulations for the enforcement of this title in "less than 41 cents" wherever appearing in such paragraph, and inserting so far as it relates t y the taxes an articles sold by the manufacturer, producer, in lieu thereof "$3 or less." THE REVENUE ACT OF 1932 26 PART III—STAMP TAXES. . Sec. 721. Stamp Tax on Issues of Bonds, 4k. (a) Subdivision 1 of Schedule A of Title VIII of the Revenue Act of 1926 Is amended by striking out -5 cents" and inserting in lieu thereof "10 cents," and by inserting at the end thereof a new sentence to read as follows: "The tax under this subdivision shall not apply to any instrument under the terms of which the obligee is required to make payment therefor in Installments and is not permitted to make in any year a payment of more than 20 per centum of the cash amount to which entitled upon maturity of the instrument." (b) Subsection (a) shall take effect on the 15th day after the date of the enactment of this Act. (c) Effective July 1 1934, such subdivision 1, as amended by subsection (a) of this section, is amended by striking out "10 cents" and inserting in lieu thereof45 cents." Sec.c722. Stamp Tax on Issues of Stock, &c. (a) Subdivision 2 of Schedule A of Title VIII of the Revenue Act of 1926 is amended to read as follows: -Capital stock (and similar interests), issue: On each original issue, whether on organization or reorganization, of shares or certificates of stock, or of profits, or of interest in property or accumulations, by any corporation, or by any investment trust or similar organization (or by any person on behalf of such investment trust or similar organization) holding or dealing in any of the instruments mentioned or described in this subdivision or subdivision 1 (whether or not such investment trust or similar organization constitutes a corporation within the meaning of this Act), on each $100 of par or face value or fraction thereof of the certificates issued by such corporation or by such investment trust or similar organization (or of the shares where no certificates were issued), 10 cents: Provided, That where such shares or certificates are issued without par or face value, the tax shall be 10 cents per share (corporate share, or investment trust or other organization share, as the case may be), unless the actual value is in excess of $100 per share, in which case the tax shall be 10 cents on each $100 of actual value or fraction thereof of such certificates (or of the shares where no certificates were issued), or unless the actual value is less than $100 per share, in which case the tax shall be 2 cents on each $20 of actual value, or fraction thereof, of such certificates (or of the shares where no certificates were issued). "The stamps representing the tax imposed by this subdivision shall be attached to the stock books or corresponding records of the organization and not to the certificates issued." (b) Subsection (a) shall take effect on the 15th day after the date of the enactment of this Act. (c) Effective July 11934. such subdivision 2, as amended by subsection (a) of this section, is amended by striking out "10 cents" wherever ap<pearing in such subdivision and inserting in lieu thereof "5 cents." and by striking out "2 cents" and inserting in lieu thereof "1 cent." Sec. 724 Stamp Tax on Transfer of Bonds, Etc. (a) Schedule A of Title VIII of the Revenue Act of 1926 is amended by adding at the end thereof a new subdivision to read as follows: "9. Bonds, etc., sales or transfers: On all sales, or agreements to sell, or memoranda of sales or deliveries of, or transfers of legal title to any of the Instruments mentioned or described in subdivision 1 and of a kind the issue of which is taxable thereunder, whether made by any assignment in blank or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale (whether entitling the holder in any manner to the benefit ofsuch instrument or not), on each $100 of face value or fraction thereof, four cents: Provided, That it is not intended by this title to impose a tax upon an agreement evidencing a deposit of instruments as collateral security for money loaned thereon, which instruments are not actually sold, nor upon the delivery or transfer for such purpose of instruments so deposited: Provided further, That the tax shall not be imposed on deliveries or transfers of bonds in connection with a reorganization (as defined in section 112 of the Revenue Act of 1932) if any of the gain or loss from the exchange or distribution involved in the delivery or transfer is not recognized under the income tax law applicable to the year in which the delivery or transfer is made: 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 setting forth the facts: Provided further, That the tax shall not be imposed upon deliveries or transfers from a fiduciary to a nominee of such fiduciary, or from one nominee of such fiduciary to another, if such instruments continue to be held by such nominee for the same purpose for which they would be held if retained by such fiduciary, or from the nominee to such fiduciary but such deliveries or transfers shall be accompanied by a certificate setting forth the facts: Provided further, That where the change of ownership is by transfer of the instrument the stamp shall be placed upon the instrument: and in cases of an agreement to sell or where the transfer is by delivery of the Instrument assigned In blank there shall be made and delivered by the seller to the buyer a bill or memorandum ofsuch sale, to which the stamp shall be affixed; and every bill or memorandum of sale or agreement to sell before mentioned shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers. Any person liable to pay 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 such Instrument, or bill or memorandum thereof, as herein required, without having the proper stamps affixed thereto, with intent to evade the aforegoing 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." (b) Subsection (a) shall take effect on the fifteenth day after the date of the enactment of this act. (c) Subdivision 9 of Schedule A of Title VIII of the Revenue Act of 1926. added to such schedule by subsection (a) of this section, is repealed effective July 11934. Sec 725. Stamp Tax on Conveyances. Schedule A of Title VIII of the Revenue Act of 1926 is amended by adding at the end thereof a new subdivision to read as follows: "8. Conveyances: Deed, instrument, or writing, delivered on or after (a) Subdivision 3 of Schedule A of Title VIII of the Revenue Act of the 15th day after the date of the enactment of the Revenue Act of 1932 and 1926 is amended to read as follows: before July 1 1934 (unless deposited in escrow before April 1 1932), whereby "3. Capital stock (and similar interests), sales or transfers: On all sales, any lands, tenements, or other realty sold shall be granted, assigned, transor agreements to sell, or memoranda of sales or deliveries of, or transfers ferred, or otherwise conveyed to, or vested in, the purchaser or purchasers. of legal title to any of the shares or certificates mentioned or described in or any other person or persons, by his, her, or their direction, when the consubdivision 2, or to rights to subscribe for or to receive such shares or sideration or value of the interest or property conveyed, exclusive of the certificates, whether made upon or shown by the books of the corporation value of any lien or encumbrance remaining thereon at the time of sale, exor other organization, or by any assignment in blank, or by any delivery, ceeds $100 and does not exceed $500, 50 cents; and for each additional $500 or by any paper or agreement or memorandum or other evidence of transfer or fractional part thereof, 50 cents. This subdivision shall not apply to any or sale (whether entitling the holder in any manner to the benefit of such instrument or writing given to secure a debt." share, certificate, interest, or rights, or not), on each $100 of par or face value or fraction thereof of the certificates of such corporation or other Sec. 726. Stamp Tax on Sales of Produce for Future Delivery. organization (or of the shares where no certificates were issued), 4 cents, (a) Subdivision 4 of Schedule A of Title VIII of the Rrvonue Act of and where such shares or certificates are without par or face value, the by striking out "one cent" wherever appearing in such tax shall be 4 cents on the transfer or sale or agreement to sell on each 1926 is amended in lieu thereof "five cents." share (corporate share, or investment trust or other organization share, subdivision, and inserting (b) Subsection (a) shall take effect on the 15th day after the date of as the case may be): Provided, That in case the selling price, if any, Act. Is $20 or more per share the above rate shall be 5 cents instead of 4 cents: the enactment of this (c) Effective July 11934, such subdivision 4, as amended by subsection Provided further, That it is not intended by this title to impose a tax amended by striking out "five cents" wherever appearupon an agreement evidencing a deposit of certificates as collateral se- (a) of this section, is inserting in leiu thereof "one cent." curity for money loaned thereon, which certificates a"e not actually sold, ing in such subdivision and nor upon the delivery or transfer for such purpose of certificates so deOF OIL BY PIPE LINE. TRANSPORTATION posited nor upon the return of stock loaned: Provided further, That the PART 1V.—TAX ON tax shall not be imposed upon deliveries or transfers to a broker for sale, Oil by Pipe Line. of Transportation on Tax Sec. 731. nor upon deliveries or transfers by a broker to a customer for whom and (a) There is hereby imposed upon all transportation of crude petroleum upon whose order he has purchased same, but such deliveries or transfers shall be accompanied by a certificate setting forth the facts: Provided and liquid products thereof by pipe line originating on or after the 15th further, That the tax shall not be imposed upon deliveries or transfe-s day after the date of the enactment of this Act and before July 1 1934— (1) A tax equivalent to four per centum of the amount paid on or after from a fiduciary to a nominee of such fiduciary, or from one nominee of such fiduciary to another, if such shares or certificates continue to be held the 15th day after the date of the enactment of this Act for such transportaby such nominee for the same purpose for which they would be held if tion, to be paid by the person furnishing such transportation. (3) In case no charge for transportation is made, either by reason of retained by such fiduciary, or from the nominee to such fiduciary, but such transported or for any other reason, a tax deliveries or transfers shall be accompanied by a certificate setting forth ownership of the commodity transportation, the facts: Provided further, That in case of sale where the evidence of equivalent to four per centum of the fair charge for such transfer is shown only by the books of the corporation or other organiza- to be paid by the person furnishing such transportation. the paytransaction) length arm's an of (3) If (other than in the case tion the stamp shall be placed upon such books; and where the change of ownership is by transfer of the certificate the stamp shall be placed upon ment for transportation is less than the fair charge therefor, a tax equivalent person furnishing the certificate; and in cases of an agreement to sell or where the transfer to four per centum of such fair charge, to be paid by the Is by delivery of the certificate assigned in blank there shall be made and such transportation. for charge fair transportation of the purposes section, this (b) For the 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 memorandum of sale shall be computed— (1) From actual bona fide rates or tariffs, or or agreement to sell before mentioned shall show the date thereof, the (2) If no such rates or tariffs exist, then on the basis of the actual bona name of the seller, the amount of the sale, and the matter or thing to which determined by itjrefers. Any person liable to pay the tax as herein provided, or anyone fide rate or tariffs of other pipe lines for like services, as who acts in the matter as agent or broker for such person, who makes any the Commissioner, or (3) If no such rates or tariffs exist, then on the basis of a reasonable such sale, or who in pursuance of any such sale delivers any certificate or Commissioner. evidence of the sale of any stock, share, interst or right, or bill or memo- charge for such transportation, as determined by the (c) Every person liable for the tax imposed under subsection (a) shall randum thereof, as herein required without having the proper stamps such taxes to the pay and duplicate in oath under returns affixed thereto, with intent to evade the foregoing provisions, shall be make monthly principal place of business deemed guilty of a misdemeanor, and upon conviction thereof shall pay a collector for the district in which is located his United States, then to fine not exceeding $1,000, or be imprisoned not more than six months, or, if he has no principal place of business in the the collectors at Baltimore, Maryland. Such returns shall contain such or both. manner as the Comsuch in and times such (b) Subscription (a) shall take effect on the fifteenth day after the date of Information and be made at missioner, with the approval of the Secretary, may by regulations prescribe. the enactment of this act. (c) Effective July 1 1934, such subdivision 3, as amended by subsection PART V.—TAX ON LEASES OF SAFEIDEPOSIT BOXES. (a) of this section, is amended by striking out "four cents" wherever appearing in such subdivision and inserting in lieu thereof "two cents," and by f Safe Deposit Boxes. Sec. 741. Tax on Le striking out the following: "In case the selling price, if any, is $20 or more (a) There is hereby imposed a tax equivalent to 10 per centum of the Per share the above rate shall be five cents instead of four cents: Provided amount collected on or after the 15th day after the date of the enactment further, That—" Sec. 723. Stamp Tax on Transfer of Stocks, &c. THE REVENUE ACT OF 1932 of this Act for the use after such date of any safe deposit box, such tax to be paid by the person paying for the use of the safe deposit box. (b) For the purpose of this section any vault,safe, box, or other receptacle of not more than 40 cubic feet capacity, used for the safekeeping or storage of jewelry, plate, money, specie, bullion, stocks, bonds, securities, valuable papers of any kind, or other valuable personal property, shall be regarded as a safe deposit box. (c) Every person making any collections specified in subsection (a) shall collect the amount of tax imposed by such subsection from the person paying for the use of the safe deposit box, and shall on or before the last day of each month make a return, under oath, for the preceding month, and pay the tax imposed by subsection (a), to the collector for the district in which is located his principal place of business, or, if he has no principal place of business in the United States, then to the collector at Baltimore, Maryland. Such returns shall contain such information and be made in such manner as the Commissioner, with the approval of the Secretary, may be regulations prescribe. PART W.—TAX ON CHECKS, &C. Sec. 751. Tax on Checks, &c. 27 TITLE VI.-ESTATE TAX AMENDMENTS. Sec. 801. Credit of Gift Tax on Estate Tax. Section 301 of the Revenue Act of 1926 is amended by inserting after subdivision (a) a new subdivision to read as follows: "(b) (1) If a tax has been paid under Title III of the Revenue Act of 1932 on a gift, and thereafter upon the death of the donor any amount in rsepect of such gift is required to be included in the value of the gross estate of the decedent for the purposes of this title, then there shall be credited against the tax imposed by subdivision (a) of this section the amount of the tax paid under such Title III with respect to so much of the property which constituted the gift as is included in the gross estate, except that the amount of such credit shall not exceed an amount which bears the same ratio to the tax imposed by suvdivision (a) of this section as the value (at the time of the gift or at the time of the death, whichever is lower) of so much of the property which constituted the gift as is included in the gross estate, bears to the value of the entire gross estate. "(2) For the purposes of paragraph (1), the amount of tax paid for any year under Title III of the Revenue Act of 1932 with respect to any property shall be an amount which bears the same ratio to the total tax paid for such year as the value of such property bears to the total amount of net gifts computed without deduction of the specific exemption) for such year." (a) There is hereby imposed a tax of two cents upon each of the following Instruments, presented for payment on or after the 15th day after the date of the enactment of this Act, and before July 1 1934: Checks, drafts, or Sec. 802. 80 Per Centum Credit. orders for the payment of money, drawn upon any bank, banker, or trust (a) Section 301 (b) of the Revenue Act of 1926 is amended to read as company; such tax to be paid by the maker or drawer. (b) Every person paying any of the instruments mentioned in sub- follows: "(c) The tax imposed by subdivision (a) of this section shall be credited section (a) as drawee of such instrument shall collect the amount of the tax imposed under such subsection by charging such amount against any with the amount of any estate, inheritance, legacy, or succession taxes deposits to the credit of the maker or drawer of such instrument, and actually paid to any State or Territory or the District of Columbia, in shall on or before the last day of each month make a return, under oath, respect of any property included in the gross estate (not including any such for the preceding month, and pay such taxes to the collector of the district taxes paid with respect to the estate of a person other than the decedent). In which his principal place of business is located, or if he has no principal The credit allowed by this subdivision shall not exceed 80 per centum of place of business in the United States, to the collector at Baltimore, Mary- the tax imposed by subdivision (a) (after deducting from such tax the land. Such returns shall contain such information and be made in such credits provided by subdivision (b)", and shall include only such taxes manner as the Commissioner, with the approval of the Secretary, may by as were actually paid and credit therefor claimed within four years after regulations prescribe. Every person required to collect any tax under the filing of the return required by section 304. except that— "(I) If a petition for redetermination of a deficiency has been filed this section is hereby indemnified against the claims and demands of any person for the amount of any payments made in accordance with the with the Board of Tax Appeals within the time prescribed in section 308. then within such four-year period or before the expiration of 60 days after provisions of this section. the division of the Board becomes final. "(2) If, under subdivision (b) of section 305 or subdivision (I) of section PART Vit.—TAX ON BOATS. 308, an extension of time has been granted for payment of the tax shown on the return, or of a deficiency, then within such four-year period or Sec. MI. Tax on Use of Boats. before the date of the expiration of the period of the extension. Refund (a) On and after July 11932, and on July 1 1933, and also at the time based on credit may (despite the provisions of section 319) be made if of the original purchase of a new yacht or other boat by a user, if on any claim therefor is filed within the period above provided. Any such refund other date than July 1 and before July 1 1934, there is hereby imposed upon shall be made without interest, except that where the overpayment was the use of yachts, pleasure boats, power boats, sailing boats, and motor made prior to the enactment of the Revenue Act of 1932, then interest boats with fixed or outboard engines, not used exclusively for trade,fishing shall be allowed and paid on the amount refunded at the rate of six per or national defense, a tax at the following rates: centum per annum from the date of the overpayment to the date of such (1) Length over 28 feet and not over 50 feet, $10. enactment." (2) Length over 5.0 feet and not over 100 feet, $40. (b) If any return required by section 304 of the Revenue Act of 1926 (3) Length over 100 feet and not over 150 feet, $100. was filed more than three years before the enactment of this Act (except (4) Length over 150 feet and not over 200 feet, $150. In cases where a petition for redetermination of a deficiency has been (5) Length over 200 feet, $200. filed with the Board of Tax Appeals within the time prescribed in section (b) In the case of any of the foregoing if foreign built and not owned on 308) the credit for estate, inheritance, legacy, or succession taxes shall Jan. 1 1926, by a citizen of the United States or by a domestic partnership be determined as if this section had not been enacted. or corporation, the tax under this section shall be twice the amount of the tax provided in subsection (a). Sec. 803. Future Interests. (c) In determining the length of any of the foregoing, the measurement (a) Section 302 (c) of the Revenue Act of 1926, as amended by the of overall length shall govern. joint resolution of March 3 1931 is amended to read as follows: (d) In the case of a tax imposed at the time of the original purchase of a "(c) To the extent of any interest therein of which the decedent has new yacht or boat on any other date than July 1, the amount to be paid at any time made a transfer, by trust or otherwise, in contemplation of shall be the same number of 12ths of the amount of the tax as the number of or intended to take effect in possession or enjoyment at or after his death, calendar months (including the month of sale) remaining prior to the follow- or of which he has at any time made a transfer, by trust or otherwise, under ing July 1. which he has retained for his life or for any period not ascertainable without (e) This section shall not apply to any yacht or other boat which is used reference to his death or for any period which does not in fact end before, without profit by any benevolent, charitable, or religious organization, his death (1) the possession or enjoyment of, or the right to the income exclusively for furnishing aid, comfort, or relief to seamen. from, the property, or (2) the right, either alone or in conjunction with (f) The taxes imposed by this section shall be collected and paid in such any person, to designate the persons who shall possess or enjoy the property manner as the Commissioner, with the approval of the Secretary, shall by or the income therefrom; except in case of a bona fide sale for an adequate regulations prescribe. and full consideration in money or money's worth. Any transfer of a (g) All provisions of law (including penalties) applicable in respect of the material part of his property in the nature of a final disposition or distaxes imposed by section 702 of the Revenue Act of 1928 shall, in so far as tribution thereof, made by the decedent within two years prior to his applicable and not inconsistent with this Act, be applicable in respect of the death without such consideration, shall, unless shown to the contrary, taxes imposed by this section. be deemed to have been made in contemplation of death within the meaning of this title." PART VIM—ADMINISTRATIVE PROVISIONS. (b) Section 302 (f) of the Revenue Act of 1926 is amended to read as follows: Sec. 771. Payment of Taxes. "(f) To the extent of any property passing under a general power of The taxes imposed by Parts I, IV, V, and VI of this title shall, without appointment exercised by the decedent (I) by will, or (2) by deed executed In contemplation of or intended to take effect in possession or enjoyment assessment by the Commissioner or notice from the collector, be due and payable to the collector at the time fixed for filing the return. If the tax at or after his death, or (3) by deed under which he has retained for his is not paid when due, there shall be added as part of the tax interest at the life or any period not ascertainable without reference to his death or for rate of 1 per centum a month from the time the tax became due until paid. any period which does not in fact end before his death (A) the possession or enjoyment of, or the right to the Income from, the property, or (B) the Sec. 772. Refunds and Credits. right, either alone or in conjunction with any person, to designate the (a) Credit or refund of any overpayment of tax imposed by Part I, persons who shall possess or enjoy the property or the income therefrom: V. or VI of this title may be allowed to the person who collected the tax except in case of a bona fide sale for an adequate and full consideration and paid it to the United States if such person establishes, to the satisfaction in money or money's worth; and" (c) The first sentence of section 315 (b) of the Revenue Act of 1926 is of the Commissioner, under such regulations as the Commissioner with the approval of the Secretary may prescribe, that he has repaid the *amount amended to read as follows: "(b) If (1) except in the case of a bona fide sale for an adequate and ofsuch tax to the person from whom he collected it, or obtained the consent full consideration in money or money's worth, the decedent makes a transof such person to the allowance of scuh credit or refund. fer, by trust or otherwise, of any property in contemplation or of intended (b) Any person entitled to refund of tax under Part I, IV, V. or VI of this title paid, or collected and paid, to the United States by him may take to take effect in possession or enjoyment at or after his death, or makes a transfer, by trust or otherwise, under which he has retained for his life or credit thereforaagainst taxes due upon any monthly return. (c) Any person making a refund of any payment on which tax under for any period not ascertainable without reference to his death or foe any Part I or V has been collected, may repay therewith the amount of tax period which does not in fact end before his death (A) the possession or collected on such payment, and the amount of tax so repaid may be credited enjoyment of, or the right to the income from, the property, or (B) the right, either alone or in conjunction with any person, to designate the against the tax under any subsequent return. persons who shall possess or enjoy the property or the income therefrom, or (2) if insurance passes under a contract executed by the decedent in Sec. 773. Regulations. favor of a specific beneficiary, and if in either case the tax in respect thereto The Commissioner, with the approval of the Secretary, shall prescribe is not paid when due, then the transferee, trustee, or beneficiary shall be and publish all needful rules and regulations for the enforcement of Parts I, personally liable for such tax, and such property, to the extent of the IV, V, and VI of this title. decedent's interest therein at the time of such transfer, or to the extent of such beneficiary's interest under such contract of insurance, shall be Sec. 774. Applicability of Administrative Provisions. subject to a like lien equal to the amount of such tax." All provision of law (inclusing penalties) applicable in respect of the taxes See. 804. Relinquishment of Dower, &c., As Consideration, imposed by section 500 of the Revenue Act of 1926. shall, in so far as applicable and not inconsistent with this Acts be applicable in respect of the taxes Section 303 (d) of the Revenue Act of 1925 is amended by adding at the Imposed by Parts I, IV, V. and VI of this title. end thereof anew sentence to read as follows:"For the purposes of this title, 28 THE REVENUE ACT OF 1932 a relinquishment or promised relinquishment of dower, curtesy, or of a statutory estate.created in lieu of dower or curtesy, or of other marital rights in the decedent's property or estate, shall not be considered to any extent'a consideration, In money or money's worth." Sec. 805. Deductions. Section 303 (a) (1) of the Revenue Act of 1926, as amended, is amended to read as follows: "(1) Such amounts-"(A) for funeral expenses, "(B) for administration expenses, "(C) for claims against the estate, "(D) for unpaid mortgages upon, or any indebtedness in respect to, property where the value of decedent's interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate, and "(E) reasonably required and actually expended for the support during the settlement of the estate of those dependent upon the decedent, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered, but not including any income taxes upon income received after the death of the decedent, or property taxes not accrued before his death, or any estate, succession, legacy, or inheritance taxes. The deduction herein allowed in the case of claims against the estate, unpaid mortgages, or any indebtedness shall, when founded upon a promise or agreement, be limited to the extent that they were contracted bona fide and for an adequate and full consideration in money or money's worth. There shall also be deducted losses incurred during the settlement of estates arising from fires, storms, shipwrecks, or other casualties, or from theft, when such losses are not compensated for by insurance or otherwise, and if at the time of the filing of the return such losses have not been claimed as a deduction for income tax purposes in an income tax return." Sec. 806. Prior Taxed Property. (a) Section 303 (a) (2) of the Revenue Act of 1926 is amended to read as follows: "(2) An amount equal to the value of any property (A)forming a part of the gross estate situated in the United States of any person who died within five years prior to the death of the decedent, or (B) transferred to the decedent by gift within five years prior to his death, where such property can be identified as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise, or inheritance, or which can be Identified as having been acquired in exchange for property so received. This deduction shall be allowed only where a gift tax imposed under the Revenue Act of 1932, or an estate tax imposed under this or any prior Act of Congress, was finally determined and paid by or on behalf of such donor,or the estate ofsuch prior decedent, as the case may be, and only in the amount finally determined as the value of such property in determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the value of such property is included in the decedent's gross estate. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate tax of the prior decedent, which was paid in whole or in part prior to the decendent's death, then the deduction allowable under this paragraph shall be reduced by the amount so paid. The deduction allowable under this paragraph shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under paragraphs (1), (3), and (4) of this subdivision as the amount otherwise deductible under this paragraph bears to the value of the decedent's gross estate. Where the property referred to in this paragraph consists of two or more items the aggregate value of such items shall be used for the purpose of computing the deduction." (b) Section 303 (b) (2) of the Revenue Act of 1926 is amended to read as follows: "(2) An amount equal to the value of any property (A)forming a part of the gross estate situated in the United States of any person who died within five years prior to the death of the decedent, or (B) transferred to the decedent by gift within five years prior to his death, where such property can be identified as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise or inheritance, or which can be identified as having been acquired in exchange for property so received. This deduction shall be allowed only where a gift tax imposed under the Revenue Act of 1932, or an estate tax imposed under this or any prior Act of Congress, was finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be. and only in the amount finally determined as the value of such property in determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the value of such property is included in that part of the decedent's gross estate which at the time of his death is situated In the United States. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate tax of the prior decedent, which was paid in whole or in part prior to the decedent's death, then the deduction allowable under this paragraph shall be reduced by the amount so paid. The deduction allowable under this paragraph shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under paragraphs (1) and (3) of this subdivision as the amount otherwise deductible under this paragraph bears to the value of that part of the decedent's gross estate which at the time of his death is situated in the United States. Where the property referred to in this paragraph consists of two or more items, the aggregate value of such items shall be used for the purpose of computing the deduction." Sec. 807. Deduction of Bequests, Etc., to Charity. Sections 303 (a) (3) and 303 (b) (3) of the Revenue Act of 1926 are amended by inserting after the first sentence of each a new sentence to read as follows: "If tne tax imposed by section 301, or any estate, succession, legacy, or inheritance taxes, are, either by the terms of the will, by the law of jurisdiction under which toe estate is administered, or by the law of the jurisdiction imposing the particular tax, payable in whole or in part out of the bequests, legacies, or devices otherwise deductible under this paragraph, then the amount deductible under this paragraph shall be the amount of such bequests, legacies, or devises reduced by the amount of such taxes." Sec. 808. Extension of Time for Payment. (a) Section 305 (b) of the Revenue Act of 1926 is amended to read as follows: "(b) Where the Commissioner finds that the payment on the due date of any part of toe amount determined by the executor as the tax would impose undue hardship upon the estate, the Commissioner may extend the time for payment of any such part not to exceed eight years from toe due date. In such case the amount in respect of whicn toe extension is granted snail be paid on or before the date of the expiration of the period of the extension, and the running of the statute of limitations for assessment and collection, as provided in sections 310 (a) and 311 (b),shall be suspended for the period of any such extension. If an extension is granted, the Commissioner may require toe executor to furnish a bond in such amount, not exceeding double the amount in respect of which the extension is granted, and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the amount in respect of which toe extension is granted in accordance witn toe terms of the extension." . (b) Section 308 (1) of the Revenue Act of 1926 is amended to read as follows: "(I) Where it is shown to the satisfaction of the Commissioner that the payment of a deficiency upon the date prescribed for toe payment thereof will result in undue hardship to the estate, the Commissioner, witn toe approval of toe Secretary (except where the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax), may grant an extension for the payment of such deficiency or any part thereof for a period not in. excess of four years. If an extension is granted, the Commissioner may require the executor to furnish a bond in such amount, not exceeding double the amount of the deficiency, and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the deficiency in accordance with the terms of the extension. In such case the running of tne statue of limitations for assessment and collection, as provided in sections 310(a) and 311(b),shall be suspended for the period of any such extension, and there shall be collected, as a part of the tax, interest on the part of the deficiency the time for payment of which is so extended, at the rate of six per centum per annum for the period of the extension, and no other interest shall be collected on such part of the deficiency for such period. If the part of the deficiency the time for payment of which is so extended is not paid in accordance with the terms of the extension, there shall be collected, as apart of the tax,interest on such unpaid amount at the rate of one per centum a month for the period from the time fixed by the terms of the extension for its payment until it is paid, and no other interest shall be collected on such unpaid amount for such period." Sec. 809. Lien for Taxes. (a) Section 315 (a) of the Revenue Act of 1926, as amended, is amended by adding at the end thereof a new sentence to read as follows: "If the Commissioner is satisfied that the tax liability of an estate has been fully discharged or provided for, he may, under regulations prescribed by him with the approval of the Secretary, issue his certificate releasing any or all property of such estate from the lien herein imposed." (b) Section 613(b) of the Revenue Act of 1928 (relating to liens for estat e taxes) is repealed. See. 810. Refunds. (a) Section 319 (b) of the Revenue Act of 1926 is amended to read as follows: "(b) All claims for the refunding of the tax imposed by this title alleged to have been erroneously or illegally assessed or collected must be presented to the Commissioner within three years next after the payment of such tax. The amount of the refund shall not exceed the portion of toe tax paid during the three years immediately preceding the filing of the claim, or if no claim was filed, tnen during the three years immediately preceding the allowance of the refund." (b) The last sentence of section 319 (c) of the Revenue Act of 1926 is amended to read as follows: "No such refund shall be made of any portion of the tax paid more than four years (or, in toe case of a tax imposed by this title, more tnan three years) before the filing of the claim or the filing of the petition, whichever is earlier." (c) Title III of toe Revenue Act of 1924 is amended by inserting after section 318 a new section to read as follows: "Sec. 318;i. The amount of any refund of the tax imposed by Part I of this title shall not exceed the portion of the tax paid during the four years immediately preceding the filing of the claim, or if no claim was filed, then during the four years immediately preceding the allowance of the refund." (d) Section 319 (b) of toe Revenue Act of 1926, as amended by this Act, and section 318% of the Revenue Act of 1924, as added by this Act, shall not bar from allowance a claim for refund filed prior to the enactment of this Act which but for such enactment would have been allowable. Sec. 811. Future Interests—Extension of Time for Payment of Tax. (a) Section 305 of the Revenue Act of 1926 is amended by adding at the end thereof a new subdivision to read as follows: (e) Where there is included in the value of the gross estate the value of a reversionary or remainder Interest in property, the payment of the part of the tax imposed by this title attributable to such interest may, at the election of the executor, be postponed until six months after the termination of the precedent interest or interests in the property, and the amount the payment of which is so postponed shall then be payable, together with interest thereon at the rate of four per centum per annum from 18 months after the date of the decedent's death until such amount is paid. The postponement of payment of such amount shall be under such regulations as the Commissioner with the approval of the Secretary may prescribe, and shall be upon condition that the executor, or any other person liable for the tax, shall furnish a bond In such an amount, and with such sureties, as the Commissioner deems necessary, conditioned upcin the payment within six months after the termination of such precedent Interest or interests of the amount the payment of which is so postponed, together with interest thereon, as above provided. Such part of any estate, Inheritance, legacy, or succession taxes allowable as a credit against the tax imposed by this title as is attributable to such reversionary or remainder interest may be allowed as a credit against the tax attributable to such interest, subject to the percentage limitation contained in section 301 (c). If such part is paid, and credit therefor claimed, at any time prior to the expiration of 60 days after the termination of the precedent interest or interests in the property." (b) The amendment to section 305 of the Revenue Apt of 1926 made by subsection (a) of this section. shall not apply. In the case of estates of decedents dying prior to the date of the enactment of this act, to that part of any payment of Federal estate taxes made prior to such date which Is attributable to a reversionary or remainder interest in property. TITLE VII.-TAX ON TRANSFERS TO AVOID • INCOME TAX. Sec. 901. Imposition of Tax. There shAll oe imposed upon the transfer of stock ar securities by a citizen or resident of the United States, or by a domestic corporation or partnership, or by a trust which is not a foreign trust, to a foreign corporation as paid-in surplus or as s contribution to capital, or to a foreign trust, or to a foreign partnership, an excise tax equal to 25 per centum of the excess of (1) the value of the stock or securities so transferred over (2) THE REVENUE Its adjusted basis in the hands of the transferor as determined under section 113 of this Act. Sec. 902. Nontaxable Transfers. The tax imposed by section 901 shall not apply— (a) if the transferee is an organization exempt from income tax under section 103 of this Act; or (o) if prior to the transfer it has been established to the satisfaction of the Commissioner thtt such transfer is not in pursuance of a plar., having as one of its principal purposes the avoidance of Federal income taxes. Sec. 903. Definition of "Foreign Trust". A trust shall be considered a foreign trust within the meaning of this title if, assuming a subsequent sale by the trustee, outside the United States and fcr cash, or the property so transferred, the profit, if any, from such sale would not be included in the gross income of the trust under Title I of this Act. Sec. 904. Payment and Collection. (a) The tax imposed by section 901 shall, without assessment or notice and demand, be due and payable by the transteror at the time of the transfer, and shall oe assessed, collected, and paid under regulations prescribed by the Commissioner with the approval of the Secretary. (b) Under regulations prescribed by the Commissioner with tne approval of the Secretary the tax may be abated, remitted, or refunded if after the transfer it has been established to the satisfaction of the Commissioner that such transfer was not in pursuance ot a plan having as one of its principal purposes the avoidance of Federal income taxes. (c) All administrative, special, or stamp provisions of law, including penalties and including the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this title. AcT OF 1932 29 Sec. 1104. Date of Allowance of Refund or Credit. Where the Commissioner has (before or after the enactment of this Act) signed a schedule of overassessments in respect of any internal revenue tax imposed by this act or any prior revenue act, the date on which he first signed such schedule (if after May 28 1928) shall be considered as the date of allowance of refund or credit in respect of such tax. Sec. 1105. Jeopardy Assessment. (a) If tne Commissioner finds that a person liable for tax (other tnan income tax) under any provision of the internal-revenue laws designs quickly to depart from the United States or to remove nis property therefrom or to conceal himself or his property therein, or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect such tax unless such proceedings be brought without delay, the Commissioner shall cause notice of sucn finding to be given such Person, together with a demand for an immediate return and immediate payment of such tax, and such tax shall thereupon become immediately due and payable. (b) If such person (1) is not in default in making any return or paying any tax under the internal-revenue laws, and (2) furnishes to tne United States, under regulations to be prescribed by tne Commissioner with the approval of the Secretary, security approved by the Commissioner that he will duly return and pay the tax to which the Commissioner's finding relates, tnen such tax shall not be payable prior to tne time otherwise fixed for payment. Sec. 1106. Refunds of Miscellaneous Taxes. (a) Subsection (a) of section 3228 of the Revised Statutes, as amended, is amended by adding at the end thereof the following: "The amount of tne refund (in tne case of taxes other than income, war-profits, excess-profits, estate, and gift taxes) shall not exceed the portion of the tax, penalty, or sum paid during the four years immediately -preceding the filing of the claim, or if no claim was filed, then during TITLE VIII.-POSTAL RATES. the four years immediately preceding the allowance of the refund." (b) The amendment made by subsection (a) of tills section to section Sec. 1001. Postal Rates. 3228 of tne Revised Statutes shall not bar from allowance a claim for which but for such enact(a) On and atter the 30th day after the date of the enactment of this act refund filed prior to the enactment of this Act and until July 1 1934,the rate of postage on an mail matter of the first class ment would have been allowable. (except postal cards and private mailing or post cards, and except other first Sec. 1107. Adjustments of Carriers Tax Liabilities to Conform to class matter on which the rate of postage under existing law is 1 cent for Recapture Payments. each ounce or fraction thereof) shall be 1 cent for each ounce or fraction The Inter-State Commerce Commission shall, as soon as practicable thereof in addition to the rate provided by existing law. (b) On and after July 1 1932, and until July 1 1934, on the advertising after its order with respect to the amount recoverable from any carrier portion of any publication entered as second-class matter subject to the under the provisions of section 15a of tne Inter-State Commerce Act, as zone rates of postage under existing law the rates per pound or fraction amended, for any year or portion thereof has become final, and such thereof for delivery within the eight postal zones established for fourth-class amount, if any, has been paid, certify to the Commissioner of Internal Revenue the amount so paid. If tne amount so paid by such carrier matter shall be as follows: differs from the amount allowed as so recoverable in computing the inFor the first and second zones, 2 cents. come or excess profits tax liabilities for any taxable period of such carrier, For the third zone.3 cents. or of any corporation whose income or excess profits tax liability is afFor the fourth zone, 5 cents. the Commissioner of Internal Revenue shall determine any defected, 6 zone, fifth For the cents. ficiency or overpayment attributable to such difference. Notwitastanding For the sixth zone, 7 cents. any otner provision of law (1) any such deficiency may be assessed within For the seventh zone, 9 cents. For the eighth Tons, and between the Philippine Islands and any portion two years from the date of such certification, and. If so assessed, shall be paid upon notice and demand from the collector, and (2) any such overseveral of the United State's, including the District of Columbia, and the payment may be credited or refunded within two years from the date Territories and possessions, 10 cents. (c) Only 85 per centum of the gross postal receipts during the period the of such certification, but not after unless, before the expiration of such increased rate of postage provided in subsection (a) remains in force shall be period, a claim therefor is filed. Tots section shall not be held to affect counted for the purpose of determining the class of the post office or the tne provisions of section 1106 (b) of tne Revenue Act of 1926 or 606 of compensation or allowances of postmasters or of postal employees of post the Revenue Act of 1928. offices of the first, second, and third classes. For the purpose of determinSec. 1108. Limitation on Prosecutions for Internal Revenue Offenses. ing the commissions (as distinguished from the compensation and the allow(a) The Act entitled "An Act to limit tne time within which prosecuances based thereon) of postmasters of the fourth class, only 85 per centum of the applicable cancellations, collections, and receipts during such period tions may be instituted against persons cnarged with violating internal revenue laws," approved July 5 1884. as amended, and as re-enacted by shall be counted. section 1110 of the Revenue Act of 1926, is amended to read as follows: "That no person snail be prosecuted, tried, or punished, for any of the TITLE IX.-ADMINISTRATIVE AND GENERAL various offenses arising under the internal revenue laws of the United PROVISIONS. States unless tne indictment is found or the information instituted within three years next after the commission of the offense, except that the period • Sec. 1101. Review of Decisions of Board of Tax Appeals. of limitation shall be six years(a) Section 1001 (a) of the Revenue Act of 1926 (relating to time for -(.1) For offenses involving the defrauding or attempting to defraud filing petition for review of decisions of the Board of Tax Appeals) is amended the United States or any agency thereof, whetner by conspiracy or not, by striking out "within six months after the decision is rendered" and In- and in any manner. serting in lieu thereof "within three months after the decision is rendered." "(2) For the offense of wilfully attempting in any manner to evade (b) The amendment made by subsection (a) of this section shall not apply or defeat any tax or the payment tnereof, and in respect of decisions of the Board of Tax Appeals rendered on or before the "(3) For tne offense of Wilfully aiding or assisting in, or procuring, counseling, or advising, the preparation or presentation under,'or in condate of the enactment of this act. nection with any matter arising under, the internal-revenue laws, of a Sec. 1102. Board of Tax Appeals—Fees. false or fraudulent return, affidavit, claim, or document (whether or person Section 1004 (b) of the Revenue Act of 1926 is amended to read as follows: not such falsity or fraud is witn the knowledge or consent of the claim, or "(b) The Board is authorized to fix a fee, not in excess of the fee fixed authorized or required to present such return, affidavit, by law to be charged and collected therefor by the clerks of the district document." "For offenses arising under section 37 of the Criminal Code, where the courts, for comparing, or for preparing and comparing, a transzipt of the record. or for copying any record, entry, or other paper and the com- object of the conspiracy is to attempt in any manner to evade or defeat any tax or the payment thereof, the period of limitation shall also be slot parison and certification thereof." years. The time during which the person committing any of the offenses mentioned is absent from the district wherein the same is comabove by Suits on Limitations 1103. Taxpayers. Sec. mitted shall not be taken as any part of the time limited by law for the (a) Section 3226 of the Revised Statutes, as amended, is amended to read commencement of such proceedings. Where a complaint is instituted as follows: before a Commissioner of the United States within the period above limited, "Sec. 3226. No suit or proceeding shall be mainatined in any court for the time shall be extended until the discharge of the grand jury at its next the recovery of any internal-revenue tax alleged to have been erroneously session within the district." or illegally assessed or collected, or of any penalty claimed to have been (b) The amendment made by subsection (a) of this section shall apply collected without authority, or of any sum alleged to have been excessive offenses whenever committed; except that it shall not apply to offenses or in any manner wrongfully collected until a claim for refund or credit has to the prosecution of which was barred before the date of the enactment of been duly filed with the Commissioner of Internal Revenue, according to this Act. the provisions of law in that regard, and the regulations of the Secretary Sec. 1109. Special Disbursing Agents of Treasury. of the Treasury established in pursuance thereof; but such suit or praceeding may be maintained, whether or not such tax, penalty, or sum has been paid The Secretary of the Treasury is authorized to designate agents in charge under protest or duress. No suit such or proceeding shall be begun before of divisions of internal revenue agents to act as special disbursing agents the expiration of six months from the date of filing such claim unless the of the Treasury for the payment of all salaries and expenses ofsuch divisions Commissioner renders a decision thereon within that time, nor after the on giving good and sufficient bond in such form, and with such security expiration of two years from the date of mailing by registered mail by the as the Secretary of the Treasury may approve, notwithstanding section Commissioner to the taxpayer of a notice of the disallowance of the part of 3144. Revised Statutes, as amended. the claim to which such suit or proceeding relates." Sec. 1110. Refund of Taxes for Taxable Year 1918. (b) Suits or proceedings instituted oefore the date of the enactment of this act shall not be affected by the amendment made by subsection (a) of this Section 284 (h) of the Revenue Act of 1926 is amended to read as follows: section to section 3226 of the Revised Statutes. In the case of suits or pro"(h) Except as provided in subdivision (d) this section shall not (1) bar ceedings instituted on or after the date of the enactment of this act where from allowance a claim for credit or refund filed prior to the enactment of the part of the claim to which suit or proceeding relates was disallowed this Act which but for such enactment Would have been allowable,or (2) bar before the date of the enactment of this Act, the statute of limitations from allowance a claim in respect of a tax for the taxable year 1918. 1919. shall be the same as provided by such section 3226 before its amendment or 1920 if such claim is filed before the expiration of five years after the by subsection (a) of this section.. date the return was due." 30 THE REVENUE ACT OF 1932 Sec. 1111. Definitions. (a) When used in this Act— (1) The term "person" means an individual, a trust or estate, a partnership, or a corporation. (2) The term "corporation'. includes associatiors, joint-stock companies, and insurance companies. (3) The term "partnership" includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this Act, a trust or estate or a corporation; and the term "partner"includes a member in such a syndicate, group, pool, joint venture, or organization. (4) The term "domestic" when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any State or Territory. (5) The term "foreign" when applied to a corporation or partnership means a corporation or partnership which is not domestic. (6) The term "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person. (7) The term "withholding agent" means any person required to deduct and withhold any tax under the provisions of section 143 or 144. (8) The term "stock" includes the share in an association, joint-stock company, or insurance company. (9) The term "shareholder" includes a member in an association, jointstock company, or insurance company. (10) The term "United States" when used in a geographical sense includes only the States, the Territories of Alaska and Hawaii, and the District of Columbia. (11) The term "Secretary" means the Secretary of the Treasury. (12) The term "Commissioner" means the Commissioner of Internal Revenue. (13) The term "collector" means collector of internal revenue. (14) The term "taxpayer" means any person subject to a tax imposed by this Act. (b) The terms "includes" and "including" when used in a definition contained in this Act shall not be deemed to exclude other things otherwise within the meaning of the term defined. Sec. 1112. Separability Clause. If any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of the Act, and the application of such provisions to other persons or circumstances, shall not be affected thereby. Sec. 1113. Effective Date of Act. Except as otherwise provided, this Act shall take effect upon its enactment.
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