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TREASURY DECISIONS
UNDER INTERNAL REVENUE LAWS
OF THE UNITED STATES
VOL. 16
JANUARY-DECEMBER, 1914
W. a McADOO
Secfelarjrof'^ TviMUiy
WASHINGTON
GOVERNMENT PRINTING OFHCE
1915
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L 2689
L 259^ -
DEC 1 5 1930
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INTRODUCTION.
Treasury Department,
OmcE OF Commissioner of Internal Revenue,
WdshingtoUj D. C.,J)ec€m'ber SI, 1914,
To officers of internal revenue and others:
The within decisions of the Commissioner of Internal Revenue,
rendered dui'ing the calendar year 1914, upon the construction to be
given to the various acts of Congress relating to the internal revenue,
are published for the information and guidance of oflBicers of the
internal revenue and others concerned.
This volume contains Treasury' Decisions numbered 1927 to 2112,
inclusive, and embraces all regulations* and rulings of the Treasury
Department up to December 31, 1914, on the subject of the emer-
gency revenue tax imposed by the act of October 22, 1914, and all
regulations and rulings made during the calendar year 1914 on the
subject of the income tax imposed by the act of October 3, 1913.
W. H. OSBORN,
Commissioner of Internal Revenue.
(m)
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INTERNAL REVENUE.
(T. D. 1927.)
Income tax.
Extension of time for filing monthly list returns by the first bank or collection agency
receiving coupons or interest orders for collection, when not accompanied by a
certificate of ownership, and monthly list return required to be filed by licensed
bank or collection agency collecting income from bonds, etc., issued in a foreign
country, in accordance with the requirements of section 2, act of October 3, 1913
(T. D. 1887).
Tebasurt Depabtmbnt,
Office of Commissioneb of Intebnal Reyekue,
Wdshington, D. C, January 2, 1914*
The time for filing the (a) monthly list return required of the first
bank or collection agency accepting coupons or interest orders for
collection; when not accompanied by a certificate of ownership, and
the (b) monthly list return required of licensed banks or collection
agencies collecting incomes from bondS; etc., issued in a foreign
country, as provided in T. D. 1887 (pp. 5 and 6), which are required
to be filed on the 20th day of the month next succeeding that in which
said items were received, is hereby extended to January 20, 1914.
W. H. OSBOBN,
(hmmissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury
(T. D. 1928.)
Income tax.
Regulation prescribing additional forms on which to make returns of annual net
income for the income tax.
Tbeasuby Depabtment,
Office of Commissioneb of Intebnal Revenue,
Washington, D. 0., January 2, 1914-
The forms numbered and described below, in addition to those
previously approved, are prescribed by this department for the pur-
poses indicated in connection with the administration of the Federal
income-tax law (sec. 2 of the act of Oct. 3, 1913) :
Forms 1030, 1031, 1032, 1033, 1034, and 1035 are to be used by
corporations in making their returns of annual net income, as follows:
27776°— VOL 16—14 1 (1)
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No. 1030 by insurance companies; No. 1031 by banks and other
financial institutions (class A); No. 1032 by public service corpo-
rations (class B); No. 1033 by manufacturing corporations (class
C); No. 1034 by mercantile corporations (class D); No. 1035 by
miscellaneous corporations (class E).
Form 1040 is to be used by individuals, or their duly authorized
agents, in making the personal return of annual net income.
Form 1041 is to be used by fiduciaries in making returns of annual
net income in behalf of their beneficiaries and as withholding agents.
Form 1042 is the annual list return of withholding agents of taxes
withheld by them on income other than that derived from corporate
obligations.
Form 1043 is a monthly list return of taxes withheld on foreign
income by licensed banks or collecting agents.
Form 1043a is the annual list return to be made by licensed banks
and collecting agents of taxes withheld by them during the year on
foreign items.
Form 1044 is a monthly list return of taxes withheld by the first
bank or collecting agency receiving coupons or interest orders not
accompanied by certificates of owners.
Form 1044a is the annual list return of taxes withheld during the
year' by the first bank or collecting agency receiving coupons or
interest orders not accompanied by certificates of owners.
Form 23a will be used by collectors in listing, for assessment, the
corporations showing net income upon which the tax is to be com-
puted, this form to be prepared in duplicate.
Form 236 will be used by collectors in fisting, for assessment, with-
holding agents, fiduciaries, etc., and individuals who return a taxable
income.
W. H. OSBORN,
Oommissioner of Internal Revenue.
Approved.
W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 1929.)
Income tax.
Supplemental regulations prescribing form of certificate to be attached to interest
coui>ons in cases where the collecting agent's certificate is substituted for the
certificate of the owners, when said owners are fiduciaries not claiming exemption
at source.
Treasury Department,
Oppioe of Commissioner of Internal Revenue,
Washington, D. G., January S, 1914-
Subject to the provisions of the regulations in T. D. 1903, dat<ed
November 28, 1913, collecting agents may substitute Form 1019a,
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properly filled in and numbered, for the certificate of the owner on
Form 1019.
When collecting agents substitute their own certificate in lieu of
owner's certificate on Form 1019, said substitute certificate shall be in
substantially the following form : .
(Farm 1019a.)
Form of certificate to he attached to interest coupons in cases where the collecting agent's
certificate is substituted for the certificate of the owners,
( When owners are fiduelariea,)
(The owner's oertiflcate, of which the following certificate is the coimteri>art, and bears the same number
as fhisoartiflcate, will be sent by the collecting agent direct to the Commissioner of Internal Revenue at
Washington, as jiresoribed by regulations.)
No
I (we) , do Bolenmly declare that the owner of
(Name of coUeoting agent.)
$ bonds of the , from which, were
(Name of debtor organisation.)
detached the accompanying interest coux>on8 due , 191..,
(ICaturity.)
amounting to I , has filed with me (us) a duly executed certificate filled up
in accordance with Treasury Regulations of December 8, 1913, Form No. 1019\ which
certificate has been indorsed by me (us) as follows: '^ Owner's certificate No ,
; , , 191..," that said certificate
(Name of collecting agency.) (Date.)
is executed by a fiduciary, and that the fiduciary, acting for and in the capacity as
stated therein, did not claim any exemption from having the normal tax of 1 per cent
withheld from said income by the debtor at the source; and I (we) do hereby promise
and pledge myself (ourselves) to forward the above-described' certificate executed by
the owners as stated and dated , 191. ., to the Conmussioner of
Internal Bevenue, at Washington, D. €., not later than the 20th day of next month,
in accordance with Treasury Regulations.
Signature of collecting agent:
Date: ,191... Address:
W. H. OSBORN,
Oamndssioner of Internal Revenue.
Approved.
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 1930.)
'Cigar mamifacturers^ look, Form 7S, revised.
Treasury Dbpartbient,
Office of Commissioner of Internal Revenue,
WasMnffton, D. G., January 6, 1914-
To collectors cf internal revenue:
Form 73 of book to be kept by manufacturers of cigars and ciga-
rettes has been revised, providing new columns in which to report
•tax-free cigars used for personal consumption and for experimental
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puiposeB; employees, etc.; as prescribed in Regulations (T. D. 1875)
under authority of tiie act of February 10, 1913. Copies of revised
Form 73 have been furnished upon request to publishers of these
books and copies have also been sent to each collector of internal
revenue.
Cigai* manufacturers need not be required to pwchase new books
73 imtil their present books have been filled, if they are keeping, in
addition to the other requirements of the law, proper record therein
in accordance with T. D. 1875, and no trouble is experienced by col-
lectors or their deputies from manufacturers making abstracts ther^
from on latest revised Form 72 of cigar manufacturers' monthly
return. Otherwise the use of revised book 73 shall be required
immediately.
W. H. OSBOBN,
Commissioner of Internal Revenue.
(T. D. 1931.)
Shipment in bond of tobacco, cigars, cigarettes, and playing cards by
registered mail.
TbEASURY DBPARTBfBNT,
Office of Commissioner of Internal Revenue,
Wa^lmigton, D. C, January 6, 1914-
To collectors of internal revenue and others concerned:
Under T. D. 1858, dated June 10, 1913, relating to the exportation
by parcel post of tobacco, snuflF, cigarettes, or playing cards, the aflBx-
ing of export stamps and the inspection of such articles by the deputy
collector of internal revenue are not required where the tax involved
does not exceed the sum of $10.
These provisions are hereby extended so as to authorize the expor-
tation of such articles, iacluding cigars, by registered mail where the
tax involved does not exceed the sum of $10.
The receipt, properly signed, to be given at the post office of mail-
ing should contain such description of the goods as will identify them
as the particular goods withdrawn for exportation, including the name
of shipper, kind of goods, number of packages, quantity, foreign desti-
nation, and name of consignee.
Such partictdars should appear on the packages deUvered at the
post office for registration.
W. H. OSBORN,
Commissions of Internal Revenue.
Approved:
Jno. Skelton Williams,
Acting Secretary of the Treasury.
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(T. D. 1932.)
Instructions relative to assignment to duty oi income-tax appointees.
Treasuby Department,
Office of Commissioner of Internal Revenue,
Wasliinffton, D. (7., January IS, 1914-
IntemaJrrevenue agents, inspectors, and others concerned:
Revenue agents in charge of revenue agents' divisions and income-
tax revenue agents and inspectors are hereby instructed as follows:
1. Income-tax agents and inspectors appointed under the pro-
visionS'of the act of October 3, 1913, and paid from the appropriation
for collecting the income tax will be assigned to duty under the
supervision of agents in charge of revenue agents' divisions.
2. Persons appointed either as income-tax agents or income-tax
inspectors, when the appointment is sent from this oflOicey will be
instructed by letter to report to one of the division revenue agents
for duty, and until otherwise ordered may report either in person or
by letter, and if by letter await the instructions of the agent in
charge of the division to which they are assigned.
3. Officers of this class are expected to perform the duties of then:
offices where their services are required, but for the present, and until
they become somewhat familiar with the duties of their places, they
wiU be assigned to the revenue agent in charge of the division embrac-
ing their legal residence.
4. Income-tax agents and inspectors will be expected to confine
their operations to income-tax work so long as there is income-tax
work to be performed, and division agents are admonished not to
employ officers of this class for the general or ordinary work of the
bureau except when their services axe not required on income-tax work.
6. The duties of officers of this class are to ascertain and report
the names of persons who in their opinion are liable to the income tax
and who have failed to make return as required by law; to inquire
into income-tax returns where there is any suspicion that the return
made is erroneous; to examine the bool;^ and accounts of persons
who have made retmrns, for the purpose of ascertaimng and reporting
as to whether the law has been complied with, when so ordered by the
agent in charge of the division to which they are assigned; to inquire
into the manner in which hicome-tax employees are discharging their
official duties and to report those who have failed in this respect.
For the purpose of securing such information as they may desire they
may visit the office of any State, county, or mimicipal officer, and for
the general purpose of tiieir employment may confer with any col-
lector or deputy collector of internal revenue within the territory in
which they are authorized to operate.
6. The reports of these officers should be made to the agent in
charge of the division to which they are assigned, who in turn will
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report to the Commissioner of Internal Revenue and the collector
of the proper district.
7. In the discharge of their official duties officers of this class, as
well as all officers of the Internal-Revenue Bureau, in making inquiries
^d investigations are expected to exercise soimd discretion, treat
all persons with due courtesy, and, while acting firmly and courage-
ously, to avoid aU contention or controversy that would give just
ground for complaint.
W. H. OSBORN,
Oommissioner of Internal Revenue.
(T. D. 1933.)
Income tax.
Mutual telephone companies, mutual insurance companies, and like organizations
whose status, under the law, is not dependent upon whether or not they are
organized for profit, and not beiog specifically enumerated as exempt, must make
returns of annual net income pursuant to the requirements of section 2, act of
October 3, 1913.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, January 12, 1914.
Sir : This office is in receipt of your letter of the 31st ultimo, asking
advice as to whether or not mutual telephone companies will be
required to file returns of annual net income under the provisions of
section 2, act of October 3, 1913.
In reply you are informed that under the provisions of the act
above cited, every corporation, joint-stock company, and every
insurance company, no matter how created or organized, is subject
to the income tax and will be required to make returns of annual
net income, except such as are specifically enumerated in the act
as exempt from its provisions. In the list of those so enumerated
as exempt do not appear mutual telephone companies or similar
organizations.
Since under this act no exemption is provided, either express or
implied, for mutual telephone and like companies, and liability is
not dependent upon whether or not the corporation is organized for
profit, it is held that all corporations not specifically enumerated as
exempt will be required to make returns of annual net income and
to pay any tax that may be assessed upon the net income returned.
This ruling wiU comprehend all telephone companies, local insur-
ance companies, and like corporations whether or not they are organ-
ized primarily for the mutual benefit of their members.
Respectfully, Robt. Williams, Jr.,
Acting Commissioner of Internal Revenue.
CoLLEcrroR of Internal Revenue, Omaha, Nebr.
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(T. D. 1934.)
iThcometax.
Individuals whose net income from March 1 to December 31, 1913, both dates inclu-
sive, is 12,500 or more must make returns of annual net income for 1913.
Treasuby Department,
Office op Commissioner of Internal Revenue,
Washington, D. C, January 16, 1914-
Section 2, act of October 3, 1913, provides that on or before the
1st day of March, 1914, and the 1st day of March in each year there-
after, a true and accurate return, under oath or affirmation, shall be
made to the collector of internal revenue by each person of lawful
age who may be subject to the tax imposed by this section who has
a net income of $3,000 or over for the taxable year.
It is further provided that for the year ending December 31, 1913,
the tax shall be computed on the net income accruing from March 1
to December 31, 1913, both dates inclusive, after deducting five-
sixths only of the specific exemption and deductions allowable for
an entire taxable year.
Since the return of annual net income for the year 1913, as applied
to individuals, is for hut Jive-sixffis of the calendar year, and as the
lat7 provides that returns shall be made on the basis ot five-sixths of
the year, it is held that individuals whose net income is $2,500 or
more for the 10 months constituting the taxable period of 1913 shall
make returns of annual net income in accordance with the general
provisions of the law covering the 1913 taxable period.
W. H. OSBORN,
Commissioner of Internal Bevenue,
Approved:
W. G. McAdoo,
Secretary of the TreoMbry.
(T. D. 1935.)
Special to/x.
Special tax as rectifier must be paid for the compounding of spurious or imitetion
liquors, for sale, with the use of alcohol and flavoring extracts, irrespective of
quantity.
Treasury Department,
Office of Commissioner op Internal Revenue,
Washington, D. C, January 17, 1914-
Sir: This office is in receipt of your letter of the 12th instant rela-
tive to the preparation by retail liquor dealers in your division of
spurious or imitation liquors by the addition to alcohol, water, etc.,
of extracts, essences, etc., furnished by the Co.
In reply you are advised that it appears probable that these
essences and extracts are similar to those the subject of T. D. 1769,
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8
in which it was held that^ for the compounding, for personal use only
and not for sale, of imitation liquors by the addition of such extracts
to alcohol, water, etc, no special-tax liability was incurred, but that
special tax would be required for the preparation for sale of a liquor
in accordance with the directions for use upon the bottles of extract.
The long-standing ruling that a retail liquor dealer may blend or
compound spirits and mixed drinks in quantities of less than 5 gallons
solely for his own convenience in serving his trade across the bar is
not to be construed as authorizing or covering a preparation of spuri-
ous or imitation liquors by the addition of flavoring extracts or
essences to alcohol.
This ruling will be published as a Treasury decision and the widest
publicity given to it, and in future all saloon keepers found to be
preparing spurious or imitation liquors in this manner shall be reported
for special tax as rectifiers.
Respectfully, Robt. Williams, Jr.,
Acting Commissioner of Internal Revenue.
Internal-Revenue Agbjnt, Chicago, III.
(T. D. 1936.)
Special excise tax on corporations — Decision of court.
1. Taxes Dub from Stockholders.
The State tax on capital stock of banks under the Massachusetts statute &II0
directly on the stockholders, and these taxes can not be legally deducted from
gross income in returns made by banks under the corporation tax act. The tax is
not upon the banks, and in paying it they act as agents. T. D. 1763 sustained.
2. Returns.
The Commissioner of Internal Revenue, upon evidence produced before him,
is authorized to amend incorrect returns, or make a return, as the case may be.
3. Assessments.
The Commissioner of Internal Revenue is authorized to make additional assess-
ments after the taxes have been assessed and paid on the original returns, even
though the errors in the original returns were made without any intention to deceive
or mislead.
4. The Three Years' Limitatign.
The statute does not require the additional assessment to be made within the three
years' period. The limitation is upon the discovery of the error by the Commissioner
of Internal Revenue within three years.
Treasury Department,
Office of Commissioner op Internal Revenue,
Washington, D. C, January 20, 1914.
The appended decision of the United States District Court for the
District of Massachusetts in the case of The Eliot National Bank v.
James D. Gill, collector of internal revenue, is published for the
information of internal-revenue officers and others concerned.
W. H. OSBORN,
Commissioner of Internal Revenue.
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Eliot Nciiwnal Bank v, James B, Qill, collector,
[December 29, 1913.]
BiNOHAM, Judge: This action was brought by the Eliot National Bank against
James D. Gill, collector of internal revenue for the third district of Maasachusetts, in
the Superior Court for the County of Suffolk, and was afterwards transferred into this
court by writ of certiorari.
The declaration contains three counts for money had and received. In the first
count plaintiff seeks to recover $338.25, with interest from March 15, 1913; in the
second and third counts for $369 and $377.20, respectively, with interest from- April
28, 1913_. The sums sought to be recovered represent certain taxes paid by the plaintiff
for the years 1909, 1910, and 1911, under the provisions of the corporation-tax law of
August 5, 1909 (36 Stat. L., c. 6, s. 38, pp. 112-117). The case is here upon an agreed
statement of ^ts with authority in the court to draw such inferences from the facts
agreed upon as may be warranted.
The plaintiff is a national bank, located and doing business in the city of Boston.
On May 1, 1909, and on April 1, 1910 and 1911, the shares of the capital stock of the
bank were assessed by the city of Boston, under the provisions of revised laws of
Massachusetts (c. 14, ss. 9-18, inclusive) and under the provisions of Massachusetts
(Statutes, 909 (c. 490, Part III; sees. 11 to 20). The tax assessed by the city upon
the shares of the bank for 1909 was $33,825; for 1910, $36,900; and for 1911, $37,720.
Returns were made by the plaintiff to the collector of internal revenue for the three
years in question for the assessment of the corporation tax, and taxes based upon such
returns were levied and paid. On or before February 27, 1913, the Commissioner of
Internal Bevenue discovered that in making these returns the bank had deducted from
its gross income the amoimt of taxes stated above and paid by it each year to the city
of Boston. Thereupon the commissioner, having made or caused to be made an
amended retmn, assessed an additional tax for each year upon the amounts so de-
ducted, which additional taxes the bank paid under protest. This suit is brought to
recover the simis so paid.
The Federal statute imposing the tax provides:
Sec. 38. First. That every corporation, joint-stock company, or association or-
ganized for profit and having a capital stock represented by shares, and every insurance
company now or hereafter organized under the laws of the United States or any State
or Territory of the United States or under the acts of Congress applicable to Alaska or
the District of Columbia, or now or hereafter organized under the laws of any foreign
country and engaged in business in any State or Territory of the United States or in
Alaska or in the District of Columbia, shall be subject to pay annually a special excise
tax with respect to the carrying on or doing business by such corporation, joint-stock
company or association, or insurance company, equivalent to one per centum upon
the entire net income over and above five thousand dollars received by it from all
sources during such year, exclusive of certain amounts therein specified, which may
.be deducted.
Second. Such net income shsill be ascertained by deducting from the gross amoimt
of the income of such corporation, joint-stock company or association, or insurance
companv, received within the jrear from all sources, * * *.
Fourth. All sums paid by it within the year for taxes imposed under the authority
of the United States or of any State or Territory thereof, or imposed by the gov-
ernment of any foreign country as a condition to carrying on business therein.
The first question presented is whether the bank had the right under this clause to
deduct the taxes levied under the provisions of Massachusetts revised laws (c. 14, ss.
9-18) which it had paid to the city of Boston.
The revised laws of Massachusetts in c. 14 provide:
Sec. 9. AH the shares of stock in banks, whether of issue or not, existing by author-
ity of the United States or of the Commonwealth, and located within the Common-
wealth, shall be assessed to the owner thereof in the city or town in which such bank
is located, and not elsewhere, in the assessment of State, county, and town taxes,
whether such owner is a resident of said city or town or not. They shsdl be assessed
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10
at their fair cash value on the first day of May, first deducting therefrom the pro*
portionate part of the value of the real estate belonging to the bank, at the same rate
as other moneyed capital in the hands of citizens is by law assessed. The persons
who appear from the books of the banks to be owners of shares at the close of the busi-
ness day last precedinc^ the first day of Mav shall be deemed to be the owners thereof.
Sec. 10. Every such bank shall pay the tax so assessed to the collector or other
person authorized to receive the same at the time when other taxes in the city or
town become due. If not so paid, said tax, with interest thereon at the rate of twelve
per cent per annum from the day when it became due, may be recovered from said
bank in an action of contract by the collector of such city or town.
Sec. 11. The shares of such banks shall be subject to the tax paid thereon by the
corporation or by the officers thereof, and the corporation and the officers thereof shall
have a lien on all the shares in such bank and on all the rijB^hts and property of the
E^reholders in the corporate property for the payment of said taxes.
Sec. 12. The cashier of every such bank shall make and deliver to the assessors of
the city or town in which it is located, on or before the tenth day of May in each year,
a statement under oath showing the name of each shareholder^ with his residence ana
the number of shares belonging to him at the close of the busmess day last preceding
the first day of May, as the same then appeared on the books of said bank. If the
cashier fails to make such statement, said assessors shall forthwith obtain a list of the
names and residences of shareholders and of the number of shares belonging to each.
They shall, forthwith, upon obtaining such statement or list, transmit a copy thereof
to the tax commissioner; and shall immediately upon the ascertainment of the rate
per cent upon the valuation of the total tax in such city or town for the year, give to
said commissioner written notice thereof, and also of the amount assessed by. them
upon the shares of each bank located therein.
Sec.~13. Said commissioner shall thereupon determine the amount of the tax aasesBed
upon shares in each of said banks which would not be liable to taxation in said city
or town according to the provisions of chapter twelve; and such amount shall be a
charge against said city or town. He shall, in like mai^ner, determine the amount
of tax so assessed upon shares which would be so liable to taxation in each city or town
other than that in which the bank is located; and such amount shall be a credit to
each city or town. He shall forthwith give notice in writing by mail or at their office
to the assessors of each city or town thereby affected of the aggregate amount so charged
against and credited to it; and they may within ten days afier notice of such determi-
nation appeal therefrom to the board of appeal constituted under the provisions of
section sixty-five.
Sec. 18. The assessors of a city or town, upon request of any person resident therein
who is the owner of any shares m such banxs or other corporations which, under the
provisions of clauses nine and ten of section five of chapter twelve, would be en-
titled to exemption from taxation, shall give to him a certificate stating such facts;
and the treasurer of such city or town, upon request therefor, and the deposit with
him of such certificate, shall pay over to such owner the amount so collected in re-
spect of such shares immediately upon the allowance , made to such city or town
under the provisions of this chapter.
There can be no doubt but that the clause in the Federal statute providing for the
deduction from the gross income of a corporation of "all sums paid by it within the
year for taxes imposed under the authority of * * * any State" means taxes
imposed upon it and not upon some other person or corporation. No other reasonable
conclusion could be drawn from the language used.
This being so, it is contended by the plaintiiS that inasmuch as under the pro-
visions of the Massachusetts statute the bank is compelled to pay a tax assessed ui)on
the shares of the stockholders or, in case of default, is made liable to an action of
contract for such tax, with interest at the rate of 12 per cent, the tax is in legal effect
assessed upon the bank and that the bank upon paying it discharged its own obli-
gation, and is therefore entitled to have it deducted in ascertaining its net income in
the assessment of the Federal tax. But this is clearly not the true construction of the
Massachusetts statute and is not the one which has been placed ui)on it either by the
State or Federal courts. The bank having paid the tax, is under the statute given
'^a lien on all the shares in such bank and on all the rights and property of the share-
holders in the corporate property for the payment of said taxes"; and, while tihe
statute does not expressly give the bank a right of action over against the individual
Stockholders to recover from each of them their proi)ortipnate part of the tax which
Digitized by VjOOQIC
11
it hafi i>aid, it is evident that as the bank in the payment of the tax acts under com-
pulsion of law and not voluntarily, and the payment is for the benefit of the stock-
holders, that a contract will be implied in law entitling it to recover from each
8tx)ckholder his proportionate part of the tax as money paid by the bank for the
stockholder's benefit. Home Savings Bank v. Des Moines (205 U. S., at page 618).
In that case it was said that —
The tax assessed to shareholders may be required bjr law to be paid in the first
instance by the corporations themselves as the debt and in behalf of the shareholders,
leaving to the corporations the right to reimbursement of the tax paid from their
shareholders, either under some express statutory authority for their recovery or under
the general principle of law that one who pays the debt of another at his request can
recover the amount from him.
Then, again, in Allen v. The Assessors (3 Wall., 573), it was held that —
The tax on the shares is not a tax on the capital of the bank. The cori)oration is the
l^al owner of all the property of the bank, real and personal; and within the powers
conferred uppn it by the charter, and for the purposes for which it was created, can deal
with the corporate property as absolutely as a private individual can deal with his
own * * *. The interest of the shareholder entitles him to participate in the net
profits earned by the bank in the employment of its capital, during tne existence of
Its charter, in proportion to the number of his shares; and upon its dfeeolution or ter-
mination, to his proportion of the property that may remain of the corporation after
the payment of its aebts. This is a distinct independent interest or property, held
by tine shareholder like any other property that may belong to him. Now, it is this
interest which the act of Congress has left subject to taxation by the States under the
limitations prescribed.
In addition to the provisions of the statute giving the bank, upon pa3anent of the
tax, a lien upon the shares and all the rights and property of the shareholders in the
corporate property for the payment of the tax, and in addition to the implied obliga-
tion of the stockholders to repay the bank the money so paid, there are other provisions
in the statute which requires the tax when collected to be credited to the towns in
which the stockholders reside (sec. 13) and that allow stockholders who are entitled to
exemption (sec. 18) to recover from the city or town in which they reside the money
paid by the bank to discharge their proportion of the tax. All this makes it certain
that the tax is upon the stockholder and not upon the bank, and that in paying it the
bank does so as figent.
My conclusion, therefore, is that as the taxes paid to the city of Boston in the years
in question were not assessed upon the bank, but upon the shareholders, and were paid
for their benefit, the bank is not entitled to have them deducted in ascertaining its
net income, as was done in its returns to the Commissioner of Internal Revenue in the
years 1909, 1910, and 1911.
Was the Commissioner of Internal Revenue vested with authority to amend the
original returns of the bank and assess additional taxes thereon for the years 1909, 1910,
and 1911, he not having discovered the error in the returns until after the. taxes assessed
on those returns had been paid?
In the third subdivision of section 38 of the corporation tax law it is provided:
Third. * * * said tax shall be computed upon the remainder of said net income
of sudi corporation, * * * for the year ending December thirty-first, nineteen
hundred ana nine, and for each calendar year thereafter; and on or before the first day
of March, nineteen hundred and ten, and the first day of March in each year thereafter,
a true and accurate return, under oath or affirmation of its president, vice president,
or other principal officer, and its treasurer or assistant treasurer, shall be made by each
of the corporations * * * subject to the tax imposed by this section, to the
coUector of internal reveifue for the district in which such corporation * * * has
its principal place of business * * * in such form as the Commissioner of Internal
Revenue, with the approval of the Secretary of the Treasury, shall prescribe, etc.
Fourth. Whenever evidence shall be produced before the Commissioner of Internal
Revenue which, in the opinion of the commissioner shall justify the belief that the
return made by any corporation * * * is incorrect, or whenever any collector
shall report to the Commissioner of Internal Revenue that any corporation * * *
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12
has foiled to make a return as required by law, the Commissioner of Internal Revenue
may require from the corporation * * * making such return, such further infor-
mation with reference to its capital, income, losses, and expenditures as he may deem
expedient; and the Commissioner of Internal Revenue, for the purpose of ascertaining
the correctness of such return, or for the purpose of making a return when none has
been made, is hereby authorized by any regularly appointed revenue agent specially
designated by him for that purpose, to examine any oooks or papers bearing upon the
matters required to be included in the return of such corporation * * * and to
require the attendance of any officer or employee of such corporation * ♦ ♦ and
to take his testimony with reference to the matter required bv law to be included in
such return, * * *. Upon the information so acquirea the Commissioner of
Internal Revenue may amend any return or make a return where none has been made.
Fifth. All returns shall be retained by the Commissioner of Internal Revenue,
who shall make assessments thereon; and in case of any return made with i&he or
fraudulent intent, he shall add.one himdred per centum of such tax, and in case of a
refusal or neglect to make a return or to verify the same as aforesaid he shall add fifty
per centum of such tax. In case of neglect occasioned by the sickness or absence of
any officer of such corporation * * * required to make said return, or for otiier
sufficient reason, the collector may allow such further time for making and deliver-
ing such return as he may deem necessary, not exceeding thirty days. The amount
so added to the tax shall oe collected at the same time and in the same manner as the
tax originally assessed unless the refusal, neglect, or falsity is discovered after the date
for payment of said taxes, in which case the amount so added shall be paid by the
dehnquent corporation, * * * immediately upon notice given by the collector.
ALL assessments shall be made and the several corporations * * * ^11 be notified
of the amount for which they are respectively liable on or before the f rst day of June
of each successive year, and said assessments shall be paid on or before the thirtieth
day of June, except in cases of refusal or neglect to make such return, and in cases of
folse or fraudulent returns, in which cases the Commissioner of Internal Revenue
shall, upon the discovery tiiereof , at any time within three years after said return is
due, make a return upon information obtained as above provided for, and the assess-
ment made by the Commissioner of Internal Revenue thereon shall be paid by such
corporation, * * * immediately upon information of the amount ,of such
assessment.
In assessing taxes under this statute the following steps are to be taken:
(1) The coriwration is to make a true and accurate return of its income not later
than March 1 in each year (par. 3).
(2) Upon such retiirn a tax is to be assessed and the corporation notified of the
amount thereof on or before June 1 in each year. And the tax is to be paid on or
before June 30 (par. 5).
(3) If the commissioner, upon evidence produced before him, is of the opinion that
a corpors^on has made an incorrect return, or is informed by the collector that a
corporation has failed to make a return, the commissioner is authorized to designate
a revenue agent to examine the books of the corporation and to take testimony, and
ui)on obtaining the desired information, to amend the incorrect return, or make a
return, as the case may be (par. 4).
(4) If the return was made incorrect — ^that is, false or fraudulent — or no return was
made through failure or n^lect, then the commissioner, upon discovery thereof at
any time within three years from March 1 of the year when the return was due, hav-
ing obtained the desired information, as above provided, and amended the return,
or made one, may assess the tax, which is to be paid by the corporation on June 30,
or immediately upon notification of the amount, depending upon whether the noti-
fication is prior or subsequent to June 30, in the year in which the return was due
(par. 5).
(5) If the information obtained discloses that the return was made with false and
fraudulent intent, the conmiissioner is to add a penalty of one himdred per centum
to the true tax, and in case the corporation has refused or neglected to ms^e a return
before March 1, or within the time as extended by the collector, not exceeding thirty
days (which he may do when the neglect is occasioned by sickness or absence of the
officers of the corporation required to make the return, or for other sufficient reason),
then the commissioner, having made a return and assessed the true tax, is author-
Digitized by VjOOQIC
13
ized to add a penalty of fifty per centum to the tax. The penalties so added are to
be collected at the same time and in the same manner as the tax on returns r^ntdarly
made, unless the refusal, neglect, or falsity is discovered after the date fixed for the
payment of the tax on returns regiilarly made. But if the discovery of either of these
facts is not made until after that date, then the commissioner is authorized, upon the
discovery of either of them within three years after March 1 in the year in which the
return was due, and having assessed the true tax, as above stated, to add the penalty
of fifty or one hundred per centum to the true tax, according as the facts warrant,
and to collect the same upon notice to the corporation (par. 5).
The case discloses that the plaintiff, having paid the taxes assessed on returns
which it had made in the regular course for the years above stated, on February 27,
1913, at the request of the commissioner, filed supplemental returns for each of those
years, and that on March 1, 1913, the commissioner made the additional assessments
here complained of.
The plaintiff takes the position that the commissioner had no authority to make
the additional assessments after the taxes had been assessed and paid on the original
returns, as the original returns were not made with a false and fraudulent intent; that
the statute confers authority upon the commissioner to amend return^ and assess
taxes thereon after taxes have been assessed and paid in the r^^ular course only where
the error in the original returns was inserted with a false and fraudulent intent, and
not where, as in this case, the error or misstatement in the returns was made in good
faith and under an erroneous construction of the law.
The question, therefore, narrows itself down to this: Does the word "false," as
used in the phrase "false or fraudulent" in that clause of paragraph 5 authorizing
the commissioner to assess additional taxes upon an amended return at any time
within three years after the original return was due, mean an error or misstatement
due to an honest mistake, or is it confined and limited to errors or misstatements
made with an intention to mislead and deceive?
A false return in the absence of an intention to mislead is not a fraudulent one.
That Congress in the enactment of this law so understood the meaning of the word
and used it is disclosed by the language employed in a previous clause of the same
paragraph, where it authorizes the imposition of a penalty of one hundred per cent
of the true tax in case the error in the original returns proceeded 'from a false and
fraudulent intent. In that clause it is manifest that it was intended the Commissioner
should not have the power to impose a penalty of one hundred per cent unless the
error in the original return was false and made with an intent to deceive and mislead.
And the reasonable inference is that if Congress had intended that the power of the
commissioner in the assessment of taxes upon amended returns, either before or after
the taxes assessed on the original returns were due and payable, should exist only in
case the error or misstatement was inserted in the original returns with an intention
to mislead and deceive, it would have used terms as plain and unambiguous as it did
in conferring the authority to impose a penalty of one hundred per cent; and that
as it did not epiploy such language, it should be held not to have so intended.
My conclusion on this branch of the case is that the commissioner was authorized
to make the additional assessment even though the errors in the original returns were
due to an honest mistake and were not discovered untU after the taxes assessed in the
r^ular course had been paid.
The defendant also contends that the additional assessment for the year 1909 is
invalid, for the alleged reaaon that it was not made within three years from March 1,
1910, when the return for the year 1909 was due. This contention is without founda-
tion. The statute does not require the additional assessment to be made within the
three years* period. The limitation is upon the discovery of the error by the com-
missioner within the three years and not upon the making of the additional assessment.
But however this may be, the additional assessment in this instance was made within
Digitized by VjOOQIC
14
three years from March 1, 1910, for that date is to be excluded in computiDg tlie time
fixed by the statute. The general rule for the interpretation of statutes where tim^
is to be computed from a particular day, as when an act is to be performed within a
specified period from or after a day named/is to exclude the day thus designated and
to include the last day of the specified period. Sheets v, Selden (2 Wall. , 177) ; Trust
V. Green Cove Springs & M. Railroad Co. (139 U. S., 145); Hicks v. National Life
Insurance Co. (9 C. C. A., 218).
The petition is dismissed, with costs, and a decree will be entered accordingly.
(T. D. 1937.)
Income tax.
Corporations are not permitted to deduct from gross or net income for the year 1913
any portion of specific exemption authorized under corporation tax law. — Sec.
38, act Aug. 5, 1909.
Treasuky Department,
Office op Commissioneb op Internal Revenue,
WasTiinffton, D. O., Janvxiry 26, 1914,
Section 2 of the act approved October 3, 1913, known as the Fed-
eral Income Tax Law, provides that all corporations, joint-stock
companies, and all insiu-ance companies, except those specifically
enumerated as exempt, shall be subject to the normal tax imposed
upon individuals, such tax to be levied, assessed, and paid annually
upon the entire net income arising or accruing from all sources during
the preceding calendar year.
The provisions of this act apply to corporations which have or
may have income arising or accruing on and after March 1, 1913.
For the purpose of covering the liabiUty of corporations to special
excise tax for the months of January and February, 1913, the provi-
sions of the corporation tax law (sec. 38, act Aug. 5, 1909) were
extended, and in subsection S of the income tax law it is provided
that the net income for these two months shall be ascertained in
accordance with the provisions of subsection G of section 2 of the act
of October 3, 1913, that is, in the same manner as the net income for
the remaining 10 months of the year is ascertained.
In the subsection G, just cited, all items or charges against income,
which constitute allowable deductions from gross income, are spe-
cifically set out. No provision, either express or implied, is made in
this subsection or elsewhere in the act for the allowance of all or any
portion of the specific exemption ($6,000) allowed under the corpo-
ration tax law. As applied to the months of January and February,
1913, the income tax law in eflfect amends the corporation tax law
by eliminating the specific exemption previously allowed, and pro-
vides that the tax for that period shall be measured by the net
income ascertained according to the rule set out in subsection G of the
later act. (See second proviso in subsec. S, act Oct. 3, 1913.)
The third proviso of subsection S also provides that —
For the year 1913 it shall not be necessary to make more than one return and aa-
sessment for all taxes imposed * * * by way of income or special excise.
Digitized by VjOOQIC
15
The net income for both kinds of taxes and for both periods of the
year being ascertained in exactly the same manner, but one return
covering the entire calendar year 1913 is required. That return will
show the entire net income ascertained in accordance with the pro-
visions of the income tax law, and no specific exemption whatever
being authorized, such net income as returned for the entire year will
be the amoimt upon which the tax is computed.
W. H. OSBORN,
Commissioner of Internal Bevenue.
(T. D. 1938.)
Income tax.
Extension of time to April 1, 1914, for the use of Forms 1001, 1003, and 1004, ad pro-
vided in T. D. 1907 of November 26, 1913.
Treasury Department,
Office op Commissioner of Internal Revenue,
WasMn^gtony D. C, January 29, 1914'
Notice is hereby given that Forms 1001, 1003, and 1004, as adapted
to the use^f foreign organizations, foreign partnerships, and foreign
fiduciaries, when properly filled in and signed, and giving the informa-
tion required by regulations, may be accepted by debtors or with-
holding agents until March 31, 1914.
W. H. OSBORN,
Comrmssioner of Internal Bevenue.
Approved:
John Skelton Williams,
Aclmg Secretary of the Trea^sury.
(T. D. 1939.)
Income tax.
Blank forms of certificates and other forms required in connection with the collection
of income tax and making of returns by taxpayers wiU be furnished on applica-
tion to the Commissioner of Internal Kevenue. Forms may be printed by cor-
porations and others, provided they conform strictly to department requirements
as to size, print, and contents. In making requisition on the department for
forms no more should be requested than the absolute needs of the office make
necessary.
Treasury Department,
Office of Commissioner op Internal Revenue,
Washington, D. (7., January 28, 1914^
To collectors of internal revenue:
You are instructed that the department will furnish blank forms of
certificates and other forms required to be used in connection with
the collection of the income tax and the making of their returns by
taxpayers to such parties as may make appUcation for the same.
Digitized by VjOOQIC
16
Private corporations and others desiring to have these forms printed
for themsleves may do so if they will strictly observe the requirements
of the department as to size, print, and contents of the forms and
certificates as prescribed by the regulations.
In pursuance of the desire of the department to furnish every
possible f aciUty to aid taxpayers in complying with the law, requisi-
tion should be made for such quantity of the various forms as may be
foimd necessary in each collection district; and these forms will be
forwarded immediately upon application. Attention is called| how-
ever, to the fact that a large stock of these forms should not be
accimiulated in any office, and that for the present, particular caution
should be exercised so as not to make requisition for more than the
absolute needs of each office. It is contemplated that in the near
future a combination of certain forms of certificates may be arranged
for, and these consolidated or combined certificates will be furnished
as soon as practicable. When such combined certificates shall be
furnished, the use of the older or original certificates — that is, those
now in use — should be discontinued at the earUest possible date.
RoBT. Williams, Jr.,
Acting Commissioner of Iniemaljtevenuen
Approved:
John Skelton Williams,
Acting Secretary of {ke Tredsury.
(T D. 1940.)
Opium — Act of January 17, 19H.
Treasuby Department,
Office op Commissioner of Internal Revenue,
Waslvmgtonj D. (7., Jarmary SI, 1914.
The appended act of Congress, approved January 17, 1914, is pub-
lished for the information of internal-revenue officers and others
concerned.
W. H. OSBORN,
Commissioner oflniemdl Revenue.
AN ACT Regulating Uie xnanafBctiae of smoking opium within the United States, and for other
purposes.
B€ it enacted by the Senate and House of Representcaives of the United States of America
in Congress assembled. That aa intemaL-revenue tax of $300 per pound shall be levied
and collected upon all opium manufactured in the United States for smoking purposes;
and no person shall engage in such manufacture who is not a citizen of the United
States and who has not given the bond required by the Commissioner of Internal
Revenue. Every person who prepares opium suitable for smoking purposes from
crude gum opium, or from any preparation thereof, or from the residue of smoked or
partially smoked opium, commonly known as yen shee, or from any mixture of Hie
above, or any of them, i^all be reg^ed as a manufacturer of smoking opium within
the meaning of this Act.
Digitized by VjOOQIC
17
Sbg. 2. That every maaufacturer of such opium shall file with the collector of
internal revenue of the district in which his manufactory is located such notices,
inventories, and bonds, shall keep such books and render such returns of material and
products, shall put up such signs and affix such number to his factory, and conduct his
business under such surveillance of officers and agents as the Commissionef of Internal
Revenue, with the approval of the Secretary of the Treasury, may by regulation re-
quire. But the bond required of such manufacturer shall be with sureties satisfactory
to the collector of internal revenue, and in a penal sum of not less than $100,000; and
the sum of said bond may be increased from time to time and additional sureties
required, at the discretion of the collector or under instructions of the Commissioner of
Internal Revenue.
Sec. 3. That all opium prepared for smoking manufactured in the United States shall
be duly stamped in such a permanent manner as to denote the payment of the internal-
revenue tax thereon.
Sec. 4. That the provisions of existing laws covering the engraving, issue, sale,
accountability, effacement, cancellation, and the destruction of stamps relating to
tobacco and snuff, as far as applicable, are hereby made to apply to stamps provided
for by the preceding section.
Sec. 5. That a penalty of not less than $10,000 or imprisonment for not less than five
years, or both, in the discretion of the court, shall be imposed for each and every
violation of the preceding sections of this Act relating to opium by any person or
persons; and all opium prepared for smoking wherever found within the United
States without the stamps required by this Act shall be forfeited and destroyed.
Sec. 6. The provisions of the Act of October first, eighteen hundred and ninet?$r
Twenty-sixth Statutes, page fifteen hundred and sixty-seven), in so far as they relates
to the manufacture of smoking opium, are hereby repealed.
Approved, January 17, 1914.
(T. D. 1941.)
Ckfrporaiifm tax — Building and loan assoda/tion^ — Decision of court.
1. Construction of Clause.
The words " no part of the net income of which inures to the benefit of any private
stockholder or individual " do uot apply to domestic building and loan associations
operatea for the mutual benefit of members.
2. Exemption.
Building and loan associations operated exclusively for the mutual benefit of
their members are exempt.
8. Issuance of Prepaid Stock.
The issuance of prepaid stock does not destroy mutuality (affirming 203 Fed.,
876).
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, January 31, 191^.
The appended decision of the United States CSrcuit Court of
Appeals for the Third Circuit, in the case of Herold, collector of
internal revenue, v. Park View Building and Loan Association, is pub-
lished for the information of internal-revenue officers and others
concerned.
W. H. OSBORN,
Commissioner of Internal Revenue.
27776°- VOL 16—14 2
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18
United States Circuit Court of Appeals, Tmrd Circuit. October Term,
1913. No. 1801.
Heroldy colUctxyr^ v. Park View BuHding and Loan AssodaHon,
Ebsob to the District Court of the United States for the District of New Jersey.
Before Gray, Bufpington, and McPherson, Circuit Judges.
McPherson, Circuit Judge: The Park View Building and Loan Association was
taxed under section 38 of the act of August 5, 1909 (Supplement of 1911 to Rev. Stats.,
p. 946), and was compelled to pay $71.04, tax and penalty for the year 1909. This
suit, which seeks to recover that sum from the collector, was removed from a State
court of New Jersey to the District Court, where the parties agreed upon a statement
of facts. The court entered judgment for the association (203 Fed., 876) — Judge Orr
presiding specially-— and we refer to his opinion with general approval. On two or
three branches of the subject something more may, perhaps, be said without extending .
the discussion unduly.
We do not think it necessary to rely on the rule that words imposing a tax should be
clear, doubtful language being construed in &vor of the citizen. There is force in
the Govenmient's contention that the words in question do not impose a tax at all;
that the tax is not laid by the proviso, but by the first clause of the section, which
includes "every corporation,'* etc.; and therefore that the court is asked to construe
not language that lays a tax but language that exempts. The Government insists
that a different rule should be applied in such a situation and that a doubt must
be resolved against a claim of exemption. We lay the subject aside, however, for we
do not think the questions presented are doubtful enough to require the aid of either
rule.
Let us consider first the question Judge Orr did not decide — ^namely, what effect
should be given to the words hereafter italicized in the proviso to the first paragraph
^of section 38. After imposing a special excise tax upon ''every corporation, joint
stock company, or association organized for profit and having a capital stock repre-
sented by shares,'* etc., the paragraph proceeds to state certain exceptions to the
generality of this clause:
Providedy however, That nothing in this section contained siiall apply to labor, agri-
cultural^ or horticultural organizations, or to fraternal beneficiary societies, orders, or
associations operating under the lodge system and providing for the payment of life,
sick, accident, and other benefits to the members of such societies, orders, or associa-
tions, and dependents of such members, nor to domestic building and loan associations,
organized and operated exclusively for the mutual benefit of their members, nor to
any corporation or association organized and operated exclusively for religious,
charitable, or educational purposes, no mart of tne net income of which inures to the
benefit of any private stockholder or indiviaual.
The Government's argument on this branch of the case is based upon the contention
that the words in italics qualify the whole proviso and apply to every organization or
association named therein, including a building association, like the plaintiff, that
issues what is known as prepaid stock. (This is not preferred stock, as will appear in
a few moments.) We do not agree with this position. As we construe the proviso, it
excepts four groups of corporations:
Labor, agricultural, or horticultural organizations.
Fraternal beneficiary societies, orders, or associations operating under the lodge
system, and providing for the payment of life, sick, accident, aid other benefits to
the members of such societies, orders, or associations, and dependents of such
members.
Domestic building and loan associations organized and operated exclusively for
the mutual benefit of their members.
Any corporation or association organized and operated exclusively for religious,
charitable, or educational purposes, no part of the net income of which inures to the
benefit of any private stockholder or individual.
Digitized by VjOOQIC
19
The character of the first three groups is well known. In none of them (as nor-
mally conducted) does the net income inure to the benefit of private stockholders or
individuals, and it would have been superfluous to add that feature to the description.
But there is a large and a' more indeterminate class — ''religious, charitable, and edu-
cational " corporations or associations — and this class contains some members whose
precise character may not be altogether easy to define. For example, a church is,
no doubt, organized and operated exclusively for religious purposes; but is this true
of a camp-meeting association also? Such an association sometimes has net income
that inures, at least in part, to the benefit of private stockholders or individuals. A
hospital is usually organized and operated exclusively for charitable purposes; but
there are private hospitals operated by associations whose net income goes to the
benefit of individuals. The exclusive purpose of a school is educational, but the
income of many schools operated by associations is devoted to private profit. Indeed,
everyone acquainted with the problems of State taxation know how often the courts
have been called on to determine the scope and application of statutes exempting
charitable and educational institutions from taxation, and we see no reason to doubt
that Congress intended to avoid such disputes as far as possible by establishing both
a positive and a negative test for the restricted membership in the fourth group.
Positively (although the use of the word ''exclusively'' makes this test partly negative
also) the test is that the corporations and associations must be organized and operated
exclusively for religious, charitable, and educational purposes, and negatively the
test is that none of such corporations and associations shall devote its net income, in
whole or in part, to the benefit of any private stockholder or individual.
As pointed out in the association's brief, section 2 of the income tax provisions of
the act of October 3, 1913, lends force to the construction that confines the italicized
clause to the fourth group. Section 2 in clause 3 of the act of 1913 repeals section 38
of the act of 1909, the reason being that an earlier clause (G) is, in effect, a substitute
for section 38 and that Congress did not intend to impose two taxes of the same nature
at the same time, one by ^e act of 1913 and the other by the act of 1909. Being a
substitute, therefore, clause G also contains an excepting proviso, and this is as follows*
Providedj however ^ That nothing in this section shall apply to labor, agricultural, or
horticultural organizations, or to mutual savings banks not having a capital stock
represented by shares, or to fraternal beneficiary societies, orders, or associations
operating under the lodge system or for the exclusive benefit of the members of a
fraternity itself operating under the lodge svstem and providing for the payment of
Ufe, sick, accident, and other benefits to the members of such societies, orders, or
associations and dependents of such members^ nor to domestic building and loan
associations, nor to cemetery companies, organized and operated exclusively for the
mutual benefit of their members, nor to any corjjoration or association organized and
oi)erated exclusively for religious^ charitable, scientific, or educational purposes, no
part of the net income of wnich inures to the benefit of any private stockholder or
mdividual, nor to business leagues, nor to chambers of commerce or boards of trade
not or^ized for profit or no part of the net income of which inures to the benefit of
the private stockholder or individual, nor to any civic league or organization not
organized for profit, but operated exclusively for the promotion of social welfare.
We think it is clear that the repeated use here made by Congress of the negative
clause, "no part of the net income of which inures to the benefit of any private stock-
holder or individual," throws light upon the previous use of the same clause in the
act of 1909 and strengthens the construction we have adopted. We agree that the
argument is somewhat weakened by the possibility of supposing that Congress was
trying to make more clear in the act. of 1913 what may have been thought obscure in
the act of 1909, and we wish to avoid even the appearance of evading this consid
eration; but certainly both constructions are available, and one seems as likely to be
correct as the other. We believe the view we have indicated should be adopted.
But there is another reason for believing that the clfi-use in italics could not have been
intended to apply to the group of "domestic building and loan associations organized
and operated exclusively for the mutual benefit of their members. " And the reason
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20
is this, such application leads to a conclusion that may fairly be described as absurd.
Every building association is organized and operated for the mutual benefit of its
members; this benefit is attained by profits, and profit is gained by the use of its funds,
whether derived from installments, premiums, interest, or fines, supplemented by
forfeitures, and by such dealing in real estate as it may be permitted or obliged to
undertake. In every year of its normal operations it expects to have a net income,
and of course this net income belongs or inures to its members. Now,' whfle the
members can hardly be described accurately as "private" stockholders (the word
seems to be contrasted with some other relation to a particular association), they are
certainly "individuate''; and, therefore, if the right of a building association to be
exempted by the proviso is to be tested by the fact that no private stockholder 02
individual receives any benefit from its net income, the inevitable result will follow
that the proviso has no effect upon building and loan associations at all, and that no
such association can be exempted. We have said that in our opinion this conclusion
comes near to absurdity, and we think that result is too plain to require further dis-
cussion.
But the chief contention of the Government is that the association is not oi^iamzed
and operated exclusively for the mutual benefit of its members, and Hie sole support
of the argument is found in th9 fact that the association issues prepaid stock. We re-
peat that this is not preferred stock. The New Je«ey statute forbids the issue of such
stock— namely, stock whose holders enjoy advantages greater than the holders of the
common stock— while the issue of common stock that is prepaid isexjiresBly authorized:
No such association shall issue preferred or other than common stock, and all share-
holders shall occupy the same relative status as to debts and losses of the association,
but nothing herein shall forbid agreements with shareholders who pay full par or ma-
turity value of shares in advance, whereby they may waive participation in the gen-
eral profits of the association in consideration of a fixed annual profit.
The holders of the stock in question have waived their right to share with install-
ment stock in the general profits of the association, and they have agreed to accept in
lieu thereof (but only "out of the profits of the association") 5 per cent yearly on the
amount prepaid. This is the only difference between the prepaid stock and the install-
ment stock; the parties have stipulated —
* * * Thattherightsof the two classes of stockholders are in all respects identical
except as to the participation in the profits of the association as above set forth; that
the profits of the Park View Building and Loan Association during the year 1909 and
subsequent thereto have been in excess of 5 per cent per annum.
We think, therefore, the question may be properly stated in this form: Is the fore-
going arrangement for the mutual benefit of the parties? In our opinion the answer
should be in the affirmative.
The subject of prepaid stock has been much discussed. Several courts have
declared against it and a few legislatures have forbidden it, but the decided weight
of authority, judicial and legislative, is in its favor. The course of the discussion
is partially indicated in 4 Am. and Eng. Ency. (2d ed.), 1030 (text and notes) and
in 6 Cyc, 127 (text and notes); but a much better reference than either of these is
Folk V, State Capital, etc.. Association (214 Pa., 529). In Folk's case Judge End-
lich, of the common pleas court of Berks County, discussed the subject elaborately
and came to the conclusion (p. 535) that there is authority of a very high and per-
suasive order for holding —
* * -)^ That the acceptance of prepayment pf stock and the issuance thereupon
of full-paid dividend-bearing stock ism no proper sense a borrowing of money * * «•
that, remembering that a building association can not successfully perform its intended
functions without members who are simply investors and not borrowers, its i>ower
to aid the latter class of members, and thus the main purpose of its creation, will be
promoted by attracting investing members capable of putting larger sums at Che
society's disposal than can be speedily ^thered by means of periodical payments
alone; that the allowance of a fixed dividend upon such paid-up stock out of the
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21
profitB of the coiporate business is a reasonable incident to its issuance, just to both
classes of sharehmders and not calculated to give either an undue advantage over the
other: that, on the contrary, the practical effect of the concurrent issuance of both
installnient and full-paid stock is likely to prove beneficial to both classes of tthaie-
holders; that no essential characteristic of the building association scheme can be
regarded as forbidding, and no essential purpose of it as defeated by, this device;
thlat it is contrary to no accepted rule of policy applicable to or involved in the nature
of building associations; and that (in Pennsylvania) it is not excluded b^r statutory
provisions in terms authorizing and regulating operations on the footing of instalment
stock, but not clearly confimng associations tnereto or expressly prohibiting any
other, and it is to be noted that with this view every adjudicated case involving the
point under discussion appears to be in harmony, except, perhaps, the one above
r^erred to decided in North Carolina.
And the Supreme Court of Pennsylvania in the brief opinion approving and adopt-
ing Judge Endlich's opinion has this to say upon the subject (p. 543):
• The general purpose of building associations is the accumulation of funds to be
loaned to their members and to be repaid in small periodical payments. The accumu-
lation from the payment of installments on stock is so slow as often to hamper their
practical operations, and different methods have been adopted to provide funds to
meet the demands of borrowing members promptly, and thus to promote the general
puipose. Building associations are authorized by the act of June 25, 1895 (P. L.,
303), to borrow money for temporary use when applications for loans exceed the
accumulations in the treasury and when a series of stock has matured. The issuing
by these associations of full-paid stock to serve the same puipose as borrowing is an
enlargement of iheji scope oi operations not inconsistent witn their original deeign,
if properly restricted. While it has not been expressly authorized by the legisla-
ture, there is a distinct recognition of the practice by the act of June 22^ 1897 (P. L.,
178), which subjects such stock to taxation. We find nothing unlawful in the issuing
of luU-paid stock, the dividends of which are not guaranteed, but are limited in
amount and payable only out of the profits, and the holders of which are entitled to
no preference and have no advantage over other stockholders upon distribution in
case of loss or insolvency^ provided that the issue is incidental to the main busineas
of the association and is intended to provide a fund from which loans may be made
to the holders of installment stock. To this extent and for this purpose its issue is
within the implied powers of such associations.
Judge Endlich is the author of a standard treatise on building associations, and
in sections 461-464 of the second edition he has again considered the subject and has
stated the results of the prevailing principles to be as follows:
464. The result of the principles declared and applied in these decisions would
seem to be, in the absence of any statutory provision expressly authorizing or pro-
hibiting it, (I) that building associations may always permit prepayment of stock
subscriptions to be received, with or without rebate or mterest allowance in consid-
eration of such prepayment; (2) that, in pursuance of charter provisions, such aaso-
ciations may issue paid-up stock with the incident of priority in distribution over
installment stock; (3) that, imder a like power and the right to pay dividends, they
may issue paid-up stock bearing income at any ^ven reasonable rate per annum
payable in cash out of and to the extent of the eammgs of the association>-an arrange-
ment on the part of any corporation to pay interest or dividends to its shareholders,
witliout reference to the ability of the company to pay them out of its earnings, being
whoUy ill^;al and void.
We agree with these conclusions and with the reastming that supports them, and
we see no occasion to prolong the discussion. In our opinion, the members of the
Park View Building & Loan Association are mutually benefited by the issue of
the prepaid stock in question, and as a consequence the association is organized and
operated exclusively for such benefit. It is certain that the association regards the
arrangement as mutually beneficial, for it has availed itself of the statutory permission
to adopt it; and we may be sure that the keen sense of self-interest possessed by the
members of such associations would scarcely tolerate an arrangement — even if
the statute did not expressly forbid it — that would constitute a small class of privi-
leged stockholders with rights superior to their fellows.
Looking at the subject fiom as many points of view as possible, we are persuaded
tbat Oongrefls intended the word ''mutual'- to mean ''substantially equal/- and that
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22
a building aasociation is oiganized and operated for tihe mutual benefit of its :
bere when they share hi the profits on substantially the same footing. Exact equality
is probably not possible where part of the stock is prepaid and part is installment;
but an approximate equality, sufficiently close for all purposes, is certainly not be-
yond the reach of calculation. We have no doubt that such a calculation is always
made before the terms are adopted upon which prepaid stock is allowed to share in
profits.
In brief, the Park View Building & Loan Association was '' organized'' exclusively
for the mutual benefit of its members; the New Jersey Legislature required such
benefit to be its object, and (as a means of attaining it) expressly permitted the use
of prepaid stock. And the association is in fact ''operated " for their mutual benefit,
if we may trust the abundant and well-reasoned authority that approves of prepaid
etock, and if we may rely also on the strong antecedent probability that the membera
would not agree to any arrangement that would distm-b their substantially equal
footing.
^e judgment is affirmed.
(T. D. 1942.)
Income tax.
Income tax ruling as to income derived from bonds containing ''tax-free covenant
clause,'' and how same may be returned on Form 1040 when exemption %8 not
daimed at the source.
Tbbasubt Depabtment,
Office of Commissioneb of Intebnal Revenue,
WasUnffton, D. C, Fehruary S, 1914.
To collectors of internal revenue:
This office is in receipt of numerous letters asking whether income
paid at tke source, although not withhdi at the source, can be placed in
column A, page 2, of Form 1040, and in reply to this inquiry you wiU
advise as follows:
The stipulation in bonds whereby the tax which may be assessed
against them or the income therefrom is guaranteed is a contract
wholly between the corporation and the bondholder, and in so far as
the income tax law applies the Government will not differentiate
between coupons from bonds of this character and those from bonds
carrying no such guarantee. The debtor corporation, or its duly
authorized withholding agent, will be held responsible for the normal
tax due on the coupons on which no tax has been withheld in cases
wherein no exemption is claimed.
Income paid by "debtors" from March 1 to November 1, 1913,
shall be included in the return of the individual (under column B,
page 2, of Form 1040) as income upon which the normal tax of 1 per
cent has not been withheld and paid at the source.
Income received by individuals between November 1 and December
31, 1913, upon which the normal tax has been withheld at the source
shall be included in their annual return (under colunm A, page 2, of
Form 1040) as income upon which the tax has been paid.
W. H. OSBOBN,
Commissioner of Internal Revenue.
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23
(T. D. 1943.)
Income tax.
Instaructions to collectors relative to fiduciaries and returns to be made by them on
Form 1041.
Teeasurt Department,
Office op Commissioner of Internal Revenue,
Washington, D. C, February 4, 1914-
To collectors of internal revenue:
T. D. 1908 provides that all fiduciaries shall on or before March 1
of each year, when the annual interest of any beneficiary in the in-
come of the estate or trust is in excess of $3,000 ($2,500 for the year
1913), make and render a return of the income of the person or per-
sons (the beneficiaries) for whom they act to the collector of internal
revenue of the district in which the fiduciary resides.
Where a decedent died after March 1 in the year 1913, and from
March 1 up to the date of his death had a net income of $2,500 or
more, the fiduciary (i. e., the executor or administrator) should make
a return for the decedent on Form 1040, and the income tax, both
normal and additional, shown to be due thereon will be a debt against
the estate of the decedent. The same principle will apply to sub-
sequent years if the net income of the decedent from January 1 to
the date of his death amoimts to $3,000 or more. No other return
is required to be made by the fiduciary imtil the settlement of the
estate has reached the stage when the beneficiaries thereof and their
respective interests in the income derived from the estate are de-
terminable, and then the fiduciary is required to file a return on or
before March 1 of each year, as prescribed by the regulations.
The fiduciary will enter on page 2 of Form 1041, under the appro-
priate heads, all income accruing to the beneficiaries of the trust or
estate from March 1 to December 31, 1913, inclusive; but the inter-
est derived from the obligations of a State or any political subdi-
vision thereof and the obligations of the United States or its posses-
sions is not to be included.
The fiduciary will enter on page 3 of Form 1041 for the year 1913
five-sixths of the deductions allowable imder paragraph B of the
law, and on line 1 it will be proper for the fiduciary to enter all
legitimate expenses incurred in administering the estate or trust.
If the fiduciary holds and rents business or residential property and
pays insurance, water rents, commissions for the collection of rents,
or any other necessary expenses in managing the estate or trust, it
will be proper to enter same on line 1 as an allowable deduction.
The amoimt to be shown on page 1, line 3, will represent the total
amount of income accruing through the fiduciary to the beneficia-
ries of the estate or trust which is subject to the normal tax, and when
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24
the interest of any one beneficiary in this amount from November 1
to December 31, 1913, inclusive, was in excess of $3,000, whether
distributed or not, the fiduciary was required to withhold and pay
the normal tax on the whole $3,000 and excess thereof, imleira the
beneficiary filed with the fiduciary Form 1007, as prescribed by the
regulations, claiming exemption imder paragraph C, and in that
event the fiduciary was only required to witUiold and pay the
normal tax on the amount in excess of the exemption claimed.
T. D. 1906 prescribes that when fiduciaries make their annual
return they shall give the name and full address of each beneficiary
and the share of income to which each may be entitled; which infor-
mation shall be given on page 1 of Form 1041. In the column
"Amoimt of income paid or accrued to beneficiaries" should be
entered the respective interest of the beneficiary in the amount of
income as shown on page 1, line 3.
When the interest of any beneficiary in the amoimt of income
subject to the normal tax, as shown on Form 1041, page 1, line 3, is
in excess of $3,000, and the same was paid to the beneficiary within
the period from November 1 to December 31, 1913, both dates
inclusive, the fiduciary was required to wiOihold and pay the normal
tax as prescribed by the regulations, and the information required
should be given on Form 1041, page 1, giving the name and full
address of. each beneficiary, the amount of income paid or payable
to each beneficiary (this amount would be the beneficiary's interest
in the amoimt of income subject to the -normal tax as shown on
line 3), the amoimt of exemption claimed under paragraph C (if
any), the amount of income on which normal tax should be with-
held, and the amount of tax withheld, all to be given in the respec-
tive columns in the order named.
A fiduciary acting for a minor or insane person who had a net
income of $2,500 or more for the year 1913 will make the return for
his ward on Form 1040 and will not be required to file a return on
Form 1041, unless he has more than one ward by reason of the same
estate or trust; then in that event a return will be required on Form
1041, and a separate return on Form 1040 for each ward having a
net income of $2,500 or more for the year 1913.
The income accruing or paid to a beneficiary through a fiduciary
may be composed in part of dividends, or income upon which the
normal tax has been withheld and paid or to he paid at the source,
or income derived from the obligations of a State or any political
subdivision thereof or from the obligations of the United States or
its possessions (income from obligations of a State or any political
subdivision thereof and from the obligations of the United States or
its possessions is not subject to the tax and should not be included).
If a beneficiary has other income which, added to the income accruing
Digitized by VjOOQIC
25
to him through his fiduciary, gives him a net income of $2,500 or
more for the period from March 1 to December 31,1913, inclusive^
he should make a return of his gross income on Form 1040, as required
by the regulations.
To illustrate: If a fiduciary's gross income was $10,000, derived
from the following sources:
1. Interest upon the obligations of the United States $1,000
2. Dividends on stock or net earnings of corporations ^ 2,000
3. Interest from bonds containing '^tax-free covenant clause/' upon which
the fiduciary did not claim any exemption at soiuce and which he en-
tered on Form 1041, on page 2, column A, as income on which normal tax
was withheld ." 2,000
4. Income from rents, etc 5,000
10,000
the fiduciary's return on Form 1041 would show as follows:
Page 2. line 3, column B, amount of rents ^,000
line 5, interest from bonds, "tax-free clause," colimm A 2, 000
line 10, dividends 2, 000
Aggregate total of gross income 9, 000
(No entry of interest on United States bonds, $1,000.)
Page 3. Line 1, necessary expenses actually paid in carrying on business, in-
cluding comx)ensation of fiduciary, water rents, insurance, etc 450
line 3, taxes paid 400
line 6» actual repairs made on building, or amoimt allowed for wear*
and tear •. 150
line 7, dividends not subject to normal tax 2, 000
line 8, amount of income on which normal tax has been deducted and
withheld at source, bonds with ''tax-free clause" 2, 000
Total deductions 6,000
PUgel. line 1, gross income , 9,000
.line 2, total deductions 5,000
line 3, amount of income due beneficiary, which is subject to normal
tax 4,000
The beneficiary has filed with iiiQ fiduciary as a witMolding agent
a claim for exemption under paragraph C for $2,600 (exemption of
single person for 1913), and the return on Form 1041 would show on
page 1, in addition to the foregoing entries, the following:
John Doe, 76 B Street, New York aty.
In third column, amount of income paid or accrued to beneficiary |4, 000
In fourth column, amount of exemption claimed 2, 500
In fifth column, amount of income on which fiduciary is liable to tax 1, 500
In sixth column, amount of normal tax withheld 15
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26
In the foregoing illustration the beneficiary, in his return on
Form 1040, would make no return of item 1, interest on United
States bonds. Item 2, dividends, would be entered on page 2, line
11, and for the purpose of calculating the normal tax would be an
allowable deduction on page 1, line 4. Item 3, interest on bonds,
would be entered on page 2, line 7, column A, and for the purpose of
calculating the normal tax would be an allowable deduction on
page 1, line 6. Item 4, rents, would be entered on page 2, line 7;
$1,500 in column A, and $2,500 in column B (exemption of $2,500
claimed and no tax withheld on this amount). This would show —
Income received from fiduciary subject to be returned on Form 1040 $8, 000
Deductions-and exemption allowable in calculating nonnal tax 8, 000
No normal tax due, it having been paid at the eource by the fiduciary as
shown by his return on Form 1041.
In making the foregoing entry on Form 1040, on line 11, there
should be written just above the printed heading, "Amount received
from fiduciary," and the amount should be entered in the appro-
priate column.
No illustration is given of income accruing to the beneficiary from
other sources, an illustration of this not being deemed necessary, as
such income is entered in the usual way.
W. H. OSBOBN,
Commissioner oflrUemal Revenue.
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Regulations No. 33 : : : : : United States Internal Revenue
LAW AND REGULATIONS
RELATIVE TO
THE TAX ON INCOME OF INDIVIDUALS,
CORPORATIONS, JOINT STOCK COM-
PANIES, ASSOCIATIONS, AND
INSURANCE COMPANIES
IMPOSED BY SECTION 2
ACT OF OCTOBER 3, 1913
January 5, 1914
WASHINGTON
GOVERNMENT PRINTING OFHCE
1914
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INCOME TAX LAW.
[Section 2, act October 3, 1913.]
A. Subdivision 1. That there shall be levied, assessed, j^JJjJfj^^ **^
collected and paid annually upon the entire net income
arising or accruing from all sources in the preceding
calendar year to every citizen of the United States,
whether residing at home or abroad, and to every per-
son residing in the United States, though not a citizen
thereof, a tax of 1 per centum per annum upon such
income, except as hereinafter provided; and a like
tax shall be assessed, levied, collected, and paid annu-
ally upon the entire net income from all property owned
and of every business, trade, or profession carried on in
the United States by persons residing elsewhere.
Subdivision 2. In addition to the income tax provided Additiawa t^
under this section (herein referred to as the normal exoeas of 120,000.
income tax) there shall be levied, assessed, and collected
upon the net income of every individual an additional
income tax (herein referred to as the additional, tax) of
1 per centum per annum upon the amount by which the
total net income exceeds $20,000 and does not exceed
$50,000, and 2 per centum per annum upon the amount
by which the total net income exceeds $50,000 and does
not exceed $75,000, 3 per centum per annum upon the
amount by which the total net income exceeds $7^,000
and does not exceed $100,000, 4 per centum per annum
upon the amount by which the total net income exceeds
$100,000 and does not exceed $250,000, 5 per centum
per annum upon the amount by which the total net
income exceeds $250,000 and does not exceed $500,000,
and 6 per centum per annum upon the amount by which
the total net income exceeds $500,000. All the pro-
visions of this section relating to individuals who are
chargeable with the normal income tax, so far as they
are applicable and are not inconsistent with this sub-
division of paragraph A, shall apply to the levy, assess-
ment, and collection of the additional tax imposed under
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4 INCOME TAX LAW.
this section. Every person subject to this additional
tax shall, for the purpose of us assessment and collection,
of^*2f^o^^make a personal return of his total net income from all
SV™*^^ "*°"" sources, corporate or otherwise, for the preceding cal-
endar year, under rules and regulations to be prescribed
by the Commissioner of Internal Revenue and approved
by the Secrietary of the Treasury. For the purpose of
fUns^and proflts*^^ additional tax the taxable income of any individual
^toSuSd*^*^^"^^^ embrace the share to which he would be entitld
of the gains and profits, if divided or distributed, whether
divided or distributed or not, of all corporations, joint-
stock companies, or associations however created or
organized, formed or fraudulently availed of tor uhe
purpose of preventing the imposition of such tax through
the medium of permitting such gains and profita uO
accumulate instead of being divided or distributed', and
the fact that any such corporation, joint-stock com-
pany, or association, is a mere holding company, or tliaf.
gatofi^Midf profi^^l^® gains and profits are permitted to accumulate beyond
hSwregardSSf^^''*'!^® reasonable needs of the business shall be prima
facie evidence of a fraudulent purpose to escape such
tax; bLt the fact that the gains and profits are m any
case permitted to accumulate and become surplus shall
not be construed as evidence of a purpose to escape the
said tax in such case unless the Secretary of the Treasury
shall certify that in his opinion such accumulation is
unreasonable for the purposes of the business. When
requested by the Commissioner of Internal Revenue, or
any district collector of internal revenue, such corpora-
tion, joint-stock company, or association shall forward
to him a correct statement of such profits and the names
of the individuals who would be entitled to the same if
distributed.
item^s coMtitSt^ S- That, subject only to such exemptions and deduc-
ing same, tions as are hereinafter allowed, the net income of a
taxable person shall include gains, profits, and income
derived from salaries, wages, or compensation for per-
sonal service of whatever kind and in whatever form
paid, or from professions, vocations, businesses, trade,
commerce, or sales, or dealings in property, whether real
or personal, growing out of the ownership or use of or
interest in real or personal property, also from interest,
rent, dividends, securities, or the transaction of any law-
ful business carried on for gain or profit, or gains or profits
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INCOME TAX LAW. 5
and income derived from any source whatever, including
the income from but not the value of property acquired qJSf^l gS?]
by gift, bequest, devise, or descent: Provided, That theJ^^^^|*S;
proceeds of life insurance policies paid upon the death of*^®^^*^'®*®'"^^-
the person insured or payments made by or credited to
the insiu'ed, on life insiu-ance, endowment, or annuity
contracts, upon the retimi thereof to the insured at the
maturity of the term mentioned in the contract, or upon
surrender of contract, shall not be included as income.
That in computing net income for the purpose of tbCj^^^cg™^^;;
normal tax there shall be allowed as deductions: First, p"^ 2?*,.?'
' come for the pur-
the necessary expenses actually paid m carrying on any ^^^ ^^^ «>r-
business, not including personal, living, or family ex-
penses; second, all interest paid within the year by a tax-
able person on indebtedness; third, all national. State,
county, school, and municipal taxes paid within the year,
not including those assessed against local benefits;
foiu'th, losses actually sustained during the year, in-
curred in trade or arising from fires, storms, or shipwreck,
and not compensated for by insurance or otnerwise; fifth,
debts due to the taxpayer actually ascertained to be
.worthless and charged off within the year; sixth, a
reasonable allowance for the exhaustion, wear and tear
of property arising out of its use or employment in the
business, not to exceed, in the case of mines, 5 per centum
of the gross value at the mine of the output for the year
for which the computation is made, but no deduction
shall be made for any amoxmt of expense of restoring
property or making good the exhaustion thereof for
which an allowance is or has been made: Provided, That
no deduction shall be allowed for any amount paid out
for new buildings, permanent improvements, or better-
ments, made to increase the value of any property or
estate; seventh, the amoimt received as dividends upon
the stock or from the net earnings of any corporation,
joint stock company, association, or insurance company
which is taxable upon its net income as hereinafter pro-
vided; eighth, the amount of income, the tax upon which
has been paid or withheld for payment at the source of
the income, under the provisions of this section, provided
that whenever the tax upon the income of a person is
required to be withheld and paid at the source as here-
inafter required, if such annual income does not exceed
the sum of $3,000 or is not fixed or certain, or is indefinite,
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6 rerooME tax law.
or irregular as to amount or time of accrual, the same shall
not be deducted in the personal return of such person.
nonresidentel The net income from property owned and business car-
^ed^to WniLi ried ou in the United States by persons residing elsewhere
states. shall be computed upon the basis prescribed in this par-
agraph and that part of paragraph G of this section
relating to the computation of the net income of corpora-
tions, joint-stock and insiu'ance companies, organized,
created, or existing imder the laws of foreign coimtries,
in so far as applicable.
ligSiOTBofstete That in computing net income under this section there
stetes and coi^ shall be excluded the interest upon the obligations of a
tetau!aoffl^State or any political subdivision thereof, and upon the
exempt from tax. obUgations of the United States or its possessions ; also the
compensation of the present President of the United
States diu'ing the term for which he has been elected, and
of the judges of the supreme and inferior courts of the
United States now in office, and the compensation of all
officers and employees of a State or any political sub-
division thereof except when such compensation is paid
by the United States Government.
•3!o5o°au?we'*d ^' ^h*^^ ^^^^^ ^hall be deducted from the amoimt of
8^ai^!oo(^-*^® net income of each of said persons, ascertained as
riidSSL'^d^e provided herein, the sum of $3,000, plus $1,000 additional
Uving together, jf ^j^^ person making the return be a married man with a
wife Uving with him, or plus the sum of $1,000 additional
if the person making the return be a married woman with
a husband living with her; but in no event shall this addi-
tional exemption of $1,000 be deducted by both a husband
and a wife: Provided, That only one deduction of $4,000
shall be made from the aggregate income of both husband
and wife when living together.
wWchVaxistobe ^- "^^^ ^^^ *®*^ shsJl be computed upon the remainder
computed. ^f ^^^ ^^^ iucome of each person subject thereto, accru-
ing during each preceding calendar year ending Decem-
ber thirty-first: Provided, however, That for the year end-
ing December thirty-first, nineteen hundred and thirteen,
said tax shall be computed on the net income accruing
from March first to December thirty-first, nineteen hun-
dred and thirteen, both dates inclusive, after deducting
five-sixths only of the specific exemptions and deductions
Digitized by VjOOQIC
nrOOME TAX LAW. 7
herein provided for. On or before the first day of March, i^tum^ to be
•^ •^ ' made under oath
nineteen hundred and fourteen, and the first day of by each ,
of March in each year thereafter, a true and accurate oome of %3%) or
return, under oath or affirmation, shall be made by each
person of lawful age, except as hereinafter provided,
subject to the tax imposed by this section, and having
a net income of $3,000 or over for the taxable year, to
the collector of internal revenue for the district in which
such person resides or has his principal place of business,
or, in the case of a person residing in a foreign country, in
the place where his principal business is carried on within
the United States, in such form as the Commissioner of
Internal Revenue, with the approval of the Secretary of
the Treasury, shall prescribe, setting forth specifically
the gross amoimt of income from all separate sources and <*«»„ income
^ - -'- fh>m all ao n rc o B
from the total thereof, deducting the aggregate items ortobeepeoifled.
expenses and allowance herein authorized; guardians. Guardians,
trustees, executors, administrators, agents, receivers, make return' for
conservators, and all persons, corporations, or associa-SS'art.^'^ ™
tions acting in any fiduciary capacity, shall make and
render a return of the net income of the person for whom
they act, subject to this tax, coming into their custody or
control and management, and be subject to all the pro-
visions of this section which apply to individuals:
Provided J That a return made by one of two or more joint
guardians, trustees, executors, administrators, agents,
receivers, and conservators, or other persons acting in a
fiduciary capacity, filed in the district where such person
resides, or in the district where the will or other instru-
ment imder which he acts is recorded, under such regu-
lations as the Secretary of the Treasury may prescribe,
shall be a sufficient compliance with the requirements of
this paragraph; and also all persons, firms, companies, Penons, firms,
_, ••• f • etc«f liavuis con*
copartnerships, corporations, jomt-stock compames ortroiofdetermina-
• • 1 • • m ble income pay*
associations, and insurance compames, except as here- able to others.
inafter provided, in whatever capacity acting, having
the control, receipt, disposal, or payment of fixed or
determinable annual or periodical gains, profits, and
income of another person subject to tax, shall in behalf
of such person deduct and withhold from the payment
an amount equivalent to the normal income tax upon Normal tax to
the same and make and render a return, as aforesaid, return thereof
but separate and distinct, of the portion of the income
of each person from which the normal tax has been thus
withheld, and containing also the name and address of
Digitized by VjOOQIC
8 INCOME TAX LAW.
such person, or stating that the name and address or the
address^ as the case may be, are imknown: Provided, That
the provision requiring the normal tax of individuals to
be withheld at the source of the income shall not be con-
strued to require any of such tax to be withheld prior to
the first day of November, nineteen hundred and thirteen :
q^S^^^^^ ^-Provided further f That in either case above mentioned
g^/^^'^^'^'no return of income not exceeding $3,000 shall be re-
i^w»t in ^iik quired: Provided further y That any persons carrying on
retum^"**^ "* business in partnership shall be liable for income tax
only in their individual capacity, and the share of the
profits of a partnership to which any taxable partner
would be entitled if the same were divided, whether
divided or otherwise, shall be returned for taxation and
the tax paid, under the provisions of this section, and any
partnershipBsuch firm, when requested by the Commissioner of Inter-
must submit _ _ ' T . . 11 ^ 1 n I. 1 ^
Etatemflnts whennal Kcvenue, or any district collector, shall forward to
him a correct statement of such profits and the names of
the individuals who would be entitled to the same, if dis-
tributed: Provided further. That persons liable for the
normal income tax only, on their own account or in
behalf of another, shall not be required to make return
Dividends on of the income derived from dividends on the capital stock
stock, when to be . • • . x i
excluded from or from the net eammgs of corporations, lomt-stock com-
retum. . . • x- j • • ^ ui
pames or associations, and insurance companies taxable
upon their net income as hereinafter provided. Any
person for whom return has been made and the tax paid,
or to be paid as aforesaid, shall not be required to make
a return unless such person has other net income, but
only one deduction of $3,000 shall be made in the case of
any such person. The collector or deputy collector shall
Returns to be require every list to be verified by the oath or aflBirmation
Md^l^imSed^re^ of the party rendering it. If the collector or deputy col-
qSr©d"byTOiieo^ lector havc rcason to believe that the amount of any
^^' income returned is understated, he shall give due notice
to the person making the return to show cause why the
amount of the return should not be increased, and upon
proof of the amount understated may increase the same
Appeals from accordingly. If dissatisfied with the decision of the col-
decisfon of col-, ^ r. i • i • i n i
lector. lector, such person may submit the case, with all the
papers, to the Commissioner of Internal Revenue for his
decision, and may furnish sworn testimony of witnesses
to prove any relevant facts.
Assessments, E. That aU assessments shall be made by the Commis-
ments'of. sioner of Internal Revenue and all persons shall be notified
Digitized by VjOOQIC
INCOME TAX LAW. 9
of. the amount for which they are respectively liable on or
before the first day of June of each successive year, and
said assessments shall be paid on or before the thirtieth
day of June, except in cases of refusal or neglect to make
such return and in cases of false or fraudulent returns, in , Lknitation as
to time wnen as-
which cases the Commissioner of Internal Revenue shall, sesanent may bo
..1.1 P*^<* without In-
upon the discovery thereof, at any time within three years ourring penalty.
after said return is due, make a return upon information
obtained as provided for in this section or by existing law,
and the assessment made by the Commissioner of Internal
Revenue thereon shall be paid by such person or persons
immediately upon notification of the amount of such as-
sessment; and to any sum or isums due and unpaid after
the thirtieth day of June in any year, and for ten days Penalty and in-
after notice and demand thereof by the collector, therenonpaymen**t
shall be added the sum of 5 per centum on the amo'unt of^erjunesothT^
tax unpaid, and interest at the rate of 1 per centum per
month upon said tax from the time the same became due,
except from the estates of insane, deceased, or insolvent
persons.
All persons, firms, copartnerships, companies, corpora- ete'^^SlKSSn '
tipns, joint-stock companies or associations, and insurance g^g^otheiT*^
companies, in whatever capacity acting, including lessees
or mortgagors of real or personal property, trustees acting
in any trust capacity, executors, administrators, agents,
receivers, conservators, employers, and all officers and em-
ployees of the United States having the control, receipt,
custody, disposal, or payment of interest, rent, salaries,
wages, premiums, annuities, compensation, remuneration,
emoluments, or other fixed or determinable annual gains,
profits, and income of another person, exceeding $3,000
for any taxable year, other than dividends on capital
stock, or from the net earnings of corporations and joint-
stock companies or associations subject to like tax, who
are required to make and render a return in behalf of
another, as provided herein, to the collector of his, her, or Return to be
its district, are hereby authorized and required to deduct of district.
and withhold from such annual gains, profits, and income
such sum as will be sufficient to pay the normal tax im-
posed thereon by this section, and shall pay to the officer ^o'^offlcer au^>
of the United States Government authorized to receive ««d to receive
same.
the same; and they are each hereby made personally liable
for such tax. In all cases where the income tax of a
person is withheld and deducted and paid or to be paid at
Digitized by VjOOQIC
10 IKOOME TAX LAW.
the source, as aforesaid, such person shall not receive the
benefit of the deduction and exemption allowed in parar
fliS^^S^ce grapli C of this section except by an application for refund
Im^iS?* 'Sid« ^^ ^^® ^*^ unless he shall, not less than thirty dajrs prior to
paragraph c. ^y^q ^^y q^ ^hich the return of his income is due, file with
the person who is required to withhold and pay tax for
him, a signed notice in writing claiming the benefit of such
exemption and thereupon no tax shall be withheld upon
Penalty lor fli-the amount of such exemption: Provided. That if any per-
ing false oUim. - ,, ^ r^ • - n ,
son for the purpose of obtammg any allowance or reduc^
tion by virtue of a claim for such exemption, either for
himself or for any other person, knowingly makes any
false statement or false or fraudulent representation, he
shall be liable to a penalty of $300; nor shall any person
under the foregoing conditions be allowed the benefit of
Notice most be any deduction provided for in subsection B of this section
for claim tor de- unless he shall, uot less than thirty days prior to the day
paragraphs, on which the return of his income is due, either -file with
the person who is required to withhold and pay tax for
him a true and correct return of his annual gains, profits,
and iucome from all other sources, and also the deductions
asked for, and the showing thus made shall then become a
part of the return to be made in his behalf by the person
required to withhold and pay the tax, or likewise make
application for deductions to the collector of the district
Returns, tor in which retum is made or to be made for him: Provided
minors, insane rm •* i • •
PMJ^^»JJ*J» ^7 further J That if such person is a minor or an msane person,
or is absent from the United States, or is unable owing to
serious illness to make the retum and application above
provided for, the retum and application may be made for
him or her by the person required to withhold and pay
the tax, he making oath under the penalties of this Act
that he has sufficient knowledge of the affairs and prop-
erty of his beneficiary to enable him to make a full and
complete return for him or her, and that the return and
application made by him are full and complete: Provided
ixfde^5*a»i/^^^^^' That the amount of the normal tax hereinbefore
J^^J,*^^J imposed shall be deducted and withheld from fixed and
Srorporattom?' ^^^^^^^^'^^^ annual gains, profits, and income derived
from interest upon bonds and mortgages, or deeds of trust
or other similar obligations of corporations, joint-stock
companies or associations, and insurance companies^
whether payable annually or at shorter or longer periods,
although such interest does not amount to $3,000, subject
to the provisions of this section requiring the tax to be
Digitized by VjOOQIC
IKOOME TAX LAW. 11
withheld at the source and deducted from annual income
and paid to the Government; and likewise the amount of
such tax shall be deducted and withheld from coupons,
diecks, or bills of exchange for or in payment of i^^®rest^^g<jend8^n
upon bonds of foreign countries and upon fore^ '^^^^mort"^^*^*
gages or like obligations (not payable in the United States) ,
and also from coupons, checks, or bills of exchange for or
in payment of any dividends upon the stock or interest
upon the obligations of foreign corporations, associations,
and insurance companies engaged in business in foreign
countries; and the tax in each case shall be withheld and
deducted for and in behalf of any person subject to the tax
hereinbefore imposed, although such interest, dividends,
or other compensation does not exceed $3,000, by any
banker or person who shall sell or otherwise realize cou-
pons, checks, or bills of exchange drawn or made in pay-
ment of any such interest or dividends (not payable in the
United States), and any person who shall obtain payment
(not in the United States), in behalf of another of such
dividends, and interest by means of coupons, checks, or
bills of exchange, and also any dealer in such coupons
who shall purchase the same for any such dividends or
interest (not payable in the United States), otherwise than
from a banker or another dealer in such coupons; but in
each case the benefit of the exemption and the deduction
allowable under this section may be had by complying
with the foregoing provisions of this paragraph.
AU persons, firms, or corporations imdertaking as aobfaSSTby^peiv
matter of business or for profit the collection of foreign l^'tobusinSs
payments of such interest or dividends by means of cou-^Lnpi^Mlts^of
pons, checks, or bills of exchange shall obtain a license *^^^*'®*°*
from the Commissioner of Internal Revenue, and shall
be subject to such regulations enabling the Government
to ascertain and verify the due withholding and pay-
ment of the income tax required to be withheld and paid
as the Commissioner of Internal Revenue, with the ap-
proval of the Secretary of the Treasury, shall prescribe;
and any person who shall knowingly undertake to coUect^jJ«J^^^<y^
such payments as aforesaid without having ob tailzied a"o«°~-
license therefor, or without complying with such regular
tions, shall be deemed guilty of a misdemeanor and for
each offense be fined in a simi not exceeding $5,000, or
imprisoned for a term not exceeding one year, or both,
in the discretion of the com^
Digitized by VjOOQIC
12 INCOME TAX LAW.
LiabUitytortax Nothiiiff in this sectioDL shall be construed to release a
not affected Dy o -i. ■• .i. - •
fered^^SSrafS^*^*^^^® person from liability for income tax, nor shall any
passage of act. contract entered into after this Act takes effect be valid
in regard to any Federal income tax imposed upon a per-
son liable to such payment.-
The tax herein imposed upon annual gains, profits,
and income not falling imder -the foregoing and not re-
turned and paid by virtue of the foregoing shall be assessed
by personal return under rules and regulations to be pre-
scribed by the Commissioner of Internal Revenue and
approved by the Secretary of the Treasury.
8ow«"ap^ to The provisions of this section relating to the deduction
normal tax only. ^^^ j payment of the tax at the source of income shall only
i^ply to the normal tax hereinbefore imposed upon indi-
viduals.
fuMOOTMgiStto ^- That if any person, corporation, joint-stock com-
jj^JJ^^^^pany, association, or insurance company liable to make
tog false retam. ^j^^ retum or pay the tax aforesaid shall refuse or neglect
to make a retum at the time or times hereinbefore speci-
fied in each year, such person shall be Uable to a penalty
of not less than $20 nor more than $1,000. Any person
or any officer of any corporation required by law to make,
niakiM false or render, sign, or verify any retum who makes any false or
'fraudulent retum or statement with intent to defeat or
evade the assessment required by this section to be made
shall be guilty of a misdemeanor, and shall be fined not
exceeding $2,000 or be imprisoned not exceeding one
year, or both, at the discretion of the court, with the costs
of prosecution.
t)e^^^ed"and G. (a) That the normal tax hereinbefore imposed
net^income^ofupon individuals likewise shall be levied, assessed, and
jotaf st(xjk com-paid annually upon the entire net income arising or
cm^T^ "**^ accruing from all sources during the preceding calendar
year to every corporation, joint-stock company or asso-
ciation, and every insurance company, organized in the
United States, no matter how created or organized, not
including partnerships; but if organized, authorized, or
existing under the laws of any foreign country, then
upon the amount of net income accruing from business
transacted and capital invested within the United States
during such year: Provided j however j That nothing in
ply tooertaSioNthis sectiou shall apply to labor, agricultural, or horti-
^iaa onsspec ^y||^^j.Qj Organizations, or to mutual savings banks not
having a capital stock represented by shares, or to fra-
Digitized by VjOOQIC
INCOME TAX LAW. IS
temal beneficiary societies, orders, or associations oper-
ating under the lodge system or for the exclusive benefit
of the members of a fraternity itseH operating under
the lodge system, and providing for the payment of life,
sick, accident, and other benefits to the members of
such societies, orders, or associations and dependents of
such members, nor to domestic building and loan asso-
ciations, nor to cemetery companies, organized and oper-
ated exclusively for the mutual benefit of their members,
nor to any corporation or association organized and
operated exclusively for religious, charitable, scientific,
or educational purposes, no part of the net income of
which inures to the benefit of any private stockholder
or individual, nor to business leagues, nor to chambers
of commerce or boards of trade, not organized for profit
or no part of the net income of which inures to the benefit
of the private stockholder or individual; nor to any
civic league or organization not organized for profit,
but operated exclusively for the promotion of social
welfare: Provided further j That there shall not be taxed
under this section any income derived from any public inoome derived
utility or from the exercise of any essential governmental u^^?^^en^
function accrumg to any State, Territory, or the District ?^*r*ui^g**u
of Columbia, or any political subdivision of a State, Ter-rf^^fc. '^"***^
ritory, or the District of Columbia, nor any income accru-
ing to the government of the Philippine Islands or Porto
Kico, or of any political subdivision of the Philippine
Islands or Porto Rico: Provided j That whenever any
State, Territory, or the District of Columbia, or any
political subdivision of a State or Territory, has, prior to
the passage of this Act, entered in good faith into a con-
tract with any person or corporation, the object and
purpose of which is to acquire, construct, operate or
maintain a public utility, no tax shall be levied under
the provisions of this Act upon the income derived from
the operation of such public utility, so far as the pay-
ment thereof will impose a loss or burden upon such
State, Territory, or the District of Columbia, or a politi-
cal subdivision of a State or Territory; but this provi-
sion is not intended to confer upon such person or cor-
poration any financial gain or exemption or to relieve Exemptions
such person or corporation from the payment of a taxSSns^^or^proflts
. T , - . .-I . ,. .1 , .. derived from con-
as provided for m this section upon the part or portion tracts by Deraons
p.v -1. . I'v i" .. or corporations.
pi the said mcome to which such person or corporation
shall be entitled under such contract.
Digitized by VjOOQIC
14 INCOME TAX LAW.
c J^^o^aUons' ^^) Such net income shall be ascertained by deducting
^°^te**eto hUSr fr^^ ^^® gross amount of the income of such corporation,
ascertained.' joint-stock Company or association, or insiu*ance com-
pany, received within the year from all sources, (first)
all the ordinary and necessary expenses paid within the
year in the maintenance and operation of its business
and properties, including rentals or other payments re-
quired to be made as a condition to the continued use or
possession of property; (second) all losses actually sus-
tained within the year and not compensated by insurance
pii^^M^^ ***" or otherwise, including a reasonable allowance for depre-
ciation by use, wear and tear of property, if any; and
in the case of mines a reasonable allowance for depletion
of ores and all other natural deposits, not to exceed 5
per centum of the gross value at the mine of the output
for the year for which the computation is made; and in
case of insurance companies the net addition, if any,
required by law to be made within the year to reserve
funds and the simis other than dividends paid within the
suranS^^Sm^'y®^^ on poHcy and annuity contracts: Provided, That
"^- mutual fire insurance companies reqtdring their members
to make premium deposits to provide for losses and ex-
penses shall not return as income any portion of the
premiimi deposits returned to their policyholders, but
shall return as taxable income all income received by
them from all other sources plus such portions of the
premiimi deposits as are retained by the companies for
purposes other than the payment of losses and expenses
insuraoeS^-®'^^ reinsurance reserves: Provided further , That mutual
^^•- marine insurance companies shall include in their rertum
of gross income gross premiums collected and received by
them less amounts paid for reinsurance, but shall be
entitled to include in deductions from gross income
amounts repaid to policyholders on account of premiums
previously paid by them and interest paid upon such
amounts between the ascertainment thereof and the pay-
Life insurance ment thereof and life insinance companies shall not
oomp es. include as income in any year such portion of any actual
premiimi received from any individual policyholder as
shall have been paid back or credited to such individual
poUcyholder, or treated as an abatement of premium of
inSJt'^Stog^^^^ individual poUcyholder, within such year; (third)
^t y«? ^iS**^® amount of interest accrued and paid within the year
bS^dedu^dfrom^^ ^^^ indebtedness to an amount of such indebtedness
inoome. j^ot exceeding one-half of the sum of its interest bearing
Digitized by VjOOQIC
INOOMB TAX LAW. 15
indebtedness and its paid-up capital stock outstanding
at the close of the year, or if no capital stock, the amount
of interest paid within the year on an amount of its
indebtedness not exceeding the amount of capital em-
ployed in the business at the close of the year : Provided,
That in case of indebtedness wholly secured by collateral
the subject of sale in ordinary business of such corpora-
tion, joint-«tock company, or association, the total inter-
est secured and paid by such company, corporation, or
association within the year on any such indebtedness may
be deducted as a part of its expense of doing business:
Provided further. That in the case of bonds or other in-^i^^^gu^t^
debtedness, which have been issued with a guaranty that^ftjj*^!^?^®}^
the interest payable thereon shall be free from taxation, **^'^-
no deduction for the payment of the tax herein imposed
shall be allowed; and in the case of a bank, banking
association, loan, or trust company, interest paid within p^^^^lV^dt
the year on deposits or on moneys received for invest- ^^f"™^^
ment and secured by interest-bearing certificates of in-
debtedness issued by such bank, banking association, loan
or trust company; (fourth) all sums paid by it within the
year for taxes imposed under the authority of the United ''^"p**<*.
States or of any State or Territory thereof, or imposed by
the Government of any foreign country: Provided, ThatraSSf^to^^'m-
in the case of a corporation, joint-stock company or asso-JS* to "u^^
ciation, or insurance company, organized, authorized, or®***"*
existing under the laws of any foreign country, such net
income shall be ascertained by deducting from the gross
amount of its income accrued within the year from
business transacted and capital invested within the
United States, (first) all the ordinary and necessary ^^-^^^^eat^]
penses actually paid within the year out of earnings in**®-
the maintenance and operation of its business and prop-
erty within the United States, including rentals or other
payments required to be made as a condition to the
continued use or possession of property; (second) ^Up^SJ^*"*^ ^®"
losses actually sustained within the year in business con-
ducted by it within the United States and not compen-
sated by insurance or otherwise, including a reasonable "
allowance for depreciation by use, wear and tear of prop-
erty, if any, and in the case of mines a reasonable allow-
ance for depletion of ores and all other natural deposits,
not to exceed 5 per centimi of the gross value at the mine
of the output for the year for which the computation is
Digitized by VjOOQIC
16 INOOME TAX ULW.
of^Smoe^ooS™^®'^®? *^^ ^^ ^^® ^^ insurance companies the net addi-
i»»^«*- tion, if any, required by law to be made within the year
to reserve funds and the sums other than dividends paid
within the year on policy and annuity contracts: Provided
Mutual fire in- further, That mutual fire insurance companies requiring
their members to make premiimi deposits to provide for
losses and expenses shall not return as income any por-
tion of the premium deposits returned to their policy-
holders, but shall return as taxable income all income
received by them from all other sources plus such por-
tions of the premium deposits as are retained by the
companies for purposes other than the payment of losses
and expenses and reinsurance reserves: Provided furlJier,
Mutual marine That mutual marine insurance companies shall include in
their return of gross income gross premiums collected and
received by them less amounts paid for reinsurance, but
shall be entitled to include in deductions from gross
income amounts repaid to policyholders on account of
premiums previously paid by them, and interest paid
upon such amounts between the ascertainment thereof
and the payment thereof and life insurance companies
shall not include as income in any year such portion of
any actual premium received ftrom any individual policy-
holder as shall have been paid back or credited to such
individual policyholder, or treated as an abatement of
premium of such individual policyholder, within such
mgaSipaid!dS-year; (third) the amount of interest accrued and paid
tolebt^^ ^^ within the year on its indebtedness to an amount of such
indebtedness not exceeding the proportion of one-half of
the sum of its interest bearing indebtedness and its
paid-up capital stock outstanding at the close of the
year, of if no capital stock, the capital employed in the
business at the close of the year which the gross amoimt
of its income for the year from business transacted and
capital invested within the United States bears to the
gross amount of its income derived from all sources within
and without the United States: Provided, That in the case
Bonds whose of bonds or othcr indebtedness which have been issued
agreed to pay with a guaranty that the interest payable thereon shall be
tax deduction, free from taxation, no deduction for the payment of the
tax herein imposed shall be allowed; (fourth) all sums
Taxes. P^^^ ^y ^^ within the year for taxes imposed under the
authority of the United States or of any State or Territory
thereof or the District of Columbia. In the case of assess^
Digitized by VjOOQIC
IKCOMB TAX LAV. 17
ment insurance companies, whether domestic or foreign,
the actual deposit of sums with State or Territorial
officers, pursuant to law, as additions to guarantee or
reserve f imds shall be treated as being payments required se^etoS ^^
by law to reserve funds.
(c) The tax herein imposed shall be computed upon its p„^ ^n^etta-
entire net income accrued within eacb preceding calendar ^%^j^^^f
year ending December thirty-first: Provided ^ Aow;ever, y®*'-
That for the year ending December thirty-first, nineteen
hundred and thirteen, said tax shall be imposed upon
its entire net income accrued within that portion of said
year from March first to December thirty-first, both dates
inclusive, to be ascertained by taking five-sixths of its
entire net income for said calendar year : Provided further, Bot fiscal year
, , _ . other tiian calen-
That any corporation, jomt-stock company or association, dar^j be desig-
or insurance company subject to this tax may designate rations,
the last day of any month in the year as the day of the
closing of its fiscal year and shall be entitled to have the
tax payable by it computed upon the basis of the net
income ascertained as herein provided for the year ending
on the day so designated in the year preceding the date of
assessment instead of upon the basis of the net income for
the calendar year preceding the date of assessment; and it
shall give notice of the day it has thus designated as the
closing of its fiscal year to the collector of the district in
which its principal business office is located at any time
not less than thirty days prior to the date upon which its
annual return shall be filed. All corporations, joint-stock to^^Sered!^
. companies or associations, and insurance companies sub-
ject to the tax herein imposed, computing taxes upon the
income of the calendar year, shall, on 6r before the first
day of March, nineteen himdred and fourteen, and the first
day of March in each year thereafter, and all corpora-
tions, joint-stock companies or associations, and insurance
companies, computing taxes Upon the income of a fiscal
year which it may designate in the manner hereinbefore
provided, shall render a like return within sixty ^ftySoa^**o?*a^S
after the close of its said fiscal year, and within sixty days ^^ Siuooto?^^^
after the close of its fiscal year in each year thereafter, ordfawot-
in the case of a corporation, joint-stock company or asso-
ciation, or insurance company, organized or existing under
the laws of a foreign coimtry, in the place where its princi-
pal business is located within the United States, in such
form as the Commissioner of Internal Revenue, with the
24785^—14- 2
Digitized by VjOOQIC
18 INCOME TAX LAW,
approval of the Secretary of the Treasury, sOiiall prescribe,
shall render a true and accurate return under oath or
afl5rmation of its president, vice president, or other prind*
pal officer, and its treasurer or assistant treasurer, to the
Information toeollector of internal revenue for the district in which it
be indnded In
return of corpo-has its principal place of business, setting forth (first)
Paid-upcapitai. the total amoimt of its paid-up capital stock outstanding,
or if no capital stock, its capital employed in business, at
the close of the year; (second) the total amount of its
^j^^^^^®^^ bonded and other indebtedness at the close of the year;
(third) the gross amount of its income, received during
such year from all sources, and if organized under the laws
Gross Income, ^f ^ foreign Country the gross amoimt of its income re-
ceived within the year from business transacted and capi-
tal invested within the United States; (fourth) the total
e ^ nxsot^ovl ^^o^"^* ^^ ^^^ ^^^ Ordinary and necessary expenses paid out
tenSooe"** ™**^of earnings in the maintenance and operation of the busi-
ness and properties of such corporation, joint-stock com-
pany or association, or insurance company within the
Rental, ete. year, stating separately all rentals or other payments
required to be made as a condition to the continued use
or possession of property, and if organized under the laws
of a foreign country the amoimt so paid in the mainte-
nance and operation of its business within the United
pii^^iu"^ ^States; (fifth) the total amount of all losses actually sus-
tained during the year and not compensated by insurance
or otherwise, stating separately any amounts allowed for
depreciation of property, and in case of insurance com-
panies the net addition, if any, required by law to be
se^el^!^ '^'made within the year to reserve funds and the sums other'
than dividends paid within the year on poHcy and annuity
contracts: Provided further j That mutual fire insurance
companies requiring their members to make premium
deposits to provide for losses and expenses shall not re-
miim*%ew»ite*^^^ as iucome any portion of the premium deposits re-
funiedMtexabte^^^"^®^ *^ their policyholders, but shall return as taxable
income. incomc all income received by them from aU other sources
plus such portions of the premium deposits as are retained
PI in ^ ^^® companies for purposes other than the payment of
suranoe,eto.' losscs and cxpcnscs and reinsurance reserves: Provided
further, That mutual marine insurance companies shall
include in their return of gross income gross premiums
collected and received by them less amounts paid for re-
insurance, but shall be entitled to include in deductions
from gross income amounts repaid to policyholders on
Digitized by VjOOQIC
* INCOME TAX LAW. 19
account of premiums previously paid by them, and in-
terest paid upon such amounts between the ascertain-
ment thereof and the payment thereof and Ufe insurance
companies shall not include as income in any year such
portion of any actual premiiun received from any in-
dividual policyholder as shall have been paid back or
credited to such individual pohcyholder, or treated as an
abatement of premiimi of such individual policyholder,
within such year; and ia case of a corporation, joint- Foreim carpo-
stock company or association, or insurance company, mttsjn the united
organized under the laws of a foreign coxmtry, all losses ®***^
actually sustained by it during the year in business con-
ducted by it within the United States, not compensated
by insurance or otherwise, stating separately any amounts ^^
allowed for depreciation of property, and ia case. of in-
surance companies the net addition, if any, required by
law to be made within the year to reserve funds and the
sums other than dividends paid within the year on policy ^utj^i ^^ jq.
and annuity contracts : Provided further, That mutual fire S2f^ *^*™^
insurance companies requiring their members to make
premium deposits to provide for losses and expenses shall
not return as income any portion of the premium deposits
returned to their policyholders, but shall return as taxar
ble income all income received by them from all other
sources plus such portions of the premium deposits as are
retained by the companies for purposes other than the
payment of losses and expenses and reinsurance reserves:
Provided further, That mutual marine insurance com- ^Mutual
pames shall mclude m their return of gross mcome gross panies.
premiums collected and received by tiem less amounts
paid for reinsurance, but shall be entitled to include in
deductions from gross income amounts repaid to policy-
holders on accoimt of premiums previously paid by them
and interest paid upon such amounts between the ascer-
tainment thereof and the payment thereof and life in- Life iDsoianoe
surance companies shall not include as income in any*^**°^
year such portion of any actual premium received from
any individual policyholder as shall have been paid back
or credited to such individual policyholder, or treated as
an abatement of premium of such individual policy-
holder, within such year: (sixth) the amount of interest what totePMt
\ 1 • 1 . 1 • -I • 1 11 1 <"* bonded in-
accrued and paid within the year on its bonded or other deMedM« may
indebtedness not exceeding one-half of the sum of its
interest bearing indebtedness and its paid-up capital
stock, outstanding at the close of the year, or if no
Digitized by VjOOQIC
20 IHCOME TAX LAW. •
capital stock, the amount of interest paid witfain tbe
year on an amount of indebtedness not exceeding the
amoimt of capital employed in the business at the close
dJwSte dSducS ^' ^^® year, and in the case of a bank, banking associa-
biefrom Incomes, tion, or trust Company, statmg separately all interest
paid by it within the year on deposits; or in case of a
corporation,, joint-stock company or association, or in-
surance company, organized under the laws of a foreign
coimtry, interest so paid on its bonded or other indebted-
ness to an amoimt of such bonded or other ind ebtedness not
Interest on in- exceeding the proportion of its paid-up capital stock out^
ejgn corporations, standing at the close of tbe year, or if no capital stock, the
amount of capital employed in tbe business at the dose of
the year, which the gross amoimt of its income for the
year from business transacted and capital invested within
the United States bears to the ^oss amount of its income
derived from all sources within and without the United
Taxes paid. States; (seventh) the amount paid by it within the year
for taxes imposed imder the authority of the United
States and separately the amount so paid by it for taxes
imposed by the Government of any foreign country;
be^^owS*Sn^(^^^) *^® ^e* income of such corporation, joint-stock
*"™- company or association, or insurance company, after
making the deductions in this subsection authorized. All
such returns shall as received be transmitted forthwith
by the collector to the Commissioner of Internal Revenue.
All assessments shall be made and the several corpo-
rations, joint-stock companies or associations, and insur-
be mSIS?aQ?n^ ^^Ji^c^ Companies shall be notified of the amount for which
tioetobegiven. ^]^^y ^^ respectively liable on or before the first day of
June of each successive year, and said assessment shall
be paid on or before the thirtieth day of June: Provided,
That every corporation, joint-stock company or asso-
ciation, and insurance company, computing taxes upon
the income of the fiscal year which it may designate in
the manner hereinbefore provided, shall pay the taxes
when^tTbe^idl ^^® uudcr its asscssmcnt within one hundred and twenty
etc. ^^'^'***°'^ days after the date upon which it is required to file its
list or return of income for assessment; except in cases
of refusal or neglect to make such return, and in cases
of false or fraudulent returns, in which cases the Com-
When feifie re-missioner of Internal Revenue shall, upon the discovery
turn has been . .-i.i # .1
^ndei^d and thereof, at any tune withm three years after said return
tected within 3 is duc, makc a return upon information obtained as pro-
ye:'"s, commis- » ^ 1 » » -, . ., .., ,, ^
8 loner may vided for m this scction or by existing law, and the assess-
make new assess- ^ 1 t
ment. ment made by the Commissioner of Internal Revenue
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ISrOOMB TAX JAW. 21
thereon shall be paid by Buch corporation, joint-stock
company or association, or insurance company imme-
diately upon notification of the amount of such assess-
ment; and to any sum or sums due and unpaid after the
thirtieth day oi June in any year, or after one hundred
and twenty days from the date on which the return of
income is required to be made by the taxpayer, aiid after
ten days notice and demand thereof by the collector,
there shall be added the sum of 5 per centum on the Penalty and in-
. • 1 I • 1 «. ^ tereet incurred by
amount of tax unpaid and mterest at the rate of 1 perfeauretopaytax
,1 ... . .1 .' .1 within prescribed
centum per month upon said tax from the time the same time.
becomes due.
(d) When the assessment shall be made, as provided ^ Retups ren-
m this section, the returns, together with anv corrections with commis-
_ i.1.1 1 -111 1 " •• sioner of Internal
thereof which may have been made by the commissioner. Revenue,
shall be filed in the office of the Commissioner of Internal
Revenue and shall constitute pubUc records and be open
to inspection as such: Provided, That any and all such ^j^^J^p^tiJlJ
returns shall be open to inspection only upon the^ order 6f Jf^^*"**^*^*^*
the President, under rules and regulations to be pre-
scribed by the Secretary of the Treasury and approved
by the Fresident: Provided further, That the proper
officers of any State imposing a general income tax may,
upon the request of the governor thereof, have access to
said returns or to an abstract thereof, showing the name
and income of each such corporation, joint stock com-
pany, association or insurance company, at such times
and in such manner as the Secretary of the Treasury
may prescribe.
If any of the corporations, joint-stock companies or ^^jj^ to oar-
associations, or insurance companies aforesaid, shall re- ^ieSi^*^o file
fuse or neglect to make a return at the time or times '®*i**^'^'®*"™--
hereinbefore specified in each year, or shall render a false
or fraudulent return, such corporation, joint-stock com-
pany or association, or insurance company shall be liable
to a penalty of not exceeding $10,000.
H. That the word ''State" or ''United States" when
used in this section shall be construed to include any
Territory, Alaska, the District of Columbia, Porto Rico,
and the Philippine Islands, when such construction is
necessary to carry out its provisions.
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22 |koom;b tax ijiw.
•i&**o*iW''S?! I. That sections thirty-one hundred and sixty-seven^
SlTo. ol70y Jtt©- ^ -iii-i -i'* 111
^^de£***"**"' thirty-one hundred and seventy-two, thirty-one hundred
and seventy-three, and thirty-one hundred and seventy-six
of the Revised Statutes of the United States as amended
are hereby amended so as to read as follows:
seo.aiOT. <<gj,^ 3jg7 j^ gj^^ i^Q unlawful for any collector,
deputy collector, agent, clerk, or other officer or employee
of the United States to divulge or to make known in any
manner whatever not provided by law to any person the
operations, style of work, or apparatus of any manufacturer
or producer visited by him in the discharge of his official
duties, or the amount or source of income, profits, losses,
expenditures, or any particular thereof, set forth or dis-
closed in any income return by any person or corporation,
or to permit any income return or copy thereof or any
book containuig any abstract of particulars thereof to be
seen or examined by any person except as provided by
law; and it shall be unlawful for any person to print or
publish in any manner whatever not provided by law any
income return or any part thereof or the amount or source
of income, profits, losses, or expenditures appearing in any
income return; and any offense against the foregoing
provision shall be a misdemeanor and be punished by a
fine not exceeding $1,000 or by imprisonment not exceed-
ing one year, or both, at the discretion of the court; and
if the offender be an officer or employee of the United
States he shall be dismissed from office and be incapable
thereafter of holding any office under the Government.
8eo.8i72. ''Seo. 3172. Every collector shall, from time to time,
cause his deputies to proceed through every part of his
district and inquire after and concerning all persons
therein who are liable to pay any internal-revenue tax,
and all persons owning or having the care and manage-
ment of any objects liable to pay any tax, and to make a
a list of such persons and enumerate said objects.
860,8178. *'Seo. 3173. It shall be the duty of any person, part-
nership, firm, association, or corporation, made liable to
any duty, special tax, or other tax imposed by law, when
not otherwise provided for, in case of a special tax, on or
before the thirty-first day of July in each year, in case of
income tax on or before the first day of March in each year,
and in other cases before the day on which the taxes ac-
crue, to make a list or return, verified by oath or affirma-
tion, to the collector or a deputy collector of the district
where located, of the articles or objects, including the
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INCOME TAX. LAW. 24
amount of annual income charged with a duty or tax, the
quantity of goodS; wares, and merchandise made or sold
and charged with a tax, the several rates and aggregate
amoimt, according to the forms and regulations to be pre-
scribed by the Commissioner of Internal Revenue, with
the approval of the Secretary of the Treasury, for which
such person, partnership, firm, association, or corpora-
tion is liable: Provided, That if any person liable to pay
any duty or tax, or owning, possessing, or haviolg the care
or management of property, goods, wares, and merchan-
dise, articles, or objects liable to pay any duty, tax, or
license, shall fail to make and exhibit a list or return re-
quired by law, but shall consent to disclose the particu-
lars of any and all the property, goods, wares, and mer-
chanflise, articles, and objects liable to pay any duty or
tax, or any business or occupation liable to pay any tax
as aforesaid, then, and in that case it shall be the duty of
the collector or deputy collector to make such list or re-
turn, which, being distinctly read, consented to, and
signed and verified by oath or aflBrmation by the person
so owning, possessing, or having the care and manage-
ment as aforesaid, may be received as the list of such
person: Provided farthery That in case no annual list or
return has been rendered by such person to the collector
or deputy collector as required by law, and the person
shall be absent from his or her residence or place of busi-
ness at the time the collector or a deputy collector shall
call for the annual list or return, it shall be the duty of
such collector or deputy collector to leave at such place
of residence or business, with some one of suitable age and
discretion, if such be present, otherwise to deposit in the
nearest post office, a note or memorandimi addressed to
such person, requiring him or her to render to such col-
lector or deputy collector the Ust or return required by
law within ten days from the date of such note or memo-
randum, verified by oath or affirmation. And if any per-
son, on being notified or required as aforesaid, shall re-
fuse or neglect to render such list or return within the
time required as aforesaid, or whenever any person who
is required to deliver a monthly or other return of objects
subject to tax fails to do so at the time required, or de-
livers any return which, in the opinion of the collector, is
false or fraudulent, or contains any undervaluation or
understatement, it shall be lawful for the collector to
simimon such person, or any other person having posses-
Digitized by VjOOQIC
Sec. 8170.
24 IKCOICBTAX LAW.
sion, custody, or cai^e of books of account containii^ en-
tries relating to the business of such person, or any other
person he may deem proper, to appear before him and
produce such books, at a time and place named in the
summons, and to give testimony or answer interroga-
tories, under oath, respecting any objects liable to tax or
the returns thereof. The collector may summon any
person residing or found within the State in which his dis-
trict lies; and when the person intended to be summoned
does not reside and can not be foimd within such State, he
may enter any collection district where such person may
be found and there make the examination herein author-
ized. And to this end he may there exercise all the au-
thority which he might lawfully exercise ia the district
for which he was commissioned.
*'Sb€. 3176. When any person, corporation, company,
or association refuses or neglects to render any return or
list required by law, or renders a false or fraudulent return
or list, the collector or any deputy collector shall make,
according to the best information which he can obtain,
including that derived from the evidence elicited by
the examination of the collector, and on his own view
and information, such list or return, accordiug to the
form prescribed, of the income, property, and objects
liable to tax owned or possessed or under the care or
management of such person or corporation, company
or association, and the Commissioner of Internal Revenue
shall assess all taxes not paid by stamps, including the
amount, if any, due for special tax, income or other
tax, and in case of any return of a false or fraudulent list
or valuation intentionally he shall add 100 per centum
to such tax; and in case of a refusal or neglect, except
in cases of sickness or absence, to make a list or return,
or to verify the same as aforesaid, he shall add 50 per
centum to such tax. In case of neglect occasioned by
•sickness or absence as aforesaid the collector may allow
such further time for making and delivering such list
or return as he may deem necessary, not exceeding
thirty days. The amount so added to the tax shall be
collected at the same time and in the same manner as
the tax unless the neglect or falsity is discovered after
the tax has been paid, in which case the amount so
added shall be collected in the same manner as the tax;
and the list or return so made and subscribed by such
collector or deputy collector shall be held prima facie
good and sufficient for all legal purposes."
Digitized by VjOOQ IC
INCOME TAX LAW; 25
J. That it shall be the duty of every collector of internal p^^to^be'Sven
revenue, to whom any payment of any taxes other than °y<^"®^**'-
the tax represented by an adhesive stamp or other en-
graved stamp is made under the provisions of this sec-
tion, to give to the person making such payment a full
written or printed receipt, expressing the amount paid
and the particular account for which such payment was
made; and whenever such payment is made, such col-
lector shall, if required, give a separate receipt for ^ach^jg^^f^^^Jg
tax paid by any debtor, on account of payments ma^e^jj^J^^^j,^^
to or to be made by him to separate creditors in such form
that such debtor can conveniently produce the same
separately to his several creditors in satisfaction of their
respective demands to the amounts specified in such
receipts; and such receipts shaU be sufficient evidence
in favor of such debtor to justify him in withholding the
amount therein expressed from his next payment to his
creditor; but such creditor may, upon giving to his
debtor a full written receipt, acknowledging the pay-
ment to him of whatever sum may be actually paid,
and accepting the amount of tax paid as aforesaid (speci-
fying the same) as a further satisfaction of the debt to
that amount, require the surrender to him of such
collector's receipt.
K. That jurisdiction is hereby conferred upon the dis-coSSj^^oii di£
trict courts of the United States for the district within J^^^^fj^gjj^
which any person summoned under this section to appear J^^^®^;*' ^*^-
to testify or to produce books shall reside, to compel
such attendance, production of books, and testimony by
appropriate process.
L. That aU administrative, special, and general pro- t^^^^J^f ^^f
visions of Jaw, including the laws in relation to the^/^^ ^^indl
assessment, remission, collection, and refund of internal- ^S^|"™^**®
revenue taxes not heretofore specifically repealed and not
inconsistent with the provisions of this section, are hereby
extended and made applicable to all the provisions of
this section and to the tax herein imposed.
M. That the provisions of this section shall extend toiaSg^to^faeoS
Porto Rico and the Philippine Islands: Provided, That thep^rto^<S^and
administration of the law and the collection of the taxesM^nda.*^^**^®
imposed in Porto Rico and the Philippine Islands shall
be by the appropriate internal-revenue officers of those
governments, and all revenues collected in Porto Rico
Digitized by VjOOQIC
26 INCOME TAX LAW.
and the Philippine Islands thereunder shall accrue intact
to the general governments, thereof, respectively: And
provided further J That the jurisdiction in this section con-
ferred upon the district courts of the United States shall,
so far as the Philippine Islands are concerned, be vested
in the courts of the first instance of said islands: And
provided further f That nothing in this section shall be
held to exclude from the computation of the net income
the compensation paid any oflBlcial by the governments
of the district of Columbia, Porto Rico and the Philip-
pine Islands or the political subdivisions thereof. * * *
Income subject Section 4 (paragraph S) of the act of October 3, 1913,
tox^ctor S* of further provides * * * That a special excise tax with
^' ' respect to the carrying on or doing of business, equiva-
lent to 1 per centum upon their entire net income, shall
be levied, assessed, and collected upon corporations, joint
stock companies or associations, and insurance companies,
of the cliaracter described in section thirty-eight of the act
of August fifth, nineteen hundred and nine, for the period
from January first to February twenty-eighth, nineteen
hundred and thirteen, both dates inclusive, which said
tax shall be computed upon one-sixth of the entire net
income of said corporations, joint stock companies or
associations, and insurance companies, for said year, said
net income to be ascertained in accordance with the pro-
visions of subsection G of section two of this act: Pro-
vided further, That the provisions of said section thirty-
eight of the act of August fifth, nineteen hundred and
nine, relative to the collection of the tax therein imposed
shall remain in force for the collection of the excise tax
oi» return may herein provided, but for the year nineteen hundred and
^e^e»Bfae^d thirteen it shall not be necessary to make more than one
^™9i3.**^ '**' return and assessment for aU the taxes imposed herein
upon said corporations, joint stock compames or asso-
ciations, and insurance companies, either by way of in-
come or excise, which return and assessment shall be
made at the times and in the manner provided in this
act. * * *
Digitized by VjOOQIC
PREFACE.
The accompanying regulations embrace the various
administrative features of the law (sec- 2, act of Oct. 3,
1913) imposing a tax on incomes. They contain in-
structions relative to the preparation of retmns, etc., and
are designed to assist both the taxpayer and the officers
charged with its enforcement in complying with the re-
quirements of this law.
Liberal construction of the law has been given that
those charged with withholding the tax at the source
mayjiot do so unnecessarily. Withholding agents may
forward evidences of non-liabihty to payment, when such
evidences are received by them, to collector for the dis-
trict in Ueu of the tax. This will reUeve them of the
necessity of withholding such tax.
The regulations are arranged according to general sub-
jects, as follows :
Part 1. Individual income returns and collections.
Part 2. Collections at the source.
A. Bonds, mortgages, deeds of trust, etc.
B. Bonds, mortgages, deeds of trust, etc., by first
bank or collection agency where certificates
of owners are not filed.
C. Bonds, mortgages, dividends, etc., of foreign
corporations.
D. Salaries, wages, rent, etc.
E. Fiduciaries.
Part 3. Relative to corporations, joint stock companies
or associations, and insurance companies.
Part 4. Assessment and collection.
All forms of certificates herein provided shall be 8
inches wide and 3 J inches from top to bottom, and printed
on paper of substantial weight and texture.
27
Digitized by VjOOQIC
Digitized by VjOOQIC
REGULATIONS.
RegoIatioBs eonc^ning the tax imposed by Section 2, Act of October
3, 1913, on net income of Indiyidnals, Corporations, Joint-stoclc
Companies, Associations, and Insurance Companies.
Treasury Department.
Office of Commissioner of Internal Revenue,
WasJiington, D. (7., January 5, 1914.
PART 1.
INDIVrDUAIi INCOME BETTJIINS AND COLLECTIONS.
Article 1. Section 2 of the above-named act imposes a^jiJ®'*™ **^
tax of 1 per centum (designated as the normal tax) on
net incomes arising or accruing from all sources during
the preceding calendar year to —
(a) Every citizen of the United States, whether resid-
ing at home or abroad; and
(6) Every person residing in the United States, though
not a citizen thereof; and
(c) From all property owned and from every business,
trade, or profession carried on in the United States, by a
pei«on residing elsewhere.
Art. 2. Said section also imposes an additional tax on Additional or
all net incomes of individuals exceeding $20,000, as
follows:
1 per cent on incomes exceeding $20,000 and not exceeding
150,000.
2 per cent on incomes exceeding $50,000 and not exceeding
$75,000.
3 per cent on incomes exceeding $75,000 and not exceeding
$100,000.
4 per cent on incomes exceeding $100,000 and not exceeding
$250,000.
5 per cent on incomes exceeding $250,000 and not exceeding
$500,000.
6 per cent on incomes exceeding $500,000.
Art. 3. The NET INOOMB shall consist of the total ^^f*»^«>°^«<*«-
gains, profits, and income derived from all sources (desig-
29
Digitized by VjOOQIC
30 INCOME TAX BEOULATIOKS.
nated as gross income) less deductions numbered first to
sixth, inclusive; specifically enumerated in paragraph B
of the act. (See article 6.)
Norm^^^ *^i ^^ computing the taxable income for the purposes of
puted. the normal tax there shall be deducted from the net
income as above ascertained:
(a) The amount included in the gross income received
as dividends upon the stock or from the net earnings
of any corporation, jomt-stock company, association, or
insurance company which is taxable upon its net income;
(&) The amount of income the tax upon which has
been paid or withheld for payment at the source; and
(c) The specific exemption of $3,000 or $4,000, as the
case may be, except in the case of nonresident aliens.
wStiti^dS' '*^* *• ^^^ss Income includes all gains, profits, and
income derived from —
(a) Salaries, wages, or compensation for personal ser-
vice of whatever kind and in whatever form paid.
(h) Professions, vocations, business (including income
from copartnerships), trade, commerce, or sales or deal-
ings in property, growing out of the ownership or use of
or interest in, real or personal property.
(c) Interest, rent, dividends, seciuities, or transaction
of any lawful business carried on for gain or profit. (See
art. 67 as to interest on deposits and certificates of
deposit.)
(d) Gains or profits and income derived from any
source whatever, including the income from, but not the
value of, property acquired by gift, bequest, devise or
descent.
The foregoing is held to include all income, gains, and
profits arising or accruing from all sources whatever in
the calendar year for which the retiu*n is made, except as
hereinafter specifically stated.
inoomeexempt Art. 6. The foUowing items should not be included as
from taxation. , °
gross mcome:
(a) Value of property acquired by gift, bequest, de-
vise, or descent during the year.
(&) Proceeds of life iosurance poUcies paid upon the
death of the person insured to beneficiaries, or payments
made by or credited to the insured, on life insurance,
endowment, or annuity contracts, upon the return
thereof to the insured at the maturity of the term men-
tioned in the contract, but this shall not be construed to
Digitized by VjOOQIC
INCOME TAX BE6ULATI0N8. 31
mean that interest payments to beneficiaries from insur-
ance companies shall not be included as income.
(c) Income derived from interest upon the obligations
of a State or any political subdivision thereof and upon
the obhgations of the United States or its possessions;
{d) The compensation of the President of the United
States in office at the time of the passage of the act of
October 3, 1913, during the term for which he was
elected, and the judges of the Supreme and inferior courts
of the United States in office at the time of the passage
of the act of October 3, 1913;
(^) The compensation of all officers and employees of
a State or any poUtical subdivision thereof, including
public-school teachers, etc. When such State officers
or employees are compensated by the United States,- they
must include such income as taxable.
Art. 6. Deductions and exemptions allowed in computing
taxable income for fhe purposes of the normal tax.
Under para^aph B the following items are to be de-j^^^^^ «J;
ducted from the gross income: agraphB.
1. The amoimt of necessary expenses actually paid for
carrying on business, but not including business expenses
of partnerships and not iQcluding personal, living, or
family expenses.
2. All interest paid within the year on personal in-
debtedness of the taxpayer incurred in the conduct of
business.
3. All National, State, coimty, school, and municipal
taxes paid within the year (not includiQg those assessed
against local benefits).
4. Losses actually sustained during the year incurred
in trade or arising from fires, storms, or shipwreck and
not compensated for by insurance or otherwise.
5. Debts due to the taxpayer which have been actually
ascertained to be worthless and charged off within the
year.
6. Amoimt representing a reasonable allowance for the
exhaustion, wear, and tear of property arising out of its
iBe or employment in the busiaess, not to exceed, in the
case of mines, 5 per cent of the gross value at the mine
of the output for the year for which the computation is
made, hut not including the expense of restoring property
or mxiking good the exhaustion thereof for which an aUow^
ance is or has been made, nor for any amount paid for
new buildings, permanent improvements, or betterments,
made to increase the value of any property or estate.
Digitized by VjOOQIC
82 nrcQME. TAX-Bs:GUL.A!ri0i;r8.
"Gross value at The temt ''gn>ss vatiie at the mino," as used in paragraphs B and G of section 2 of the
tiie mine" de- ^^t of October 3, 1 913, prescribing a limit to the amount which may be deducted in thd
^^ * return of individuals and corporations as depreciation in the case of mines, is held to
mean the bona Side market value of ore, coal, crude oil, and gas at the mine or well,
where such value is established by actual sales at the mice or well; and in case the
market value of the product of the mine or well is established at some other pUoe than
at the mine or well, or on the basis of the bullion or metallic value of the ore, then tbA
gross value at the mine is held to be the value of the ore, coal, oil, or gas sold, or of the
metal produced, less transportation, reduction, and smelting charges.
7. The amount included in gross income received as
dividends upon the stock, or upon the net earnings, of
any corporation, joint-stock company, association, or
insurance company which is taxable upon its net income.
8. The amount of income, the normal tax upon which
has been paid or withheld for payment at the source of
income.
.Gifts or dona- None of the above items of deduction shall include
ing the vear not money or Other items of value disposed of by gift, dona-
tion, or endowment.
Exemptions ai- Under paragraph C the personal exemption of $3,000
a^ph^S *' ^^" or $4,000, as the case may be, is to be deducted from the
net income except in the cases of nonresident' aliens.
(See arts. 7, 9, and 10.)
Tax computed Art. 7. The act provides that the said normal tax shall
on the calendar. . / • i # . t
year except for be computed ou the rcmamdcr of said net mcome accru-
ing during each preceding calendar year, and that for the
year ended December 31, 1913, said tax shall be com-
puted on the net income accruing from March 1 to
December 31, both dates inclusive, after deducting five-
sixths only of the specific exemptions and deductions
authorized. A specific exemption, therefore, of $2,500
or $3,333.33, as the case may be, will be allowed for the
year 1913.
Income of non- Art. 8. The income of nonresident aliens subject to
resident aliens _ , - in * i
subjecttothenor-the normal tax of 1 per cent shall consist of the total
gains, profits, and income derived from all property
owned, and from every business, trade, or profession car-
ried on and capital invested within the United States
(to be designated as gross income), less deductions (1 to
8, inclusive) specifically enumerated in paragraph B of
the act (see Art. 6), in so far as said deductions relate to
said gains, profits, etc.
der^par^ph^ The spccific exemption in paragraph C of the act can
oompS^g taJ£^^^ ^^ allowed as a deduction in computing the normal
SilinSSS^*^^ of nonresident aliens.
Nonresident Nonresident aliens are subject to additional or surtax
additional or sur- the Same as prescribed in the case of citizens of the United
States or persons residing in the United States.
Digitized by VjOOQIC
INOOMB TAX BEQULATIONS. 8S
■ The responsible heads, agents, or representatives of said
nonresident aliens who are in charge of the property-
owned or business carried on or capital invested shall
make fuU and complete return of said income and shall
pay the tax as provided herein.
Art. 9. Under paragraph C, every single person and ttoip^owS°^to
every married person not living with husband or wife^fg^^^^
in the sense below defined, who has a net income exceed- ^^^ *p*^
ing $3,000 per annum, is liable to pay the normal tax
under this law, but in making return for such tax such
person may claim an exemption of $3,000 from his or her
total net income.
Art. 10. Husband and wife living together are entitled tion^^r^S
to an exemption of $4,000 only from the aggregate net J^^^^^JJ^^f^
income of both, which may be deducted in making the^^gl**^^ ^^^
return of such income for taxation. However, when the
husband and wife are separated and living permanently
apart from each other each shall be entitled to an exemp-
tion of $3,000.
If the husband and wife not living apart have separate if husband and
estates, the mcome from both may be made on one return, rate estates one
■II f ' * -I 1 1 ji -n 1 return may be
but the amoimt of mcome of each, and the luLl name andmadeshowtogin-
, _ come of eacb.
address of both, must be shown m such return.
The husband, as the head and legal representative of
the household and general custodian of its income, should
make and render the return of the aggr^ate income of
himself and wife, and for the purpose of levying the in-
come tax it is assumed that he can ascertain the total
amount of said income.
If a wife has a separate estate managed by herself aSsep^teSSteto
her own separate property and receives an income of husba^^etum
$3,000 or over, she may make return of her own in- <>' husband's in-
' ' •' come may be in-
come, and if the husband has other net income, making ^^^ ^ ^^«'s
the aggregate of both incomes more than $4,000, the
wife^s return should be attached to the return of her
husband, or his income should .be included in her return,
in order that a deduction of $4,000 may be made from
the aggregate of both incomes. The tax in such case,
however, will be imposed only upon so much of the
aggregate income of both as shall exceed $4,000.
If either husband or wife separately has an income* ^u^^^^'etthe;
equal to or in excess of $3,000, a return of annual net ^^j^^^omT^S
income is required under the law, and such return must ^'^^ **' ®^®'-
include the income of both, and in such case the return
24785<>— 14 ^3
Digitized by VjOOQIC
84 INCOME TAX BEGULATIOirS.
must be made even though the combined income of both
be less than $4,000.
Jfr^*y* ^t ^^ ^^ aggregate net income of both exceeds $4,000^.
§aS) ^*^"d wile *^ annual return of their combined incomes must be made
tim *S^ h^ *^® manner stated, although neither one separately
^it^r^ij^ have may havc an incomeof $3,000 per annum. They are jointly
j3,ooo or over, and Separately liable for such return and for the payment
of the tax.
tob?dSte]n^ed! "^^^ single or married status of the person claiming the
specific exemption shall be determined as of the time of
claiming such exemption if such claim be made within
the year for which return is made, otherwise the status
at the close of the year.
ne^J^*^^ ^^' ^^' H^ ^^ ^^^ prorata share of the net profits de-
how reported, rived f rom a partnership business, whether or not divided
and paid out shall be included in the personal return of
each partner,
assudi notifabSe ^** ^^* Partnerships, as such, are not subject to the
to tax, 'but state- income tax, and are only required to make return when
ment may oere- ' ^ r>t > • » -r ^ t%
quired. requested to do so by the Ctonmiissioner of Internal Reve-
nue or the collector of internal revenue for the district in
which said partnership has its principal place of business;
and when a return is required it shall give a complete
and correct statement of the gross income of the said
partnership and also a complete statement of the actual
expenses of conducting the business of said partnership,
and the net profits and the name and address of each
member of said partnership, and their respective interest
in the net profit thus reported. ,
piom3*to*i»^fiS ^^*« !*• The net annual profits of a partnership when
SSdfbfiS^^'^? divided and paid to the members thereof shall be included
uai partners. |jy Qikch individual partner receiving same in his annual
return of net income, and the tax shall be paid thereon
as required by law. When the annual profits of a part-
nership are not distributed and paid to the members
thereof the respective interest of each member in said
profits shall be ascertained, and the individuals entitled
thereto shall include the said amount in their annual
return as a part of their gross income, the same as if said
profits had been distributed and paid to them.
pa?t^iler8hi*p ^^' ^*' Undivided annual net profits of partnerships
profits. thus returned by the individual members thereof, and
tax paid thereon, shall not, when said profits are actually
distributed and paid to such members, be again included
in their annual return as a part of their gross income.
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IHOOMB TAX BEGXJLAXI0N8. 85
Partnerships owning interest coupons or registered in- ag^SJh^^JJy^fiie
terest orders may claim deduction for legitimate expenses t^^^tj^™"
incurred in business by filing the proper certificate with
the withholding agent. (See article 47.)
BBJURNS.
Art. 16. Each person of lawful age whose net income is when retums
$3,000 or over shall, on or before the 1st day of March, comeof»,(»uor
1914, and on or before the 1st day of March each year made.
thereafter, file an acciu*ate return of income under oath
or affirmation, except as herein provided. (See article 8.)
If the person making the return of income has his place where filed,
of business in the collection district in which he resides,
the return shall be filed with the collector of that district.
If his principal place of business is elsewhere, the return
shall be filed in the (fistrict in which that business is
located.
In the case of an individual residing in a foreign country
return shall be made to the collector of iatemal revenue
for the district where his principal business is carried on
within the United States.
Art. 16. The required return will be made on Form Form of return.
1040 in accordance with the instructions printed thereon,
and will specifically set forth —
1. All income received from each specific source and
the total thereof.
2. All the separate items of deduction claimed under
para^aph B of this law.
3. The amount of specific exemption claimed under
paragraph C.
4. All amounts of income upon which tax has been
withheld at source by withholding agent or agents.
Art. 17. When by reason of minority, insanity, ab- wm^made^by
sence, sickness, or other disability, the individual is un- ISS'SSjd agSil
able to make his own return, the same shall be made by
his guardian or duly authorized agent.
In the case of the death of a person whose net income mfnStrat ""to
for the part of the year during which he lived was $3,000 SS?^fSJ^ ^
or over, return of net income shall be made by the
executor or administrator of the estate of the deceased,
and in computing the taxable income of such estate there
shall be allowed the specific exemption provided by law.
Art. 18. When the required return has not been made Notice of feaure
. ^,. . ..tofile return to
by a person actmg as guardian, agent of a nonresident be served on
, . , ,, , , , '. • 1 • 1 guardian oragent.
ahen, or by one actmg m any other capacity m which
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86 INCOME TAX BEOTTLATIONS.
the law makes it a duty for him to represent the in-
dividualy notice of failure to make such return will be
served upon such guardian or agent.
The person upon whom such notice is served may, how-
be^m^d^So^ever, when the facts warrant, file evidence with the col-
im^re^n. *° Icctor sho wiug that the individual for whom he acts did not
receive an income subject to tax .during the year, or
that the said guardian or agent had filed the return with
some other collector.
Returns not Art. 19. Anv individual whose net income is less than
required of per- *i#ii
sons for whom $20,000, for whom fuU return has been made by others
iuJ returns have .,,1,. in , .11
i3«en^made by as Withholding agents, shall not be requu*ed to make a
return,
^^iietmjs^to^e Art. 20. If any person Hable to pay an income tax for
ctOT in certain himself or others shall fail to make and deliver the re-
turn required by law, but shall consent to disclose the
particulars of any business or occupation liable to pay
such tax, it shall be the duty of the collector or deputy
collector to make such list or return, which being dis-
tinctly read and consented to, signed, and verified by
oath or afiirmation by the person liable to make such
return, the same may be received as the list or return of
such person.
Refusal or neg- Art. 21. In case any person liable to make return shall
turn. neglect or refuse to make or render a list or return, or
shall render a willfully false or fraudulent return, it shall
be the duty of the collector, after due notice has been
given, to make such list, according to the best informa-
tion he can obtain by the examination of such person,
or any other evidence.^
bimf% nu£e When duly certified by the collector, the said fist thus
ma^g f^ re-Pr^P®'^^^ sli^^^ be the return of said person and the tax
tuni. g^) ascertained to be due, together with the 50 per cent or
100 per cent penalty incurred, shall be assessed and
collected.
verified"by*oatiS ^^' ^^' '^^ annual return must be verified by oath or
orafBrmation. affirmation of the person making the same. Collectors are
directed by law to require every return to be so verified
by the person rendering it. The affidavit may be made
before the collector for the district or before any officer
authorized by law to administer oaths.
1 For method of procedure in such cases, see sects. 3173 and 3176, Rev. Stat., and also
Form 1045, the form of notice to be given in such cases.
Digitized by VjOOQIC
IKOOMB TAX BBQTJLATIONB. 37
Art. 23. When the return is not filed within the re-^j^^^^J^^'
quired time by reason of sickness or absence of the indi-^^y^s*^*®^-
vidual, an extension of time, not exceeding 30 days from
March 1, within which to file such return may be granted
by the collector, provided a written appHeation therefor
is made by the individual within the period for which
such extension is desired.
Art. 24. The annual returns will be forwarded by col-. Returns to be
lectors by registered mail to the Commissioner of Internal ( ommissioner of
.Til.- -.. I'll Internal It avenue
Revenue with the list for the month in which the returns by .registered
are filed. CoUectors must provide that said returns aad"^'
all forms relating thereto are securely sealed in envelopes
or packages before forwarding the same.
Art. 26. AU assessments shall be made by the Com- Assessments;
• xx iT> jn "Ln-L notification of:
nussioner of internal Kevenue, and all persons shall be when to bo paid,
notified of the amount for which they are respectively
liable on or before the 1st day of June of each successive
year, and said assessments shall be paid on or before the
30th day of June, except in cases of refusal or neglect to
make such return and in cases of false or fraudulent
returns, in which cases the Commissioner of Internal
Revenue shall, upon the discovery thereof, at any time
within three years after said return is due, make a return
upon information obtained, as provided by the law, and
the assessment made by the Commissioner of Internal
Revenue thereon shall be paid by such person or persons
immediately upon notification of the amount of such
assessment.
To any sum or sums due and unpaid after the 30 th Penalty for faii-
** ■* ure to pay tax.
day of June iu any year, and for 10 days after notice and
demand thereof by the collector, there shall be added the
sum of 5 per cent on the amount of tax unpaid, and in-
terest at the rate of 1 per cent per month upon said tax
from the time the same became due, except from the
estates of insane, deceased, or insolvent persons.
Art. 26. If any person, corporation, joint^tock com-,afliiJ*}**J5JSto
pany, association, or insurance company Kable to make^®*^^^*
returns or pay tax shall refuse or neglect to make returns
at the time or times specified in each yeai, such person
shall be Uable to a penalty of not less than $20 nor more
than $1,000.
Any person or any officer of any corporation required mSSSlValtoe'S
bylaw to make, render, sign, or verify any return whotiSS?'*^®'^*'^*"
makes any false or fraudulent return or statement with
Digitized by VjOOQIC
88 INOOMB TAX BEQULATIOKS.
intent to defeat or evade the assessment required by
law to be made shall be guilty of a misdemeanor; and
shall be fiued not exceeding $2,000 or be imprisoned not
exceeding one year, or both, at the discretion of the court,
with the costs of prosecution.
Art. 27. Nothing in the law or these regulations shall
be construed to release a taxable person from liability for
income tax, nor shall any contract entered into after the
act of October 3, 1913, took effect be valid in regard to
any Federal income tax imposed upon a person liable to
such payment.
Art. 28. For regulations relative to the claiming of
exemptions and deductions on income, the tax on which
is to be deducted and withheld at the source, see article 33.
Digitized by VjOOQIC
PART 2.
COLLECTIONS AT THE SOX7BGE.
Art. 29. The deductions and payment of the tax at the^^^^J^^^j^
source of income applies only to the normal tax imposed J^^f tax Imp^
upon individuals and shall not be construed* to require gP^^j^J^J^^^*^^^^*
any of such tax to be withheld prior to the 1st day of tfvJmitii*N^T
November, 1913. iw3.
Art. SO. Paragraph E of section 2 of the act provides ^^^jo^^^J™";
that withhold tax at
the sOQioe.
AU persone, firms, copartnershipe, companies, corporations, joint-
stock companies or associations, and insurance companies, in what-
ever capacity acting, including lessees or mortgagors of real or per-
sonal property, trustees acting in any trust capacity, executors, ad-
ministrators, agents, receivers, conservators, employers, and all
officers and employees of the United States having the control, re-
ceipt, custody, disposal, or payment of interest, rent, salaries, wages,
premiums, annuities, compensation, remuneration, emoluments, or
other fixed or determinable annual gains, profits, and income of an-
other person, exceeding $3,000 for any taxable year, other than divi-
dends on capital stock, or from the net earnings of corporations and
joint-stock companies or associations subject to like tax, who are re-
quired to make and render a return in behalf of another, as provided
herein, to ihe collector of his, her, or its district, are hereby author-
ized and required to deduct and withhold from such annual gains,
profits, and income such sum as will be sufficient to pay the normal
tax imposed thereon by this section, and shall pay to ihe officer of
the United States Government authorized to receive the same; and
they are^each hereby made personally liable for such tax.
Art. 31. All persons, firms, etc., mentioned in the ^^^^^'^^''^^
above-quoted paragraph are referred- to in these regula-
tions as '' debtors'' or ''withholding agents,'* and the word
''source" is to apply to the place where the income origi-
nated and is payable.
Art. 32. The income from which the normal tax of income as to
1 per cent is to be withheld by withholding agents in- withheld.
eludes all items of income exceeding in the aggregate
$3,000 and payable to any one person during the year,
except: .
(a) Dividends on capital stock or from the net earnings
of corporations and joint-stock companies or associations
and insurance companies subject to like tax.
39
Digitized by VjOOQIC
40 IKCOMB TAX BEOULATIONS.
(b) Income of an individual which is not Sxed or cer-
tain and not payable at stated periods, or is indefinite or
irregular as to amount or time of accrual, shall not be
withheld at the source, but shall he listed in the annual
return of the individual, and the tax shall be paid thereon
by him.
Incomes derived from the following professions and]vo-
cations come under this head: Agents compensated on
the commission basis, lawyers, doctors, authors, inven-
tors, and other professional persons whose income is irregu-
lar and indefinite.
Such persons shall make personal return of all their
income, provided their total net income from all sources is
aimui*reStoere^ $3,000 or ovcr. For example: When a lawyer receives a
retainer of $5,000 as a special fee, a deduction therefrom
shall not be made by the payer; but when a lawyer re-
ceives a retainer of $5,000 per annum, and the exemp-
tion claimed is $3,000, $2,000 of such income would be
taxed and the tax retained at the source; or if his ex-
emption claimed should be $4,000, $1,000 of such income
would be taxed and the tax thereon withheld at the
source.
(c) Items listed in article 5, which are wholly exempt
from tax.
undw^Mi^^h ^^- *3- («) I^ ^ cases where the income tax of a
bifl£dwia^th^P®rsoi^ is withheld and deducted and paid or to be paid
holding agent. ^^ ^^ sourcc, such persou shall not receive the benefit
of the deduction and exemption allowed in paragraph C
(see arts. 9 and 10) except by an appUcation to the col-
lector for refund of .the tax unless he shall, not less than
SO days prior to the day on which the return of his in-
come is due, file with the person who is required to with-
hold and pay tax for him, a certificate claiming the
benefit of such exemption, and thereupon no tax shall
mSd^g^fiLrep^he withheld upon the amount of such exemption. If
S?u^n *^^em^ any pcrson for the purpose of obtaining any allowance
tion. Qj, reduction by virtue of a claim for such exemption,
either for himself or for any other person, knowingly
makes any fa^se statement or false or fraudulent repre-
sentation, be shall be liable to a penalty of $300.
di^^wS^h^" (^) ^^^ ^\i93X any person under the foregoing condi-
fliS'witS^th- *'i^^ be allowed the benefit of any deduction provided
^ttr.^""* °'for in subsection B (see art. 6, 1 to 6) unless he shall, not
less than 30 days prior to the day on which the return of
his income is due, either file with the person who is re-
Digitized by VjOOQIC
INCOME TAX BEGULATIONS, 41
quired to withhold and pay tax for him a true and correct
return (on Form 1008) of his annual gains, profits, and
income from all other sources, and also the deductions
asked for, and the showing thus made shall then become
a part of the return to be made in his behalf by the person
required to withhold and pay the tax and the debtor or
withholding agent will only withhold the tax on the pay-
ments made in excess of the deductions claimed on said
form. Or such person may likewise make application for
deductions to the collector of the district in which return
is made or to be made for him.
If such person is a minor or an insane person, or is oxmSSS? *of 'm^
absent from the United States, or is unable owing toJSJodJ."^ *™*"®
serious illness to make the return and application above
provided for, the return and application may be made
for him or her by the person required to withhold and
pay the tax, he making oath on certificate (Form 1009)
under the penalties of this act that he has sufficient
knowledge of the affairs and property of his beneficiary
to enable him to miake a full and complete return for him
or her, and that the return and application made by him
are full and complete.
(c) When, however, claims for exemption and deductions fu^*"*' *" ^
as above described are not filed within the prescribed
time, the tax collected in excess can be remitted only on
presentation of a claim for refund under the provisions
of section 3220, Revised Statutes, said claims to be made
either by the withholding agent against whom the assess-
ment was made, or by the person on account of whom
such taxes were withheld.
Claims for abatement of taxes erroneously assessed, abatement! '^'
or which are excessive in amount, may, prior to collec-
tion thereof, be filed under the provisions of said sec-
tion 3220, Revised Statutes, either by the withholding
agent against whom the assessment was made, or by the
persons on account of whom such taxes were withJield.
In the monthly list returns as now prescribed a space ^J^a"^'^*^^®!^
is provided to show the amount of taxes which the with- yarded to ooueo-
r,. . 1 11 1 tor until notices
holding agent may renut to the collector when such re-g^^asBeBsme^
tiwns are filed. The withholding agents will not, how-<»ived.
ever, forward to the collector amounts withheld by him
until notices of assessment are received from the collector.
Claims for exemption and deductions may be filed with
the withholding agent and claims for deductions may be
Digitized by VjOOQIC
42 INCOME TAX BBGXJLATIONS,
filed with the collector, not later tJian SO days prior to
March 1.
a«nt?t<?tw fur? In cases where claims for deductions are filed with the
of /fe duct icfns collector within the time prescribed, the collector wiU
TOU3ctor.***'**'^^inmiediately furnish the withholding agent (whose name
and address must be shown on Form 1008) with a state-
ment of the amount of deductions claimed, and said with-
holding agent shall not withhold and pay the normal
tax to the extent of the deductions claimed as per said
list.
Withholdii^ agents should not file their annual returns
until after the expiration of the time allowed persons to
file claims for exemptions and deductions and if claims
for deductions are filed with the collector in the required
time, yet not in sufficient time to have the adjustment
made by the withholding agent, the collector will make
the adjustment on the withholding agent's return and in
reporting such withholding agent for assessment will
make allowance for the amount of such deductions
claimed. Notice of such adjustment, however, must be
furnished the withholding agent,
to be paid to ooi- Art. 34. The normal tax of 1 per cent shall be deducted
and withheld at the source, and payment made to the
collector of internal revenue as provided in the law, by
the debtor, or his, her, or its duly appointed agent author-
ized to make such deduction and payment.
by^Seal^jit No Other person, firm, or organization, in whatever
feid^bf^^r capacity acting, having the receipt, custody, or disposal
^^^' of any income, as herein provided, shall be required to
again deduct and withhold the normal tax of 1 per cent
thereon, provided that any such person, firm, or organiza-
tion other than the debtor who has withheld said tax,
shall file with the collector of internal revenue for his, her,
or its district, a certificate (Form 1006) showing from
whom and in what amount the tax has been so withheld.
m]^e**toa)itecto? ^^' *** Withholding agents who are required to make
of intemaj reve- monthly retums will, on or before the 20th day of each
month, file with the collector for their respective dis-
tricts such retums for the preceding month, accom-
panied by all certificates relating thereto, and there
shall also accompany said retums all certificates claiming
exemptions and deductions which are not required to be
listed thereon; and on or before the 1st day of March in
each year said withholding agents shall likewise file their
annual retums for the preceding calendar year. Annual
Digitized by VjOOQIC
INCOME TAX BBGULATIONS. 48
returns (Forms 1041 and 1042) must be accompanied by
all certificates claiming exemptions and deductions
relating thereto.
Art. 36. For regulations as to assessment and collec-
tion of taxes from withliolding agents, see article 25 and
"Assessments and collections," Part 4.
A.
Income derived from interest upon bonds and mortgages or
deeds of trust or other siTnilar obligations of corporations,
etc.
Art. 37. Under the law a tax of 1 per cent, designated ^ Twc<m income
cLerh;fid from in-
as the normal tax, shall be deducted at ''the source," twof^bonda,
beginning November 1, 1913, from all income accruing duoWd.
and payable to any person subject to such tax which
may be derived from interest upon bonds and mortgages,
or deeds of trust, or other similar obligations, including
equipment trust agreements and receivers' certificates
of corporations, joint-stock companies or associations,
and insurance companies, although such interest does not
amount to $3,000.
Income derived from the interest upon the obliga-gtete^iid^Gov^
tions of a State, county, city, or any other political ^SLmJt!^*"
subdivision thereof, and upon the obligations of the
United States or its possessions, is not subject to the
income tax, and certificates of ownership in connection
with coupons or registered interest orders for such inter-
est wiU not be required.
Art. 38. The term ''debtor," as hereinafter used, shall Term "debtor*'
apply to all corporations, joint-stock companies or asso-corporattons!etc.,
• X- J • • J 1. uj ux „ and to duly ap-
ciations, and msurance companies; and such debtor pointed withhoid-
may appoint withholding and paying agents to act for it aglnts.
in matters pertaining to the collection of this tax, upon
filing with the collector of internal revenue for the dis-
trict a proper notice of the appointment of such agent or
agents. Where such withholding agent is so authorized
by the debtor corporation, he may file with the collector
of his district the required returns and accompanying
certificates (arts. 50 and 51), in which case the assessment
of the tax withheld by him will be made in that district.
Unless such authority is given, such reports, etc., will be
furnished by the debtor corporation to the collector of its
district (i. e., the district in which its principal financial
•Digitized by VjOOQIC
44 INCOME TAX BBGULATIONS.
or business office is located) , where, in such case, assess-
ment will be made.
dimt^Lfrndwi^ "^** *^* ^^^ *^® purpose of collecting the tax on all
c*^^araSox?®^**^^^^P^^® ^^^ registered interest originating or payable
in the United States, the source shall be the debtor (or
its withholding and paying agent in the United States),
who shall deduct the tax when same is to be withheld,
di^ffls^Srtttg®^^ ^^ other bank, trust company, banking firm, or indi-
tor^ect?on!°^'^^^^^^ taking coupous or interest orders for collection, or
otherwise, shall withhold the tax thereon, where such
coupons or orders for registered interest are accon^^panied
o^S^^^to ao^'^^y certificates of ownership signed by the owners of the
c2^S^f^*^i-^^^^s upon which the mterest matured. These certifi-
ectfon. cates shall be made on the prescribed forms and shall be
made out by each owner of bonds for the coupons or in-
terest orders for each separate issue of bonds or obliga-
tions of each debtor. (See Arts. 43 and 46.)
til^tes!*°*whS Art. 40, Responsible banks, bankers, and collecting
permitted. agents receiving coupons for collection with the aforesaid
certificates of ownership attached, may present the cou-
pons with the attached certificates to the debtor or
withholding agent for collection, or such certificates may
be detached and forwarded direct to the Commissioner
of Internal Revenue, provided such bank, banker, or
collecting agent shall substitute for such certificates its
ke^tb^'couectin*^^^ certificate, and shall keep a complete record of each
agent. transaction, showing —
1. Serial number of item received.
2. Date received.
3. Name and address of person from whom received.
4. Name of debtor corporation.
6. Class of bonds from which coupons were cut.
6. Face amount of coupons.
7. Exemptions from tax claimed by owner under para-
graph C.
For the piu'pose of identification, such substitute cer-
tificates should be numbered consecutively, and cor-
responding numbers given the original certificates of
ownership.
stftmtog^^oertffl- '^^^ permission here granted will extend to responsible
for(^gn^c^ntrie*s!^*^^'^^ bankers, and collecting agents in foreign coun-
tries, through whom collection of such interest coupons
is made.
Digitized by VjOOQIC
INCOME TAX BBOULATIONS. 45
The various substitute certificates hereby authorized
will correspond with the form numbers of the ownership
certificates detached by the collecting agent, except that
the substitute certificates' form numbers will be followed
by the letter ''a,:'
Art. 41. A debtor whose bonds may be registered, both ^^^Nomai^M^
as to principal and interest, shall deduct the normal tax ^|IJ,p*^^®^* ^
of 1 per cent from the accruing interest on all bonds
before sending out checks for said interest to registered
owners or before paying such interest upon interest
orders signed by the registered holders of said bonds
unless there shall be filed with said debtor or its fiscal
agent (not later than 30 days prior to March 1), through
whom said interest is customarily paid, the proper cer-
tificates claiming exemption from liability for said tax
as herein provided, executed —
By a citizen or resident of the United States, the bona claims for ex-
fide owner of the registered obligations, who may claim tax, by whom
exemption under paragraph C, section 2, of the income
tax law, or
By corporations, joint-stock companies, associations,
or insurance companies organized in the United States,
or organizations, associations, fraternities, etc., which are
either taxable or exempt from taxation, as provided in
paragraph G, subdivision (a), of the act, or
By a bona fide resident and citizen of a foreign country,
claiming exemption as such.
Art. 42. If the owners of the bonds are individuals certificates of
who are citizens or residents of the United States, the specify iJonds and
^ 'J x*z! ^ T. 11 xi_ amomit of inteiv
aforesaid certmcates snail accompany the coupons, or, est due.
with respect to the interest on registered bonds, shall be
filed with payer of said interest, and such certificates
shall describe the bonds and show the amount of cou-
pons attached or the amount of interest due such owners
on registered bonds and the name and address of the
owners, and if registered in names other than the owners
such names with addresses shall also be given. Such
certificates shall also show whether the claimants do or
do not then claim exemption from taxation at the source, ciaim for ex
under paragraph C, articles 9 and 10 ($3,000, and under p™ag^h*c?
certain conditions $4,000), as to the income represented
by such coupons or interest. The certificates will be
prepared on Form 1000 and must show the amount, if
any, of exemption claimed, the total amount of exemp-
tion to which the claimant is entitled and must be signed
Digitized by VjOOQIC
46 INCOME TAX BEGULATIONS.
by the claimants, who shall use their ordinary business
signatures. The certificates shall also show the post-
office and street address of the claimants, the internal-rev-
enue district, and the date when signed.
Certificates Art. 43. Duly authorized agents may sign such cer-
duiy authorke^ tificates f or the persons for whom they act, and withhold-
ing agents, banks, or others, with whom such certificates
are filed, if satisfied as to the identity and responsibility
of the persons so signiog, shall stamp or write on the
face of each such certificate ** Satisfied as to identity and
responsibility pf agent," giving name and address of
be^^*v^ed* by person thus certifying. Certificates so verified may be
agents.^ ^^^^'"^^ accepted by all other persons, firms, or organizations to
whom presented, without question as to authority of
such agent. If the person, firm, or organization first
receiving such certificate is not satisfied as to the agent's
identity and responsibility, then, in fhat event, the agent
shall furnish evidence of his authority to so act, which
will be retained by the person, firm, or organization
receiving it, an4 the certificate of ownership shall be
indorsed as above provided.
Tax to be de- Art. 44. Whenever interest coupons, accompanied by
payment of inter- a Certificate of an individual who is a citizen or resident
of the United States, are presented to a debtor or its
withholding agent for payment, or whenever interest is
payable to such individual on a bond registered as to both
principal and interest, the debtor or its withholding agents
shall deduct and withhold the amount of the normal tax,
except to the extent that exemption is claimed in the
certificate of ownership (Form 1000).
Where the interest to be paid is registered, the same
form of certificate shall be used where exemptions are
clauned, and it shaU be filed with the debtor at least five
days before the due date of such interest.
Tax on interest Art. 46. If the owuers of the bonds are corporations,
payable to cer- , . , , -, , ... .
tain corporations, J omt-stock compauies, associatious, or msurance com-
ducted. panies organized in the United States, no matter how
created or organized, or organizations, associations,
fraternities, etc., which are either taxable or exempt
from taxation as provided in paragraph G, subdivision (a)
of the act, the debtor is not required to withhold or de-
duct the tax upon income derived from interest on such
bonds, provided coupons or orders for interest from such
bonds shall be accompanied by a certificate of the owners
thereof certifying to such ownership, which certificates
Digitized by VjOOQIC
INOOMB TAX BBOULATIOlifS. 47
shall be filed with the debtor when such coupons or inter-
est orders are presented for payment.
Such certificate will be made on Form 1001, and mustc^Jf^^uoni
be signed in the name of the organization (stating its y^"*^ exemp-
place of business) by the persident, secretary, or some
other principal officer of the said corporation or organi-
zation duly authorized to sign same, and must be prop-
erly dated.
Art. 46. Coupons, or orders for registered interest, noni%*den^t
payable in the United States, representing the interest *"®°^*
on bonds owned by nonresident aUens^ must be accom-
panied by the prescribed certificate (Form 1004X, but
this certificate may be signed either by the owner or, ux
behalf of the owner, by a reputable bank or bankers oi
other responsible collecting agency, certifying to the
ownership of the bonds and giving the name and
address of the bona fide nonresident and ahen owners,
and when such certificate is thus attached the normal
tax of 1 per cent on such coupons or interest orders need
not be withheld at the source by the debtor or collecting
agency. Unless such proof of foreign ownership is fur-
nished, the normal tax of 1 per cent should be deducted.
Foreign organizations engaged in business within the
United States are subject to the normal tax of 1 per cent
per annum upon the amount of net income accruing from
business transacted and capital invested within the
United States; but said organizations shall be exempt
from having any part of their income withheld by a
debtor or withholding agent, and claim for such exemp-
tion will be made on Form 1018.
Art. 47. Inasmuch as individual members of a part-^j^^^^yy^j^^^
nership are liable for income tax upon their respective J^^P'^^^J^^f^g:
interest in the net earnings of such partnership, the part-^^^P*^®'-
nership may file with the withholding agent a notice
signed in the name of the partnership, by a member
thereof, claiming a deduction of a specific amount on
account of the legitimate expense incurred in conducting
the business of said partnership; and upon receipt of
said notice said withholding agent shall not withhold,
and shall not be held Uable for, the normal tax on the
amount of income equal to the amount of deduction
claimed in said notice; but in no event shall the total of
the amounts claimed, as provided herein, be in excess of
the total amount of the actual legitimate annual expenses
incurred by said partnership in the conduct of its busi-
Digitized by VjOOQIC
48 INCOME TAX BBOULATION8.
ness. Application for such deduction shall be made on
Form 1011.
noMi" ce^- ^^^' *** Foreign partnerships or firms, all the members
may^^i^^^fby ^^ ^^^^^ ^^^ b^th citizens, or subjects, and residents of a
foreign country, which are the owners of bonds and mort-
gages or deeds of trust or other similar obligations, in-
cluding equipment trust agreements, receivers' certifi-
cates, and stocks of corporations, joint-stock companies
or associations and insurance companies, organized or
doing business in the United States, may file with the
debtor or withholding agent, with their coupons or orders
for registered interest, or orders for other income derived
from property or investments in the United States, a
certificate and notice of ownership (Form 1016) setting
forth the above facts'; and the debtor or withholding
agent shall not withhold any part of said income.
Foreign part- Art. 49. Where a foreign partnership or firm is composed
nership, com- ^,, ,, *. !•• #i t-T • •»
posed of nonresi-of both nonresident foreigners and citizens of the Umted
dent lOreigners , , _
M»d citteens of States, Or foreigners residing in the Umted States or its
possessions, the certificate of ownership shall show this
fact, and the name and legal address of each member of
said partnership who is a citizen of the United States,
or who is a foreigner residing in the United States or its
possessions, shall be given on the back of said certificate,
and no part of said income shall be withheld. The said
certificate and notice of owiiership in either case above
provided shall be on Form 1014.
^^onthiyiistre- ^^^ 5Q Withholding agents are required to file in
duplicate a monthly list return (Form 1012) giving a
list of all coupon or interest payments made on which
the normal tax of 1 per cent was deducted and
withheld from interest payments made upon bonds or
other similar obligations, and shall show the name and
address in full of the owners of the bonds, amount of the
income, amount of exemption claimed, amount of in-
come on which withholding agent is liable for tax, and
the amount of tax withheld.
Forms 1012a, 1012b, and 1012c are to be used where
Form 1012 does not afford sufficient space in which to
enter aU items.
m^oTt°hiy liste FoHU 1012d, whcn necessary to be used, shall be made
may be used. ^ dupUcatc and shall be a summary of the monthly list
return. Form 1012, as made in detail by the withholding
agent, and the said summary and lists thereto attached
when properly filled in and the summary signed and
Digitized by VjOOQIC
IVOOMB TAX BBQULAIIOlirS. 49
sworn to shall constitute the complete monthly list re-
turn of the withholding agent making same as fully as
if each list attached to the summary was signed and sworn
to separately.
An annual list return (Form 1013) in duplicate is also
required to be made by debtors or withholding agents of
the normal tax of 1 per cent withheld from interest pay-
ments made upon bonds or other similar obligations, and
it shall be filed on or before March 1 of each calendar
year.
Art. 61. The monthly list return in the form as re- MontiJy list to
■^ ooDStitate a Dart
quired herein shall constitute a part of the annual listjJ^^anaoa'Jtot
return to be made by debtors or withholding agents, and
the debtor or withholding agent will not be requirecj, in
making an annual list return of the tax withheld from
income derived from interest upon bonds and mortgages
or deeds of trust, or other similar obligations of corpora-
tions, joint-stock companies, or associations and insurance
companies, to again make an itemized list of the amount
of tax withheld from each person, but will give in the
annual list return the totals of the monthly list return
for each month of the year for which annual "list return
is made.
All substitute certificates of collecting agents, author-
ized by regulations, that are received by debtors or
withholding agents will be considered the same as
certificates of owners, and in entering same in making
monthly list returns debtors or withholding agents will
enter the name and address of the collecting agent and
the number of the substitute certificate issued in lieu of
the original certificate containing the name and address
<rf the owner of the bonds. Until the further ruling on this
subject by this department no list return is required to
be made of certificates of ownership accompanying cou-
pons or registered interest orders filed with a debtor or
withholding agent when the owners of the bonds are not
subject to having the normal tax withheld at the source, but
all such certificates of ownership shall be forwarded by certifieauii to
the debtor or withholding agent to the collector of collector,
internal revenue for the district, on or before the 20th
day of the month succeeding that in which said certificates
of ownership were received.
24786«— 14 4
Digitized by VjOOQIC
50 IKOOME TAX BEGULATI0K8.
B.
Incoine derived from interest upon bonds, nxortgages, etc.,
paid by first bank or collecting agency when certificates of
owners are not filed.
Interest cou- Alt. 62. Where the coupons or interest orders are not
pons or oraers. ^ ^ *
go* ^^g^«^ accompanied by certificates as heretofore prescribed, the
first bank, trust company, banking firm, or individual, or
collecting agency receiving the coupons or interest orders
for collection, or otherwise, shall deduct and withhold the
tax and shall attach to such coupons or interest orders its
own certificate (Form 1002), giving the name and address
of the owner of, or the person presenting such coupons or
interest orders if the owner is not known, with a descrip-
tion of the coupons or interest orders; also. setting forth
the fact that they are withholding the tax upon them;
whereupon the debtor shall not again withhold the tax
on said coupons or interest orders, but in Ueu thereof
shall deliver to the Collector of Internal Revenue the
certificate of such bank, trust company, etc., which is
withholding such tax money,
^wentftyofgaw ^y corporation, Collecting agency, or person first
g*g^^^^ receiving from the owner any interest coupons or orders
for the collection of registered interest should require the
persons tendering such coupons or orders for registered
interest to satisfactorily establish their identity.
Art. 63. Withholding agents receiving coupons or
aimSi^rtet "y^iiiterest orders not accompanied by certificates of owners
turns. are. required to file monthly and annual list returns in
duplicate.
The required monthly list return (Form 1044) shall
give a list of all coupon or interest payments made on
which the normal tax of 1 per cent was deducted and
withheld and shall show the name and address in f uU of
the owner of, or the person presenting such coupons or
interest orders, if the owner is not known, amount of the
income subject to tax and the amount of tax withheld.
An annual list return (Form 1044a) is also required
to be made by such withholding agents, showing the
amount of tax withheld during the preceding year on in-
come of this character. This return must be filed on or
before the 1st day of March of each calendar year.
The monthly list returns in the form as required herein
shall constitute a part of the annual list return to be made,
and the withholding agent will not be required, in making
Digitized by VjOOQIC
INCOME TAX BEGULATIONS. 51
an annual list return of the tax thus withheld, to again
make an itemized list of the amount of tax withheld from
each person, but will give in the annual list return the
totals of the monthly list returns for the year for which
annual hst return is made.
C.
Inconie derived from ooupons, checks or bills of exchange on
foreign bonds, mortgages, dividends, etc.
Art. 64. All persons, firms, or corporations under- conection of
taking for accommodation or profit (this includes hand- brnfofexcbange;
ling either by way of purchase or collection) the collec-
tion of coupons, checks, bills of exchange, etc., for or in
payment of interest upon bonds issued in foreign coim-
tries, and upon foreign mortgages or like obligations, and
for any dividends upon stock or interest upon obligations
of foreign corporations, associations, or insurance com- J^^^P^ *<> be
, . , . . - . . obtained from
pames engaged m busmess m foreign countries, are re-<^.<>m»i8sioner
quired by law to obtain a hcense from the Commissioner «»««•
of Internal Revenue.
Art. 66. AppHcations for such license (Form 1017) willy^Pi*icagj>» ^^
be made to the collector for the district in which such ?«ie ip j*?*©-
tor 01 Qistrict.
business is to be carried on. Upon the acceptance of such
application the collector will issue to the appHcant with-
out cost a hcense (Form 1010) which will continue in
force until revoked or canceled. Blank forms of such
license, bearing the f ac simile signature of the Commis-
sioner of Internal Revenue, will be furnished collectors
on requisition, who will in aU cases countersign the same
before issuing it to applicant. Failure to obtain a license
or to comply with regulations is punishable by a fine not Penalty for
T ^t rx^/> • • 1. failure to obtain
exceeding $5,000 or imprisonment not exceeding one year, license.
or both, in the discretion of the court.
Art. 66. Where the collector is not sufficiently in-
formed as to the entire responsibiUty of the appUcant, orj.g®^2^^^y^
where in any case he deems it advisable, the Commissioner ^ '
• of Internal Revenue may upon the recommendation of the
collector require of the applicant a bond, in duplicate,
with satisfactory sureties, in a penal sum at least equal to
the estimated amount of tax to be withheld by such appli-
cant during any one year. A form of bond to be given
in such cases will be furnished collectors on appHcation
for the same. Where licenses are issued without bond,
the collector will each year inquire into and satisfy him-
self of the fibaancial responsibility of the Ucensee.
Digitized by VjOOQIC
52 INCOME TAX BEGULATI0N8.
Art. 67. When any person, firm, or corporation shall
obtetoSf *** fOT^*^^ branch offices and desh^ to collect foreign interest
branch offices, qj. dividend incomc through said branch offices, the ap-
pUcation for license or licenses shall be made by the per-
son, firm, or corporation through its principal office for
its branch office or offices. AppHcation for licenses in
AppUcatoi for such cases shall be made to the collector of internal
tifled to collector revcnuc f or the district in which the home office is
which hrandi located. The uames and addresses of the branch offices
shall be furnished to the collector in the application of
the said principal, and if the requirements of the fore-
going regulations have been complied with to the satis-
faction of the collector, he shall certify this fact to the
collector of internal revenue for the district in which
the branch office is located, and the collector to whom
this certification is made shall issue to such branch office
a license, as in the case provided in article 55.
tote^t^itooted ^^^' ^®* '^^^ licensed person, firm, or corporation first
to iw withheld by re^jeiying a^y such foreign items for collection or other-
wise, shall withhold therefrom the normal tax of 1 per
cent, and will be held responsible therefor. Such Hcensee
shall indorse or stamp on each such coupon, check, or
st^tomt|stobill of exchange, when practicable, the words '-Income
be indorsed or ap. tax withheld by'' (giving his or their name, address, and
pons, checks, etc. date), which shall be sufficient evidence to relieve subse-
quent holders or purchasers from the duty of also with-
holding the income tiax.
If the size or nature of such coupons, checMs, etc.,
makes it impracticable to make said indorsement thereon,
a statement identifying the item on which tax is with-
held and bearing said indorsement may be attached
thereto with the same effect as if the indorsement was
made directly thereon,
ni^'^wstor'^of ^^^' ^^' Such licensee shall obtain the namis and
of^toes'dSnct^*^^^^^^®® ^' ^^® persons from whom such items are re-
ed, etc. ceived and shall prepare a list of same in duplicate (on
Form 1043) and file it with the collector of internal
revenue for his district not later than the 20th day of
the month next succeeding the month in which such
items were paid. The list shall be dated, and shaU
contain the names and addresses of the taxable persons,
the character and amount of income, amount of exemp-
tion claimed, amount of income on which withholding
agent is liable for tax, and the amount of tax withheld.
In addition to the monthly lists the lic^isee wiM, on or
Digitized by VjOOQIC
INCOME TAX BEOXJLATIONS. 53
I
before the 1st day of March in each year, file with the
collector in duplicate a return (Form 1043a), showing
the amount .of income paid iind the amount of tax with-
held by him during the preceding year and such other
information 'as the form prescribes.
The monthly list return in the form as required herein
shall constitute a p&rlPof the annual list return to be made
by the Ucensee as withholding agent, and he will not be
required, in making an annual list return of the tax with-
held from income described in article 54, to again make
an itemized list of the amount of tax withheld from each
person, but will give in the annual Ust return the totals
of the monthly list return for each month of the year for
which annual list return is made.
Art. 60, In the event such coupons, checks, or bills of ^^^1^ *5^
exchange above mentioned are presented for collection gJ^JP** ^ ""y
by an individual claiming the benefit of the exemptions
aUowable under paragraph C (arts. 9 and 10), such indi-
vidual shall be permitted to avail himself of the exemption
claimed, upon signing on the form heretofore prescribed
for coupons payable in the United States, and no tax shall
be deducted for the amount of the exemption so claimed }
or if such items are presented by corporations, joint-stock organkatioiis
companies, or associations and insurance companies, or-gJ^™g*^^2d
ganized in the United States, the form of certificate here- ®* ^^ ^'"^^.
toforc prescribed for sudi organizations shall be used, and
in such instances no tax shall be deducted.
Art. 61. In both instances the hcensee first receiving certificates of
such items shall retain such certificates for delivery with i^rwded with
the lists aforesaid, and with respect to said coupons, Sams t/oouecton
checks, or biUs of exchange, said licensee shall attach
thereto (identifying the items) or indorse or stamp
thereon the words ^'Income tax exemption claimed
through" (giving name and address of licensee), which
sliall be sufficient evidence to relieve subsequent holders
or purchasers from the duty of also withholding the tax
thereon.
The, provisions for collection of the tax on foreign obli-:
gations herein set forth includes the interest upon all for-
eign bonds, even though the coupons may, at the option
of the holder, be payablo in the United States as well as
in some foreign country.
Art* 62, All persons licensed shall keep their records i^^J^*;^^^* *®
such manner as to show from whom every such item has
been received, and such records shall be open at all times
to the inspection of internal-revenue officers.
Digitized by VjOOQIC
54 Iia^OOME TAX BEGUJLATION^S.
D.
Inoome derived from wages, rent, interest, or other fixed and
determinable gains, profits, and income.
renL^^.^"*®^' Art. 63. Tlio above title includes all income derived
from salaries, wages, rents, royalties, interest, taxable
annuities, emoluments, or other fixed and determinable
annual gains, profits, and income of another person.
(^'Income derived from interest upon bonds and mort-
gages, or deeds of trust, or other similar obligations of
corporajbions, etc.," and "Income derived from coupons,
checks, or bills of exchange on foreign bonds, mortgages,
dividends, etc.," which have been covered by regulations
under such titles, are not to be included here.)
agSte ^o didwt Art. 64. Copartnerships, companies, corporations, joint-
^ ^*^ stock companies or associations, insurance companies, iu
whatever capacity acting, including lessees, mortgagors
of real or personal property, trustees acting in any trust
capacity, executors, administrators, agents, receivers,
conservators, employers and all officers and employees
of the United States, hereinafter referred to as *' debtors"
or withholding agents, having the control, receipt, custody,
disposal, or payment of income as described in article 63,
shall deduct and withhold from such annual gains, profit,
and income, when the same shall have reached an aggre-
gate amount in excess of $3,000, such sum as will be
sufficient to pay the normal tax of 1 per cent imposed by
law, and shall pay the taxes so withheld to the collector
of internal revenue for the district in which the said
withholduxg agent resides or has his, her, or its principal
place of business.
iie?don1>?ri<3iSi ^\ ^' ^ withholdmg agent who pays monthly, or
gyments wh«tt periodically duruxg the year, interest, rents, salaries,
13,000. wages, etc., shall not withhold the said tax imtil such
time as the interest, rents, salaries, wages, etc., shall have
reached an aggregate amount ia excess of $3,000. When
such amount has been reached, such agent shall withhold
the tax on the whole $3,000 and any excess thereof,
unless the person to whom the income is due fiiles a notice
Exemption u^ claiming exemption \mder paragraph C (as provided in
may declaimed, art. 33 (a) ) , in which case the withholding agent shall with-
hold only the tax on the iucome ia excess of said exemp-
tion of $3,000 or $4,000 (as the case may be), and the tax
so withheld shall be paid as required by law.
Digitized by VjOOQIC
IKOOMB TAX BEOULATIONS. 55
Art. 66. In case the person to whom the income is due de?lJ2S^ii"B
is entitled to any deductions under paragraph B, he may ™*3^ ^ ciaKed.
avail himself of such deductions by filing with the with-
holding agent Form 1008, as provided in article 33(b), in
which case the withholding agent will only withhold the
tax on such income in excess of the deductions claimed
on said form.
Art. 67. Banks, bankers, trust companies, and other^i'^hfii^i^
banking institutions receiving deposits of money, are not^da^^^S^to*
required to withhold at the source the normal income tax
of 1 per cent on interest paid, or accrued, or accruing to
depositors, whether on open accoimts or on certificates
of deposit; but all such interest, whether paid or accrued
and unpaid, must be included in the annual income
return of the person entitled to receive such interest,
whether on open accoimt or on the certificate of deposit.
Art. 68. When a note shall have been given in payment hew^p'irySLnt
of interest, rents, or other income accruing after March SJiotwSven for
1, 1913, the maker of the note, as the ''debtor" and as the""**
''source" where the income originates, is required, in
paying such note, to withhold the normal tax of 1 per
cent on the entire amount of the note, if in excess of
$3,000, unless claim for exemption or deductions under
article 33(a) or 33(b) is filed, in which case the said tax
shall be withheld only on the amount of said note in
excess of the exemption or deductions so claimed.
If any person who has purchased or discounted anyj^gJJ^^JJg ^
such notes omitted, in acquiring them from previous ^^"^^^^'J.jJ^
holder, to make a deduction or allowance for said tax, he^**^-
can look for relief only to the person from whom the notes
were obtained, as the "debtor," the maker of said notes,
is required to deduct, withhold, and pay to the collector
of int^nal revenue the amount of the normal tax of 1 per
cent which may be due thereon.
Art. 69. Withholding agents shall make an annual list ^^^^^ with-
return (Form 1042), in dupUcate, to the collector of in- iM>idto« agents,
temal revenue for the district in which the withholdiog
agent resides or has his principal place of business on
or before the Ist day of March in each year, showing
the names and addresses of persons who have received
incomes in excess of $3,000, on which the normal tax
of 1 per cent has been deducted and withheld during
the preceding year. This return must be accompanied
by all forms presented claiming exemptions and deduc-
tions.
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56 INCOME TAX BBGX;tATI(»rB;
E.
Fiduciaries.
as^'^id^o^iar^y Art. 70. Guardians, trustees; executors, administrators,
^ts, to deduct ^g^j^^^ receivers, conservators, and all persons, corpora-
tions, or associations acting in any fiduciary capacity
hereinafter referred to as fiduciary agents, who hold in
trust an estate of another person or persons, shall be des-
ignated the ''source" for the purpose of collecting the in-
d^Sont iSflfe^^^® *^^' ^^^ ^y filing notice with other debtors or with-
wimother with- holding agents said fiduciary shall be exempt from having
any income, due to them as such, withheld for any income
tax by any other debtor or withholding agent. Other
debtors or withholding agents upon receipt of such notice
shall not withhold any part of such income from said fidu-
ciary and will not in such case be held liable for normal
tax of 1 per cent due thereon. The form of notice to be
filed with the debtor or withholding agent by fiduciary
wDl be on Form 1015. Where such exemption is not
claimed, notice thereof on Form 1019 should be filed
with the withholdmg agent.
tobS^e?^ ^** ''^* Fiduciaries shall, on or before March 1 of each
dSSctf ^' *^*year, make and render a return of the income coming into
their custody or control and management from each trust
or estate when the annual interest of any beneficiary in
said trust or estate is in excess of $3,000. This return
(Form 1041) must be filed with the collector for the
district in which the fiduciary resides or has his principal
place of business, and shall contain an itemized statement
of the gross income and deductions claimed.
Notice of failure to file return as required shall be
served upon the fiduciary. (See art. 18.)
The entries on the first page of Form 1041 in column
headed ''Amount of income paid or accrued to bene-
ficiaries'' should not include their respective shares of in-
come derived from dividends on the stock or from the
net earnings of corporations, jointr«tock companies, etc.,
subject to like tax or the income on which the normal
tax of 1 per cent has been deducted and withheld at the
source by the debtor or the prior withholding agent, &a
these two items of income are treated as deductions in
determining the amount of income subject to tax for
which the fiduciary as withholding agent has to accoimt.
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INOOMB TAX BBQULAHOlSrS. 57
When the share of any beneficiary, therefore, in the
amount stated on line 3 of the first page of said return is
in excess of $3,000, return must be made.
Art. 72. As each such fiduciary acts solely in behalf of ^,^^6*^1*^ £:
the beneficiaries of the trust, the annual return required ^^^"•^^5^'^^
in such cases has reference only to the income accruing fj*]^|^^®®^j^c£
and payable through said fiduciary, and not to the®^*^*
income of the beneficiary derived from other sources. If,
however, such fiduciary is legally authorized to act for
such beneficiary as agent or attorney in fact, he may in
such case also make for the beneficiary the personal annual
return (Form 1040) required by law.
Art. 78. The annual return of the fiduciary shall con- lo-^JjlS^e ws?S
tain a Hst of the name and full address of each beneficiary ^^J^'^^J^^'^^®^
and the share of said income to which each may be enti-J^^*^ '"*°*
tied. There must also be entered opposite the name of
each beneficiary the amount of exemption, if any,
claimed by him, the amount of income on which the
fiduciary is liable for tax, and the amount of tax with-
held, and the said return shall be signed and sworn to by
the fiduciary, if an individual, making same, and his full
address must be stated. If the fiduciary is an oi^aniza-
tion, the return shall be signed and sworn to by the
president, secretary, or treasurer of said organization.
Art* 74. Fiduciaries having control of any portion of aUnJ^^"^ ^^
annual income accruing during the year, but not dis-^^,lU^ ^gj
tributed or paid to the beneficiaries during the year, shall, ****y*"-
in rendering their annual return (Form 1041), give the
name and address of each of said beneficiaries having a
distributive interest in said income, and shall furnish all
information called for in such returns. The fiduciary
shall in aU such cases withhold and pay to the collector,
as provided by law, the normal tax of 1 per cent upon
the distributive interest of each of said beneficiaries when
in excess of $3,000, the same as if said income was
actually distributed and paid. Exemption uiider para-
graph C, however, may be claimed by the beneficiary or^^^^^ ^^ un^
his legal representative by filing his claim for exemption^J™"*®^^^* J;
with the fiduciary agent. graph c.
Art. 7*. When the normal tax on undivided annual net^J^^j^^J^^
incomo has been so withheld, such tax shall not be again ^S^ "^witSiew
witMield when iauch portion of the income is actually dis-^^^^™* ^
tributed and paid to said beneficiary.
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58 INCOME TAX BBGULATIONS.
PART 3.
BELATIKG TO THE INCOME TAX IMPOSED BY SECTIONS 2 AND
4 OF THE ACT OF OCTOBER 3, 1913, ON CORPORATIONS, JOINT-
STOCK COMPANIES OR ASSOCIATIONS, AND INSURANCE COM-
PANIES.
8ubjMt*tiu^^°* Art. 76. Under the provisions of sections 2 and 4 of
the act of October 3, 1913, every corporation, joint-stock
company or association, and every insurance company
organized in the United States, no matter how created or
organized, except those specifically exempted, shall be
eii?fiBrM?tiSSitt? subject to pay annually an income tax of 1 per centum per
annum upon the entire net income arising or accruing from
all sources during the preceding calendar or fiscal year,
as the case may be. Certain exceptions as to taxability
will be noted specifically hereinafter.
pomSb^sabf^t Art. 77. A similar tax shall be levied, assessed against,
to the tax. ^^^ ^^^ annually by corporations, joint-stock companies
or associations, and insurance companies organized,
authorized, or existing under the laws of any foreign
country upon the amount of net income accruing from
business transacted and capital invested within the United
States during such year.
deS^**'****^ ^^' '^®* ''Corporation'' or "corporations," as used in
these regulations, shall be construed to include all cor-
porations, joint-stock companies or associations, and all
insurance companies coming within the terms of the law,
and such organizations will hereinafter be referred to as
"corporations."
reiieetate'trSs' ^^' '^*' ^* ^ immaterial how such corporations are
etc., subject to created or organized. The terms "joint-stock com-
panies" or "associations" shall include associates, real
estate trusts, or by whatever name known, which carry
on or do business in an organized capacity, whether organ-
ized under and pursuant to State laws, trust agreements,
declarations of trusts, or otherwise, the net income of
which, if any, is distributed, or distributable, among the
members or share owners on the basis of the capital stock
which each holds, or, where there is no capital stock, on
the basis of the proportionate share of capital which each
has invested in the business or property of the organiza-
tion, all of which joint-stock companies or associations
shall, in their organized capacity, be subject to the tax
imposed by this act.
lequip&^tofnSe ^^' ®®' Every corporation not specifically enumerated
returns. g^g exempt shall make the return of annual net income
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IKOOME TAX BE6ULATI0NS. 59
required by law whether or not it may have any income
liable to tax, or whether or not it shaD be subordinate to
or controlled by another corporation. Mutual telephone pijJ^B^^^i ^S^
companies, mutual insurance companies, and like organi- SmpanS*^'^
zations, although local in character, and whose income ®^™p*-
consists largely from assessments, dues, and fees paid
by members, do not come within the class of corporations
specifically enumerated as exempt. Their status under
the law is not dependent upon whether they are or are
not organized for profit. Not coming within the statu-
tory exemption, all organizations of this character will
be required to make returns of annual net income, and
pay any income tax thereby shown to be due. For this
purpose the surplus of receipts of the year over expenses
will constitute the net income upon which the tax wiU
be assessed.
A railroad or other corporation which has leased its
properties in consideration of a rental equivalent to a
certain rate of dividends on its outstanding capital stock
and the interest on the bonded indebtedness, and such
rental is paid by the lessee directly to the stock and bond
holders, should, nevertheless, make a return of annual
net income showing the rental so paid as having been
received by the corporation.
Art. 81. A railroad company operating leased or pur-ti^^bTwjSSJ^
chased lines shall include all receipts derived therefrom, J*SSd «^pSJ
and, if bonded indebtedness of such lines has been as-****"^""***
sumed, such operating company may deduct the interest
paid thereon to an amount not exceeding one-half of the
sum of its interest-bearing indebtedness and its paid-up
capital stock outstanding at the close of the year.
Art. 82. Corporations operating leased lines should ^ot ^^^^^^^^^^^
include the capital stock of the lessor corporations ii^Sookorini^^toS
their own statement of capital stock outstanding at the"^®J^^'«>'-
close of the year. The indebtedness of such lessor cor-
porations should not be included in the statement of the
indebtedness of the lessee unless the lessee has assumed
the same. Each leased or subsidiary company will make
its own separate return, accounting for therein all income
which it may have received by way of dividends, rentals,
interest, or from any other source.
Art. 83. A foreign corporation having several branch ^g^J^J^^^JgJf
offices in the United States should designate one of such^^Jg^ gg;g Jj
biranches as its principal office and should also designate ^Jf^;^ p'^"
the proper officers to make the required return.
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60 INCOME TAX BEOULATIONS.
orgaSiLS^duiSI ^*' ^^' ^ corporation organized during the year
5^^to make re- gi^ould render a sworn return on the prescribed form,
covering that portion of the year (calendar or fiscal) dur-
ing which it was engaged in business or had an income
accruiQg to it.
gokii'mto uq^ ^^' ^^' Corporations going into liquidation during any
^**^«^- tax period may, at the time of such liquidation, prepare
a ^' final return'' covering the income received or accrued
to them during the fractional part of the year during
which they were engaged in business, and immediately
file the same with the collector of the district in which
the corporations have their principal places of business.
nw8^^ P»^ Art. 86. Limited partnerships are held to be corpo-
rations within the meaning of this act and these regula-
tions, and in their organized capacity are subject to the
income tax as corporations.
exempFfrom^ Art. 87. The act specifically enumerates and exempts
from its provisions and requirements labor, agricultural,
or horticultural organizations, mutual savings banks not
having a capital stock represented by shares, fraternal
beneficiary societies, orders, or associations operating
under the lodge system, or for the exclusive benefit of
the members of a fraternity itself operating under the
lodge system, and providing for the payment of life, sick,
accident, and other benefits to the members of such soci-
eties, orders, or associations, and dependents of such mem-
bers, domestic building and loan associations, cemetery
campanies organized and operated exclusively for the
mutual benefit of their members, any and all corpora-
tions or associations oi^anized and operated exclusively
for religious, charitable, scientific, or educational pur-
poses, no part of whose net income inures to the benefit
of any private stockholder or individual, business leagues,
chambers of commerce, or boards of trade not organized
for profit, no part of the net income of which inures to the
benefit of the private stockholder or individual, and civic
leagues or similar organizations not organized for pr<^ti
but operated exclusively for the promotion of social
welfare.
iiPfml^ioan^ Domestic building and loan associations are among
c^tfoM^deto»a. those enumerated as exempt from the requirements of
^^' the law. A domestic building and loan association is held
to be one organized under and pursuant to the laws of the
United States, or of a State or Territory thereof, or under
the laws applicable to Alaska or the District of Colum-
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INCOME TAX BBQULATI0N8. 61
bia. Mutuality in operation and in the distribution of
profits and benefits is essential to exemption. There-
fore, in order to come within the exempted class such
associations must not only be '^Domestic/' as defined,
but they must be organized and operated exclusively
for the mutual benefit of the members; that is, all the
profits and benefits provided for in the articles of asso-
ciation and by-laws must be ratably distributed among
all members regardless of the kind of stock held, according
to the amount of money they have on deposit. An
association issuing different classes of stock upon which
different rates of interest or dividends are guaranteed
or paid, does not come within the exempted class;
Art. 88. All corporations and all beneficiary societies corporations
. 1 1 1 n i_ /r> 1 • .1 . ^ must establish
enumerated above snail by amdavit, or otherwise, at their right to ex-
, . ' emptlon.
the request of the collector or Commissioner of Internal
Revenue, estabUsh their right to the exemption provided,
in which case it wiH not be sufficient to merely declare
that they are exempt, but they must show the character
and purpose of the organization, the manner of distribut-
ing the net income., if any, or that none of the net income
inures to the benefit of any private stockholder or indi-
vidual. In the absence of such a showing, such organiza-
tions may, at any time, be required to make petm-nH of
annual net income or disclose their books of accoimt to a
revenue officer for examination in order that the status
of the company may be determined.
Art. 89. A society or association '^operating under ^^^ ^^^^^^ ^^^^
lodge system" is considered to be one organized under aw^ption de-
charter, with properly appointed or elected officers, with
an adopted ritual or ceremonial, holding meetings at
stated intervals, and supported by fees, dues, or assess-
ments.
Art. 90. Cemetery companies organized and operated J^^^^^Sa^SS
exclusively for the mutual benefit of their members are^^^^JJ^^^
exempt. The provisions of the law clearly indicate that*'*"'*^^®™^*-
companies which operate cemeteries for profit are liable
to the tax. The status of cemetery associations under
the law will, therefore, depend upon the character and
purpose of the organization and what disposition is made
of the income;
Art. 91. Any corporation, concerning whose status corporations
under the law there is any doubt, or which does not «cemption is in
clearly come within one or another of the classes of those return,
specifically enumerated as exempt, should file a return
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C2 INCOME TAX REGULATIONS.
(in blank if desired) and attach thereto a statement set-
ting out fully the nature and purpose of the organization,
the source of its income; and what disposition is made of
it, and particularly of any surplus*
Cooperative Art. 92. Cooperative dairies not issuing stock and
taTs^w^k^Mid^ai- allowing patrons dividends based on butter fat in milk
^^videnSf,*'ex- furnished are not liable. In such case the '^dividends"
^™P*- are the purchase price of the raw material furnished.
When income Art. 98. The income derived from any pubhc utility
tteTS^not "tex^or from the exercise of any essential governmental func-
*^^®* tion, which income accrues to any State, territory, the
District of Columbia, or any poUtical subdivision of a
State, Territory, or the District of Columbia, and any
income accruing to the government of the Philippine
Islands, or to Porto Rico, shall not be subject to the tax
imposed by this act. In cases wherein any State, Ter-
ritory, or the District of Columbia, or any political sub-
division of a State, or Territory, shall have, prior to the
passage of this act, contracted in good faith with any
^ person or corporation to acquire, construct, operate, or
maintain a pubUc utiUty, no income tax pursuant to
this act shall be levied upon the income derived from
the operation of such public utiUty, so far as the assess-
ment and payment of such tax will impose a loss or bur-
den upon such State, Territory, District of Columbia,
Persons or cor- or political subdivisiou. But the person or corporation
empt. is not relieved from the payment of the tax upon that
portion of the income accruing to him, or it, under such
contract.
not^tSaWe^ M ^^' **• Ordinary copartnerships are not, as such, sub-
corporationg. j^^^ ^q ^j^^ ^^^^ imposcd by this act, but the individual
members of any such partnership are liable for income
tax only in their individual capacity on their respective
shares of the earnings of such partnership, whether such
earnings be distributed or not.
tutes*** ai^?u*" ^^^' ®^' ^^^ amount of stock, as represented by the
capital stock, par yalue of the shares issued, is to be regarded as the
paid-up capital stock, except when such stock is assess-
able on account of deferred payments, or payable in
installments, in which case the amount actually paid on
such shares will constitute the actual paid-up capital
stock of the corporation.
how*^teJS^' ^^* ®^' ^^'^ following definitions and rules are given
for determining the gross income of various classes of
corporations :
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IFOOMB TAX BBaXJLATIONS. 63
Gross income of banks and other financial institutions ban£fattd*Sh«f
consists of the total revenue derived from the operation J^®^^ institu-
of the business, including income, gains, or profits from
all other so\u*ces, as shown by the entries on the books of
account, within .the calendar or fiscal year for which the
return is made.
Art. 97. Gross income of insurance companies consists j^^^^J^^™®®'
of the total revenue derived from the operation of the^»^-
business, including income, gains, or profits from all other
soxu:ces, as shown by the entries on the books of account
within the calendar or fiscal year for which the return is
made, except as modified by the express exemptions of
the articles which apply to mutual fire, mutual marine,
and life insurance companies.
Art. 98. Mutual fire insurance companies, which re- mutSaf&SkSiir'
quire their members to make premium deposits to pro-*"®*®®"^^"''^*^
vide for losses and expenses, shall not return as gross
income any portion of the premium deposits returned to
their policyholders, but shall return as taxable income
all income received by them from all other sources plus
such portions of the premium deposits as are retained by
the companies for purposes otha* than the payment of
losses and expenses and reinsurance reserves.
Art.. 99. Mutual marine insurance companies may in-|JS^55m^t
elude in their deductions from gross income amounts "*"*
repaid to policyholders on account of premiums previ-
ously paid by them and interest paid upon such amounts
between the ascertainment thereof and the payment
thereof, such amounts and interest having been included
in gross income.
Art. 100. Life insurance companies are authorized to
omit from gross income such portion of any actual pre-
mium received from any individual policyholder as shall
have been paid back or credited to the policyholder or
treated as an abatement of his premium. In so far as
"deferred dividends" payable at a stated period repre- d^*SSictiwi
sent "a portion of any actual premium received,*' such'^***^
deferred dividends may be included in the amounts to be
omitted from gross income for the year in which they
were actually paid back, credited to the policyholder, or
applied as an abatement of premium. In the case of
dividends credited or apportioned annually to the policy-
holder, only the aggregate amount so actually credited
or apportioned during the premium-paying period, and
not any accretions thereto, can be excluded from gross
Digitized by VjOOQIC
64 INOOMB TAX BB0ULATI0N8.
income. In the case of whole-life or five-year distribu-
tion policies^ deferred dividends may be excluded from
gross income to the extent that they are paid back, or
credited to the insured, or used as an abatement of his
annual premiums.
ix^So^^m' ^^' ^^^' Grross income of insurance companies, as
^^'*°^®^** defined above, will include net premium income as
reported to the State insurance departments, except the
foregoing items specifically exempted in the act, and, in
the case of life insurance companies, surrender values
applied in any manner, consideration for supplementary
contracts involving and not involving life contingencies,
and all other income, gains, or profit as shown by the
books of account,
for'* suTOtoS -^^** 1^2* Applied surrender values and consideration
tary contracts, j^j. supplementary contracts not involving life contin-
gencies included in income will, of course, be deducted as
payments under policy contracts, but for convenience in
verifying the returns, these items should appear in the
return in both gross income and deductions,
stat^^to ao- Art. 103. All insurance companies should include and
company re 'g^j^^i^ji f^Q their retums a supplementary statement show-
ing, for life companies, the aggregate of items ''of such
portion of any actual premium received from any indi-
vidual policyholder as shall have been paid back or cred-
ited to such individual policyholder, or treated as an
abatement of premium of such individual policyholder
within such year;'' in the case of mutual fire insurance
companies a statement showing '' any portion of the pre-
mium deposits returned to their policyholders;'' and in
the case of mutual marine companies ''amounts repaid
to policyholders on account of premiums previously paid
by them, and interest paid upon such amounts between
the ascertainment thereof and the payment thereof,"
which are, or may be, omitted from gross income. (For
authorized deductions, on account of losses, etc., see
Arts. 113 and 147.)
manufacSSS ^^* ^^' Gross income of manufacturing companies
companies. shall cousist of the totiJ sales of manufactured goods
during the year covered by the return, increased or de-
creased by the gain or loss as shown by the inventories
of finished and unfinished products, raw material, etc.,
at the beginning and end of the year. To this amount
should -be added the income, gains, or profits from all
other sources as shown by the books of account.
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INCOME TAX BEQXJIAXI0N8. 65
Art 106. Gross income of mercantile companies shall mSSSlufolMi)^
include the total merchandise sales during the year, in-'***®"^-
creased or decreased by the gain or loss as shown by
the inventories of merchandise at the beginning and end
of the year for which the return is made; to this amount
should be added the income, gains, or profits derived
from all other sources as shown by the books of account.
Art. 106. Gross income of miscellaneous corporations nateSTuneous
consists of the total revenue derived from the operation ^™p^*-
and management of the business and property of the
corporation making the return, together with all amounts
of income,"including the income, gains, or profits from all
other sources as shown by the books of account.
Art. 107. It will be noted from these definitions that Definition of
the gross income embraces not only the operating
revenues, but also income, gains, or profits from all
other sources, such as rentals, royalties, interest, and
dividends from stock owned in other corporations, and
appreciation in values of assets, if taken up on the books
of account as gain; also profits made from the sale of
assets, investments, etc.
Art. 108. For the purpose of determining the income fro^^|^f^^
resulting from the sale of capital assets and the amount *^®^**-
to be accounted for as income under this act, there shall
be included any and all profit resulting from such sale
and which may be apportioned to the period during
which the corporation tax law (sec. 38, act of Aug. 6,
1909) was in force and effect, which was not returned as
income during that period.
Art. 109. In ascertaining net income derived from thej^gf^^^^j^J^g
sale of capital assets, if such assets were acquired sub-JJ^g^^^'^p****
sequent to January 1, 1909, the difference between the
selling price and the buying price shall constitute an
item to be added to or subtracted from gross income ac-
cording to whether the selling price was greater or less
than the buying price. If the capital assets were ac-
quired prior to January 1, 1909, the amount of profit or
loss representing the difference between the selling and
buying price is to be prorated to determine the propor-
tion of the gain or loss arising subsequent to January 1,
1909, and the proportionate part belonging to the years
subsequent to January 1, 1909, shall be added to or de-
d.ucted from the gross income for the year in which the
sale was made.
24785*>— 14 5
Digitized by VjOOQIC
66 IKOOm TAX BBGUULTI0ir8*:
arS^*frOTi ^Se ^^' ^^®' ^^^ ^^® purpose of determining the profit or
sale of such assets, i^gg arising from the sale of such assets, there shall be
added to the price actually realized from the sale any
amount which has heretofore been set aside and de-
ducted from gross income by way of depreciation since
January 1, 1909, which has not been paid out in making
good such depreciation on the property sold,
book vSue*of a£ ^^* HI- I^^ ^^^ ^ase of changes in book values of
^^' capital assets resulting from a reappraisal of property,'
the consequent gains or losses shall be computed for the
return in the manner prescribed above in the case of the
sale of capital assets
nu^f^diustmOTt ^^ cascs whcrsin there is an annual adjustment of
^oTm"in return ^^^^ Valu3s of sccuiities, real estate and like assets,
and the increases and decreases in values, thus indi-
cated, are taken up on the books and reflectsd in the
profit and loss account, such readjusted values will be
taken into account in making the return of annual net-
income and no prorating will be required. If such
adjustment had been made annually prior to March 1,
1913, the book value of the assets at that date will be
taken as the basis for determining gain or loss resulting
from subsequent sale, maturity, or adjustment. The
adjustment referred to will comprehend assets which
have increased in value as well as those which have de-
creased.
ti<^areen^gwi ^*' ^^^' Where a corporation is engaged in carrying
oiaS o?biwtoess!^ ^^ ^^^® than One class of business, gross income derived
from the different classes of business shall be ascertained
according to the definitions above, and which are appli-
cable thereto.
bow* aswrtainedl Art. 118. The net incomc shall be ascertained by de-
ducting from the gross amount of the income of such
corporation received within the year from all sources :
nec^y^^ex^ First. All the ordinary and necessary expenses paid
^' within the year in the maintenance and operation of
its business and properties, including rentals or other
payments required to be made as a condition to the con-
tinued use or possession of property.
wubiQ tiw^year.^ Sccond. All losscs actually sustained within the year
and not compensated by insurance or otherwise, includ-
Depreciation. jj^g q^ reasonable allowance for depreciation by use, wear
and tear of property, if any, and in the case of mines, a
reasonable allowance for depletion of ores and all natural
deposits, not to exceed 5 per centum of the gross value
Digitized by VjOOQ IC
INCOME TAX begulahons. 67
at the mine of the output for the year for which the com-
putation is made; and in the case of insurance companies,
the net addition, if any, reqmied by law to be made
within the year to reserve funds, and tihe sums other than
dividends paid within the year on policy and annuity
contracts, except as provided in the cases of mutual fire,
mutual marine, and life insurance companies.
Third. The amount of interest accrued and paid withincrSSi®iS3*pS
the year on its indebtedness to an amount of such indebt-^"^^ ^"^^ y®**"-
edness not exceeding one-half of the sum of its interest-
bearing indebtedness and it3 paid-up capital stock out-
standing at the close of the year, or if no capital stock, on
the amount of its indebtedness not exceeding the amount
of capital employed in the business, at the close of the
year: Provided, That in case of indebtedness wholly se- interest on in-
cured by collateral the subject of sale in ordinary business cured by couat-
of such corporation, joint-stock company, or association,
the total interest secured and paid by such company, cor-
poration^ or association within the year on any such in-
debtedness may be deducted as a part of its expense of
doing business: Provided further. That in the case of Tax paid on
bonds or other indebtedness, which have been issued withStdeductfbte.
a guaranty that the interest payable thereon shall be free
from taxation, no deduction for the payment of the tax
herein imposed shall be allowed; and in tiie case of a bank,
banking association, loan, or trust company. Interest
paid within the year on deposits or on moneys received
for investment and secured by interest-bearing certifi- '\
cates of indebtedness issued by such bank, banking asso- ■
ciation, loan, or trust company.
Fourth. All sums paid within the year for taxes im- Tarea paid
* •' wlthux the year.
posed under the authority of the United States, or any
State or Territory thereof, or imposed by the government
of any foreign country.
Art. 114. Expenses of operation and maintenance shall G-merai ex-
include all expenditures for material, labor, fuel, and other .
items entering into the cost of the goods sold or inven-
toried at tlie end of the year, and all other expenses
incurred in the operation of the business except such as
are required by the act to be segregated in the return.
Art. 116. The cost of erecting permanent buildings ta^^'on^ \A
on ground leased by a company is a proper deduction as f^^^^-
a rental chaise, provided such buildings are left on the
ground at the expiration of the lease as a part of the
rental payment. In such case the cost will be prorated
Digitized by VjOOQIC
68 INOOMB TAX BEGXJLATIOKB.
according to the number of years constituting the term
of the lease and the annual deduction will be made
accordingly.
Expen^for- Alt. 116. General expenses, such as coal, ship stores,
companies. ctc, of foreign steamship companies, shall be prorated as
provided in the act for interest deductions in the case of
foreign corporations.
^jj^issfoMto Art. 117. Commissions allowed salesmen, paid in stock,
stock. may be deducted as expense if so charged on books at the
actual value of such stock.
Additions and Art. 118. Amounts expended in additions and better-
bettennents. . ^ . . . i .
ments which constitute an increase m capital mvestment
are not a proper deduction,
bwed^^n'sto^ Art. 119. Amounts paid as compensation or addi-
duciiSfe."*** ^^tional compensation to officers or employees, which
amounts are based upon the stockholdings of such officers
or employees, are held to be dividends, and although
paid in lieu of salaries or wages, are not allowable deduc-
tions from gross income, for the reason that dividends
are not deductible.
•r^grStSttM^lMi '^'** ^^^' Amounts paid for pensions to retired employ-
deductible, ees, or to their families, or others dependent upon them,
or on account of injuries received by employees, are
proper deductions as ''ordinary and necessary expenses" ;
^ts or gratuities to employees in the service of a corpora-
tion are not properly deductible in ascertaining net
income,
ww^ffffldlduc^ •^^** ^^^' I^<>ii8'tions made for purposes connected with
ibie. fjr^Q operation of the property when limited to charitable
institutions, hospitals, or educational institutions, con-
ducted for the benefit of its employees, or their depend-
ents, shall be a proper deduction for ordinary and nec-
essary expenses.
Reserves for Art. 122. Funds sct aside by a corporation for insuring
insurance. . i t . -i t
its own property are not a proper deduction, but any loss
actually sustained and charged to such fund may be
deducted.
^Mafewiaisand Art. 123. In ascertaining expenses proper to be in-
cluded in the deductions to be made under the item of
*' Expenses," corporations carrying materials and sup-
plies on hand for use should include in such expenses the
charges for materials and supplies only to the amount
that the same are actually disbursed and used in opera-
tion and maintenance during the year for which the return,
is made.
Digitized by VjOOQIC
IKGOME TAX BBGXJLATIONS. 69
Art. 124. The deduction for losses must be losses ac- ^J^^^^j^gS^-
tually sustained during the year and not compensated hj^^-
insurance or otherwise. It must be based upon the dif-
ference between the cost value and salvage value of
property or assets, including in the latter value such
amount, if any, as has, in the current or previous years,
been set aside and deducted from gross income by way of
depreciation, as elsewhere defined, and has not been paid
out in making good such depreciation.
Art. 126. Bad debts, if so charged off the company's ^^ed off. "^^^^^
books, during the year, are proper deductions. But
such debts, if subsequently collected, must be treated as
income.
Art. 126. Reserves to take care of anticipated or Reserves not
probable losses are not a proper deduction from gross in-
come.
Art. 127. Loss due to volimtary removal of buildings, ^^^J^^ M^buiSl
etc., incident to improvements is either a proper charge ^s^*
to the cost of new additions or to depreciation already
provided, as the facts may indicate, but in no case is it a
proper deduction in determining net income, except as it
may be reflected in the reasonable amoimt allowable as a
deduction for depreciation of the new building. Any
loss claimed because of the volimtary removal of a build-
ing is presumed to have been covered by previous depre-
ciation charges; other^e the amount of such loss will*
constitute a part of the cost of the new building.
Art. 128. All losses claimed arising from sale of capital ^f^"^^^^^^
assets should be arrived at in the manner prescribed in
article 109, defining gains arising from sale of capital
assets.
Art. 129. The deduction for depreciation should be the ^^^jg^e elation
estimated amoimt of the loss, accrued during the year to
which the return relates^ in the value of the property in
respect of which such deduction is claimed, that arises
from exhaustion, wear and tear, or obsolescence out of the
uses to which the property is put, and which loss has not
been made good by payments for ordinary maintenance
and repairs deducted under the heading of expenses of
maintenance and operation. This estimate should be j^^^® J^^^^J^^
formed upon the assumed life of the property, its cost, and
its use. Expenses paid in any one year in making
good exhaustion, wear and tear, or obsolescence in
respect of which any deduction for depreciation is
claimed must not be included in the deduction for ex-
Digitized by VjOOQIC
reserve.
TO INCOME TAX. KEGULATIONS.
pense of maintenance and operation of. the property, but
must be made out of accumulated allowances, deducted
for depreciation in current and previous years.
Depreciation Art. 130. The depreciation allowance, to be deductible,
treated. ' must be, as nearly as possible, the measure of the loss due
to wear and tear, exhaustion, and obsolescence, and
should be so entered on the books as to constitute a lia-
bility against the assets of the company, and must be re-
flected in the annual balance sheet of the company. The.
annual allowance deductible on this account should be
such an amount as that the aggregate of the annual
allowances deducted during the life of the property, with
respect to which it is claimed, will not, when the property
is worn out, exhausted, or obsolete, exceed its original
cost.
pih^!^^^^^^ ^ ^^*' ^^^' Incidental repairs which neither add to the
value of the property nor appreciably prolong its life,
but keep it in an operating condition, may be deducted
as expenses.
Depreciation Art. 132. Depreciation set up on the books and de-
ducted from gross income can not be used for any pur-
pose other than making good the loss sustained by
reason of the wear and tear, exhaustion, or obsolescence
of the property with respect to which it was claimed. If
it develops that an amount has been reserved or do-
ducted in excess of the loss by depreciation, the excess
shall be restored to income and so accounted for.
Diversion of dc- Art. 133. If any portion of the depreciation set up is
prec *°'^'®*'"^'®^ygp^g^ ^Q 2Lnj purpose other than making good the loss
sustained by reason of depreciation, the income account
for the year in which such diversion takes place must be
correspondingly increased.
Shrinkage in Art. 134. Depreciation in book values of capital assets
shall be treated in the return in the manner prescribed in
the case of loss from the sale of capital assets (art. 109),
but amounts arbitrarily charged off will not be allowed
as deductions except so far as they represent an actual
shrinkage in values which may be determined to have
. taken place during the year for which the return is made.
Art. 136. Where a corporation holds bonds which were
purchased at a rate above par and said corporation shall
proportionately reduce the value of those bonds on its
books each year so that the book value shall be the re-
demption value of the bonds when such bonds become
due and payable, the return of annual net income of the
Digitized by VjOOQIC
INCOME TAX BEQULATIOKa ' 71
corporation holding suck bonds may show the deprecia-
tion on account of amortization of such bonds. The re- Am^tization
quirement is, however, that the an^ount carried to the
amortization account each year shall be equitably pro-
portioned with respect to the difference between the
purchase price and the maturing value and the number of
years to elapse imtil the bonds become due and payable.
With respect to bond issues where such bonds are dis-
posed of for a price less than par and are redeemable at
par, it is also held that because of the fact that such bonds
must be redeemed at their face value, the loss sustained loss to be pro-
by reason of their sale for less than their face value may^**^*
be prorated by the issuing corporation in accordance
with the life of the bond.
Art, 136. "Goodwill'' represents the value attached to qoodwiu.
a business over and above the value of the physical prop-
erty, and is such an entirely intangible asset that no claim
for depreciation in connection therewith can be allowed.
Art. 137. An allowance for depreciation of patents will
be made on the following basis:
The deduction claimed for exhaustion of the capital depreciation on
^ patents.
assets as represented by patents to be made in the return
of annual net income of a corporation for any given year
shall be one-seventeenth of the actual cost of such
patents reduced to a cash basis. Where the patent has how deter-
been secured from the Government by a corporation
itself, its cost would be represented by the various Gov-
ernment fees, cost of drawings, experimental models,
attorneys' fees, etc. Where the patent has been pur-'
chased by the corporation for a cash consideration, the
amount would represent the cost. Where the corporation
has purchased a patent and made payment therefor in
stocks or other securities, the actual cash value of such
stocks or other securities at the time of the purchase will
represent the cost of the patent to the corporation.
Art. 138. With respect to the depreciation of patents. Deduction in
one-seventeenth of the cost is allowable as a proper «enoe of patents.
deduction each year until the cost of the patent has been
returned to the corporation. Where the value of a
patent has disappeared through obsolescence or any other
cause and the fact has been established that the patent is
valueless, the unre turned cash investment remaining in
the patent m^y be claimed as a total loss and be deducted
from gross income in the return of annual net income for
Digitized by VjOOQIC
72 INCOM35 TAX BBGTJLATIONS.
the year during which the facts as to obsolescence or loss
shall be established, such unreturned cash value to be
fixed in accordance jvith the proportion that the number
of years which the patent stiU has to run bears to the full
patent period of 17 years.
tim^rSnd **" **' ^^** ^^®' Corporations owning tracts of timber lands
and removing therefrom and selling, or otherwise dispos-
ing of the timber will be permitted to deduct from their
gross income on account of depreciation or depletion an
amoimt representing the original cost of such timber, plus
any carrying charges that may have been capitalized or
not deducted from income. The purpose of the depre-
ciation or depletion deduction is to secm*e to the corpora-
tion, when the timber has been exhausted, an aggregate
amoimt which, plus the salvage value of the land, will
equal the capital actually invested in such timber and
land.
Deductions to Art. 140. When an amount sufficient to return this cap-
ital has been secured through annual depreciation deduc-
tions no further deduction on this account shall be al-
lowed. For the purpose of increasing the deduction on
this account no arbitrary increase in values shall be made,
unless such increase in value shall be returned as income
for the year in which the increase in value was taken up
on the books.
D^^iation of Alt. 141. The depreciation of coal, iron, oil, gas, and
aU other natural deposits must be based upon the actual
cost of the properties containing such deposits. In no
case shall the annual deduction on this account exceed
5 per cent of the gross value at the mine (well, etc.) of
the output for the year for which the computation is
made,
-^o^vitoe" at Art. 142. The term ''gross value at the mine,'' bs used
the mine. ^ paragraphs B and G of section 2 of the act of October
3, 1913, prescribing a limit to the amount which may be
deducted in the retmn of individuals and corporations
as depreciation in the case of mines, is held to mean the
market value of ore, coal, crude oU, and gas at the mine
or well, where such value is established by actual sales
at the mine or well; and in case the market value of the
product of the mine or well is established at some place
other than at the mine or well, or on the basis of the
bullion or metalhc value of the ore, then the gross value
at the mine is held to be the value of the ore, coal, oil,
Digitized by VjOOQIC
INCOME TAX BEGTJLATIONS. 78
or gas sold, or of the metal produced, less transporta-
tion, reduction, and smelting charges.
If the rate of 6 per cent per annum shall return to the y^^^J^^f^J^
corporation its capital investment prior to the exhaustion ^^«"-
of the deposits, the rate on which the annual deduction
for depletion of deposits is based must be lowered in
accordance with the estimated number of years it will
take to exhaust the estimated reserves.
In case the reserves shall be in excess of the estimates, ceSef when^ ^
no further deduction on accoimt of depletion shaU be
made where the capital investment has been returned to
the corporation.
Art. 143. In addition to the deduction to measure the Depreciation of
loss due to depletion, the* corporation will be allowed the^*^ '^ *^*
usual depreciation of its machinery, equipment, etc.,
such depreciation to be determined on the basis of the
cost and estimated life of the property with respect to
which the depreciation is claimed.
Art. 144. Corporations leasing oil or gas territory shall jJ^j^'^PjO'^^uom
base their depletion deduction upon the cost of the lease,
and not upon the estimated vdlue, in place, of the oil
or gas.
Art. 146. Corporations operating mines (including oil corporations
,,.■*■ 11.1 ? . operating mines.
or gas wells) upon a royalty basis only can not clami
depreciation because of the exhaustion of the deposits.
Art. 146. Unearned increment will not be considered unearned in-
in fixing the value on which depreciation shall be based.
Art. 147. (a) Under item 5 (a) of the return form, the, deduction of
,,.. ,, , ', losses, deprecia-
msurance company may take credit for all losses actually ^^^> payments
1 1 ' 1 1 11'^^ policy con-
sustamed during the year and not compensated by m- tracts by insu-
,. .11. 1 ,. -1 ranee companies.
surance or otherwise, mcludmg losses rosultmg from the
sale or maturity of securities or other assets, as well as
decreases by adjustment of book values of securities, in
so far as such decreases represent actual declines in
values which have taken place during the year for which
the return is made; also losses from agency balances, or
other accounts, charged oflF as worthless; losses by defal-
cation; premium notes voided by lapse, when such notes
shall have been included in gross income. This item
will not, however, include payments on policy contracts.
(b) In this item may be deducted actual losses sus- J^?sses ?y
, ,, *^ shrinkagein
tained within the year by reason of the depreciation of v^ue of prop -
property, which shall have been so entered on the books
of the company as to constitute a liability against its
assets. An arbitrary depreciation deduction claimed in
Digitized by VjOOQIC
74 INCOME TAX BEGULATIONS,
the return, but not evidenced by book entry, can not be
allowed.
Policy con- (c) In this item credit will be taken for all death, dis-
tracts paid, ability, or other policy claims, including fire, accident,
and liability losses, matured endowments, annuities, pay-
ments on installment policies, surrender values, and all
claims actually paid under the terms of policy contracts.
Salvage need not be included in gross income if deducted
in ascertaining the net amount paid for losses under
Losses incurred policy contracts. Reservcs covering liabilities for losses
and upaid not de- 1 *^ •■■ti
ductibie. mcurrcd, reported, resisted, adjusted or unadjusted but
not paid, can not be deducted from gross income under
this or any other item of the return.
Additions to (d) The rcscrvo funds of insurance companies to be
bylaw, how de. considered in computing the deductible net addition to
reserve funds are held to include only the reinsurance re-
serve and the reserve for supplementary contracts required
by law in the case of life insurance companies, the un-
earned premium reserves required by law in the case of
fire, marine, accident, liability, and other insurance
companies, and only such other reserves as are specifically
required by the statutes of a State within which the com-
pany making the return is doing business. The reserves
used in computing the net addition must not include the
reserve on any poHcies the premiums on which have not
been accounted for in gross income. For the purpose of
this deduction, the net addition is the excess of the
reserve at the end of the year over that at the beginning
of the year and may be based upon the highest authorized
reserve required by any State in which the company
making the return does business.
companV°^\°- ^^ ^^^ ^^sc of assessmcut insurance companies, the
^'^^®^- actual deposits of sums with the State or Territorial
officers pursuant to law, as additions to guaranty or
reserve funds, shall be treated as payments required by law
to reserve funds.
Mutual marine insurance companies will deduct under
item 5(e) amounts repaid to policyholders on account of
premiums previously paid by them and interest paid upon
such amounts between the ascertainment thereof and the
payment thereof.
tutS'^^aiiow^Ve ^^** ^^^' '^^ amount of interest accrued and paid
tionf^* ^^^^<^- within the year by a corporation on an amount of bonded
. or other indebtedness not in excess of one-half of the
sum of the interest-bearing indebtedness and the paid-up
Digitized by VjOOQIC
INCOME TAX BEQTJLATIONS. 76
capital stock outstanding at the close of the year, or, if
no capital stock, on the amount of interest-bearing
indebtedness not exceeding the amount of capital em-
ployed in the business at the close of the year, consti-
tutes an allowable deduction; that is, the maximum
principal, upon which interest for the purpose of this
deduction, can be computed must not exceed, in the one
case, one-half of the sum of the interest-bearing indebted-
ness and the capital stock outstanding at the close of the
year, or, in the other case, must not exceed the amount
of capital employed in the business at the close of the
year. The interest to be deductible must have been
computed on the proper principal at the contract rate
and must have been actually paid within the year.
Interest paid pursuant to contract on an indebtedness i°*f ^f** P^jl ^s
^ , , . Ill rentaUleductible.
secured by mortgage on real estate occupied and used by
a corporation, in which real estate the corporation has
no equity or to which it is not taking title is an allowable
deduction from gross income as a rental charge, payment
of which is required to be made as a condition to the
continued use and possession of the property. If, how-j^J^^g*^^^-^*,^
ever, the corporation has an equity in or is purchasing ^^^J?jj^^^^
for its own use the real estate upon which such mortgage ^^^{tj^^'^^* ^^
is a prior lien, the indebtedness will be held to be indebt^
edness of the corporation within the meaning of the law
and the interest paid on such mortgage will be deductible '
only to the extent that it, w^ith interest on other obliga-
tions of the corporation, is wdthin the limit fixed by the
act.
Art. 149, In the case of banks and banking associa- bankfng aL<Si^
tions, loan or trust companies, interest paid within the^'^^*
year on deposits, or on moneys received for investment
and secured by interest-bearing certificates of indebted-
ness issued by such bank, banking association, loan or
trust company, may be allowably deducted from the
gross income of such corporations.
Art. 160. Interest paid on indebtedness, wholly secured j^J^jf^fg^p^^^^^**
by collateral the subject of sale in ordinary business of
such corporations, is also deductible to the full amount
of such interest paid. This contemplates that the entire
interest received on the collateral securing such indebted-
ness shall be included in the gross income returned.
Art. 161. Interest on bonded or other indebtedness ^^f^J^J* 'a*^
bearing different rates of interest may be deducted from
gross income during the year, provided the aggregate
Digitized by VjOOQIC
76 INCOME TAX BBGULATIOKS.
amount of such indebtedness on which the interest is
paid does not exceed the limit prescribed by law, and in
case the indebtedness is in excess of the amount on which
interest may be legally deducted the indebtedness bearing
the highest rate may be first considered in computing the
interest deduction and the balance, if any, will be com-
puted upon the indebtedness bearing the next lower rate
actually paid, and so on until interest on the maximum
principal allowed has been computed.
^ Taxes dedncti- j^^ ^52. All sums paid within the year for taxes im-
posed under the authority of the United States or of any
State or Territory thereof, or imposed by the government
of any foreign country, are deductible from gross income.
duSubll. "^^^ ^^ Art.*153. Taxes paid for local benefits are not deducti-
ble. Taxes paid by a corporation pursuant to a contract
guaranteeing that the interest payable on its bonds or
other indebtedness shall be free from taxation are not
deductible.
Tax^on^^itai Art. 154. Banks paying taxes assessed against their,
stockholders because of their ownership of the shares of
stock issued by such banks can not deduct the amount of *
taxes so paid ^n making their return for the income tax
imposed by this act unless specially authorized to do so
by the laws of the State in which they do business. The
shares of stock are the property of the stockholders, and
such holders are primarily liable for the tax.
Import duties. Art. 156. Import duties or taxes are not deductible un-
der the item of taxes paid during the year, but should be
included in arriving at the cost of goods under item No.
4 (expenses).
neserves for Art. 156. Reserves for taxes can not be allowed, as the
taxes. , , '
law specifically provides that only such sums as are paid
within the year for taxes shall be deducted.
Foreign corpo- Art. 157. Foreign corporations shall be subject to the
rations subject to -, pi Z. . 1 j^i^*
tax. normal tax of 1 per cent computed upon the net mcome
received by or accruing to such corporations from busi-
ness transacted and capital invested in this country. For
the purpose of the tax the net income of such foreign or-
ganizations shall be ascertained by deducting from the
gross income arising, received, or accruing from business
done and capital invested in this coimtry the deductions
enumerated in the act, which deductions shall be limited
Deductions to expenditures or charges actually incurred in the main-
^MM of***busi- tenance and operation of the business transacted and cap-
^t^^stai^.^®ital invested in the United States or, as to certain charges,
Digitized by VjOOQIC
INCOME TAX BE6ULATI0NS. 77
such propartion of the aggregate charges as the gross in-
come from business done and capital invested in the
United States bears to the aggregate income within and
without the United States. In other words, the deduc-
tions from the gross income of a foreign corporation doing
business in this country, should, as nearly as possible, rep-
resent the actual expenses and authorized charges incident
to the business done and capital invested in this country
and must not comprehend, either directly or indirectly,
any expenditures or charges incurred in the transaction of
business or the investment of capital without the United
States.
Art. 168. It is immaterial whether the deductions ex- „ how „dedro-
tions shall be evi-
cept for taxes and losses are evidenced by actual dis-<Je^ce^-
bursements in cash, or whether evidenced in such other
way as to be properly acknowledged by the corporate
officers and so entered on the books of the corporation
as to constitute a liability against the assets of the cor-
poration making the return. Deductions for taxes, how-
ever, should be the aggregate of the amounts actually
paid, as shown on the cash book of the corporation.
Deductions for losses should be confined to losses actually
sustained and charged off during the year and not com-
pensated by insurance or otherwise. Except as the saine
may be modified by the provisions of the act, limiting
certain deductions and authorizing others, the net in-
come as returned for the purpose of the tax should be the
same as that shown by the books or the annual balance
sheet.
Art. 159. The tax imposed upon the income of cor- Tax on net in-
, , come of Qorpont'
porations, whether domestic or foreign, shall be com- wons for the year
puted upon the net income, ascertained in the manner
hereinbefore indicated, except that for the year ending
December 31, 1913, the income tax will be imposed upon
the net income accrued from March 1 to December 31,
both dates inclusive, and such amount of net income is
ascertained by taking five-sixths of the entire net income
for said calendar year.
Art. 160. The special excise tax on corporations pro-^P^^^^^J^jise
vided for in the act of August 5, 1909, is reaffirmed and «om.
made operative and effective as to the period from Janu-
ary 1 to February 28, 1913, both dates inclusive, which
said tax shall be computed upon one-sixth of the entire
net income of said corporations for said year, and the
Digitized by VjOOQIC
78 INCOME TAX BEGULATIQKS.
net income shall be ^ascertained in accordance with the :
provisions of the income-tax law.
sJmS?.^'^^" For the year 1913 it shall bo necessary to make
but one return and assessmen.t for all taxes imposed in
the income-tax law upon corporations, either by way of
income or excise, which return and assessment shall be
made at the times and in the manner provided in section.
2 of the act of October 3, 1913.
emptian^^ allow- Under the present law, no specific exemption is allow-
able as a deduc- ■■ •• ,i j ±\^ x* x i
tion. able, as was the case under the corporation-tax law;:
hence the assessment will be based upon the entire net
income of the corporation arising or accruing to it from,
all sources during the entire year for which the return is
made.
Inventories. ^^.^^ j^gj^^ j^^ Order that certain classes of corporations
may arrive at their correct income, it is necessary that
an inventory, or its equivalent, of materials, supplies,
and merchandise on hand for use or sale at the close of
each calendar year shall be made in order to determine
the gross income or to determine the expense of opera-
tion.
to^J^*^*"^"^*"' ^ physical inventory is at all times preferred, but
where a physical inventory is impossible and an equiva-
lent inventory is equally accurate, the latter will be ac-
ceptable.
An equivalent inventory is an inventory of materials,
suppUes, and merchandise on hand taken from the books
of the corporation.
ci^^oV^^^'"'^' -Ajrt. 162. For the purpose of this tax, corporations are
divided into five classes, as follows:
Class A. Financial and commercial, including banks,
banking associations, trust companies, guaranty and
surety companies, title insurance companies, building
associations (if for profit), and insurance companies, not.
specifically exempt.
Class B. Class B. Public service, such as railroad, steamboat,
ferryboat, and stage-line companies; street-railway com-
panies; pipe-Une, gas-light, and electric-light companies;
express companies, telegraph and telephone companies.
Class C. Industrial and manufacturing, such as mining,
oil and gas producing companies, lumber and coke com-
panies; roUing mills; foundry and machine shops;,
sawmills; flour, woolen, cotton, and other mills; manu-
facturera of cars, automobiles, elevators, agricultural
implements, etc.; manufacturers or refiners of sugar.
Class A.
Class C.
Digitized by VjOOQIC
INOOMB TAX BEG0ULTtOlSrS. 79
molasses, sirups, or otker products; ice and refrigerating
companies; slaughterhouse, tannery, packing, or can-
ning companies; printing and publishing companies, etc.
Class D: Merccmtile, including all dealers (not other- ciassD. ♦
wise classed as producers or manufacturers) in coal, lum-
ber, grain, produce, and all goods, wares, and merchan-.
dise.
Class E: J/isceZZaneou5, such as architects, contractors, ciassE.
hotel, theater, or other companies or associations not
otherwise classified.
Art. 163. Under the authority conferred by this act, ^^"^ «'"*""'•
forms of return have been prescribed, in which the
various items specified in the law are to be stated.
Blank forms of this return will be forwarded to collectors
and should be funushed to every corporation, not ex-
pressly exempted, on or before January 1 of each year,
in the case of corporations making their returns for the
calendar year, or on or before the first day of the next
fiscal year in the case of corporations making returns for
their fiscal year. Failure on the part of any corporation,
joint-stock company, association, or insiu'ance company
liable to this tax to receive a prescribed blank form will
not excuse it from making the return required by law,
or relieve it from any penalties for failure to make the
return in the prescribed time. Corporations not supplied
with the proper forms for making the return should make
application therefor to the collector of internal revenue
in whose district is located its principal place of business
in ample time to have its return prepared, verified, and
filed with the collector on or before the last due date as
hereinafter defined. Failure in this respect subjects it
not only to 50 per cent additional tax, but to the specific
penalty imposed for delinquency. Each corporation
should carefully prepare its return so as to fully and
clearly set forth the data therein called for. Imperfect
or incorrect returns will not be accepted as meeting the
requirements of the law.
Art. 164. To any sum or sums due and unpaid after pdiSbySt. ^"
the date for payment stated in the notice and demand
issued by the collector there shall be added the sum of
5 per cent of the amount so unpaid, and interest at the
rate of 1 per cent per month. To the amount assessable
on the basis of the net income there shall be added 50
per cent in case of refusal or neglect of a corporation to
make a return or 100 per cent in case of a false or fraud-
Digitized by VjOOQIC
80 IKOOME TAX BBGUULnOirS.
ulent return. For refusal or neglect to make a return
within the prescribed time, or for a false or fraudulent
return, the corporation so oflfending shall be liable to a
specific pendty not exceeding $10,000. Any person
divulging unlawfully any information whatever disclosed
by a return shall be punished by a fine not exceeding
$1,000, or by imprisonment not exceeding one year, or
both.
Any person or any oflSicer of any corporation required
by law to make, render, sign, or verify any return, who
Fraudulent re- makes any false or fraudulent return or statement with
"™*' intent to defeat or evade the assessment required by
section 2, act of October 3, 1913, shall be guilty of a
misdemeanor and shall be fined not exceeding $2,000 or
be imprisoned not exceeding one ye^, or both, at the
discretion of the court, with the costs of prosecution.
Fiscal yw; ^yt. 166. The Federal income-tax law authorizes cor-
how estaDlisnea.
porations, joint-stock compames, etc., under certam con-
ditions to make their returns on the basis of an estab-
lished ^'fiscal year'' or consecutive 12-months period,
which may be other than the calendar year.
Pursuant to this provision the following instructions
are issued for the guidance of collectors and other inter-
ested parties:
da^^f or ciOT^of ^y corporation, joint-stock company, or association,
i^g^eatiewl*^^ any insurance company subject to the tax imposed
^oifetor^of^^thSby tlds act may, at its option, have the tax payable by
M?ed *° ^®^^"it computed upon the basis of the net income arising or
accruing from all sources during its fiscal year, provided
that it shall designate the last day of the month selected
as. the month in. which its fiscal year shall close as the
day of the closing of its fiscal year, and shall, not less
than 30 days prior to the date upon which its annual
return is to be filed give notice, in writing, to the col-
lector of internal revenue of the district in which its
principal place of business is located, of the day it has
thus designated as the closing of such fiscal year.
fii^oy^Sr"**'* ^^ ^^*' ^®®* ^^ pursuance of this provision, a corporation
or hke. organization subject to this tax may, for example,
designate the 30th day of September as the day for the
closing of its fiscal year, whereupon its return of annual
net income shall be filed with the collector of internal
revenue of the district in which its principal place of
business is located not later than 60 days after the close
Digitized by VjOOQIC
INCOME TAX BBGULATIOKS. 81
of its said proposed fiscal year; tliat is to say, on or before
the 29th day of November next succeeding.
The date of the closing of the fiscal year having been
designated, notice thereof must be given to the collector
not less than 30 days prior to the last day of such 60-day
period. In the case just instanced the notice must be
given not later than October 29.
If such designation (September 30, 1913) had been
made and notice given, as hereinbefore indicated, as to
the closing of the fiscal year 1913, the corporation would
be authorized to make its return and have the tax payable
by it computed upon the basis of the net income arising
or accruing to it during the period from January 1 to
September 30, 1913, both dates inclusive.
Art. 167. Collectors of internal revenue receiving j^^^^J^^J^^^^
notices of the selection and designation of the ''fiscal ^J^^JjJIi?!
years, " as above indicated, will make record of the same,
recording, (a) the name of the corporation or like organi-
zation, (6) the date when notice was given, (c) the day
designated for the closing of the fiscal year, and (d) the
date when the return under such designation must be
filed, which must be, as above stated, not later than the
last day of the 60-day period next following the day
designated as the close of the fiscal year.
Art. 168. If it shaU appear that for the year. 1^13 ^^^^^^^o^^e
the notice was given within the prescribed time — that is, gj^dw^ear^fll
within 30 days of the last day of the 60-day period — the govern.
1913 return may be made as of the fiscal year so estab-
lished ; otherwise it will be made on the basis of the cal-
endar year until such time as the designation shall be
duly made and notice thereof properly given.
Art. 169. The designation and notice can not be retro- ^^«^*^|j5^**J^
active; that is to say, if a corporation now designates g^^^ retroao-
April 30, 1914, as the date of the closing of its fiscal year
and gives notice of such designation, it would not be
authorized to make a return for the four months ended
April 30, 1913, and then for the fiscal year ended April
30, 1914, nor would it be authorized to make one return
covering the entire 16 months ended April 30, 1914. In
the case of such corporation the return for the year
must be made for the calendar year ended December
31, 1913, and then, assuming that designation and notice
had been properly made and given, it may make a return
for the four months ended April 30, 1914, and thereafter
24785**— 14 6
Digitized by VjOOQIC
82 lUCOME TAX BEGULATIOKS.
the return will be made on the basis of the fiscal year so
established.
yeTMlliot pro^^ ^^^' ^'^*** ^^ ^^ cases where a fiscal year is not estab-
retan^^^i^^be^^^^®^ ^ above prescribed returns must be made on the
made for calendar basis of the Calendar year, in which case such returns must
be filed on or before the 1st day of March next succeeding
such calendar year. Such returns in either case pro-
vided muist be verified under oath or affirmation of its
president or other principal officer, and its treasurer
or assistant treasurer; that is to say, by two dififerent
persons acting in the official capacity indicated.
on^basi? of fiscal ^^^' ^"^^^ ^ it shall appear in any case that returns
St^d^an^nifb^l^^ave been made to the collector on the basis of a fiscal
accepted. j^^j, not designated as above indicated, the corporations
making such returns will be advised that such returns
can not be accepted, but must be made to cover the
business of the calendar year.
i9i3®*must^ be ^1^' ^72. Returns made under this act and pursuant
foras. °^ '^^^to these instructions must be made on the new forms
prescribed by this department.
The forms heretofore in use, under the special excise
tax law, can not be used for making returns for either
the fiscal or calendar year 1913.
towcledsTdays^ ^^' ^*^^' "^^ extension of time within which a return
may be filed can iji no case exceed 30 days from the date
on which the return is due and can be granted only upon
written appUcation to the collector, and in case of sickness
or absence of an officer whose signature to the return is
required, such apphcation to be made prior to the expi-
ration of the period for which the extension is desired.
er&^^maiiel^T ^^*' ^^^' ^' * return is made and placed in the United
J^j.^^^e^^i- States mails, properly addressed^ and postage paid, in
J®gP«»^j*y^Q^®^ ample time, in due course of maUs, to reach the office of
tions. the collector or deputy collector on or before the last due
date, no penalty will be held to attach should the return
not be actually received by such officer until subsequent
to that date.
defl^ed.^^^ ^^^ •^^' ^'^** " ^^^^ ^"® date,*' as her^before used, is con-
strued to mean the last day upon which a return is re-
quired to be filed in accordance with the provisions <d
the law, or the last day of the period not exceeding 30
days covered by an extension of time granted by the
collector*
faK'^sund'ay ^Tt. 176, When the due date as above defined falls
or legal holiday, q^ Sunday or on a legal holiday, the last due date will
Digitized by VjOOQIC
ISrCOME TAX BEGULATiaNS. 83
be held to be the day next following such Sunday or
legal holiday and the'retiim should be made to the
csoUector not later than such following day, or, if placed
in the mails, it should be posted in ample time to reach
the collector's oflSce, under ordinary handling of the
mails, on or before the date on which the return is thus
made due in the office of the collector.
Art. 177. All assessments against corporations, etc.,j^j^^»se»smeiit
making returns for the calendar year are required to be*a^«s.
made and the several corporations, joint-stock companies,
etc., notified of the amount for which they are liable on
or before the 1st of June of each sucessive year, and said y J°^ caieodar
assessments shall be paid on or before the 30th day of
June of such year. In the case of corporations making j^^®^**^®<>^^sess-
returns for the fiscal year, the assessments shall be made
and notice given on or before the expiration of 90 days
from the date when the returns were required to be filed,
and the taxes assessed against such corporations, etc.,
shall be paid within 120 days after the date upon which
the returns were required to be filed. In case of refusal
or neglect by a corporation, etc., to make a return, and
in case of false or fraudulent return, the commissioner,
upon the discovery thereof within three years after such
returns are due, shall make a return upon information
obtained in the manner provided in the act, and the
assessment made on the basis of such return shall be paid
immediately upon notice and demand given by the col-
lector.
Upon failure to pay the tax when due and for 10 days^^^^^^^J^gP^y
after notice and demand, a penalty of 5 per cent of the
wnount of the tax unpaid and interest at the rate of 1
per cent per month until paid shall be added to the
amount of such tax.
Art. 178. When the assessments shall have been niade,p^bUc'^records!
the returns shall be filed in the office of the commissioner J^^^^J^V*^^
and shall constitute pubMc records, subject to inspection **^*^^®^^^*^
upon ihe order of the President, imder rules and regula-
tions prescribed by the Secretary of the Treasury and
■approved by the President. Copies of returns on file in
the Commisisioner's office are not permitted to be sent to
any person, except to the corporation itself or to its duly
a^uthorized attorney.
Art. 179. Upon request of the governor of a State g^^j^^J^^'^^^^J^j^^
which imposes a general income tax, the proper officers of ^gJ^J^ income
such State may have access to the returns filed by corpo-
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84 INCOME TAX BEGULATIONS;
rations doing business in such States, or to an abstract
thereof showing the name and income of such corporar-
tions, etc., at such times and in such manner as the Secre-
tary may prescribe. In no case are the original returns
to be removed from the office of the commissioner, except
upon order and by direction of the Secretary of the
Treasury or the President.
Certified copies Art. 180. At the request of the Attorney General, or by
direction of the Secretary of the Treasury, certified copies
of returns may be made and delivered to the United
States district attorneys for their use as evidence in the
prosecution or defense of suits in which the collection or
legality of the tax assessed on the basis of such returns is
involved, or in any suit to which the United States Gov-
ernment and the corporation, etc., making the return are
parties and in which suit such certified copies would con-
stitute material evidence.
Penalty for giv- Art. 181. The disclosuro by any collector, deputy col-
to regard to re- lector, agent, clcrk, or other officer or employee of the
United States to any person of any information whatever
contained in or set forth by any return of annual net
income made pursuant to this act is, by the act, made a
misdemeanor, and is punishable by a fine not exceeding
$1,000, or by imprisonment not exceeding one year, or
both, at the discretion of the court, and if the offender
is an officer or employee of the United States he shall be
dismissed and be incapable thereafter of holding any
office under the United States Government.
Bookkeeping. Art. 182. No particular system of bookkeeping or ac-
counting will be required by the department. However,
the business transacted by corporations must be so
recorded that each and every item set forth in the return
of annual net income may be readily verified by an exami-
nation of the books of account.
Books of ac- Art. 183. The books of a corporation are assumed to
count best guide , , -^ ,
to income. reflect the facts as to its eammgs, mcome, etc. Hence
they will be taken as the best guide in determining the net
income upon which the tax imposed by this act is calcu-
lated. Except as the same may be modified by the pro-*
visions of the law, wherein certain deductions are limited,
the net income disclosed by the books and verified by the
annual balance sheet, or the annual report to stockhold-
ers, should be the same as that returned for taxation.
Omitted taxes Art. 184. In cases wherein corporations have neglected
may be assessed. i.i ^ ^ > i».
or refused to make returns, and m cases wherein returns
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INCOME TAX BEGULATIONS. 85
made are found, upon investigation or otherwise, to be
false or fraudulent, the commissioner may, upon discov-
ery thereof, at any time within three yeara after said re-
turn is due, make return upon the information obtained
in the manner provided in the act, and the tax so discov-
ered to be due, together with the additional tax pre-
scribed, shall be assessed, and the amount thereof shall
be paid immediately upon notice and demand.
Art. 186. Corporations coming within the terms of thiSgu^j^jP^^**^
law are subject to the normal tax only; that is, a tax^^-
computed at a level rate of 1 per cent of their entire net
income regardless of the amount of such net income.
Art. 186. -For the purpose of verifying any return, ^^^"^^^^^^^o'
made pursuant to this act, the Commissioner of Internal
Revenue may, by any duly authorized revenue agent or
deputy collector, cause the books of such corporation to
be examined, and if such examination discloses that the
corporation is Uable to tax in addition to that previously
assessed, or assessable, the same shall be assessed and
shall be payable immediately upon notice and demand.
For the purpose of such examination, the books of corpo-
rations shall be open to the examining officer, or shall be
produced for this purpose upon summons issued by any
properly authorized officer.
Digitized by VjOOQIC
PART 4.
ASSESSMENT AND COLLECTION.
re^rtS^on*^^ ^'*- ^87. All income taxes found to be due will be re-
sessment lists, ported by collectoFS on their assessment lists, Form 23-A
in the case of corporations, and on Form 23-B in the
case of individuals and withholding agents.
Names to be Art. 188. The names of corporations subject to tax
listed m alpha- -,•, -, ■,* ■. -r^ ^va t i'i»
beticai order, will be listed on FoHU 23-A, according to theu* designated
class, and in alphabetical order as to each class. Names
of individuals subject to tax will be listed on Form 23-B,
alphabetically, without reference to class or rate of tax.
Following such names there will be listed, alphabetically,
Names of with- the uamcs of all withholding or licensed collecting
holding agents, ^ ^
how to be listed, ageuts, and the aggregaie amount of tax withheld by each,
as shown by the annual returns rendered by them.
An assessment against each person, firm or company,
from whose income the tax has been so withheld, will be
unnecessary in such cases.
Assessment Art. 189. To avoid, as far as possible, the assessment
against withhold- i . i i . i. . i i .
hig agents to be of taxcs as to which claims for exemption or deduction
deietxed until an- , ■*■
nuai rM)orts are may be filed undcr article 33, collectors will delay report-
ing for assessment taxes remaining in the hands of with-
holding agents, until the annual reports of such agents,
which must be filed not later than March 1 in each year,
are received.
to^m'Sdi."'^"'' Art. 190. Returns of withholding agents (including
those of licensed collecting agents) as to interest payments
shall be made monthly and returns containing sum-
maries of said monthly returns shall be made annually.
(See Part 2, A, B, and C.) Returns of individuals
(see Part 1), corporations (see Part 3), and withholding
agents, withholding tax on wages, salaries, rents, etc.
(see Part 2, D), and fiduciaries acting as withholding
agents (see Part 2, E) shall be made annually. All
monthly returns are required to be made on or before
the 20th day of each month for the preceding month.
All annual returns are required to be made on or before
the 1st day of March in each year, except in the case of
86
Digitized by VjOOQIC
INCOME TAX REGULATIOKS* 87
corporations which have given due notice of the termi-
nation of their fiscal year, in which cases the prescribed
return is to be filed within 60 days after the termination
of such fiscal year.
Art. 191. Corporations which are subject to the special ^^^'^^^^^^^
excise tax 3n income received during: the months of retnm* *» y«ar
T T -f-i 1 - ^ . « ? 1 . . 1913 income sub-
January and February, 1913, may, under the provisions ject to special ex-
of section 4, paragiaph S, of the act of October 3, 1913,
include such income, as also the income taxable under said
act, in one return for the year 1913. In each such case
one assessment only will be made.
Art. 192. All returns of income, whether of individuals coSil*to^bS'for:
or corporations, should be forwarded with the assessment ^L^t^^. ^"
list rendered. Where in any case the collector has reason
to believe that any return rendered is false or fraudulent, lent^^Jlanlr"*^""
he will prepare and retain in his office a copy of such
return, and will note on the original and under the head
of "Remarks'' of his assessment list the words "Investi-
gation pending.'' He will in aU such cases make his inves-
tigation in the manner prescribed in section 3173, Revised
Statutes, and paragraph D of said act of October 3, 1913;
and he will report the results of his investigation to the
Commissioner of Internal Revenue, referring to the list,
folio, and line on which the assessment was reported.
Art. 193. Monthly and annual returns of withholding ^^^^^j^retorns
agents (including those of licensed agents) as to interest je^jg^^ ^ ^
payments and the annual returns of withholding agents,
withholding tax on wages, salaries, etc., will be made in
duplicate, one copy of which will be retained by the col-
lector in his office and one copy transmitted to the Com-
missioner of Internal Revenue. Annual returns of with-
holding agents (including those of licensed agents) as to
interest payments, and returns of withholding agents as
to wages, salaries, etc., and of fiduciaries will be forwarded
by the collector ^vith his list. Form 23-B, on which the
tax withheld is reported for assessment.
Art. 194. All certificates of exemption or deductions, ^^®^*^**^
filed by or on behalf of persons subject to tax, will bej^'^^f ^oon
]forwarded by the collector as soon as received; and all
such certificates, reports, and returns, before being trans-
mitted to the commissioner, will have stamped thereon
the name and number of the district; wiU be arranged
(unfolded) in alphabetical order and, in the case of cor-
porations, according to the designated class to which they
belong. Care should be taken to have all such papers.
Digitized by VjOOQIC
88 INCOME TAX REGULATIONS,
when so arranged, carefully secured by cord, or other
fastening, so as to insure their receipt in Kke order. This
is especially necessary in view of the large number of like
papers which will be forwarded from the various districts:
tun^^o'^atonw ^^^* ^^^* I^ Order that assessment lists may be
fectoi^^ ^^ ^^^" promptly prepared and forwarded, collectors will see
that all reports and returns to be listed are examined
as received, and that no delay occurs in this branch of
the work. Special dihgence in this matter is necessary,
as sufficienj) time must be given for the reexamination of
such returns in the commissioner's office before assess-
lists^to^^be^pre-^^^^ is made. The forwarding of assessment lists, how-
wMd^d^wthSft®^^^^ should in no case be delayed, beyond the time
delay. allowed, on account of unexamined returns, as such
returns can be examined and reported on a subsequent
list. As the law limits the time in which these assess-
ments are to be made and notice of assessment given,
collectors will assign to this work all available force in
their respective offices.
sent°*^to *deito- ^'^' ^^^- Where the required returns are not filed
quents. within the prescribed time, either by individuals or
corporations, notice on Form 1045, should in each case
be sent to the deUnquent. (For authorized extension of
time, see articles 23 and 173.)
mfnt!^^^^^^^ ^^** ^^'^' When assessment has been made, collectors
will, on receipt of their returned lists, at once issue pre-
liminary notices of assessment (Form 647), and where
in any case the tax assessed is not paid on or before the
30th day of June, or in case of corporations designating
their own fiscal year, within 120 days following the date
on which the return should have been filed, notice and
demand (Form 17) should be at once issued, and unless
u?,*^uy, iSd *^® .tax in such case is paid within 10 days after the
interest. scrvico of such noticc, general demand for tax, penalty,
and interest (Form 21) should at once be issued. Imme-
diate notice and demand (Form 17) will, however, be
served in case of failure to file the required return within
the statutory period.
mStftotfllnt ^^*' ^^^- Pending assessment on returns forwarded to
iSum ?ntt ^^ ^^® commissioner, collectors will have prepared the neces-
sary notices of assessment, with properly addressed
envelopes, to bo used immediately on return of their
assessment lists.
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INCOME TAX BEGULATIONS. 89
Art. 199. Statements of payment, abatement, and out-jj^atemStl'^i^ci
standing balances of such assessed taxes will be rendered ance?"^^^' ^'
monthly by collectors on special Form 325. Such
statements will be prepared in the same manner as
required in the case of assessments on the regular Form
23, except that in Statement III the outstanding bal-
ances on the various lists will be reported in aggregate
only. Items constituting such balances, however, willba?ancLs**to**^f
be carded by collectors, but only as to such as were?^c?ora. ^^ ^^'
assessed during the month for which the return is ren-
dered, thus avoiding detailed statements each month of
outstanding balances previously reported. A separate
card (Form 1020) will be used for each such item; and
all cards so prepared each month should be arranged
alphabetically, and so forwarded by the collector with
his report on special Form 325.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury*
Digitized by VjOOQIC
Digitized by VjOOQIC
INDEX.
Note.— Regulations are indexed by article number; law indexed by page.
A.
Abatement : Article.
Claim for, of tax, may be filed when, by whom : 33c
Absence:
From United States, who may make claim for deductions (Form 1008)
for 33b
Additional tax:
Nonresident alien subject to, computed same as for citizens of United
States 8
Regulations for 2
Additions and betterments:
Constituting increase in capital investment not deductible expense of
corporation 118
Adjustment:
Assessment of tax withheld, ^^^.thholding agent to be notified 33c
Administrator :•
Is fiduciary when 70
Make return of income deceased person, when and what 17
Affidavit: ^
Verifying return of income, before whom mdde 22
Agent:
Authorized, may sign for principal, certificate of ownership of bond 43
Compensated on commission basis, income of, not subject to withholding
at source 32
Return made by, when 17
Signing for principal, certificate of ownership of bonds, to furnish
evidence of authority to act, when 43
Agricultural organizations:
Exempt from tax p. 12
Aliens :
Nonresident —
Duly authorized s^ent of, to make return for and pay tax, when 8
Income of, what to be included in return of 8
Net income of, defined 8
Normal tax on entire net income of 8
Not allowed exemption under paragraph C 8
Not entitled to exemption under paragraph C 3
Subject to additional tax 8
Taxable on entire net income in United States 1
Tax on coupons or registered interest payable in United States to be
withheld unless certificate of exemption (Form 1004) filed 46
Resident —
Certificate of ownership of bond, when and how to be used, ^ind to
specify what 42
Income of, from coupon or registered interest, tax on to be deducted
and %vithheld except to extent exemption claimed 44
Taxable on net income less exemption and deductions 1
91
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92
INDEX.
Ajff.VI/MfcsT?*: Articl?.
i^,^l'v,TaZ}f',7. 3J72. 3173. 317^;. R*-v. Sfat pp. 22-24
AuotcnzATJOs:
Jhfpr^^tUjn for. ^-r^rp^^ralv.n allow^r*!. wh*-n. how 135
A V %' r; A L & ETC R V :
fVyrm 1013, to «hcw what, ami to be filed on or before Mar. 1 ea^h year. . 50
(fi ffjn^rffmt or inter^'srt ord^Tg not afvY>mpanied by certificate of ownership
''form of., what to fjhow when filed, totals only of monthly return 53
iff lireny^e for rolWiion of foreign itpms ^form of) what to show, with
whom iih^lj when 50
A%M:iTy:
Money j^aid for •returried; not to be included in gross income 5
Taxab J'r, how t re&twl 63
r^f guardian, et*^-,, to notue for failure to make return, may show what. . 18
ArrzAL:
lU'c'wion of rolh'«^'tor —
All jjz\>^:r» fjiy to rommissioner oi Internal Revenue; diseutisfied
may submit f-a^K*; furnish sworn testimony to prove facts ]). 8
A FFUC ATIOX:
P'or license
For collection foreign items 55
To collect foreign items to be made through principal office to col-
lector of district in which located principal office 57
Appueii surrender values and consideration:
For supplementary contracts —
To be both added and deducted in return life insurance company. . 102
Arrangement and packing:
^V'rtificates, ref>orts, returns, for forwarding by collector 194
A«8Kh«ment:
( nsurance company, reeerve of, definition , 147d
f )f tax to be made by Commissioner of Internal Revenue 25
Against income withheld at source, where to be made 38
AgaiuBt withholding agent 36
I' orra and notice of ^. 197
List rendered, collector to forward 192
Amount of, when persons shall be notified pp. 8, 9
Basis of calendar year or fiscal year, time to })e made 177
Failure to pay, extra tax on p. 9
Limitation on time of making '* P- 9
Made by Commissioner of Internal Revenue p. 8
Of tax against withholding agent, deferred until agent makes return. . . 189
IVnalty and interest for nonpayment of, exceptions p. 9
PcrHons notified of amount of p. 9
When U) be paid p. 9
Ahmkts, capital:
('()ri)orat ion-
Change in book value by annual adjustment on books, that value to
bo used in making annual returns, net income 111
, Change in book value by reappraisal, gain or loss, how computed- . . Ill
Profit or loss on sale of, how determined 110
Loss from sale of, how ascertained 128
Sale of corporation, net income from, how determined 109
Sale of by corporation, income from, how determined. . .* 108
Shrinkage in book value of corporation, how treated 134
Digitized by VjOOQIC
INDEX. 93
Association: Article.
Charitable, exemption, when p. 13
Making false return, penalty for p. 12
Mutual, domestic building, etc p. 13
Neglecting to make return, penalty for p. 12
Net income of, preceding calendar year, normal tax on p. 12
Operating under *'Lodge system, " defined 89
Refusing to make return, penalty for p. 12
Religious, exemption p. 13
Return of, when available p. 21
Scientific, exemption, when p. 13
Taxes to be assessed by Commissioner of Internal Revenue, when, section
3176 p. 24
To make list or return of taxes, how, when, section 3173 pp. 22, 23
Authors:
Earnings of, indefinite or irregular, not subject to withholding at source. . 32
B.
Bad debts:
Corporation, deductible, when 125
Collected, are income 125
Balances:
Outstanding tax, how treated 199
Banks:
Allowing interest on deposits, not to withhold tax from 67
Deductible status of taxes assessed against stockholder, paid by 154
Interest paid on deposits allowable deduction p. 20, art. 149
Taking coupons for collection, originated or payable in the United States,
duty of .' 39
Mutual savings —
Ha\dng capital stock represented by shaies, exempt fi-om tax. ..... p. 12
Beneficiaries:
Exemption from tax may be claimed by, from fiduciaries 74
Interest received by, from insurance companies on insurance contract,
part of gi'oss income 5
Bequest:
Of property —
Income from part of gross income 4
Value of, not income 4
Boards op Trade:
Exempt, when p. 13
Bond:
May be required of licensee for collection of foreign items 56
Bonds, etc:
Of corporations, etc. —
Income from, subject to withholding at source, regardless of amount. 37
Interest of foreign, subject to deduction and withholding, when p. 11
Bond and mortgages:
Interest on, subject to deduction, when p. 10
Bookkeeping:
Requisites of, for verifying return 1 82
Books:
Of corporation subject to examination, by .whom, for what, result 186
Digitized by VjOOQIC
^4 INDEX.
Book value:
(^apital assets — Article.
Change in, by reappraisal, gain or loss, how computed Ill
Shrinkage in, how treated , 134
Building:
Removal of, corporation, not deductible loss, why 127
Building and loan association:
Domestic, defined; what necessary to exempt from tax 87
Business:
I^awful, carried on for gain or profit; income from part of gioss income. . 4
C.
Calendar year:
To govern when notice of corporation fiscal ye^x not given in time 1G8
Capital assets:
Book value of corporation, shrinkage in, how treated 134
Corporation —
Change in value of, by annual adjustment on books, that value used
in making return annual net income Ill
Change in book value by reappraisal; gain or loss, how computed... Ill
Loss from sale of, how ascertained. . , 128
Profit or loss on sale of, how determined 1 10
Net income from sale of, how determined 109
Sale of, by corporation, income from, how determined 108
Capital investment:
Corporation, increased by additions and betterments, not deductible
expense 118
Cemetery company:
Taxable status depends on what 90
Certificate :
Accompanying foreign items, disposition of, by licensee Gl
Claiming deductions account partnership expense, what and how 47
Claiming exemption and deductions to accompany annual return of
withholding agents 69
Claiming exemption —
As nonresident alien must be filed or tax withheld from payment
coupon or registered interest 46
From tax on registered interest to be filed at least five days before
due date of interest 44
Of withholding, by foreign organization. Form 1018 46
For nonresident alien, may be executed by whom 46
Exemption or deduction, disjwsition of 194
Form of, for foreign partnership composed of nonresident aliens, resident
aliens, and citizens of United States 49
Of deposit, interest on, part of gross income 4
Of ownership accompanying coupons or registered orders, duty of col-
lecting agency 39
Of ownership—
By corporations organized in United States claiming exemption,
form of, and how executed 45
Disposition of, by collecting agent 40
Of persons not subject to having tax withheld, disposition of, by
debtors and withholding agent 51
Not accompan3dng coupons or interest orders, tax to be withheld by
first collecting agent, disposition of certificate 52
Digitized by VjOOQIC
INDEX. 95
Certificate — Contin ued .
Of ownership — Continued.
Of bonds — Article.
By citizen or resident of United States, when and how to be used
and to specify what 42
By corporations organized in United States and certain exempt,
must be filed to prevent withholding 45
May be signed by authorized agents 43
Of corporations, etc., organized or doing business in United
States, form of, for foreign partnership 48
Signed by agent, when verified by first withholding agent, etc.,
good in all other hands 43
Who to make and for what 39
Size of and paper for p. 27
Substitute by collecting agent, how to be treated by debtors or with-
holding agent 51
That of collecting agent substituted when 40
Certificates, reports, returns:
Arrangement and packii^ of, for forwarding by collector 194
Chambers op commerce:
Exempt, when. , p. 13
Change ts book value:
Capital assets, corporation, reappraisal, gain or loss, how computed Ill
Citizen :
Income of, from coupon or registered interest, tax to be withheld on ex-
cept to extent exemption claimed. : 44
Of United States, certificate of ownership of bond, when and how to be
used and to spc^cify what 42
Taxable on net income less exemption and deductions 1
Civic leagues:
Exempt, when p. 13
Organizations —
Exempt, when p. 13
Claim :
For exemption —
By whom, for what, who to file 41
Paragraph C, in connection with foreign item, allowed to person enti-
tled to 60
Penalty for false p. 10
What must show and how executed 42
When,- and when to be filed p. 10
Insurance company, amount actually paid under i)olicy contract, consti-
tute deduction 147c
Collecting agency:
First receiving coupons or interest orders not accompanied by certificates
of ownership should withhold tax and attach its certificate, Form 1002,
that tax withheld 52
Agent —
In foreign countries to have privilege of substituting certificates for
original ownership 40
Record to be kept by, what 40
Should require person presenting coupon or interest orders to estab-
lish identity 52
Digitized by VjOOQIC
96 INDEX.
CoLLECnox: Article.
Of tax from withholding agent 36
roLLECTOR:
Advanced preparation notice of aflsessment by, particulars 198
Arrangement and packing certificates, reports, returns 194
Authority of, in any district, section 3173 p. 24
(,'laim for deductions may be filed with, when 33c
Dispatch of business in offices of ' 195
Duty of—
As to returns withholding agents 193
If persons refuse or neglect to render return p. 23
In absence from home or place of business p. 23
In ca4»e of refusal or neglect of liable individual to make return 21
In case of undervaluation or understatement p. 23
In forwarding —
Annual individual return to commissioner 24
Return and assessment list and investigation of return 192
In making returns for i)ersons failing to do so p. 23
Upon receiving notice of fiscal year of corporation 167
Failure to find person at home, duty of, section 3173 p. 23
Sickness or absence, may extend time for making returns, section 3176.. p. 24
Legality of returns made by, section 3176 •. p. 24
Make return for individual, when 20
May enter any collection district to examine witnep{»es, when, section
3173 p. 24
Method of handling and accounting for outstanding tax balances 199
Must require returns to be verified by oath or affirmation 22
Not satisfied with responsibility, applicant for license to collect f<jreign
items, may require bond 56
Of what district, P'orm 1008 to be filed 33b
Order of arrangement, names in list made by 188
Shall make report of false or fraudulent returns, how, section 3176 p. 24
Shall require deputies to ascertain persons liable to tax, section 3172 p. 22
Tax statement rendered monthly, particulars of 199
Tax withheld to be paid to 34
To adjust in assessment in case of withholding, when 33c
To furnish withholding agent with statement of claim for deductions
filed with collector 33c
To obtain test imony, may summon whom, section 3173 p. 24
To report tax due, how, forms for 187
To send notice of what, form of and time to serve 197
To send notice to delinquent and file return 196
To which, application of principal office made for license for branch
office, to serve collector in district of branch with what 57
Wlicn claim for deductions, paragraph B, to be filed with 33b
Commissioner op Internal Revenue:
Annual return of individual to be forwarded to, how 24
Assessments made by p. 8
Facsimile of signature on licenses for collecting foreign items furnished
collectors 55
Shall add 50 per cent or 100 per cent to tax, when p. 24
' Shall assess taxes, when, section 3176 p. 24
To impose additional tax, when p. 9
Digitized by VjOOQIC
INDEX. 97
Commissioner op Internal Revenue — Continued. Article.
To issue licenses for collection of foreign items through collectors 54
To make assessment .of taxes; give notice of, when; duty of in case
neglect or refusal to make return or of false or fraudulent return 25
Commissions :
Paid to salesmen in stock of corporation, deductible expense, when 117
Company:
Foreign, normal tax on business transacted in United States p. 12
Joint-stock, etc., withholding normal tax on behalf of others. p. 9
Mutual cemetery, exempt when p. 13
Taxes to be assessed by commissioner, when, section 3176 p. 24
Compensation :
For personal service, part of gross income 4
Officers and employees of State or political subdivision of, not to be
included in gross income 5
Paid to employees of corporation on basis of stockholdings not deductible,
why ! 119
Present President and judges of court exempt from tax, what 5
Public-school teachers of State or political subdivision of, not part of
gross income 5
Consideration fob supplementary contracts and applied surrender
values:
To be both added and deducted in return life insurance companies 102
Construction op law:
As to withholding at source, liberal p. 27
Contract:
Affecting liability of a taxable person as such, to be invalid 27
Copies of returns:
How obtained, for what purpose 178, 180
Corporation :
Additions and betterments constituting increase in capital investment
not deductible 118
All organized in United States subject to tax (certain exceptions) . . 76
Amount allowed for depreciation of property p. 18
Amounts paid employees —
As compensation on basis of stockholdings not deductible, why 119
For pension or on account injuries, deductible expense 120
Assessment —
Insurance company, reserve, definition 147d
To be paid when p. 20
Bad debts deductible, when 125
Banks, etc. —
Interest paid on deposits, etc., allowable deduction 149
Paying taxes assessed against their stockholders, deductible status of . 154
Books of, subject to examination, by whom, for what, result 186
Cemetery, taxable status depends on what 90
Certificates of ownership by claiming exemption, form of and how exe-
cuted 45
Change in book value of capital assets by annual adjustment on books,
that value to be carried into return : Ill
Change in book value of capital assets by reappraisal, gain or loss, how
computed Ill
Charitable, exempt, when p. 13
24785—14 7
Digitized by VjOOQIC
98 tlTDBX
CoRFORATioN— Continued. Artlds.
Classes, enumemtion of 162
Collector to fumiaii blanks for return of 163
Collecting foreign income, to have license p. 11
Commissions to salesmen paid in stock, deductible expense when. . 117
Complete return to be made by or will not be accepted 163
Contract with by State, etc., prior to passage income-tax act, income
from accruing to individual, subject to tax 93
Contract with by State, ete., prior to paasage income-tax act, income .
from accruing to State, ete., exempt from tax when 93
Cost of buildings on leased ground, deductible as rent, when 115
Dairies, cooperative, not subject to tax, what 92
Deductible loss defined 124
Deduction account interest on indebtedness limited to what, when. .... 81
Deduction —
Account raaterialB and supplies on hand, what 123
For depletion of mines r^ulation and rate of, Hmit of 142
For depreciation of natural deposits, bads and limit of 141
For depreciation on patent, what, how detennined 137
For depreciation on timberlands, limit of, excess of, is income 140
For interest joAd at different rates, rule of application 151
For obsolescence of patents, what, how determined 138
Defined 78
Depreciation timberland from removal of timlier, amount, how deter-
mined 139
Depreciation —
Deductible, amount, how treated 130
Defined 129
For amortization allowed, when, how 135
How determined 129
Reserve, use of, disposition excess of 132
Division of depreciation of reserve, correction 133
Donation for charitable purposes, deductible when 121
Duties not deductible as tax but item of cost 155
Educational, exempt, when. . i p. 13
Engaged in more than one class of busineas, gvoes income ascertained in
accordance with applicable definitions of such income 112
Every, not specifically exempt, required to make return of income 80
Evidence requisite for allowance of deductions 158
Excise and income tax for 1913 in one return 191
Excise tax on, for what period, how computed 160
Exempt from tax, what are 87
Expense of operation and maintenance to be shown in return p. 18
Includes what 114
Failure to. receive blanks will not excuse from making returns, or from
penalties for such failure : 163
Firms, etc. , withholding normal tax on behalf of others p. 9
Fiscal year of, how established, what to do 165
Illustration of and what to do 166
Foreign, normal tax on business in United States p. 12
Coupons, checks, bills of exchange, ete., normal tax deducted from,
when p. 1 1
Dividends on stocks of, normal tax deducted when * p. 11
Digitized by VjOOQIC
INDEX, 99
Corporation — Continued.
Foreign — Continued. Article.
Having more than one branch office in United .States to dea%iiate
principal office and person tg make return . - - 83
Interest on indebtedness to be deducted, vhat p. 20
To give amount of bonded and other indebtedaeas p. 18
To set forth paid-up capital etock , , p. 18
Form of return prcscribed for 163
Oeneral expense foreign steamship companies, how treated. 116
Gifts or gratuities to employees mot deductibk 120
Good will, depreciation not allowed in connection with. 136
Gross income —
Definition of 96
General definition < 107
Gross value at the mines, definition of ^,. 142
In addition to deduction for depletion of mines, etc., deduction for de-
preciation of plant, what, basis of 143
Income —
Excepted during the year , 15
From sale of capital assets, how determined. , . , 108
How ascertained , p. 14
Losses from p. 14
Insurance company —
'' Deductible net addition to leserve, ' ' definition ; wiiat basis of com-
putation of; what not to be included in 147d
Deduction, claims actually paid und^ policy oontcact 147c
Depreciation loss by shrinkage in property value, wiiat and when
deductible ^ 147b
Gross income of, definition of 97, 101
Losses, deductions for, what ^ 147a
Reserve to meet losses, how treated 147c
Salvage, how to be treated in return of .^ I47c
Interest paid —
As rental, how treated 148
By, on mortgage on property in which coi|»oration has equity or is
purchasing 148
Deduction, what, when 148
On debts secured by collateral subject to sale, deductible, when, why. 150
On deposits, etc., deductible, when 113
Inventory, purpose and use of; kinds of 161
Leased, to make its own return 82
Leasing oil or gas territory, deductions for depletion, ba^ of . 144
Leasee, property of, assuming . indebtedness of lessor, return by lessee,
what : 81
Lessee, not to include capital stock or debts of lessor in return, except. . 82
Life Insurance Company —
Applied surrender values and consid^ution for euppJementary
contracts both added and deducted in return 102
Deductions from gross income, what 100
Gross income, defiLnition of , 101
Supplementary statement attached to return of,. showing what . . 103
Liquidation of, ma^ke final return of what; filed when and where . 85
** Lodge system," defined 89
Digitized by VjOOQIC
100 INDEX.
Corporation — Continued.
Loss — Article.
Actual, sustained p. 14
Sustained during year ♦. p. 18
From removal of buildings, not deductible, why 127
From sale of capital assets, how ascertained 128
Securities below par, how treated 135
Making false return, penalty for p. 12
May designate day to pay tax p. 17
Manufacturing company, gross income, definition 104
Mercantile company, gross income, definition 105
Miscellaneous, gross income, definition 106
Mutual compani^ making return, definition of net income 80
Mutual fire insurance company —
Gross income, definition 98
Supplementary statement attached to return, showing, what 103
Mutual marine insurance company —
Deductions from gross income, what 99
Supplementary statement attached to return of, showing what 103
Will deduct, what 147d
Neglecting to make return, penalty for p. 12
Net income —
Annual, normal tax on p. 12
Engaged in more than one class business, how ascertained 113
For 1913, how ascertained 159
Preceding calendar year, normal tax on p. 12
Of, should be what 1 158
Of, which is distributable to owners thereof; subject to tax 79
From all sources p. 14
From sale of capital assets, how determined 109
To be shown on return .' p. 20
No specific exemption frpm tax 160
Notice —
Given of assessments made p. 20
Of fiscal year, not retroactive 169
Not receiving blank for making return, should make application for, to
whom, when 163
Not to include taxes paid in foreign countries in income; see seventh
deduction p. 20
Ofiicers of, making false return, penalty p. 12
Only one return and assessment for 1913 160
On what taxed; what, and amount of p. 12
Operating mines, oil or gas welb, on royalty basis, not allowed, deduction
for depletion of deposits 145
Operations of, etc., unlawful to divulge. Section 3167 p. 22
Organized —
During the year, to make return of what 84
Elsewhere than in United States, subject to tax on what 77
In United States and certain exempt, interest on bonds payable to,
tax not to be withheld if certificate of ownership filed 45
Paid-up capital stock, definition of 95
Partnership —
limited, is, and subject to corporation tax 86
Ordinary, not subject to tax as 94
Digitized by VjOOQIC
INDEX. 101
Corporation— Continued. Article.
Payments on account of tax from covenant in bonds, not deductible in
ascertaining net income * 113
Penalty for —
Failure to
Make return p. 20, Art. 163
Pay tax by June 30 p . 20
Refusal to make return. p. 12
Profit or loss on sale, capital assets, how determined 110
Public utility, governmental function, income accruing through, to State,
exempt from tax 93
Railroad whose income paid by its lessee direct to stock holders must make
return of income 80
Religious, exempt p. 13
Repairs may be deducted, what 131
Reserve for —
Insurance of own property not deductible 122
Losses, not deductible 126
Taxes, not deductible 156
Return —
For 1913 must be on new form and not on excise form heretofore used . 172
To be made, when 190
^Vhen available p. 21
When State officers may have access to * . . . p. 21
When to be made. Section 3173 p. 22
Shrinkage in value, capital assets, how treated 134
Special excise tax, how computed p. 26
Status for taxation purposes to be establislied, how 88
Subject to tax —
Classes enumerated j). 12
Normal only, but on entire net income 185
Special excise, under act August 5, 1909 p. 26
Taxable status in doubt, must make return and attach thereto statement
. showing what 91
Tax-
Computed on net income of 159
Deduct amount paid for p. 20
Paid by-
Constitute deduction, when 152
When not deductible. 153
To be assessed by Commissioner of Intern al Re ve nue , when . Sec tion
3176 p. 24
To give notice, day designated for return p. 17
Make list or return, how, when. Section 3173 pp. 22, 23
Unearned increment, not value for 'depreciation purposes 146
United States, filing certificates of ownership, exempt from withholding
of foreign items 60
When to make return p. 17
Cost:
Of buildings on leased ground, deductible as rent of corporation, when . . . 115
Digitized by VjOOQIC
102 INDEX.
D.
Dairies: Article.
Cooperative, not subject lo tax, what 92
Debtor:
Annual-
List return by, when and wliat 50
Return by, to show totals only of monthly list return 51
Definition of 38
How to treat substitute certificate of collecting agent and certificate of
owner not subject to having tax withheld 51
Interest on bonds due, corporations organized in United States and
certain exempt, not to withhold tax if certificate filed 45
Maker of note given in payment of interest held responsible for tax on 68
May appoint withholding and paying agent to act for it 38
Note given in payment of income, maker of note is 68
Not to withhold against nonresident alien or foreign organization doing
business in United States, when 40
Not to withhold when receiving certificate of collecting agent that tax
withheld by same, disposition of certificate 52
Return of witliholding by, where to be filed 38
In United States (or its withholding agent) charged with duty of with-
holding from coupons or registered interest 39
In United States, duty of, before payment of registered interest 41
When source for withholding purposes 31
^'Deductible net addition to reserve":
Insurance company; definition; what basis of computation of; what
not to be included in 147d
Deduction :
Account partnership expense, account of and form for claiming 47
Additions and betterments constituting increase in capital investment,
not 118
Allowance for in computing, what, when p. 5
Amount of, to ascertain net income p. 5
At source, applies to normal tax only p. 12
Bad debts of corporation, when 125
Basis, for depletion leased oil or gas territory 144
Claims for —
Filed with collector, withholding agent to be furnished statement of . . 33c
May be filed with withholding agent, when 33c
Not allowed unless made, when p. 10
Commission to salesmen paid in stock of corporation is, when 117
Corapensaticn, officers and emploj'ces of State, etc., except, when;
judges Federal courts now in office ; present President for present term . . p . 6
Compensation paid employees of corporation based on stockholding, not,
why 119
Corporation —
Account interest paid on debt, limited to wliat, when 81
Materials and supplies on hand, what 123
Depreciation, amount, how treated 130
Donations for charitable purpose, when 121
Evidence requisite for allowance of 158
For interest paid at different rates, rule of application 151
Gifts or gratuities to employees, not 120
Pensions and damages for injuries to employees, are 120
Digitized by VjOOQIC
INOBX. 103
Deduction — Continued.
Corporation — Continued.
Reserve— Article.
For insurance its own property, not.* 122
To meet losses insurance companies, not 147c
Status of tax for, to bank, assessed against stockholder, paid \>y bank. . 154
And exemptions in certain cases p. 11
Debts due taxpayer, ascertained worthless and clxaiged off in year p. 5
Depletion of mines, regulation of rate of, limit of . . *. 142
Depreciation —
Defined 129
For amortization, allowed when, how 135
How deteimined 129
Loss by fthrinkage in property value, insurance company, wliat and
when 1 , ... i47d
Reserve, how, disposition excess of 132
Of good will not allowable / 136
Of natural deposits, basis and limit of 141
Of plant (in addition to deduction for depletion of mine), what, and
basis of 143
On patent, what, how determined 137
Unearned increment, not value for puipoae. of 146
Timberland —
Limit of, excess of, is income 140
Removal of timber, amount, how determined 139
Dividends on stock, what, when p. 5
Exemption under paragraph C, not allowed nonresident alien p. 6, Art. 8
False statement in regard to, penalty p. 10
From gross income —
Mutual marine insurance companies, what 99
Of nonresident alien, what 8
To ascertain net income, for normal tax, paragraph B, what 6
From net income to ascertain taxable, exemption, paragraph C 6
From premiums, etc., by whom made, when p. 9
For ascertaining net income, what - 3
For fire, storm, shipwreck p. 5
Foreign corporation, to ascertain net income 157
For expense of businem, partnership may claim, when and how 14
For restoring property, etc., none j). 5
Increase value of property, none p. 5
Insurance ooimpamf —
Claims actually paid under policy contract, are 147c
Losses, what 147a
Interest on obligations, State or political subdivision of, and of United
States or possession p. 6
Interest paid by —
Bank, etc., on deposits, etc., is 149
Corporation —
As rental, not allowable , 148
Is, what, when 148
On indebtedness secured by collateral subject to sale, when, why. 150
On mortgage on projjerty in which corporation has equity, is
and amount of 148
Digitized by VjOOQIC
104 INDEX.
P EDUCTION — Continued. Article.
Joint-stock company pp. 5,6
. lAfe insurance company —
From gross income, applied surrendered values and consideration
for supplementary contracts 102
From gross income, what 100
Loss —
During year p. 5
Which corporation may make, defined 124
From removal of building not deductible, why 127
From sale —
Capital assets, how ascertained 128
Corporation securities below par, how treated 135
May be claimed account tax on note given in payment of income 68
Only, claim for, may be filed with collector, when 33c
Mutual marine insurance company, what 147d
Not compensated by insurance or otherwise p. 5
Notice to be filed for p. 10
Obsolescence of patents, what, how determined 138
Paid for new buildings, none p. 5
Paragraph B
For normal tax only, 7 and 8 included* for purpose of additional tax. . 6
May be claimed in case of fixed, determinable annual income 66
Not claimed of withholding agent in time, only remedy, applica-
tion for refund 33c
When claim for (Form 1008), to be filed with withholding agent or
collector 33b
Permanent improvements or betterments, none p. 5
Property owned, business carried on in United States, person residing
elsewhere, what p. 6
Repairs, when 131
Reserve for losses, not 126
Single person, amount allowed j). 6
Tax withheld, when p. 5
Taxes paid by corporation —
Are, when 152
When not 153
To ascertain net income corporation engaged in more than one class of
business 113
Deeds op trust, etc.:
Corporation, income from, subject to withholding at source regardless of
amount, when p. 10, Art. 37
Delinquent:
Tax becomes, if not paid by June 30 25
Depletion:
Deduction for, mines, oil or gas wells operated on royalty basis, not
allowed operating cori)oration 145
Leased oil or gas territory, basis for deduction for 144
Of mines, etc. , regulation of rate of deduction for, limit of 142
Deposit:
Certificate of, interest on, part of gross income 4
Interest on, not subject to withholding; must be included in personal
return whether paid or not 67
Interest on, part of gross income 4
Digitized by VjOOQIC
INDEX, 105
I>epreciation: Article.
Corporation, defined 129
Deductible, amount how treated : 130
Deduction for —
Of natural deposits, basis and limit of 141
Of plant (in addition to deduction for depletion of mine), what, and
basis of 143
On patent, what, how determined 1 137
Diversion reserve for, correction 133
For amortization, allowed when, how 135
Gross value at the mine, defined "6
How established in case of mines 6
Loss by shrinkage in property value, insurance company, what, and when
deductible 147b
Of good will not allowable deduction 136
Timberland —
From removal timber, amount, how determined 139
Deduction for, limit of, excess of is income 140
Unearned increment, not value for basis of deduction for. 146
Depreciation reserve:
Use of, disposition-excess of 132
Deputy collector:
Ascertain persons liable to tax and enumerate objects, section 3172 p. 22
Legality of returns made by, section 3176 p. 24
To make report, false or fraudulent return, how, section 3176 p. 24
Descent:
Of property —
Income from, part of gross income 4
Value of, not income , 4
Devise op property:
Income, part of gross income; value of, not income 4
Dispatch op business:
In collector's office 195
District op Columbia:
Exemptions, proviso p. 13
Diversion :
Depreciation reserve, correction 133
Dividends:
Compensation paid employees of corporation based on stockholding
are, when 119
Cooperative dairies^ is purchase price of raw material 92
Of corporations subject to tax not subject to withholding p. 9, Art. 32
Deducted from net income, when 3
Part of gross income 4
Stock foreign corporations, subject to withholding when p. 11
Stock subject to tax — individual owning, how treated }>. 8
Doctors:
Fees of, indefinite or irregular not subject to withholding 32
Donations:
By corporation for charitable purpose, deductible when 121
Domestic building and loan association:
Definition, what necessary to exempt from tax . . .• H7
Due date:
Return on Sunday or legal holiday, effect of 176
Duties:
Not tax and not deductible but are item of cost 155
Digitized by VjOOQIC
106 IXDEX,
E.
Educational corporations: Article.
Exempt, when p. 13
Employees:
State or political subdivisions, compenbatiou of officers and employees
paid by, not part of gross income 5
State officers or employees, compensation paid by United States a part
of gross income 5
Endowment:
Money paid for; returned, not to ])o included in gross income 5
EyiDENCE:
Furnished by agent of authority to sign ownership certificate to be re-
tained by verifying agent 43
Guardian, etc., served with notice for failure to make return, may fur-
nish, what 18
Of nonliability to payment of tax, filed with withholding agent, may be
forwarded to collector in lieu of tax p. 27
Requisite for allowance of deduction by corporation 158
Excise and income:
Tax, corporation, 1913 in one return 191
Excise tax:
Corporation, for whut ]>eriod, how computed '. 160
Executor:
Is fiduciary when 70
Make return of income of deceased within taxable year, when and what. 17
Exempt:
From tax —
Corporations, what 87
Cooperative dairies, what 92
Income from public utility 93
Exemption:
Allowed in computing taxable income of deceased person, when 17
Amount allowed married person p. 6
Beneficiary may claim from fiduciary 74
Boards of trade, when p. 13
And deductions p. 11
Cemetery company, depends on what 90
Certificate claiming by corporation organized in ITnited States form of and
how executed 45
Certificate claiming, what must show and how executed 42
Chambers of commerce, when p. 13
Charitable associations, when p. 13
Civic leagues or organizations, classes of, when p. 13
Claimed by fiduciary, forms 1015 or 1019 70
Claimed for —
By whom, with whom and when to be filed P- 10, Art. 41
How to be filed p. 10
May be filed with withholding agent when 33c
Under paragraph C —
Allowed to person permitted to claim 60
Failure to claim, effect of 65
Corporation claiming —
To establish rights to, how 88
Whose taxable status in doubt, must make return and attach state-
ment showing what 91
District of Columbia, provisions : p. 13
Digitized by VjOOQIC
I^DEX. 107
Exemption— Continued. Artide.
Domestic building and loan associations p. 13
Educational corporation, when p. 13
False claim or statement as to, penalty for. 33a
Fraternal societies i p. 13
Husband and wife-
Living together, citizen or resident alien, add incomes for purpose
of, amount of 10
Separated and living permanently apart, citizen or resident alien,
each entitled to $3,000 10
Individual —
Deduction of from net income to ascertain taxable 3
Amount of for 1913 7
Single, or married but not livingtwith husband or wife, may claim
$3,000 each 9,10
May be claimed, note given in payment of income 68
Mutual cemetery companies , p. J.3
None for corporations 160
Paragraph C —
Not allowed nonresident alien , 8
Not claimed of withholding agent in time, only remedy application
for refund 33c
To be filed with withholding agent when . . , 33
Philippine Islands ^ p. 13
Porto Rico p. 13
Public utility : p. 13
Religious associations and corporations p. 13
Scientific associations when p. 13
Status of person claiming determined as of time of claim 10
To be deducted from net income to ascertain taxable under paragraph C . . 6
Expense:
Deductible, pensioner amounts paid employees account injuries are.. 120
General, foreign steamship companies, how treated 116
Of operation and maintenance corporate business, what includes 114
Partnership may claim deduction for, when and how 14
Extension:
Time for filing return, when, what, how 23
To make return, not exceed what, how and to whom made 173
False returns:
Additional tax imposed p. 9
Or fraudulent, penalty 1 p. 21
Fiduciary:
Annual return by, what to show and how executed 73
Definition of 70
Filing notice with other withholding agent (Form 1015), nothing to be
withheld 70
Having withheld and paid tax on undistributed annual net income not
to again withhold when distribution made 75
Income of beneficiary not distributed during the year; what to be shown
in return; tax to be withheld and paid when 74
May be appointed agent or attorney for the purpose of making personal
return of income (Form 1040) for beneficiary 72
Optional claim (Form 1015 or 1019) 70
Regulations as to — 70-75
Digitized by VjOOQIC
108 INDEX.
Fiduciary — Continued. Article.
Return by must be made when 71
Return by to include only matter within scope of authority 72
Return of not to include income on which tax paid 71
Return, when to be made 190
To make annual return (Form 1041) to collector of district when, to show
what 71
Firm :
To make return, how, when, section 3173 pp. 22, 23
Collecting foreign items, license required p. 11
Fiscal year:
Corporation —
Duty of collector upon receiving notice of 167
How established, what to be done 165
Illustration of and what to do 166
Making return on basis of but not so designating, return not accepted
and must be made for calendar year 171
Notice of not retroactive 169
Notice to collector not given in prescribed time, calendar year to
govern 168
Not properly established, return to be made for what calendar year and
filed when 170
Foreign:
Corporation —
Doing business in United States —
Provision for • p. 15
Return by p. 19
Particulars of p. 18
Where filed p. 17
Subject to tax on what 77
Tax on net income: net income defined; deductions to ascertain 157
Items —
Too small for notation on, statement of facts may be attached to 58
License required for collection of, when and from whom 54
Provisions for collection of tax on apply wherever said items payable,
if paid in United States 61
Income paid in United States, provisions for collection of tax on 54-62
Organization doing business in United States subject to tax but exempt
from withholding upon filing certificate claiming (Form 1018) 46
Partnership owning bonds of corporations organized or doing business
within United States, not subject to withholding on interest of, when . . 48
Payments of dividends, etc., provisions as to collection, license, penalty. p. 11
Steamsliip company, general expense of, how treated 116
Fraudulent return:
Additional tax imposed ; time limit for paying after notice p. 9
G.
Gains:
For taxable purposes arising or accruing within calendar year, part of
gross income, what • ^. . . 4
Gas or oil territory leased:
Corporation, basis of deduction for depletion of 144
Gas or oil wells and mines:
Operated on royalty basis, deduction for depletion of deposits not allowed
operating corporation 145
Digitized by VjOOQIC
INDEX, 1Q9
Gift: Article.
Of property, income from part of gross income; value not income 4
To employees of corporation not deductible 120
Governmental function:
Income accruing to State from exercise of, exempt 93
Good will:
Corporation, depreciation of, not allowable deduction 136
Gratuities:
To employees of corporation not deductible 120
Gross income:
Corporation —
Definition of 96
Engaged in more than one class business, ascertained in accordance
with applicable definition each class 112
General definition of gross income 107
Manufacturing company ^ definition of 104
Mercantile company, definition of 105
Miscellaneous corporation^ definition of 106
All sources to be specified : 1 p. 7
Definitions , 3, 4
Deductions from —
By mutual marine insurance companies, what 99
To ascertain net income for normal tax, paragraph B* 6
Insurance company, definition of 101
Life insurance company —
Definition 101
To include applied surrender values and consideration for supple-
mentary contracts 102
Of nonresident alien, what constitutes : 8
What to be excluded in computing 5
Gross value at the mine:
Defined 6
Corporation, definition 142
Guardian:
Is fiduciary, when 70
Ketum made by, when, regulation p. 7, 17
H.
Holiday:
Due date of return falling on, effect of ^ 176
Horticultural organizations:
Exempt p. 12
Husband:
Assumed to have sufficient knowledge of income of wife to make retium
for 10
Having net income other than wife's income from separate estate so that
aggregate income both more than |4,000, wife return attached to hus-
band or his income included in her return for purpose of |4,000 exemp-
tion 10
Should make return of income for self and wife 10
Husband and wife:
Combined net income of, exceeds $4,000, return of must be made 10
Both jointly and separately liable for return and payment of tax 10
Digitized by VjOOQIC
110 l^DEX.
Husband and wife — Continued. Artkde;
Not living apart, having separate estates, income of both may be n^ide
on one return, but return must show income of each separately stated
with name and address of both 10
Living together, citizen or resident alien, entitled to $4,000 exemption
from their aggregate net income 10
Separated and living permanently apart, citizen or resident alien, each
entitled to $3,000 exemption from net income 10
Husband or wife:
Either having net income of $3,000, return required, and must include
incomes of 1x)th 10
Identity:
Persons presenting c(fupons or interest orders should be required to
establish 52
Income:
Additional tax on, referred to as additional tax p. 3
Amount from which withholding to be had 32
Banks, interest paid on deposits by, to be deducted p. 20
Bonds or other indebtedness p. 15
But not YBlxie of property, acqidred by gift, bequest, devise or descent ... p. 6
Compensation of officers and employees of State or political subdivision
of, paid by United States, part of gross income 5
Corporation —
Allowance for depreciation by wear and tear p. 14
Amount allowed for —
Depreciation p. 18
Taxes p. 20
Bad debts collected are 125
How ascertained p. 14
From sale of capital assets, how determined 108
Interest paid deductible p. 20
Losses sustained during the year p. 18
May designate fiscal year p. 17
Ordinary expenses of operation deductible p. 18
Penalty for failure to —
Make return of p. 21
Pay tax on after June 30 p. 21
To give notice of fiscal year adopted p. 17
Deductions from gross, mutual marine insurance company, what 99
Derived from all sources p. 13, Art. 14
Fixed determinable annual —
From what derived 63
Normal tax on bonds, etc., when deducted p. 10
Withholdiiig from, when 64
Foreign corporation doing business in the United States, retiu-a of,
particulars , pp . 15, 1 7, 1 9
Foreign, paid in United States, provisions for collection of tax of» 64-62
For taxable purposes — is income for calendar year 4
For 1913, how computed. p. 17
From all sources part of gross inawne 4
From bonds, mortgages, deeds of trust, and similar obligations of corpora-
tions, etc., subject to withholding at souix* regai'diess of amount 37
From capital invested in the United States p. 18
From certain professions not subject to withholding at source 32
Digitized by VjOOQIC
INDEX. Ill
f
Income— Continued. Artide.
From public utility or governmental function accruing to State, etc.,
exempt from tax : 93
From what, obligations not subject to tax and certificate of ownership
not required '. .. 37
Gross, defined 3, 4
Corporation —
Engfi^ed in more than one class of business, ascertained in
accordance with applicable definition for each class 112
Definition of 96
General definition 107
Insurance company, definition of gross income 97, 101
Life uuuranee company ^ to include applied surrender values and
considemtion for supplementary contracts 102
Manufaelvrmg company^ definition 104
Mercaniile corporation, definition 105
Miscellaneous corporation, definition 106
Mutual fire insurance company, definition ' 103
What to be included in computing 5
Husband and wife, what 10
Individual, not subject to withholding when 32
Insurance company, to be separately stated •, . . 1 p. 18
Insurance reserve, how treated p. 17
Interest —
Accruing duriug year ... p. 16
On deposits p. 15
On obligations of State, etc 5
Joint stock companies, how ascertained and stated pp. 14, 15, 18
Life insurance companies, what included, deductions pp. 14, 19, Art. 100
Mutual fire insurance companies pp. 14, 18, 10
What taxable 98
Mutual marine insurance companies pp. 18, 19
Net-
Defined 3
Of corporation engaged in more than one class of business, how
ascertained 113
Deductions allowed for ascertaining p. 5
Shall include what pp. 3, 4, 13, 14, 15, 16, 17, 20
Not subject to withholding at source, to be covered in personal
return 32
Note given in payment of; maker of note is debtor and source;
required to withhold, except, when 68
Of corporations, verified how 183
Returns of, filed, are public records; inspection of, who may and for
what purpose p. 21
Penalty for divulging infonnation on or exhibiting returns, section
3167 p. 22
Tax paid at source, deducted in ascertaining taxable 3
On, from coupon or registered interest to be deducted and withheld,
except to extent exemption claimed 44
Taxable-
Defined 3
Persons subject to 1
Fpr normal tax, what, how ascertained p. 3, Art. 7
Digitized by VjOOQIC
112 INDEX.
Income — Continued. Article.
Subject to additional tax p. 3
What not liable to withholding at source : 32
Withheld, what, when, by whom p. 9
Individual:
Who may claim exemption paragraph C 9, 10
Duty of, collection interest coupons originating in United States 39
Husband and wife living together, citizen or resident alien, exemption
$4,000. 10
Income accruing to, from contract with State, etc., prior to passage of
act for construction, operation, or maintenance, public utility,
taxable 93
Income less than $20,000 required to make return, except when 19
Income of , liable to withholding at source on and after November 1, 1 913. 29
Liable for income tax on share of net earnings of partnership 47
Married and not living with husband or wife, amount exemption 9
Normal tax, what 1
Partnership profits included in return of and tax paid, not reported as
income again 14
Residing in foreign country, where to file return 15
Return —
For calendar year 4
Required of guardian, etc., notice of failure to make, served when. . 18
When to be made 190
Share of earnings, partnership, property of, subject to tax chargeable to
individual 94
Share of partnership profits to be included in personal return 13
Single, allowable exemption for 9
Status for claiming exemption, determined as of time of claim 10
Information:
From returns to officers of State, when, what, how. : . . 179
Insane :
\Mio make claim for deductions for 33b
Inspection:
Of returns, how 178
Insurance company:
^'Deductible net addition to reserve"; definition; what basis of com-
putation of; what not to be included in 147d
Deduction, claims actually paid under policy contract 147c
Depreciation loss by shrinkage in property value, what and when
deductible 147b
Gross income, definition 97, 101
Income to be stated separately. » . * p. 18
Losses —
Actually sustained pp. 14, 19
Deduction for what .\ 147a
Making false return, penalty , p. 12
Mutvjdl marine^ deduct what 147d
Neglecting to make return, penalty p. 12
Net addition to reserve p. 18
Net income, source, time of accrual, return of pp. 12, 14, 20
Notice of assessments to p. 20
Penalty for failure to pay tax p. 21
Refusing to make return, penalty p. 12
Digitized by VjOOQIC
INDEX. 113
Insurance Company — Continued. Article.
Reserve-
Definition 147d
Fund, how treated p. 17
To meet losses, how treated 147c
Returns of, when available p. 21
Salvage, how treated in return of 147c
Special excise tax, how computed, time, what p. 26
To make return of others, when p. 9
Insurance :
Life—
Paid to beneficiaries not to be included in gross income, when 5
Payment credited to insurance not to be included in gross income,
when : , 5
Received by insured not to be included in gross income, when 5
Interest:
Coupon or registered, originating or payable in the United States, who to
withhold 39
From what obligation not subject to tax and certificates of ownership not
♦ required 37
How treated 63
On deposits —
Part of gross income 4
Subject to withholding ; must be included in personal return whether *
paid or not 67
On obligations of State or political subdivision of. United States or pos-
sessions, not part of gross income 5
Paid as rental by corporation, how treated 148
Paid by bank, etc., on deposits, etc., allowable deduction 149
Paid by corporation —
Deduction of what, when 148
On indebtedness secured by collateral subject to sale, deductible
when, why 150
At different rates, rule for application of deduction of 151
On mortgage on property in which corporation has equity or is pur-
chasing, how treated * 148
Part of gross income • 4
Payment of, to beneficiaries by insurance companies, part of gross income . 5
Registered, certificate claiming exemption to be filed at least five days
before due-date of interest 44
Registered, duty of debtor before payment of 41
Inventors:
Earnings of, indefinite or irregular not subject to withholdii^ 32
Inventory:
Corporation, purpose and use of, kinds of 161
Joint stock company:
Assessment against, payable pp. 4, 20
Deductions allowable to 9
Income —
How ascertained pp. 14, 15
To be separately stated p. 18
Losses actually sustained. . . . : p. 14
Neglecting to make return, penalty p. 12
24785—14 8
Digitized by VjOOQIC
114 INDEX.
Joint stock company — Continued. ArUde.
Net income from all sources p. 14
Net income taxable for preceding calendar year p. 12
Notice to be given of assessments p. 20
Penalty for failure —
To make return p. 20
To pay tax p. 21
Return —
False, penalty for p. 12
For others made by p. 9
Net income to be shown on j •. p. 20
Refusing to make, penalty p. 12
When available p. 21
When to make .• p. I7
Special excise tax and how computed p. 26
Judges:
United States courts, salaries exempt, what 5
Jurisdiction :
Of courts • p. 25
L. ♦
Labor organizations:
Exempt p. 12
Last due date:
Defined 175
Laws:
Relating to assessment, remission, collection, refunding p. 25
Lawyers:
Fees, indefinite or irregular, not subject to withholding 32
Lessees or mortgagors:
Make return for others, when p. 9
Liability:
To tax of a taxable person not to be released 27
License :
Bond may be required on form furnished 50
Failure to obtain, penalty for 55
For branch, to be made through principal oflice 57
•Form of application for, to be made to collector of district 55
Form of ; to be issued by collector, good until revoked 55
Required for collection of interest or other foreign items, when, by
whom, where obtained p. 11, Art. 54
Licensee :
First, receiving foreign item for collection to withhold and be respon-
sible for tax and to note fact of withholding on such item, effect of . . . 58
For collection of foreign items —
Disposition of certificates accompanying, by 61
To keep record showing wliat 62
To report to collector (Form 1043), what, when 59
Life insurance:
Proceeds of policies, when to be excluded from gross income p. 5, Art. 5
Life insurance company:
Applied surrender values and consideration for supplementary con-
tracts both to be added and deducted in return 102
Deductions from gross income, what p. 19, Art. 100
Gross income, definition pp. 14, 19, Art. 101
Supplementary statement attached to return of, showing what 103
Digitized by VjOOQIC
INDEX. H5
Limitation, statute of: Article.
For income tax purposes, tliree years 177
Lodge system:
Corporation oj^erating under, defined 89
Loss :
Corporation —
Deductible, defined 124
From sale capital a«»t8, how ascertained 128
From sale gecurities below par, how treated 135
Insurance company, deduction for, what 147a
Removal of building not deductible, why 127
Reserve for, not deductible 126
M.
Maker:
Of note given in payment of interest held resj^onsible for normal tax 68
Manufacturing company:
Gross income, definition 104
Manufacturers:
Returns of, accessible how, penalty, sec. 31G7 p. 22
Marine insurance company:
Deductions by p. 18
Materials and supplies on hand:
Deduction by corporation on account of, what 123
Mercantile corporation:
Gross income, definition 105
Mine:
Gross value at —
Defined '. 6
Corporation, definition 142
Depreciation . .'. ; p. 14
Operated on royalty basis, corporation, deduction for depletion of de-
posits not allowed operating corporation 145
Minor:
Who make claim for deductions for 33b
Miscellaneous corporation:
Gross income of, definition 106
Monthly list return:
Form of, what to contain, to be filed in duplicate 50
Of coupon or registered interest orders received with ownership certifi-
cates, form of and what to show 53
Of licensee for collection of foreign item, form of, what to show, with
whom filed, when 59
Summary of, when to be filed and what to show s 50
Totals only to be carried into annual return 51
Mortgages:
Interest on, when subject to withholding p. 10
Not payable in United States, when subject to withholding. ... p. 11
Paid by corporation which has equity, how treated 148
Of corporation, income from, subject to withholding, regardless of amount . 37
Mutual companies :
To make return of income; definition of net income 80
Digitized by VjOOQIC
116 INDEX.
Mutual fire insurance company: Artide.
Gross income of, definition 98
Prenjiiuni deposits returned, what p. 18
Return of pp. 14,16,18,19
Supplementary statement attached to return of, showing what. 103
Taxable income, what 98
Mutual marine insurance company:
Deductions, what p. 19, Arts. 99, 147d
Gross income pp. 14, 18
Supplementary statement attached to return of, showing what 103
N.
Names:
Arrangement of, in list by collector 188
Natural deposits:
Deduction for depreciation of, basis and limit of 141
Net income:
Defined 3
Corporation —
Engaged in more than one class of business, how ascertained 113
For 1913, how ascertained 159
From sale of capital assets, how determined 109
Should be what 1 58, 183
Foreign corporation, defined 157
Mutual companies, defined 80
Normal tax 1
Note:
Given in payment of income; maker is debtor or source and must withhold
on entire amount of note if in excess $3,000, except allowance exemp-
tion or deduction claimed 68
Given in payment of interest; failure of purchaser to make allowance or
deduction for tax, only remedy is against vendor, how 68
Notice :
Answer of guardian, etc., may show what 18
Asssessment, advance preparation of, by collector 198
Claiming deduction account partnership expense, by whom filed, what
and how 47
Collector to give withholding agent, when tax withheld is adjusted in
assessment 33c
Form 1015 filed by fiduciary with other withholding agent, nothing with-
held 70
Of assessment; failure to pay tax; make return; form of; time 197
Of claim for exemption by foreign partnership, when, wh^it, how 48
Of failure fiduciary to file return, served 71
Of failure to make return, when to be served on guardian, etc 18
To delinquent, failure to file return in time 196
To taxpayer, of amount for which liable as on or before June 1 25
O.
Oath or affirmation:
Required in verifying returns 22
Obligations :
Interest on, of State or political subdivision; United States or posses-
sions not part of gross income 5
Digitized by VjOOQIC
INDEX. 117
Obligations op corporations, etc.: Articte.
Similar to bonds, mortgages, and deeds of trust, income from, subject to
withholding, regardless of amount 37
Obsolescence:
Of patents, deduction for, what, how determined 138
Officers:
Of State or political subdivision of, compensation —
Of not part of gross income 5
Paid by United States is part of gross income 5
Regulations designed for enforcing coinpliance with law p. 27
Of the United States making returns for others 9
Oil or gas territory leased :
Basis of deduction for depletion of 144
Oil or gas wells and mines:
Operated on royalty basis, deduction for depletion of deposits not allowed
operatii^ corporation 145
Omitted tax:
May be assessed and with penalty, when 184
Organizations:
Civic, exemptions p. 13
P.
Paid-up capital stock:
Definition of 95
Partnership:
As such not subject to tax and not required to make return except on
request Commissioner or Secretary 12
Foreign —
Composed of nonresident aliens, resident aliens, and citizens of
United States, either or both, requisites of ownership certificate for. 49
Owning bonds, etc., of corporations, etc., organized or doing business
in the United States not subject to withholding on interest of,
provided exemption claimed (Form 1016) 48
Individual share of profits of, to be included in personal return 11
Limited, is corporation and subject to corporation tax 86
Liable only in individual capacity p. 8
May claim deduction for expenses of business, when and how 14
Members of, liable in individual capacity for tax on their respective
shares of earnings of, whether distributed or not p. 4, Art. 94
Profits of—
Once returned and tax paid, not again reported as income 14
To be included by individuals entitled to, in their personal return. . 13
Return of, when to be made, section 3173 . p. 22
Shall forward correct statement of profits and names p. 8
Share of profit to partners p. 8
To file with withholding agent notice claiming deduction for expense of,
what and how 47
To make list or return, how and when, section 3173 p. 22, Art. 23
When required to make return must make complete and correct 12
Patents:
Deduction for —
- Depreciation, what, and how determined 137
Obsolescence, what, how determined 138
Digitized by VjOOQIC
118 INDEX.
Payment: Artictoi
To officer authorized to receive p. 9
Penalty:
And interest fur nonpayment when due and for 10 days after notice, when. p. 9
Delinquent tax —
Amount of, and how determined, not assessed against estates, in-
sane, deceased, or insolvent persons 25
Penalty:
For divulging —
Information on return, what 181
Unla^v^uUy, information on return, fine or imprisonment, or both,
with costs 164
Failure to make return in prescribed time or for false or fraudulent,
fine or imprisonment, or both p. 21, Art. 164
Failure to pay tax, 5 per cent to tax plus 1 per cent per month 164
False claim or statement to eecure exemption p. 10, Art. 33a
False or fraudulent return T^ath intent to evade or defeat tax, what 26
False or fraudulent return, 100 per cent to tax P- 21, Art. 164
False statement in regard to deduction p. 10, Art. 33b
Making false retiun p. 12
Neglect or refusal to make return p. 12, Art. 164
Person or officer of corporation requked to make return, making false or
fraudulent, \vith intent to defeat or evade assessment 164
Refusal or neglect to make return, liable person, corporation, etc. p. 12, Art. 26
Refusal to make or for false return, to be assessed and collected, what. . 21
Return made and properly mailed in time but not received in time,
none 174
Pensions:
Or payments on account of injiuies to employees of corporations, de-
ductible expense 120
Person:
Whose income is not subject to withholding at source, make personal
return 32
Persons, firms, etc.:
Collecting foreign items, license required p. 11
Whatever capacity acting, withholding agent, when, wliat pp. 7, 9
Withholding none prior to November 1,1913 p. 8
Philippine Island^:
Exemptions p. 13, Arts. 25, 26
Plant:
Corporation, deduction for depreciation (hi addition to the deduction
for depletion of mine), wliat and basis of 143
Political subdivision of State:
Interest on obligations of, not part of gross income 5
Officers and employees of, compensation not part of gross income 5
Porto Rico:
Exemptions and provisionij p.. 13, Arts. 25, 26
Possessions:
Of United States, interest on obligations of, not part of gross income 5
Premiums:
Deductions from, l)y whom, when p. 9
President of the United States:
Salary of, exempt, what 5
Digitized by VjOOQIC
iia)Ex. 1 19
Procedure: Article.
In case of refusal or neglect, liable individual to make retiu*n or for
false return made Note to Art. 21
Professional:
Persons whose income indefinite or irregular, not subject to withholding. 32
Profit or loss:
Corporation, on sale of capital assets, how determined 110
Profits :
For taxable purposes of those arising or accruiug within calendar year. . 4
From any source part of gross income 4
Partnership once return and tax paid, not reported as income 14
Partnership, individual entitled to include in his personal return 13
Share of, in partnership to be included in return of individual 11
Property:
Received by gift, bequest, de\'i8e, descent, income from but not value,
part of gross income 4
Public records:
Returns are, inspection of or copies, how 178
Public utility:
Income from accruing to State, etc., exempt from tax 93
Purchaser:
Of note given in payment of interest, failure to make allowance or deduc-
tion of tax in purchsuse or discount only remedy is against vendor. ... ' 68
R.
Rate :
Deduction for depletion of mines, etc., regulation and limit of 142
Receipts:
Separate to be issued, when 25
Record :
To be kept by —
Collecting agent, what 40
Licensee for collection of foreign items, what to show 62
Refund:
Failure to make claim for exemption or deductions with withholding
agent in time ; only remedy is by application for 33c
Registered interest:
Certificate claiming exemption from tax on, to be filed at least five days
before due date of interest 44
Regulations:
Designed to assist taxpayer and officer in complying with the law p. 27
Subjects covered and arrangement of p. 27
Removal of buildings:
Not deductible loss, corporation, why 127
Rent:
• Corporation, cost of buildings on leased ground deductible, when 115
How treated 63
Interest paid by corporation as, how treated 148
Part of gross income 4
Repairs:
Deduction, when 131
Digitized by VjOOQ IC
120 INDEX.
Beserve : Article.
Assessment insurance company, definition 147d
For depreciation — . .
Diversion of, correction 133
Use of, disposition of excess of : 132
For insurance of corporate property not deductible 122
For losses not deductible 126
For taxes of corporation not deductible 156
Insurance company, deductible net addition to, definition; what basis
computation; what not to be included in 147d
To meet loss, insurance company, how treated 147c
Resident alien :
Certificates of ownership of bonds, when and how to be used and to
specify what - 42
Income of, from coupon or registered interest, subject to withholding
except to extent exemption claimed 44
Returns:
Admtuistrators to make for heirs, when 9
Agents to make for others 9
Annual individual and monthly list to be forwarded to Commissioner,
how 24
Annual list (Form 1013) , to show what, and to be filed on or before March 1 . 50
Annual, of coupon or registered interest orders not accompanied by
certificates of ownership; form of, and what to show; to be filed when;
to show totals only on monthly return 53
Annual, of debtors or withholding agents to show totals only on monthly
list 51
Annual, fiduciary to collector of district when ; show what 71
Annual, of withholding agent, form for, to be accompanied by what,
when to be filed 35
Annual, of withholding agent (Form 1042), what to show and when to be
filed 69
Approval of Secretary 7
Blanks for, furnished corporations by collector. 163
By persons of lawful age 7
Certified copies of, when, why, delivered to whom 180
Conservators to make for others 9
Corporation —
Every, not specifically exempt, to make 80
Fiduciaries, withholding agents, when to be made 190
Going into liquidation to make final; filed when and where 85
Not receiving blank for, should make application for, to whom, when . 163
One only for 1913 160
Organized during year, to make 84
To make complete or nor accepted 163
WTien income paid by lessee direct to stockholders, must neverthe-
less make. 80
Copy of, unlawful to exhibit, section 3167 p. 22
Divulging —
Information from, penalty 181
Unlawfully, information on, penalty 164
Due date on Sunday or legal holiday, effect of 176
Duplicate, when, of whom required, disposition of 193
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INDEX. 121
Returns — Continuea.
Duty of collector— Article.
On failure to find person at home, section 3173 : . . p. 23
In forwarding and investigation of . . . ! 192
Employees to make for others p. 9
Evidence by which to verify, what 183
Executors to make for others p. 9
Extension of time —
For filing, when, what, how 23
To make, not to exceed what, how, to whom made 173
Failure of corporation to receive blank for, not excused from making
return or penalties for failure 163
Failure —
Of fiduciary to file, notice of, served 71
To make by guardian, agent, or other person acting in trust capacity,
notice to, served on 18
To make in prescribed time, of a false or "fraudulent, penalty 164
To make —
Notice of, form and time to serve 197
Legal provisions as to ^ p. 23
False or fraudulent —
Penalty. p. 12, Art. 164
Duty of collector in matter of : 192
With intent to defeat or evade tax, penalty 26
Fiduciary —
Having income not distributed; what to be shown ; tax to be withheld
and paid when 24
Must be made when 71
Not to include income on which tax paid 71
To include only m-atter within scope of authority 72
What to show, and how executed 73
For 1913, must be on new form and not on excise form heretofore used. . 172
Foreign corporation having more than one branch office in United
States to designate principal office and person to make return 83
Form of for corporation prescribed 163
For persons incapacitated, by whom made p. 10
For persons absent from United States, by whom made .• p. 10
Fraudulent —
Duty of collector p. 23
Extra tax because of . . » p. 9
Time limitation for paying after notice p. 9
Husband and wife, net income both exceeds $4,000, of combined in-
come, required 10
Husband and wife not living apart, separate income from separate estate
may be made on one; separately stated and with names and addresses
of both 10
Husband should make for himself and wife- 10
Husband or wife, either having net income $3,000 or over, required, and
must include income of both 10
Individual —
To be made when - 190
For calendar year 4
Made by collector when 20
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122 INDEX.
Returns— Continued.
Individual — Continued. Article.
Not required to make, when made by other for him, when 19
To include share of partnership profits in 13
Information or copies from, to officers of State, when, what, how; orig-
inal not removed except 179
Last due date defined '. 175
Leased corporations make their own 82
L^ality of, made by collector of deputy, sec 3176 p. 24
Lessee corporation assuming debts of lessor to include in lessee return
all receipts of lessor 81
Lessee corporation not to include in its own statement of capital stock,
that of lessor; nor in its own statement of indebtedness, that of lessor
except when said indebtedness is assumed by lessee 82
Life insurance company —
Applied surrender values and conjsideration for supplementary con-
tracts both added and deducted 102
Supplementary statement attached to return of, showing what 103
Made and properly mailed in time, no penalty if not received in time . . 174
Made by euardian or authorized agent, when 17
Made on basis of fiscal year but not so designated, not accepted, and must
be made for calendar year 171
Made to collector p. 9
Monthly, by withholding agent, when to be filed; with whom, what to
accompany 35
Monthly list and annual, by licensee for collection of foreign items, what,
to whom, when 69
Monthly list, form of, what to contain, to be filed in duplicate 50
Monthly list of coupon or interest orders not accompanied by certificates
of ownership, form of, and what to show 53
Must be made, when, section 3173 p. 22
Mutual companies to make; definition net income 80
Mutual fire insurance companies, supplementary statement attached to,
showing what 103
Mutual marine insurance companies, supplementary statement attached
to, showing what 103
Neglect or refusal of liable person, corporation, etc. , to make, penalty 26
Neglect or refusal to make, 50 per cent additional tax 164
Neglect to make, penalty p. 12
Nonresident alien, agent or representative to make for, when, what to be
included in / 8
Not required, income not exceeding $3,000 p. 8
Not filed in time, notice sent to delinquent 196
Officers and employees of the United States, having control salaries,
rents, etc., to make when p. 9
Of income —
When required, where filed 15
persons deceased within taxable year, made by executor or adminis-
trator 17
On basis ot calendar year or fiscal year, time of assessment and payment
of tax 177
One deduction only of exemption p. 8
One to cover both special excise and income tax for 1913 for corporation . . p. 26
Open to inspection, when p. 21
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INDEX. 123
Returns — Continued. Arti<*!.
Partnership profits included by individual and tax paid, not again re-
ported as income 14
Partnership, requisite of 12
Penalty —
Against corporation for failure to make. 163
For failure to make at time specified p. 21
For refusal to make 1 p. 12
Personal, Form 1040; fiduciary may be appointed agent or attorney to
make for beneficiary 72
Personal not required, when 8
Person or oflicer of corporation required to make, making false or fraudu-
lent with intent to defeat or evade; penalty 164
Person residing in foreign country, provision for 7
Public records, inspection or copies, how P- 21, Art. 178
Receivers to make for others 9
Refusal or neglect of liable individual, duty of collector p. 23, Art. 21
Refusal to miake, extra tax p. 9
Requisite of bookkeeping for verifying 182
State officer may have access to p. 21
To be filed, when. p. 7
To be made on Form 1040 for individuals 16
To be made to collector pp. 7, 9
To include —
Personal income not subject to withholding 32
Share of profits in partnership whether divided or not 11
To be verified, how, before whom p. 7, 22
Trustees to make for others p. 9
Understatement of income, cause to be shown why amount not in-
creased p. 8
Undervaluation or understatement p. 23
Unlawful to exhibit or divulge information from, section 3167 p. 22
Wife having income of $3,000 from separate estate managed by herself
may make her own ^ 10
What must be shown on 16
When to be made; where filed, section 3173 pp. 21, 22
Withholding agent, what disposition of; should not be filed until expira-
tion of time allowed for filing claims for exemption or deductions 33c
Revised Statutes:
Amended sections of, providing duties and penalties, sections 3167,^
3172,3173 pp. 22, 23, 24
Royalties:
How treated 63
Royalty basis:
Mines, oil or gas wells, operated on, deduction for depletion of deposits
not allowed operating corporation 145
S.
Salaries:
How treated 4, 63
Sale of capital assets:
Corporation —
Income from, how determined 108, 109
Loss from, how ascertained 128
Profit or loss on 110
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124: INDEX.
SALEfifMEN: Artide.
Gommififlion to, paid in stock, deductible expense when 117
Salvage:
How treated in return of insurance company. 147c
Scientific association:
Exemptions p. 13
Securities:
Income from; sale of, below par; loss 4, 135
Shrinkage:
In book value capital assets, how treated 134
In property value insurance company, depreciation loss by, what and
when deductible 147b
Size:
Foreign items too small for notation on, statement may be attached to. . 58
Society:
Operating under the "lodge system,'* defined; exemptions p. 13, art. 89
Source:
Defined 31
Example of where and where not withholding at 32
Fiduciary is, when '. . . 70
Note given in payment of income, maker of note is 68
Persons, firms, etc., acting as, designated "debtors" or "withholding
agents" 31
Tax withheld at, to be paid to collector 34
Withliolding at, applies only to normal tax imposed on individuals 29
Who required to act as; liable for tax withheld 30
Special tax:
See sections 3173, 3176 pp. 22-26
State:
Information from return, when, how 179
Officers and employees, paid by United States; compensation part of
gross income 5
Political subdivision of, compensation of officers and employees not
part of gross income ; interest on obligations of, not part of gross income . 5
Stat^or United States:
C^onstruction; exemptions, distinction as to, for certain income from State,
etc pp. 13, .21
Status:
For claiming exemption by individuals 10
Statute op limitation:
For income-tax purposes, three years 177
Stock:
Paid-up capital, definition 95
Substitute certificates 40
Summary of monthly list return 50
Summons, section 3173 p. 24
Sunday or legal holiday 176
Supplementary statement attached to return 103
Supplies on hand 123
T.
Tax:
Additional, on individuals only, rates and classes 2
Amounts added as penalty, section 3176 p. 24
Assessment and collection 25
From withholding agent 36
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INDEX. 125
Tax— Contiuued.
Assessment — Article.
Against income withheld at source 38
Of, against withholding agent deferred i * . 189
Claim for abatement of 33c
Cooperative dairies exempt 92
Corporations —
Exempt 87
On entire net income 1 185
Organized in United States, all (with certain exceptions) subject to. 76
Delinquent if not paid by June 30 25
Deputy collectors, duties, section 3172 p. 22
Domestic building az^ loan association, what necessary to exempt 87
"Duties" are not but item of cost 155
Evidence of nonliability, received by withholding agent, disposition of. p. 27
Evidence of payment ©f , by corporation for deduction purposes 158
^xcise on corporation Arts. 160, 191
Extra p. 9
Failure to pay..... 164, 177, 197
Fixed determinable annual income, subject to withholding 65, 66
Fraternal Bocietie&, exempt p. 13
Individual —
Net income over $3,000 annually, liable to. ... - p. 12, Art. 9
Income from public utility taxable when 93
Income of corporations organized elsewhere than in the United States,
liability 79
Normal —
Computation of ^ Art. 1, 7
Deductions in connection with pp. 10-12, Art. 41
Agricultural, horticultural, and labor organizations, certain mutual
savings banks, exempt '. p. 12
Not to be withheld against partnership profits 47
Not to be withheld on bank deposits 67
Omitted, procedure upon discovery of 184
Once withheld, subsequent withholding agent, exempt on filing certifi-
cate (Form 1006) 34
On excess of income over exemption 10
Paid by corporation, when not deductible 153
Partnership limited is corporation and subject to corporation tax 86
Penalty on delinquent 25
On income —
From bonds, etc., corporations, etc 37
Paid by note 68
On interest on bonds owned by corporations organized in United States. 45
On net income of foreign corporation; definition; deduction 157
On net income of corporation —
Computation of 153
Distributable to owners 79
Receipts to be given by collector P- 25
Returns of, to be made, section 3173 p. 22
Special excise P* 26
Taxable person not to be relieved from liability 27
To be paid 177
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126 INDEX,
Tax — Continued. Artiete.
To be withh3ld 44, 64
Withheld—
At source^ to be paid to 30
By first licensee, fact of withholding noted 58
Collector to adjust in assessment against withholding agent 33c
From what 64, 75
To be paid to collector 33c, 34
Taxable income:
Definition; liability 3, 7
Tax due... 187
Taxes:
Paid by corporation constitute deduction 152
Reserve for, by corporation not deductible 156
Taxpayer:
Regulations designed to assist p. 27
Tax statements » 199
Tax year 1913 * 7
Trustee:
As fiduciary 70
Duties of p. 9
Teacher:
Public school - : 5
Timberland:
Deduction for depreciation —
Account removal of timber 139
Limit of, excess of, is income 140
Time:
Extension of, for making and filing return 23,173
IT.
Unearned increment:
Not value for depreciation purposes * 146
*' United States" or "State":
Construction p. 21
Interest upon obligations of 5
V.
Value:
Book, capital assets, shrinkage in 134
Gross at the mine, definition 6, 142
Of property, acquired by gift, etc 4,5
Shrinkage in property, deductible , . . . 147b
Unearned increment, not as basis of deduction for depreciation 146
W.
Wages 4, 63
Wife:
Having income of $3,000 from separate estate managed by herself may
make return of her own income 10
Wife and husband:
Combined net income of exceeds $4,000, return required, both jointly
and separately liable for return and tax 10
Wife or husband:
Either having income $3,000 or over, return required and must include
incomes of both 10
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INDEX. 127
WiTHKOLDiXG : Article.
At source 30
Example of where and where not 32
On and after November 1, 1913 29
By first liscensee; notation by; responsibility of 58
From what , 64
Withholding agent:
Annual return by —
By, when, to show what 50, 51
Of (Form 1042), when to be filed, to be accompanied by what 35, 69
Not to be filed until 33c
Assessment of tax against, deferred until 189
Claim for exemption and deductions filed with (par. B and C). p. 10, Arts. 33ac
Definition of, as source 31
Disposition of returns of 193
Duty in matter of certificates of ownership p. 9, Art. 43
Duty of, in matter of claims for deduction (par. B) 33c
Duty of, in case of foreign partnership 48
Evidence of nonliability to tax filed with, disposition of p. 27
How to treat substitute certificate of collecting agent and certificates of
owners not subject to having tax withheld 51
May file claim for abatement of tax 33c
Monthly return by, when to be made, with whom filed, to be accom-
panied by what 35
Notice filed with, claim for deduction, account partnership expense 47
Not to withhold against nonresident alien or foreign organization doing
business in United States, when 46
Return of, when to be made 190
Relieved from necessity of withholding, when p. 27
To file monthly list return, form of, and what to contain 50
To forward to collector tax withheld, when 33c
To furnish statement of claim for deductions filed with collector 33c
To pay to collector tax withheld 64
To withhold from, what, amount of 32, 65
When claim for deductions, paragraph B, to be filed with, duty of 33b, 66
When so authorized, may file return of withholding in district of his
location 38
Wlio to be, in cases cited 64
Withholding and paying agent: *
Of debtor in United States, charged with duty of withholding, when 39
Witnesses:
Jurisdiction for compellmg at tendance p. 25
Y.
Year:
For taxable purposes for individual, is c-uleiidar year 4
(See fiscal year for corporation.)
^ o
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27
(T. D. 1945.)
Income tax.
Eesulation relative to exclusion of income derived from dividends or net earnings
of corporations, joint-stock companies or associations, and insurance companies
by persons subject to the normal tax only in computing their net income for the
taxable year.
Tbeasuey Depabtment,
Office of Commissioner of Internal Revenue,
Wdshington, D, C, February 7, 1914.
To collectors of internal revenue:
Beferring to that provision of the income-tax law which reads as
follows : '
Provided further f That persons liable for the normal income tax only, on their own
account or in behalf of another, shall not be required to make return of the income
derived from dividends on the capital stock or from the net earnings of corporations,
joint-stock companies or associations, and insurance companies taxable upon their
net income as hereinafter provided—
you are informed that returns of individuals, when such individuals
are subject to the normal tax only, need not include the income
derived from the dividends or net earnings referred to above. When
individuals are subject to the additional tax, such income derived
from said dividends or net earnings must be shown on the return.
Persons having an annual net income of $3,000 or more, including
the income derived from dividends or net earnings of corporations,
etc., but whose total net income is less than $20,000, and whose net
income, exclusive of the income derived from dividends or net earn-
ings of such corporations, etc., is less than $3,000 for the taxable
year ($2,500 for the year 1913), shall not be required to make a
return of annual net income.
Ketums which have been or may be received from persons subject
to the normal tax only, in which such dividends are included and
deducted, need not be changed to meet the provisions of this regu-
lation.
All previous rulings of the department, including the general regu-
lations No. 33, are amended accordingly.
W. H. OSBOEN,
Oommissioner of Internal Revenue.
Approved:
Charles S. Hamlin,
Acting Secretary of the Treasury.
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28
(T. D. 1946.)
Income tax.
Special afiseeBment districts created under the laws of the several States for public
purposes, such as the improvement of streets and public highways, the provision
for sewerage, gas, and light, and the reclamation, drainage, or irrigation of bodies
of land, and levee and school districtis are held to be political subdivisions ola
State.
• Tbeasuby Depabtment,
Office of Commissioner of Internal Revenue,
WasMnffton, D. C, February 10, 1914-
To collectors of internal revenue:
Referring to paragraph B, section 2, of the income-tax law, which
reads as follows :
That in computing net income there shall be excluded interest upon the obliga-
tions of a State or any political subdivision thereof—
you are informed that under date of January 30, 1914, the honorable
the Attorney General held that special assessment districts created
imder the laws of the several States for public purposes, such as the
improvement of streets and public highways, the provision for sew-
erage, gas, and light, and the reclamation, drainage, or irrigation of
bodies of land within such special assessment districts when such
districts are for public use, are political subdivisions of the State
within the meaning of the above proviso.
It is held that the term ''political subdivision" indud^ special
assessment districts or divisions of a State created by the proper
authority of the State acting within its constitutional powers and
under its general laws, for the purpose of carrying out a portion of
those functions of the State which by long usage and inherent neces-
sities of government have always been regarded as public.
Levee and school districts when lawfully created under the author-
ity of the State and which are authorized by the laws of the State to
levy a tax to meet the obligations of such districts are also held to
be political subdivisions of a State within the meaning of the income-
tax law.
The income derived from interest upon the obligations of all such
public districts shall therefore be excluded in computing net income
for the income tax.
This decision supersedes T. D. 1910.
W. H. OSBORN,
Commissioner of Internal Revenue,
Approved:
Chables S. Hamlin,
Acting Secretary of the Treasury,
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29
(T. D. 1947.)
Income tax.
Extending T. D. 1945 to cover returns made by fiduciaries in their fiduciary capacity.
Tbeasuby Depabtment,
Office of Commissioneb of Internal Revenue,
Washington, D. (7., February 12, 1914.
To collectors of internal revenue:
You are advised that the provisions of T. D. 1946 — ^in matter of
exclusion of dividends or net earnings of corporations, joint-stock
companies or associations; and insurance companies, by persons sub-
ject to the normal tax only, in computing their net income for the
taxable year — are extended to cover such returns by fiduciaries.
To make clear any doubt on the subject, the provisions of T. D,
1946 are hereby specifically extended to include returns made by
fiduciaries as such.
W. H. OSBOEN,
Commissioner of Internal Revenue.
Approved:
Chables S. Hamlin,
Acting Secretary of the Treasury.
(T. D. 1948.)
Income tax.
Amendment of T. D. 1942.
Tbeasuby Depabtment,
Office of Commissioneb of Intebnal Revenue,
Washin^gton, D. C, Felruary 12, 1914.
To collectors of internal revemie:
T. D. 1942 is hereby amended as follows:
In the first paragraph, after the word ''income," insert tax on which
is, and after the word ''paid" insert or to le paid. In the second
paragraph, for words "on the coupons on which," substitute in such
cases when, and for words "in cases wherein," substitute the word and.
In the third paragraph, for the word "paid," substitute the word
withheld.
So that the decision as amended will read:
"This office is in receipt of numerous letters asking whether income,
tax on which is paid or to le paid at the source, although not withheld
at the source, can be placed in column A, page 2, of Form 4040, and
in reply to this inquiry you will advise as follows:
"The stipulation in bonds whereby the tax which may be assessed
against them or the income therefrom is guaranteed, is a contract
Digitized by VjOOQIC
30
wholly between the corporation and the bondholder, and in so far as
the income-tax law applies, the Government will not diflferentiate
between coupons from bonds of this character and those from bonds
carrying no such guaranty. The debtor corporation, or its duly
authorizell withholding agent, will be held responsible for the normal
tax due in such cases when no tax has been withheld and no exemption
claimed.
''Income paid by 'debtors' from March 1 to November 1, 1913,
shall be included in the return of the individual (under column B,
page 2, of Form 1040) as income upon which the normal tax of 1
per cent has not been withheld and paid at the source. Income
received by individuals between November 1 and December 31, 1913,
upon which the normal tax has been withheld at the source shall be
included in their annual return (imder column A, page 2, of Form
1040) as income upon which the tax has been withheld."
W. H. OSBOBN,
Commissioner of Internal Revenue.
(T. D. 1949.)
Use of masTi ft for distittation in the production of artificial wines,
Tbeasuey Depabtment,
Office of Commissioneb of Internal Revenue,
Washington, D. O., February 16, 1914.
To coUectors of internal revenue and others concerned:
In view of the large quantity of alcoholic spirits commonly known
as "pomace" or "raisin" wine now being produced from meLshfit
for distillation, attention is called to section 3282, Revised Stat-
utes, as amended by section 6 of the act of March 1, 1879, which
provides:
No mash, wort, or wash fit for distillation or for the production of spirits or alcohol shall
be made or fermented in any building or on any premises other than a distiUery duly
authorized according to law; and no mash, wort, or wash so made and fermented
shall be sold or removed from any distillery before being distilled; and no person
other than an authorized distiller shall, by distillation or by any other process, sep-
arate the alcoholic spirits from any fermented mash, wort, or wash; and no person shall
use spirits or alcohol * * * in manufacturing vinegar or any other article, or in
any process of manu^ture whatever, unless the spirits or alcohol so used shall have
been produced in an authorized distillery and the tax thereon paid. Every person
who violates any provision of this section shall be fined for each offense not less than
five hundred dollars nor more than five thousand dollars, and be imprisoned not lees
than six months nor more than two years: Provided further^ That nothing in this
section shall be construed to apply to fermented liquors, or to fermented liquids
used for the manufacture of vinegar exclusively, ♦ * *,
Digitized by VjOOQIC
31
Attention is also called to section 3248, Revised Statutes, which
declares that —
Distilled spirits, spirits, alcohol, and alcoholic spirit, within the true intent and
meaning of this act, is that substance known as ethyl alcohol, hydiated oxide of ethyl,
or spirit of wine, which is commonly produced by the fermentation of grain, starch,
molasses, or sugar, including all dilutions and mixtures of this substance; and the
tax shall attach to this substance as soon as it is in existence as such, whether it be
subsequently separated as pure or impure spirit, or be immediately, or at any sub-
sequent time, transfeired into any other substance, either in the process of original
production or by any subsequent process.
After a careful consideration, this office is clearly of the opinion
that the mash used in the production of these so-called wines is a
"mash fit for distillation," and that the wine so produced is an
" alcoholic spirit'' within the true intent and meaning of the statute.
As early as November 21, 1908, this office, in passing upon a wine
formula then submitted, stated (T. D. 1437):
The mash herein described is not a wine mash, as indicated. Neither is the product
of the same a genuine wine, and manifestly there could be no other purpose on the
X>art of a rectifier in making and fermenting such a mash than to produce a liquor
free from tax sufficiently high in alcoholic strength as to render imneceseary the addi-
tion of tax-paid spirits in the manufacture of a compoimd liquor.
The use of such mash for the purpose indicated was then, as is now,
held to be illegal, and notice was then given that any person so using
such mash or any similar mash on and after January 1, 1909, would
be reported for violation of said section 3282.
On application made the time so fixed has been several times
extended by this office to enable the wine maker to secure, if po£h
sible, legislation authorizing the use of such mash in the production
of wine, but such legislation, if sought, has not been secured, and this
office must therefore insist upon a strict observance of the law as it
now stands.
Notice is therefore now given that all parties using such mash in
the manufacture of wine, however designated, on and after the 1st
day of May, 1914, wiU be reported for prosecution under the provi-
sions of said section 3282, and that all such mash found on any
premises not authorized by law and all wines produced from any
such mash on or after said date, wherever found, will be seized for
forfeiture.
All decisions or instructions heretofore issued in conffict with the
forgoing are hereby revoked.
W. H. OSBOEN,
Commissioner of Internal Revenue.
Approved:
Chables S. Hamlin,
Acting Secretary oftTie Treasury.
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32
(T. D. 1960.)
Income tax.
Time for filing retonu of income, and penaHdee in connection therewith.
Tbeasttbt Dbpabtment,
Office of Commissioneb of Internal Revenue,
W(is7dngt(m, D. C, February 19, 1914.
To collectors ofvnJtemal revenue:
You are advised, and will so announce from your respective ojfices,
that the law and regulations require returns of income for the taxable
period, March 1 to December 31, 1913, to be made and filed on or
before March 1, 1914. The law is mandatory and allows no discretioij
to be exercised by any officer. Section 3176, Revised Statutes of the
United States, as amended and made part of the income-tax law, gives
to collectors of internal revenue (they being satisfied as to the merits
of the claim, and in the reasonable exercise of their judgii at and
dis(»:etion) authority to grant extension of time not to exceed 30 days
from the time prescribed by law in which to file a return of net income,
and then only in cases where such failure, neglect, or refusal is the
result of " sickness or absence. "
You are also advised, and will so annotmce, that there w^"- 'T ^
change in income-tax regulations as they now exist prior to k'^ M^'*
1914, imd that all persons and corporations required to'mak ni
which have not as yet done so should make and file their r^u^
the earliest opportimity and on or before March 1. . > &m
Collectors will forward to this office immediately a report showing
the nimiber of returns filed in their respective offices as of February
20, 1914.
Penalties and additional tax, in connection with refusal or neglect tojUe
return of income within the prescribed time.
As to corporations. — ^For neglect or refusal to make a return within
the prescribed time, corporations are liable to a penalty not to exceed
$10,000; and in case of neglect or refusal to make, or for a false or
fraudulent return made, 100 per cent is to be added to the tax; and in
the case of neglect or refusal to make and verify a return within the
prescribed time (except in case of sickness or absence) 50 per cent is
to be added to the tax; and in case of an officer of a corporation or
like institution chained with the duty and responsibility of making
and verifyiog a return who makes a false or fraudulent return with
the intent to defeat or evade any assessment or tax, he shall be guilty
of a misdemeanor, and be subject to a fine not to exceed $2,000, or to
imprisonment not to exceed one year, or both, at the discretion of
the court, together with costs.
Digitized by VjOOQIC
33
As to individuala, — ^For n^lect or refusal to make a return within
the prescribed time, the penalty is not less than $20 nor more than
$1,000; and in case of intentional neglect or refusal to make, or for a
false or fraudulent return made, there shall be added 100 per cent to
the tax; and in case of neglect or refusal to make a return within the
prescribed time (except in case of sickness or absence) there shall be
added 50 per cent to the tax.
W. H. OSBOBN,
Commissioner of iTUemal Beven/ae.
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 1961.)
Records aholisTied.
Records 29 and 32 abolished; copies of Forms 51B and 79 to be retained in lieu
'^^^ thereof.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington^ D. C, February 16, 1914*
^^^He^tors of internal revenue:
^^^ '„ pi 29, Record of Reports on Form 6lB, and Record 32, Record
such^' r|3 on Form 79, are hereby abolished.
be repv. v?' these records, coilectors will retain copies of each report on
Qr B and of each revenue account on Form 79, binders for which
wjU De lumished without requisition as soon as received by the
department*
W. H. OSBORN,
Commissioner of Internal Revenue,
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 1952.)
Diary reports.
General deputy collectors, special gaugers, and special employees will render but
one Form 629 to the revenue agent under whom assigned.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, February 27, 1914.
To internal-revenue agents in charge of divisions:
After March 1, 1914, revenue agents in charge of divisions are
authorized to require every general deputy collector, every special
27776^— VOL 16—14 ^3
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34
ganger, and every special employee to render one trimonthly diary
report on Form 629, covering each 10-day period of the montib, such
report to be sent to the revenue agent under whose direction the
officer is assigned to duty for examination and for file.
These instructions are issued in order that there may be a record
in the office of every agent in charge of a division, showing the work
performed by all employees subject to direction by the agent.
Other internal-revenue agents and inspectors will continue to make
their trimonthly diary reports in duplicate, one copy for the agent in
charge of the division and one copy for the Commissioner of Internal
Revenue, as. now required by the regulations.
W. H. OSBOEN,
Commissioner of Internal Revenue.
Approved:
.W. G. McAdoo,
Secretary of tlie Treasury.
(T. D. 1953.)
Income tax.
Exteiiflion of time for filing returns under income-tax law by citizens of the United
States living abroad.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washinfftonj D. (7., March 2y 1914.
To collectors of internal revenue:
Referring to that portion of section 3176, as incorporated in the
income-tax law, which provides that —
In case of n^lect occasioned by sickness or absence as aforesaid, the collector may
allow such further time for making and delivering such list or return as he may deem
necessary, not exceeding thirty days —
you are informed as follows:
Various citizens of the United States living abroad were imable
through such absence from this country to inform themselves as to
the requirements of the law, and were also unable to obtain the
necessary blank forms on which to make their returns of annual net
income for the income tax. You are therefore authorized to mark
the returns received from foreign countries after March 2 and up to
and including March 31 as having the time extended to cover the
period of filing such return.
The State Department has cabled the consular service and others
residing in foreign countries that they shall forward a letter, in which
their income shall be stated, and that such letter will be received in.
lieu of the return so far as the date of filing is concerned.
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35
Such letters axe now coming to this oj£ce, and they are being for-
warded to the various collection districts to be hdd as tentative
returns until the returns on Form 1040 shall be received. The regu-
lar returns on Form 1040 when received should be attached to tiia
tentative returns and both should be forwarded to this office with
the assessment lists on which the same shall be listed. The date of
filing the returns shotild be considered that on which such tentative
returns were filed.
W. H. OSBOBN,
Commissioner of Internal Revemie.
Approved:
W. G. McAboo,
SeerekMry of the Trea&ury.
(T. D. 1954.)
Denatured alcoJuA.
Formula No. 2B for epeciaU j denatured alcohol for uae in the manufacture of pyroj^ylin
plastics.
Trbasubt Department,
OmoB OF Commissioner of Internal Reventte,
Washington, D. C, March 10, 1914.
The following formula for denaturing alcohol to be used essehmvdy
in the manufacture of pyroxylin plastics (pyralin, ceQuIoidi and mmr
lar products, but not solutions of pyroxylin, such as varnishes, etc.)
is hereby approved:
Formula tB.
To 100 parts by volume of ethyl alcohol add one-half part by vcdusie of bensol,
such benzol to be tested according to the following specifications:
SolvhUity in water. — When 10 c. c. of benzol are shaken with an equal volume of
water in a glass-stoppered cylinder, divided into tenths of a cubic centimeter and
allowed to stand five minutes to separate, the upper layer of liquid must meumte not
less than 9.5 c. c.
Boiling point,— Wien 100 c. c. of benzol are subjected to distillation in the flune
manner as described for the determination of the boiling i>oint of wood alcohol, not
more than 1 c. c. should go over at 77^ C. and not less than 95 c. c. at 85^ 0.
The use of alcohol denatured according to the above formula wifi
be permitted only for the purpose herein specifically authorized, and
only where the process of manufacture (including the recovery of the
alcohol for reuse) is a ^'continuous'' one.
Samples of such recovered alcohol will be obtained from time to
time by the inspecting officers, who will submit the same for analysis
in order that it may be determined whether the alcohol so recovered
requires redeiiaturation.
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36
In submitting samples of the benzol for analysis the officers sub-
mitting the same should state that such benzol is to be used under
this particular formula, so as to differentiate' it from other benzol
which may be used imder other formulas.
W. H. OSBOBN,
Commissioner of Internal Revenue.
(T. D. 1955.)
Income tax.
Extension to June 30, 1914, of waiver of T. D. 1901, Treuniry requirements for the
filling in on certificates of the numbers of the bonds of corporations, etc.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, March 10, 19 H.
Notice is hereby given that T. D. 1901, issued November 28, 1913,
waiving, until March 31, 1914,* the requirement that the numbers of
(he londs or other like obligations of corporations, etc., from which
interest coupons are detached or upon which registered interest is
to be paid shall be filled in on the certificates is hereby extended to
June 30, 1914.
In all other respects the certificates referred to must be filled in
in accordance with the Treasury regulations before the coupons or
ordets for registered interest to which they may be attached shall' be
paid.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. O. MgAdoo,
Secretary of the Treasury .
(T. D. 1956.)
[Mimeographed and erroneously numbered T. D. 19ttL
Income tax.
Iliqiiiries relajtite to the income tax covered by FegulationB and rulings to be answered
by collectors.
Treasury Departmbnt,
Office of Commissioner of Internal Revbntje,
Washington, D. C, Feiruary I4, I914.
To eoUeetors of internal revenue:
A large part of the volume of correspondence coming to this office
asking for information relative to making return and ascertainment
Digitized by VjOOQIC
37
of net income, etc.^ for the income tax, is sufficiently covered by
regulations, and shotild be answered in the offices of coUectors.
Collectors have been furnished with copies of Regulations No. 33,
and will be advised from time to time of additional rulings in income-
tax matters.
Collectors are therefore advised that letters coming to this office
asking for information which should be supplied by collectors in
accordance with instructions and r^ulations furnished them, wiU be
referred to collectors for reply and writers of the letters advised of
the reference. Collectors, upon receipt of letter referred to them by
this office, wiU give immediate attention to the subject matter of the
inqiury, in accordance with the regulations and instructions bearing
upon the same.
W. H. OSBOBN,
Commiasiorier of Internal Revenue.
(T. D. 1957.)
Income tax.
Partnenihips are not subject to income tax, but are required to file certificates of
owneiship of bonds, etc., in connection with coupon and registered interest pay-
ments to prevent withholding of their income at the soiirce.
Tbeasuky Department,
Office of Commissioner of Internal REyENUE,
WasMngton, D. C, March 12, 1914-
To collectors of internal revenue:
Referring to the following provision in paragraph D of the income-
tax law —
That any persons carrying on business in partnership shall be liable for income tax
only in their individual capacity, and the share of the profits of a partnership to which
any taxable partner would be entitled if the same were divided, whether divided or
otherwise, shaU be returned for taxation and the tax paid, under the pmvisionB of this
section, and any sudi finn, when requested by the OommissiQner of Internal Revenue,
or any district collector, shall forward to him a correct statement of such profits and
the names of the individuals who would be entitled to the same, if distdbuted —
it is held that the income of partnerships per se is not subject to tibte
income tax. The provisions of the law ''relating to the deduction
and payment of the tax at the source of income" do not apply to the
income of partnei:ships as such. Taxable members of partnerships
will be required to account, in thj^ir individual returns, for th^
respective shares or interest in the partnership profits, whetlier the
same are divided and distributed or not.
Partnerships owning "bonds and mortgages, or deeds of trust, and
other similar obligations of corporations, joint stock companies or
associations, and insurance companies," shall file certificates of
Digitized by VjOOQIC
38
own«rahip, in Form 1001, eTidencing the fact of partnership ownership
when presenting for collection or payment coupons or interest orders
for interest upon said obligations; and when such certificates are
filed, the tax on such interest payments to partnerships shall not be
withheld.
The last sentence in article 14, page 36, and article 47 of Income
Tax Regulations No. 33, providing for claim by partnerships for de-
duction for legitimate expense incurred in conducting the bumnees
of a partnership, are hereby superseded and repealed.
W. H. OSBORN,
C?omm{m(m^ of /h<erna2 £«e^em^.
Approved:
W. G. MoAdoo,
Secretary ofihe Treasury.
(T. D. 1958.)
Special employees^ diaries.
Special employees' monthly diaries on Fonn 63ia to show specific duties perfonned
and expenses incurred.
Tbeasurt Depabtmsnt,
Office of Commissioneb of Intehnal Revenue,
WasUnffton, D. C, March 10, 1914.
To revenue agerds and special employees:
In complying with instructions contained in T. D. 1952, dated
February 27, 1914, in the matter of rendering trimonthly diary
reports, special employees will execute Form 63ia in the manner out-
lined below, in order that a complete accounting may be made of
aH expenses incurred and the duties performed during the month
covered by the report, the original to be sent to the Commissioner of
Internal Revenue with Form 10, the memorandum copy to be re-
tained by the revenue agent under whose direction the services wero
rendered.
At the top of the page of Form 63^a, the special employee should
note the place of his legal residence.
Form 63^a should be a diary of the official transactions of the
special employee. The first entry on each day should show the name
of the town in which the special employee is located or whidi he is
canvassing. There must be a concise statement of the duties per-
formed, and there should be clearly shown the hotu* of arrival at and
departure from the revenue agent's headquarters and all other towns
visited; the names of all persons visited and the object of the visit;
the number of miles traveled, and the specific expenses incurred.
The name of the person from whom any livery, meals, or lodgii^
Digitized by VjOOQIC
39
are procured should be given whether a voucher for the expense is
required or not. Charges for sleeping and parlor car service must be
supported by passenger's checks.
W. H. Osbohn,
Comnmsioner of IrUemdl Beverme.
Approved: .
W. G. MoAdoo^
Secretary of the Treasury.
(T. D. 1959.)
DiitiUed spirits — DistiUery warehouses — Decision of United Stages
Supreme Court.
1. DiBTILLEBT WaBBHOUSBS.
Law stated relative to distiUery warehouses and control of spirits therein.
2. Wabbhousb Cbbtoicates.
Warehouse certificates represent spirits in warehouse; and ownership of the spirits
in store under governmental control are transferred by delivery of such documents.
3. LiBN ON Sfibits in Wabbhousb.
Where spirits in bonded warehouse are pledged to a bank as security for money
b<mK)wed, and the owner is adjudicated bankrupt, the lien of the bank on the spirits
is superior to the claim of the trustee in bankruptcy.
4. Decision of Loweb Coubts Affibhed.
The decisions of the United States District Court (176 Fed., 606) and the United
States Circuit Court of Appeals (187 Fed., 689) are affirmed.
Tbeasuky DePABTMENT;
Office of Commissioner of Intebnal Revenue,
Washington, D. C, March 12, 1914.
The appended decision of the United States Supreme Court in the
case of Joseph A. Taney, trustee of the estate of the Miller Pure Rye
Distilling Co., appellant, v. Penn National Bank, of Reading, is pub-
lished for the information of internal-revenue officers and others
concerned.
W. H. OSBOBN,
Commissioner of Internal Revenue.
StJPBBMB COUBT OF THB UNITED STATES. No. 115. OcTOBEB TbbH, 1913.
Joieph A. ToMy, trustee of the estate of the Miller Pure Rye Distilling Co., appelkmif
V. Penn National Bank of Reading.
Aptbal from th« United States Citenit Court of Appeals for the Third Circnlt
[January 26, 1914.]
Mr. Jiisdce Hi70HEs delivered the opinion of the court:
On February S, 1908, a petition in bankruptcy was filed against the Miller Pure
Rye Distilling Co.; it was adjudicated a bankrupt on February 19, 1908, and the
appellant was appointed trustee. The Penn National Bank, of Raiding, Pa., the
appellee, intervened in the bankruptcy proceeding with a petition asking for the
Digitized by VjOOQIC
40
delivery to it of 200 banels of whisky stored in the bonded warehouse of the diqt.illiiig
company upon the ground that the property had been lawfully pledged by the com-
pany to the bank. The District Court sustained the lien and accordingly held the
claimant entitled to the delivery sought (176 Fed., 006), and on appeal this decree
was affirmed by the Circuit Court of Appeals (187 Fed., 689).
The pertinent facts are these: On August 27, 1907, the bank lent to the distilling
company |2,500, for which the company gave its four months' note, reciting the
deposit with the bank, as collateral security, of "200 bbls. whisky in bonded ware-
house at Womelsdorf, Pa., as per Warehouse Beets, ganger's ctf. &c, accompanying."
The form of the receipts is shown by the following copy of one of them:
No. 5454. 25 Bbls.
First District of Pennsylvania.
United States Internal Bevenue Distillery Bonded Warehouse of Miller Pure Bye
Distilling Company.
Byeland, Berks Co., Pa., Augast 26th, 1907.
Beceived on Storage from Ourselves Twenty-five (25) Barrels of MiUer Pure Bye
Whiskey Distilled, Marked and Numbered as per Becord Attached, Subject to our
Order and Bisk of Loss or Damage by Fire, The Elements, Leakage, Evapomtion or
Accident, Deliverable only upon Surrender of this Certificate, Payment of Tax and
other Chaiges due Thereon, and Storage at the Bate of Five Cents per Barrel per month,
from August 26th, 1907.
Inspection Spring 1907.
Stored in Warehouse No. 2.
Serial Nos. of Packages 7964/7988.
Miller Pure Bye Distilling Co.,
S. V. Naolb, President.
Address all Communications to Miller Pure Bye Distilling Company, Philadel-
phia, Pa.
Special Notice — ^Particular care should be taken of this Certificate as the whiskey
cannot be delivered without its surrender. ^
These receipts were indorsed by the company, and, with the gauger's certificates,
were delivered to the bank. The whisky itself was not actually delivered and re-
mained in the bonded warehouse. The note not being paid at maturity, the bank
ui>on notice sold the warehouse receipts at public sale on February 5, 1908, and became
the purchaser. This sale, however, is not material to the present question, which
tuna upon the validity of the Hen.
There is no doubt as to the intention and actual good faith of the parties. The loan
was made in reliance upon the designated security and the ground of attack is that the
lien fialed for want of delivery of possession.
The legal effect of the transaction depends upon the local law. Thompson v,
Fairbanks (196 U. S., 516); Humphrey v. Tapman (198 U. 8., 91); York ManufacturiBg
Co. V. CasseU (201 U. S., 344); Hiscock v. Varick Bank (206 U. S., 28); Security Ware-
housing Co. V, Hand (206 U. S., 415, 425); Bryant v. Swofford Bros. (214 U. S., 279).
Beviewing the decisions of the Supreme Court of Pennsylvania with respect to
sales — ^the principles of which were deemed to be applicable — ^the Circuit Court of
Appeals reached the following conclusion:
It suffices to say that the law of Pennsylvania in respect of the question we aire now
considering is settled by a line of cases extending through nearly a century. Start-
ing with the policy of the statute of Elizabeth, tor the circumvention of fraud and
deceit in sales of personal property (which nowhere in terms refers to retention of
possession by a vendor), it has wisely developed the spirt of that statute and evolved
the salutary rule, that where there is nothing m the case but tiie retention of a physical
poesessipn by the vendor, which he is capable of delivering to the vendee, such re-
tention is fraud per se, and not merely evidence of fraud^ even though tiiere be noth-
ing inconsistent with the most perfect honesty. But this rule is not applied by the
courts of Pennsylvania to cases where the inherent nature of the transaction and the
attendant circimistances are such as to preclude the possibility of a delivery by th/B
vendor, that would be consistent with the avowed and fair purpose of the sale, or
where the absence of a physical delivery is excused by the usages of the trade or
business in which the sale was made. (187 Fed., 689, 696.)
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41
We enterta^ no doubt as to the coirectuesB of this statement. Clow v. Woods (5
S. & R., 277); Ban v. Beitz (53 Pa., 256); McEibbint;. Martin (04 Pa., 352), Craw-
fwd V. Davis (99 Pa., 576); Stephens i;. Gitford (137 Pa., 219); F^ressel v. Bice (142
Pa., 263); Garretson v. Hackenbeig (144 Pa., 107); Barlow v. Fox (203 Pa., 114);
White V. Gunn (205 Pa., 229); and it was in the light of these principles that the
court below held that, considering the situation of the property and the usages of the
buflinesB, the transaction in question was vaMd.
To insure collection of the heavy tax that is laid upon distilled spirits, the pioduction
is carefuily supervised and the product is impounded. (Revised Statutes, sees.
3247-3334, as amended; act of May 28, 1880, ch. 108, 21 Stat., 145; act of Aug. 27, 1894,
ch. 349, sees. 48-67, 28 Stat., 609, 563-568.)
Every distiller is required to provide, at his own expense, '*a warehouse, to be situ-
ated on and to constitute a part of his distillery premises, and to be used only for the
storage of distilled spirits of his own manufacture until the tax thereon shall have been
paid.''' This warehouse, when approved by the Oommisaioner of Internal Revenue, Ib
declared by the statute to be ''a bonded warehouse of the United States, to be known
as a distillery warehouse," and is *' under the direction and control of the collector
of the district, and in charge of an intemal-revenue storekeeper, assigned thereto by
the commissioner" (sec. 3271). While the statute provides that "every distillery
warehouse shall be in the joint custody of the storekeeper and the proprietor thereof,"
the control of- the Government's representative is made dominant, as in the nature
of the case it must be in order to fulfill the purposes of the act. The warehouse, the
sCatute continues, " shall be kept securely locked, and shall at no time be unlocked
or opened, or remain open unless in the presence of such storekeeper or other person
who may be designated to act for him, as provided by law; and no articles shall be
received in or detivered from such warehouse except on an order or permit addressed
to the storekeeper and signed by the collector having control of the warehouse"
(sec. 3274).
Under the departmental regulations ''the only lock to the warehouse door must be
the Government lock, the key of which must at all times be in charge of the store-
keeper." There must be an immediate removal of the distilled spirits to the dis-
tillery warehouse as soon as they are drawn into casks or x>ackages and gauged, proved,
and marked, as required, and thereupon the internal revenue ganger "shall, in the
presence of the storekeeper of the warehouse, place upon the head of the cask or pack-
age an engraved stamp, which shall be signed by the collector of the district and the
storekeeper and ganger; and shall have written thereon the number of proof gallons
contained therein, the name of the distiller, the date of the receipt in the wsaehouaef
and the serial number of each cask or package, in progressive order, as the same are
received from the distillery." (Sec. 3287; act of May 28, 1880, ch. 108, sec. 6.) The
spirits must be entered for deposit in the- warehouse under the r^:iilations prescribed
by the commissioner and bond must be given for the payment of the tax. The statute
gives the form of the entry which, made in triplicate and duly verified, must set forth
the name of the person making it, the designation of the warehouse, the specification
of the spirits deposited, with the marks and serial numbers of the packages, etc., and
a statement of the amount of tax. Withdrawal may be made on payment of the tax —
which is payable within eight years— by application to the collector in charge of the
warehouse and the making of a withdrawal entry. (Sees. 3293, 3294; act of May 28,
1880, ch. 108, sees. 4, 5; act of Aug. 27, 1894, ch. 349, sec. 49.) Proviaon is made for
regauging and for an allowance for loss from leakage or evaporation (H.^ sec. 60; act
of Mar. 3, 1899, ch. 435, 30 Stat., 1349; act of Jan. 13, 1903, ch. 134, 32 Stat., 770);
and after four years the spirits may be bottled in bond, in a separate x>ortion of the
warehouse set apart for that purpose, under the supervision of the Gov^^ment oflicial
(act of Mar. 3, 1897, ch. 379, 29 Stat., 626). The storekeeper is to keep "a warehouse
book " in which all deposits and deliveries are to be entered, with appropriate descrix)-
Digitized by VjOQQIC
42
tion, indudiag marks and serial niuaber^ (sec. 3301). And the removal " of any dis-
tilled spirits from a distillery waiehouse * * * in any manner other than is
provided by law " is punishable by fine and imprisonment (sec. 3296).
The minute regulations <^ tiie statute, and the j^ovision for prolonged governmental
control, proceed upon a recognition of the exigencies of the business. It is a matter
of common knowledge that the product is not ready to be marketed for consumption
when it is drawn from the still. It must undeigo an aging process, and for this pur-
pose it is kept in store for several yeare. In laying the tax, Congress has taken this
necessity into consideration permitting a long poetp<mement of the required payment,
the Efpirits meanwhile being held in charge of the Government's representative. It
is, however, a matter of obvious business importance that the distiller should be able
to release the capital represented in the cost of production of the spirits m store and
to make it available for further production; and hence the practice is well established
to deal with the product in the bonded warehouse by sale or pledge, storage certificates
suitably identifying the properly being delivered in lieu of the actual transfer of pos-
session. The District Court found as a fact that it is '' the unbroken custom of the trade
to treat storage receipts for i^irits as completely equivalent to the spirits themselves,
and to sell or pledge them freely without question." This finding is approved by
the Circuit Court of Appeals, and the fact that this custom exists we understand to be
undisputed.
It is argued for the appellant that one can not make himself a warehouseman of bis
own goods and issue so-called receipts to take the place of the delivery which the law
requires to give effect to his sale or pledge. Security Warehouse Co. v. Hand (206 U. 8.,
415, 422); Bank v. Jagode (186 Pa., 556). The aigument ignores the special circum-
stances of the case and the restrictions imposed by law upon the distiller. The build-
ing is his, but the Government is in complete control. The spirits are his, but he is
subject to fine and imprisonment if he attempts to remove them. It is undoubtedly
true that the Government is not strictly a bailee. It assumes no responsibility to the
distiller for the safe-keeping of the goods. United States i;.Whitten (143 U. S., 76, 78).
But the immunity which is incident to the exercise of governmental power in no way
limits its effect upon the distiller's relation to the goods. They are effectually taken
out of his power so that he is absolutely unable to make a physical delivery of them
imtil the tax is paid. On the other hand, to pay the tax and remove the property
before the aging process is completed would defeat the object of the deposit for which
the statute provides, and would frustrate the purpose of a' transfer of epirits in bond,
which is an entirely lawful transaction. In these circumstances, the certificates-
such as were here used-~appropriately represent the property.
It is said that the distiller need not use his own warehouse, but may place the goods
in one of the general bonded warehouses established under the act of 1894 (28 Stat.,
564, 565). The appellee asserts that this would be impracticable; that no general
bonded warehouse had been established in the collection district in question; that
there are only 12 in the entire country, with a capacity that is extremely small in com-
parison with the output of the distilleries. But, aside from this, the distillery ware-
house is equally recognized by law; it is ^'a bonded warehouse of the United States."
If it is a fit place for storage, the distiller is not obliged to remove the spirits elsewhere.
And while they are thus deposited in conformity with law he is not debarred from
passing title or creating a special interest by way of pledge.
The fundamental objection is that the custom, to which the entire trade is adjusted,
is opposed to public policy. But we know of no ground for thus condemning honeet
transactions which grow out of the recognized necessities of a lawful business. The
case is not one where credit may be assumed to be given upon the faith of the ostensible
ownership of goods in the debtor's possession. Everyone dealing with distillers is
familiar with the established practice in accordance with which spirits are held in
store, under governmental control, and ace transferred by the delivery of such doca-
Digitized by VjOOQIC
43
ments as we have here. There is no warrant for saying that creditors are misled by
delusive appearances. The usage serves a fair purpose and there is no public policy
which requires that the trade should be thrown into disorder by a refusal to uphold it.
It is urged that frauds may be perpetrated by the duplication of such documents; but
the present dispute does not call for the determination of the equities as between two
innocent purchasers. We are concerned here simply with the rights of creditors rep-
resented by a trustee in bankruptcy, and we agree with the court below in its con-
clusion that, in the circumstances disclosed, his right is inferior to that of the appellee.
The decree is affirmed.
(T. D. 1960.)
Income tax.
Corporations are allowed by law to deduct interest actually accrued and paid within
the year on an amount not in excess of paid-up capital stock outstanding at the
close of the year, plus one-half the interest-bearing indebtedness then also out-
standing.
Teeasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C,, March 18, 1914.
To collectors of internal revenue:
Your attention is called to that provision of the income-tax law
designated as the third deduction, subdivision (6), paragraph G,
reading as follows:
The amount of interest accrued and paid within the year on its indebtedness to
an amount of such indebtedness not exceeding one-half of the sum of its interest-
bearing indebtedness ancl its psdd-up capital stock outstanding at the close of the
year, and if no paid-up capital stock, the amount of interest paid within the year
on an amount of its indebtedness not exceeding the amount of capital employed in
the business at the close of the year.
It is held that in the case of a corporation hayiQg capital stock
this deductible interest is interest actually accrued and paid within
the year on an amount of iadebtedness not exceeding the paid-up
capital stock outstanding at the close of the year, increased by the
addition thereto of one-half the interest-bearing indebtedness out-
standing at the close of the year.
The qualifying phrase, "outstanding at the close of the year,"
appearing in the foregoing quotation, is held to apply to both paid-up
capital stock and indebtedness, and "one-half the sum of" qualifies
only the indebtedness, which indebtedness, like the paid-up capital
stock, is required by the law to be reported, in making return of
annual net income, as outstanding at the close of the year.
If no indebtedness is outstanding at the close of the year, the
maximum deduction allowable on account of interest paid will be
the amount of interest actually accrued and paid on an amount of
indebtedness not exceeding at any time within the year the entire
paid-up capital stock outstanding at the close of the taxable year;
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44
that is, in such case, the paid-up capital stock outstanding at the
close of the year measures the highest amount of indebtedness upon
which deductible interest can be computed.
For the purpose of an allowable deduction, interest on the maxi-
mum amount of indebtedness, determined in the manner above
indicated, can be computed upon such amount only for the time
during which such amotmt of indebtedness is not in excess of the
paid-up capital stock, increased by one-half the sum of the interest-
bearing indebtedness outstanding at the close of the year.
In any event, the amount of interest, in order to constitute an
allowable deduction, must -not only be within the limit of the law as
herein defined, but must have actually accrued and been paid within
the year for which the return is made.
In cases where no capital stock exists, the limitation as to deduc-
tion is confined to interest actually paid on an amoimt of indebted-
ness not exceeding at any time during the year the capital employed
in the business at the close of the year.
Any provision in the regulations heretofore issued inconsistent
with the foregoing is hereby revoked.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 1961.)
Income tax — Fiduciaries.
Forau 1015 and 1019 may be adapted so that but one certificate will be required to be
filed with coupons fh>m the same issue of bonds, the property of different estates
or trusts.
Treasuby Dbpabtbcent,
Office of Commissioner of Internal Revenue,
Washington, D. C, March 19, 1914.
To collectors o^ internal revenue:
Under income-tax regulations No. 33, articles 39 and 70, fiduciaries
are required to file certificates on Form 1015 or Form 1019, according
to the nature of the claim to be made by the fiduciary, for each issue
of bonds and for each trust.
It is therefore provided that where fiduciaries have the custody
and control of more than one estate or trust, and said estates or
trusts have as assets bonds of corporations, etc., of the same issue, said
fiduciaries may adapt certificates Form 1015 or Form 1019 by chang-
ing the words ''estate or trust'' in lines 2 and 3 of said forms to the
plural, and inserting in the blank space provided in line 3 of said
Digitized by VjOOQIC
45
forms for the description of the estate or trust the words "As noted on
the back hereof." In such cases the notation on the back of the
certificate should show for each estate or trust (a) the name of the
estate or trust, (b) the amount of the bond, (c) the amount of the
interest. In all other respects the certificates should be filled out as
indicated thereon.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury.
(T.D. 1962.)
Income tax.
Information contained in income-tax returns to be treated as inviolably confidential.
Trkasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. O. March 20, 1914.
To collectors of internal revenus, intemalrrevenue agents, and others
concerned:
The attention of collectors of internal revenue, internal-revenue
agents, and other oflBicers concerned is invited to section 3167 of the
United States Revenue Statutes, which prohibits the disclosure of
information contained in income and other returns of internal-rev-
enue taxpayers.
All internal-revenue officers will preserve as inviolably confidential
all income-tax returns, as the shghtest infraction of law upon this
subject will be severely punished. .
W. H. OsBORN,
• Commissioner of Internal Revenue.
(T. D. 1963.)
Acceptance of certified checks in paymsnt of internal-revenue taxes.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, March 18, 1914-
Sib: This office is in receipt of your letter of the 16th instant in
rrference to certified checks offered in payment of internal-revenue
taxes and to the refusal of your depository to accept such checks
where you indorse the same ''without recourse.^^
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46
In reply you are informed that such qualified indoraement is
unnecessary, and that any instructions on Forms 17, 21, and 647
contrary to this view are hereby rescinded.
In this connection attention is called to the act of Maxch 2, 1911
(p. 108, Comp., 1911), respecting such checks not duly paid by the
bank certifying to the same.
Respectfully, W. H. Osbobn,
Commissioner of Internal Reven/iie.
CoLLECTOB FmsT DISTRICT, BrooJclyn, N. Y.
(T. D. 1964.)
Searches and seizures — Decision of United States Supreme Court.
1. XJnbbasokablb Searches and Seizubes.
The fourth amendment to the Constitation puts Federal officials under limita-
tions and restraints and secures the people, their peisons, houses, papers, and
effects against all unreasonable searches and seizures under the guise of law.
Efforts of officials to bring the guilty to pimishment are not to be aided by a sac-
rifice of this principle embodied in the fundamental law.
2. Seizure of Correspondence.
The seizure of private correspondence by a United States marshal holding no
wanant for arrest and none for search of premises is unauthorized. *
Teeasuby Dbpabtmbnt,
Office of Comhissioneb op Intebnal Eevbnue,
Washington, D. C, March 2S, 1914.
The appended decision of the Supreme Court of the United States
in the case of Fremont Weeks, plaintiflf in error, v. United States,
defendant in error, is published for the information of internal-
revenue officers and others concerned.
W. H. Osbobn,
Commissioner of Internal Reoerme.
Supreme Court of the IlNrrEn States. No. 461. October Term, 1913. .
Fremont WeehSy plaintiff in errors v. United States.
In ebbob to the District Court of the United States for the Westcni Distrlot of HissoorL
[February 24, 1914.]
Mr. Justice Day delivered the opbuon of the court:
An indictment waa returned against the plaintiff in error, def^idant below, and
herein so designated, in the District Court of the United States for the Western Die
trict of Missouri containing nine counts. The seventh count, iix>on which a con-
viction was had, chaiged the use of the mails for the purpose of transporting certain
coupons or tickets representing chances or ehares In a lottery or gift entevptue in
violation of section 213 of the Criminal Code. Sentence of fine and imprisonmeiit
was imposed. This writ of error is to review that judgment.
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47
The defendant was arrested by a police officer, so far as the record showis, without
warrant, at the Union Station in Kansas City, Mo., where he was employed by an
express company. Other police officers had gone to the house of the defendant,
and being told by a neighbor where the key was kept, found it and entered thehouse.
They searched the defendant's room and took possession of various papers and articles
found there, which were afterwards turned over to the United States marshal. Later
in the same day police officers returned with the marshal, who thoi^ht he might
find additional evidence, and, being admitted by some one in the house, probably
a boarder, in response to a rap, the marshal searched the defendant's room and carried
away certain letters and envelopes found in the drawer of a chiftoniCT. Neither the
marshal nor the police officer had a search warrant.
The defendant filed in the cause before the time for trial the following petition:
Petition to return private papers, books, and other property.
Now comes defendant and states that he is a citizen and resident of Kansas City,
Missouri, and that he resides, owns, and occupies a home at 1834 Penn Street in said
That on the 21st day of December, 1911, while plaintiff was absent at his daily
vocation, certain officers of the Government, whose names are to plaintiff unknown,
unlawfully and without warrant or authority so to do, broke open the door to plsdntiff 's
said home and seized all of his books, letters, money, papers, notes, evidences of
indebtedness, stock, certificates, insurance policies, deeds, abstracts, and other muni-
ments of title, bonds, candies, clothes, ana other property in said home, and this in
violation of sections 11 and 23 to the constitution of Missouri and of the fourth and
fifth amendments to the Constitution of the United States.
That the district attomejr, marshal, and clerk of the United States Court for the
Western District of Miesouri took the above-described property so seized into their
possession and have failed and refused to return to defendant portion of same, to wit:
One (1) leather grip, value about $7; one (1) tin box valued at $3; one (1) Pettis
Cotmty, Missouri, bond, value $500; three (3) nuning stock certificates which defend-
ant is unable to more particularly describe, valued at 112,000; and certain stock cer*
tificates in addition thereto issued by the San Domingo Muring Loan and Investment
Company, about $75 in currency; one (1) newspaper published about 1790, an heir-
loom; and certain other property which plaintin is now unable to describe.
That said property is being unlawfullv and improperly held by said district attorney,
marshal, and clerk in violation of defendant's ri^ts under tne Constitution of the
United States and the State of Missouri.
That said district attorney purposes to use said book& letters, papers, certificates of
stock, etc., at the trial of the above entitled cause, and that by reason thereof and of
the facts above set forth defendant's rights tmder the amendments aforesaid to the
constitution of Missouri and the United States have been and will be violated unless
the court order the return prayed for;
Wherefore, defendant prays that said district attorney, marshal, and clerk be
notified, and that the court direct and order said district attorney, marshal, and clerk
to return said property to said defendant.
Ux)on consideration of the petition the court entered in the cause an order directing
the return of such property as was not pertinent to the charge against the defendant,
but denied the petition as to pertinent matter, reserving the right to pass upon the
pertinency at a later time. In obedience to the order the district attorney returned
part of the property taken and retained the remainder, concluding a list of the latter
with the statement that "all of which last above-described property is to be used in
evidence in the trial of the above-entitled cause, and pertains to tiie alleged sale of
lottery tickets of the company above named."
After the jury had been sworn and before any evidence had been given, the defend-
ant again urged his petition for the return of his property, which was denied by the
court. Upon the introduction of such papers during the trial the defendant objected
on the ground that the papers had been obtained without a search warrant and by
breaking open his home in violation of the fourth and fifth amendments to the Consti-
tution of the United States, which objection was overruled by the court. Among the
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48
papers retained and put in evidence were a number of lottery tickets and statements
with reference to the lottery, taken at the first visit of the police to the defendant's
room, and a number of letters written to the defendant in respect to the lottery, taken
by the marshal upon his search of defendant's room.
The defendant assigns error, among other things, in the court's refusal to grant bis
petition for the return of his property and in permitting the papers to be used at the
trial.
It is thus apparent that the question presented involves the determination of the
duty of the court with reference to the motion made by the defendant for the return
of certain letters, as well as other papers taken from his room by the Uidted States
marshal, who, without authority of process, if any such could have been legally issued,
visited the room of the defendant for the declared purpose of obtaiiung additional
testimony to support the charge against the accused, and having gained admission to
the house took from the drawer of a chiffonier there found certain letters written to
the defendant, tending to show his guilt. These letters were placed in the control
of the district attorney and were subsequently produced by him and offered in evi-
dence against the accused at the trial. The defendant contends that such appropria-
tion of his private correspondence was in violation of rights secured to him by the
foiirth and fifth amendments to the Constitution of the United States. We shall deal
with the fourth amendment, which provides:
The right of the people to be secure in their persons, houses, papers, and effects,
against unreasonable searches and seizures, shall not be violated, and no warrants
[Sail issuOj but upon probable cause, supported by oath or affirmation and particu-
larly descnbing the place to be searched, and the persons or things to be seizea.
The history of this amendment is given with particularity in the opinion of Mr.
Justice Bradley, speaking for the court in Boyd v. United States (116 U. S., 616).
As was there shown, it took its origin in the determination of the framers of the amend-
ments to the Federal Constitution to provide for that instrument a Bill of Rights,
securing to the American people, among other things, those saf^uards which had
grown up in England to protect the people from unreasonable searches and seizures,
such as were permitted under the general warrants issued imder authority of the
government by which there had been invasions of the home and privacy of the citizens
and the seizure of their private papers in support of charges, real or imaginary, made
against them. Such practices had also received sanction under warrants and seizures
imder the so-called writs of assbtance, issued in the American Colonies. See 2 Watson
on the Constitution (1414 et seq). Resistance to these practices had established the
principle which was enacted into the fundamental law in the fourth amendment, that
a man's house was his castle and not to be invaded by any general authority to search
and seize his goods and papers. Judge Cooley, in his Constitutional Limitationfl
(pages 425, 426), in treating of this feature of our Constitution, said: ''The maxim that
'every man's house is his castle' is made a part of * our constitutional law in the clauses
prohibiting unreasonable searches and seizures, and has always been looked upon as of
high value to the citizen." "Accordingly," says Lieber in his work on Civil Liberty
and Self-Govemment (62), in speaking of the English law in this respect, **no man's
house can be forcibly opened, or he or his goods be carried away after it has thus been
forced, except in cases of felony, and then the sheriff must be furnished with a warrant,
and take great care lest he commit a trespass. This principle is jealously insisted upon. "
In Ex parte Jackson (96 U. S., 727, 733), this court recognized the principle of pro-
tection as applicable to letters and sealed packages in the mails, and held that consist-
ently with this guaranty of the right of the people to be seciu-e in their papers against
unreasonable searches and seizures such matter could only be opened and examined
upon warrants issued on oath or affirmation, particularly describing the thing to be
seized, "as is required when papers are subjected to search in one's own household."
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49
In the Boyd caae, supra, after citing Lord Camden's judgment in Entick v. Car-
rington (19 How. St. Tr., 1029), Mr. Justice Bradley said i
The principles laid down in this opinion affect the very essence of constitutional
liberty and security. They reach fi^er than the concrete form of tiie case theli
before the court, with its adventitious circumstances; they apply to all invasiaQs on
the part of the Government and its employees of the sanctitv oi a man's home and
the privacies of life. It is not the bresudng of his doors, and t^e rummaging of his
drawers, that constitutes the essence of the offense; but it is the invasion ot his inde-
feasible rig^t of personal security, personal liberty, and private prop^ty, where that
rig^t has never been forfeited by his convictiQn of some pubuc offense— it is the
invasion of this sacred ri^t which underlies and constitutes the essence of Lord
Camden's judgment.
In Bram v. United States (168 U. S., 532), this court In speaking, by the present
Chief Justice, of Boyd's case, dealing with the fourth and fifth amendments, said (544):
It was in tiiat caae demonstrated that both of these amendments contemplated
perpetilating, in their full efficacy, by means of a constitutional provision, principles
of humanity and civil liberty^ wnicn had been secured in the mother country only
after years of struggle, so as to implant them in our institutions in the fullness of Iheir
integrity, free from the poesibilitieB of future legislative change.
The effect of the fourth amendment is to put the courts of the United States and
Federal officials, in the exercise of their x>ower and authority, tmder limitations and
restraints as to the exercise of such power and authority, and to forever secure the
people, their persons, houses, papers, and effects against all unreasonable searches and
seizures under the guise of law. This protection reaches all alike, whether accused of
crime or not, and the duty of giving to it force and effect is obligatory upon all intrusted
under our Federal system with the enforcement of the laws. The tendency of those
who execute the criminal laws of the country to obtain conviction by means of unlaw-
ful seizures and enforced confessions, the latter often obtained after subjecting accused
persons to unwarranted practices destructive of rights secured by the Federal Con-
stitution, should find no sanction in the judgments of the courts, which are chaiged at
all times with the support of the Constitution and to which people of all conditions
have a right to appeal for the maintenance of such fundamental rights.
' "What, then, is the present case? Before answering that inquiry specifically it
may be well by a process of exclusion to state what it is not. It is not an assertion
of the right on the part of the Government, always recognized under English and
American law, to search the person of the accused when legally arrested to discover
and seize the fruits or evidences of crime. This right has been uniformly main-
tained in many cases. 1 Bishop on Criminal Procedure (sec. 211); Wharton Crim.
Plead, and Practice (8th ed., sec. 60); Dillon v. O'Brien and Davis (16 Cox C. C,
245). Nor is it the case of testimony offered at a trial where the court is asked to
stop and consider the illegal means by which proofe, otherwise competent, were
obtained — of which we shsJl have occasion to treat later in this opinion. Nor is it
the case of burglar's tools or other proofe of guilt found upon his arrest within his
control.
The case in the aspect in which we are dealing with it involves the right of the court
in a criminal prosecution to retain for the purposes of evidence the letters and cor-
respondence of the accused, seized in his house in his absence and without his author-
ity, by a United States marshal holding no warrant for his arrest and none for the search
of his premises. The accused, without awaiting his trial, made timely application
to the court for an order for the return of these letters, as well as other property. This
application was denied, the letters retained and put in evidence, after a further appli-
cation at the beginning of the trial, both applications asserting the rights of the ac-
cused under the fourth and fifth amendments to the Constitution. If letters and
private documents can thus be seized and held and used in evidence against a cit-
izen accused of an offense, the protection of the fourth amendment declaring his
27776**— VOL 16—14 i
Digitized by VjOOQIC
50
li^t to be secure agaiiut such seaiches and sekuj!e8 is of no value, and, so lar as those
thus placed are concerned, might as well be stricken from the Oonstitnlion. The
efforts of the courts and their officials to bring the guilty to puniahmenty praiseworthy
as they are, are not to be aided by the sacrifice of those great principles established
by years of endeavor and suffering which have resulted in their embodiment in the
fundamental law of the land. The United States marahal. could only have invaded
the house of the accused when armed with a warrant issued as required by the Consti«
tution, upon sworn information and describing with reasonable particularity the thing
for which the search was to be made. Instead, he acted without sanction of law,
doubtless prompted by the desire to bring further proof to the aid of the Government,
and under color of his office undertook to make a seizure of private papers in direct
violation of the constitutional prohibition against such action. Under such drcum-
stancee, without sworn information and particular description, not even an order of
court would have justified such procedure, much less was it within the authority of
the United States marshal to thus invade the house and privacy of the accused. In
Adams v. New York (192 U. S., 585), this comrt said that the fourth amendment was
intended to secure the citizen in person and property against unlawful invasion of the
sanctity of his home by officers of the law acting under legislative or judicial sanction.
This protection is equally extended to the action of the Government and officers of
the law acting under it. (Boyd case, supra.) To sanction such proceedings would
be to affirm by judicial decision a manifest neglect, if not an open defiance of the pro-
hibitions of the Constitution, intended for the protection of the people against such
unauthorized action.
The court before which the application was made in this case recognized the illegal
character of the seizure and ordered the return of property not in its judgment com-
petent to be offered at the trial, but refused the application of the accused to turn over
the letters, which were afterwards put in evidence on behalf of the Government.
While there is no opinion in the case, the court in this proceeding doubtless relied upon
what is now contended by the Government to be the correct rule of law under such
circumstances, that the letters having come into the control of the court it would not
inquire into the manner in which they were obtained, but if competent would keep
them and permit their use in evidence. Such proposition, the Government asserts, is
conclusively established by certain decisions of this court, the first of which is Adams v.
New York, supra. In that case the plaintiff in error had been convicted in the Su-
preme Court of the State of New York for having in his possession certain gamblipg
paraphernalia used in the game known as policy in violation of the Penal Code of
New York. At the trial certain papers, which had been seized by police officeis
executing a search warrant for the discovery and seizure of policy slips and which had
been found in addition to the policy slips, were offered in evidence over his objection.
The conviction was affirmed by the Court of Appeals of New York (176 N. Y., 351), and
the case was brought here for alleged violation of the fourth and -fifth amendments to
the Constitution of the United States. Pretermitting the question whether these
amendments applied to the action of the States, this court proceeded to examine the
all^^d violations of the fourth and fifth amendments, and put its decision upon the
ground that the papers found in the execution of the search warrant, which warrant
had a legal purpose in the attempt to find gambling paraphernalia, was competent
evidence against the accused, and their offer in testimony did not violate his con-
stitutional privilege against unlawful search or seizure, for it was held that such in-
criminatory documents thus discovered were not the subject of an unreasonable search
and seizure, and in effect that the same were incidentally seized in the lawful execu-
tion of a warrant and not in the wrongful invasion of the home of the citizen and the
unwarranted seizure of his papers and property. It was further held, approving in
that respect the doctrine laid down in 1 Greenleaf (section 254a), that it was no valid
objection to the use of the papers that they had been thus seized, and that the courts
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51
.ill die Goiirae of a trial would not make an iasue to determine that question, and many
State cases were cited supporting that doctrine.
The same point had been ruled in People v. Adams (176 N. Y., 351), iiom which
decision the case was brought to this court, where it was held that if the papers seized
in addition to the policy slips were competent evidence in the case, as the court
held they were, they were admissible in evidence at the trial, the court flaying
(p. 358): ''The underlying principle obviously is that the court, when engaged in
trying a criminal cause, will not take notice <^ the manner in which witnesses have
possessed themselves of papers, or other articles of personal property, which are
material and properly offered in evidence." This doctrine thus laid down by the
New York Court of Appeals and approved by this court, that a court will not in trying
a criminal cause permit a collateral issue to be raised as to the source of competent
testimony, has the sanction of so many State cases that it would be impracticable to
cite or refer to them in detail. Many of them are collected in the note to State v.
Turner (136 Am. St. Rep., 129, 135 et seq.). After citing numerous cases the editor
says: ''T£e underlying principle of all tJiese dedsiona obviously is that the coozt
when engaged in the trial of a criminal action will not take notice of the manner in
which a witness has 2>osBesBed himself of papers or other chattels, subjects ot evidence,
which are material and properly offered in evidence. People v. Adams (176 N. Y.,
351; 9a Am. St. Hep., 675; 68 N. E., 636; 63 L. E. A., 406). Such an investigation
is not involved necessarily in the litigation in chief, and to pursue it would be to
halt in the orderly progress of a cause, and consider incidentally a question whidi has
lu^pened to cross the path of such litigation, and which is wholly independent
thereof."
It is therefore evident that the Adams case affords no aulhority for the action of
the court in this case when applied to in due season for the return of papers seized
in violation of the constitutional amendment. The decision in that cases rests upon
incidental seizure made in the execution of a legal warrant and in the application
of the doctrine that a collateral issue will not be raised to ascertain the source from
which testimony, competent in a criminal case, comes.
The Government also relies upon Hale v. Henkel (201 U. S., 43), in which the
previous cases of Boyd v. United States, supra, Adams v. New York, supra. Interstate
Ck^nmierce Commission v. Brimscm (154 U. S., 447), and Interstate Commerce Com-
mission V. Baird (194 U. S., 25) are reviewed, and wherein it was held that a subpoena
duces tecum requiring a corporation to produce all its contracts and correspondence
with no less than six other companies, as well as all letters received by the corpora-
tion from 13 other companies located in different parts of the United States, was an
unreasonable search and seizure within the fourth amendment, and' it was there
stated that (p. 76) ^^ an order for the production of books and papers may constitute an
unreasonable search and seizure within the fourth amendment. While a search ordi-
narily impUes a quest by an officer of the law, and a seizure contemplate^^ a forcible
dispossession of the owner, still, as was held in the Boyd case, the substance of the
offense is the compulsory production of private papers, whether under a search war-
rant or a subpoena duces tecum, against which the person, be he individual or cor-
poration , is entitled to protection. ' ' If such a seizure under the authority of a warrant
supposed to be legal constitutes a violation of the constitutional protection, a fortiori
does the attempt of an officer of the United States, the United States marshal, acting
under color of his office, without even the sanction of a warrant, constitute an inva-
sion of the rights within the protection afforded by the fourth amendment.
Anotitier case relied upon is American Tobacco Co. v, Werckmeister (207 U. S., 284),
in which it was held that the seizure by the United States marshal in a copyright case
of certain pictures under a writ of replevin did not constitute an unreasonable search
and seizure. The other case from this court relied upon is Holt v. United States (218
U. S., 245), in which it was held that testimony tending to show that a certam blouse
Digitized by VjOOQIC
52
which wem in evidence as incriminating him imi6t t)een put upon the priBoner and
fitted him, did not violate his constitutional right. We are at a loss to see the applica-
tion of these cases to the one at hand.
The right of the court to deal with papers and documents in the possession of the
district attorney and other officers of the court and subject to its authority was recog-
nised in Wise v. Henkel (220 XT. S., 556). That papers wrongfully seized should be
turned over to the accused has been frequently recognized in the early as well as later
decisions of the courts. 1 Bishop on Criminal Procedure (sec. 210); Hex v. Bamett
(3 0. A P., 600); Rex v, Kinsey (7 0. & P., 447); United States v. Mills (186 Fed., 318);
United States v. McHie (194 Fed., 894, 898).
We therefore reach the conclusion that the letters in question were taken from the
house of the accused by an official of the United States acting under color of his office
in direct violation of ^e constitutional rights of the defendant; that having made a
seasonable application for their return, which was heard and passed upon by the court,
there was involved in the order refusing the application a denial of the constitutional
rights of the accused, and that the court should have restored these letters to the accused*
In holding them and permitting their use upon the trial, we think prejudicial error
was committed. As to the papers and property seized by the x>olicemen, it does not
appear that they acted under any claim of Federal authority such as would make the
amendment applicable to such unauthorized seizures. The record shows that what
they did by way of arrest and search and seizure was done before the finding of the
indictment in the Federal court, under what supposed right or authority does not
appear. What remedies the defendant may have against them we need not inquire, as
the fourth amendment is not directed to individual misconduct of such officials. Its
limitations reach the Federal Government and its agencies. Boyd case (116 U. S.),
supra, and see Twining v. New Jersey (211 U. S., 78).
It results that the judgment of the court below must be reversed, and the case re-
manded for further jnoceedings in accordance with this opinion.
(T. D. 1966.)
Income tax.
Advance payment of tax withheld by withholding agents not to be made prior to
30 days preceding the date on which the annual return is required to be filed.
Treasubt Depabtment,
Office of Commissioneb of Intebnai. Revenue,
Washington, D. C, March 23, 1914.
To collectors of internal revenue:
Attention is directed to note A appearing on the bottom of Forms
1012, 1012c, 1043, and 1044, providing that-
Withholding agents may, if they so desire, pay at the time this list is filed, to the
collector of internal revenue with whom the list is filed, the amoimt of tax withheld
during the month for which the list is made,
And to note A, Fonn 1042, providing that —
The amoimt of the tax withheld during the year for which the list is made, may be
paid to the collector at the time the list is filed.
In order that persons whose income tax is deducted and withheld
and is to be paid at the source, may have an opportunity to file with
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53
the source which is required to withhold and pay tax for them cer-
tificates claiming the benefit of deductions and exemptions provided
for in paragraph B and allowed in paragraph C of the law, withholding
agents will not pay to collectors of internal revenue the tax withheld
by them imder the law until after the time for filing claims for
deductions and exemptions has expired. See Regulations No. 33,
art. 33, (a) and (h).
W. H. OSBOBN,
Commissioner of IrUerrud Revenue. .
Approved:
W. G. McAdoo,
Secretary oftTie Treasury,
(T. D. 1966.)
Raisin amd pom^ice wine.
Treasuby Depaktment,
Offioe of Commissioner of Internal Revenue,
WasUngiony D. (7., March 28 ^ 1914.
Sie: In reply to your letter of the 26th instant you are informed
that T. D. 1949, while not sanctioning, does not prohibit the sale or
use of raisin or pomace wiae, heretofore permitted, provided such
wines are actually produced prior to May 1, 1914.
Respectfully, G. E. Fletcher,
Acting Commissioner of Internal Revenue.
Mr. , Philadelphia, Pa.
(T. D. 1967.)
Income ta/t.
OrganizatioDs, etc. , exempted by the fiirst proviso of paragraph G of section 2 of the act
of October 3, 1913, from payment of the income tax, are not subject to the provi-
sions of the income-tax law as withholding agents.
Treasuby BEPABTBiSNT,
Office of Commissioner of Internal Revenue,
WasUn/gton, D. C, March 26, 1914.
To edUeetors of internal revenue:
This office is in receipt of several communications relative to the
duty as withholding agents of religious corporations and other oi^ani-
zations which are specifically enumerated in the first proviso of para-
graph G of section 2 of the act of October 3, 1913.
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54
The language of said proviso is as follows:
Tbat nothing in this section sliall apply to labor, agricultural, or horticultural organi-
tttioDs, or to mutual savings banks not having a capital stock represented by shares,
or to fraternal beneficiary societies, orders, or associations operating under the lodge
system or for the exclusive benefit of the members of a fraternity itself operating under
the lodge s>'stem, and providing for the payment of life, sick, accident, and other
benefits to the members of such societies, orders, or associations and dependents of
such members; nor to domestic building and loan associations; nor to cemetery com-
panies, organized and operated exclusively for the mutual benefit of their members;
nor to any corporation or association organized and operated exclusively for religious,
charitable, scientific, or educational purposes, no part of the net income of nvhich
inures to tiie benefit of any private stockholder or individual; nor to business leagues;
nor to chambers of commerce or boards of trade, not organized for profit or no part of
the net income of 'which inures to the benefit of the private stockholder or individual;
nor to any civic league or organization not organized for profit but operated exclu-
sively for the promotion of social welfare.
You are therefore advised that the words "this section" are held
to refer to and mean the whole of section 2 of the act of October 3,
1913, which section comprises the income-tax law, and that the
words "nothing in this section shall apply to" were intended to
relieve such organizations, etc., as properly come within the classi-
fications referred to in the proviso quoted, riot only from the pay-
ment of an income tax but from every obUgation or requirement
imposed by any or all of the provisions of said section upon with-
holding agents.
RoBT. Williams, Jr.,
Acting Commissioner of Internal Revenue,
Approved:
W. G. MgAdoo,
Secretary of the Treasury.
(T. D. 1968.)
Use of rectified dcoJiol — Manufacture for export.
RegulationB relative to the use of rectified alcohol or other high-proof spirits in the
manufacture for export of flavoring extracts, medicinal, or toilet articles oiider
the provisions of paragraph O, section 4, act of October 3, 1913.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. a, March 2S, 1914.
Where alcohol or other high-proof spirit to be used in the manu-
facture of any of the above-named articles is to be rectified for that
purpose, the rectifier, before removing the same from the distiller's
original stamped packages, wiU file with the collector of the district
a Inquest for an official inspection and gauge of such spirits, which
request will be in the following form :
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55
Past!
<SWm*^-
To-
-, Esq.,
.101-.
Collector district of-
You are hereby requested to cause to be inspected and gauged the following-
described spirits contained in the distiller's original packages and now stored on my
(or eur) rectifying premises, located at , such spirits to be rectified for use in
the manufacture of certain articles for export upon which drawback of tax will be
claimed under the provisions of section 4, act of October 3, 1913:
Name of distiller and district.
Kinds
of
spirits.
Number
of
packages.
Serial
numbers of
packages.
Numbers
of tax-paid
stamps.
Proof
gallons.
, Rectifier.
Upon the receipt of the foregoing request the collector will cause
the spirits to be carefully inspected by a ganger, who will append to
the request made his certificate in the following form:
Past 2.
191-.
I hereby certify that on the day of -
-, 191-, the above-described packages
were carefully examined by me and foimd to be as described, and to contain proof
gallons of ■- — , and that the said spirits were in my presence conveyed directly
to a BtUl or receiving tank, containing no other spirits or only such other tax-paid
spirits as had been conveyed thereto, in my presence, from distiller's ordinal stamped
packages.
And I further certify that on the day of , 191-, the said spirits, after recti-
fication, were, in my presence, drawn into the following-described packages and were
duly inspected by me, as shown by the accompanying detail report on Form 59, and
that I believe the same to be the identical spirits previously removed from the dis-
tiller's original packages set forth in the accompanying request of .
Spirits in rectiJierU
i packages.
Kind of spirits.
Number of
paekages.
Serial num-
bers rectifier's
stamps.
Wine
gallons.
Degree
of proof.
Proof
gallons.
"fCkatger,
The above prescribed form will be required in addition to, and not
as a substitute for, Forms 122 and 237.
After the spirits have been rectified and duly inspected the collector
of the district will, on application of the rectifier or the manufacturer
* Until printed blanlcs of this form are furnished typewritten forms may be use^
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56
using such alcohol, issue his certificate, Form 646, modified ^ as the
circumstances require, which certificate wiU in every instance be di-
rectly transmitted ly such collector to the collector of customs to le desig-
nated in {he application fled. A duplicate of said certificate will
also be forwarded to the Commissioner of Internal Revenue.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 1969.)
Alcohol for scientific purposes.
Amending T. B. 1757 prescribing formulas for denaturing alcohol withdrawn for
scientific'purposes under section 3297, Revised Statutes.
Tbeashry Department,
Office of Commissioner of Internal Revenue,
Washington, D. 0., April 14, 1914'
To collectors of internal revenue and others concerned:
In order to secure uniformity in the issuance of .permits for the
withdrawal of alcohol free of tax under section 3297, Revised
Statutes, for scientific purposes by incorporated and chartered
institutions, and to safeguard the use of such alcohol under the pro-
visions of section 3297, Revised Statutes, and T. D. 1731, permits
for such withdrawals will be issued to hospitals and sanitariums to
which the 'privileges of this section have heretofore been extended
only on applications which contain in full the formula or formulas
embodied in the bond filed for the withdrawal of alcohol for such
institutions, which formula or formulas must have been previously
approved by the Coromissioner of Internal Revenue.
With a view to the destruction of the identity of the alcohol in the
chemical laboratories of such institutions, as set forth in article 1,
T. D. 1731, the following formulas have been approved by this office,
viz:
FOR ANTISEPTIC PUBFOSES IN QBNBBAL.
1. Alum, 10 grains, camphor 3 grains, alcohol 4 ounces.
2. Carbolic acid 1 part, alcohol 99 parts.
3. Formaldehyde 1 part, alcohol 250 parts.
4. Alum 2 oimces, sulphate of zinc 1 ounce, alcohol 1 gallon.
5. Alum 1 dram, camphor 1 ounce, alcohol 1 pint.
6. Bichloride of mercury 1 part, alcohol 2,000 parts.
1 In addition to the required description of original packages, a description of the packages containing
the rectified spirits should be given, showing the name of the rectifier, the wine gallons, degree of proof,
proof gallons, and serial numbers of the rectifier's stamps.
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57
7. Alum 2 ounces, salicylic acid 2 ounces, oil gaultheiia 2 ounees, water 1 pint,
alcohol q. s. 1 gallon.
8. Carbolic acid 2 drams, oil gaultheria 20 drops, alcohol 1 gallon.
9. Bichloride of mercury 0.8 gram, hydrochloric acid 60 c. c, alcohol 640 c. c,
water 300 c. c.
10. Bichloride of mercury 1^ grains, hydrochloric acid 2 drams, alcoh<d 4 ounces.
11. Bicarbonate of soda 3 ounces, extract of hamamelis 16 ounces, water 16 ounces,
alcohol 16 ounces.
12. Formaldehyde 2 parts, glycerin 2 parts, alcohol 96 parts.
13. Oil cajuputi 1 drs^, alcohol 1 pint.
14. Tannic acid 12 puts, alcohol 125 parts, water 125 parts.
15. Carbolic acid 1 dram, tannic acid 1 dram, alcohol 1 pint, water 1 pint.
16. Alum i ounce, formaldehyde 2 drams, camphor 1 ounce, alcohol and water
each 1 pint.
17. Lysol 1 part, alcohol 99 parta.
18. Liquor Cresolis Comp. (U. S. P.), 10 c. c. alcohol 1,000 c. c.
Applicants may incorporate one or more formulas in the condi-
tions of the bonds filed, but are restricted to the use of the alcohol
according to the formulas incorporated therein.
Withdrawals wiU not be permitted under bonds in which a formula
does not appear, and applications and bonds should not be submitted
to this office for consideration and approval which contain formulas
differing from those heretofore mentioned and which ha^e been
approved by this office.
As it is the policy of the office not to multiply the number of for-
mulas, and as it is believed that those above set forth will meet all
requirements, consideration will not be given to other formulas with
a view to their approval and publication.
The instructions herern contained supersede those contained in
T. D. 1739, in so far as the same are in conffict therewith.
RoBT. Williams, Jr.,
Acting Oommissioner of IrUemal Revenue.
(T. D. 1970.)
AdtbUerated hutter.
A product which comes within the clasBification of adulterated butter under act of
May 9, 1902, where manufactured for export to a foreign country on orders received
therefor, and where not in violation of the laws of Buch country, may be marked,
labeled, or branded ''Preserved butter."
Tbeasuby Depabtmekt,
Office of Commissioner of Intebnal Revenue,
Washington, D. C, AprUg, 1914.
To collectors of internal revenue and oOiera eoncerrked:
Under the terms of unpublished ruling of June 13, 1912, a product
coming within the classification of adtdterated butter as defined in
the act of May 9, 1902, where manufactured for export to a foreign
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58
country on orders or Bpecifications receired from the foreign cus-
tomers, may be marked, labeled, or branded "Preserved butter" when
not in violation of or in conflict with the laws of the country to which
exported, in accordance with the provisions of the pure-food law, act
of June 30, 1906, and the regulations made under authority thereof
by the Department of Agriculture.
Regulations No. 29, governing the exportation of articles free of
tax under the internal-revenue laws, are, therefore, modified accord-
ingly, in respect to the marking and branding of adulterated butter
for export.
W. H. OSBOSK,
Commissioner of Internal Revenue.
Approved:
W. G. McAboo,
Secretary of {he Treasury.
(T. D. 1971.)
Jlcoholfor scientific purposes.
Modifying department regulatLona of November 4, 1911 (Tr D. 1731), reBpectiog the
use of tax-free alcohol for scientific purposes.
Trbasuby Depabtmbnt, April £0^ 19H.
On a careful examination of the provisions of section 3297, Kevised
Statutes, authoring incorporated or chartered scientific institutions
or colleges of learning to obtain and use alcohol, free of tax, for cer-
tain specified [purposes, the term ^^ chemical, laboratory*' as used in
said section 3297 is held to include any allied laboratory, such as
physical or electrical laboratory, belonging to such institution or
college in which the alcohol so obtained is used purely for scientific
purposes.
So much of T. D. 1731 as conflicts herewith is hereby repealed.
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 1972.)
Raisin and pomace wines.
Construing T. D. 1949 of February 16, 1914, and T. D. 1966 of March 28, 1914.
Tbeasttbt Depaetment,
Office of Commissioner of Intebkal KEvsNtJE,
Washington, D. C, AprU 21, 1914.
Sm: In reply to yonr letter of the 14th instant relative to the
manufacture of raisin and pomace wine, you are informed that T. D.
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59
1966, referred to by you, does not authorize the use of pomace wine
I»poduced prior to May 1, 1914, in the manufacture of spirits or
cordials, as such use would be in direct violation of T. D. 1721 and
the bond given by the producer of such wine.
Begarding artificial wines in process of manufacture May 1 next,
you are informed that the provisions of T. D. 1949 are not intended
to apply to such wines which have been separated from the mash
prior to that date, although undergoing fermentation, provided no
artificial sweetening or other substance is subsequently added which
will produce further fermentation.
Respectfully, Robt. Williams, Jr.,
ActiTig Commissioner oflrUemal Revenue.
Cou-BOTOB Fifth District, Peoria, lU.
(T, D. 1973.)
IncoTne tax.
Revision of Form 1044, monthly list return of amount of normal income tax withheld
by first bank or coUecting agency.
Treasubt Department,
Office of Commissioner of Internal Revenue,
Washington, D. O., April £1, 1914.
To coReetors of internal revenue:
Collectors are hereby advised that Form 1044, for monthly Kst
return of amount of normal tax withheld by first bank or coHectiii^
agency, has been revised in the following particulars, so that the tax
withheld from interest on bonds of diflFerent classes or of more than
one organization can be reported thereon:
In the section of reading matter beginning, "To be made in dupli-
cate," in the fourth line thereof, change "coupon" to "coupons," and
strike out " and interest orders."
In the last line, next above the tabular Ust, strike out the blank
lines and the words therexmder, "Describe the particular issue of
bonds," and "State name and address of debtor organization^"
Strike out the headings in the tabular list and substitute therefor,
in separate colunms, "Party presenting coupons," and immediately
thereunder, in separate columns, "Name" and "Address," "Name of .
debtor corporation," "Name of particular issue of bonds," "Amount
of income subject to tax," and "Amount of tax withhdd."
Immediately after and under the line of totals of the tabular list
there shall be a double rule line. Strike out the words now appearing
below the total line of the tabular list on Form 1044, viz, "Amount of
tax remitted herewith (if any) Jo collector," and strike out the dotted
Digitized by VjOOQIC
60
line foUowing these words, and aJso the dollar mark on the same line,
and strike out the double rule line appearing immediately thereunder.
Strike out all of Note A appearing at the bottom of the form.
W. H. OSBOBN,
Cammiasianer of Intetynal Revenue.
Approved:
W, G. MoAnoo,
Secretary of the Treasury.
(T. D. 1974.)
Incorne tax.
Change of regulations as to certificates of ownership in connection with interest orden
or checks for interest on registered bonds.
Tbeasuet Depabtment,
Office of CoiofissioNEB of Intebnal Revenue,
Washington, D. (7., April 21 , 1914.
To collectors of internal revenue:
Articles 41 to 46 of the regulations are hereby amended bo as to
require, in the case of interest payments on bonds regbtered as to
both principal and interest, that debtors in such cases shall deduct
the normal tax of 1 per cent from accruing interest on all such bonds
before sending out orders or checks for said interest to re^stered
owners, unless there shall be filed with said, debtors, at least five days
before the due date of said interest, the prescribed certificates claiio-
ing exemption.
Where such certificates are so filed the said debtors shall stamp
or write on the interest orders or checks, as the case may be, "Exemp'
tion daimed hy certificate filed with debtor.^'
Where prescribed certificates are not so filed, said debtor shall
deduct and withhold the normal tax of 1 per cent from the amount of
such payment, and shall stamp or write on the interest order or
check, as the case may be, '* Income tax wiOiheld hy dehtor.''
Responsible banks, bankers, or collecting agents receiving for col-
lection interest orders or checks bearing the aforesaid indorsements
may present said interest orders or checks for collection without
requiring that certificates of ownership be filed therewith.
Certificates of ownership are not required to accompany interest
orders or checks in payment of interest on fully registered bonds, as
information as to ownership of bonds will be furnished by debtor
organizations on monthly list returns. Form 1012; but claim for
exemption must be filed with debtors, or the tax must be withheld;
and the form of certificate provided for use of owners of coupon
bonds may be used by owners of registered bonds for the purpose of
claiming this exemption.
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61
Where, because of failure to file certificates claiming exemption,
in compliance with above regulations, a part of the income from
interest on registered bonds has he&a withheld for the payment of
the normal income tax, debtors may, upon the filing of the proper
certificates as provided in article 42, Income Tax Regulations, to
the extent of exemption claimed, release and pay to the persons
entitled thereto the amount of such income so withheld.
W. H. Obboen,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury,
(T. D. 1975.)
Denatured alcohol.
Modification of special formula No. 4, to be used in the denaturing of rum for manu-
facturers of tobacco.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, April 25, 1914.
Sir: This office, at the request of , has decided to
modify special formula No. 4, which is used in the denaturing of rum
for the use of manufacturers of tobacco. The revised formula is as
follows:
No. 4. One gallon of the following solution: Five gallons of an aqueous solution con-
taining 40 per cent nicotine; 0.4 pound acid, yellow dye (fast yellow Y); 0.4 pound
tetrazo brilliant blue; 12 B. conct.; water to make 100 gallons.
The tobacco denaturant must conform to the following analytical requirements:
Determination of nicotine. — It must contain not less than 1.88 per cent of nicotine
when tested by the following process:
Twenty c. c. of the solution are measured into a 500 c. c. Kjoldahl flask, provided
with a suitable bulb tube, 10 c. c. of N/10 alkali added, the liquid made up to 50
CO., and distilled in a current of steam until the distillate is no longer alkaline (about
600 c. c). The distillate is then titrated with N/10 H2SO4, using rosolic acid as an
indicator. Not less than 23.2 c. c. should be required for the neutralization.
Teat of coloring matter. — ^Take 1 c. c. of the denaturant and make up to 100 c. c. with
water, acidulating with a few drops of H2SO4. Immerse in this solution a pi^e of
white cotton cloth and boil the solution . Ck>ntinue the process, adding more cloth and
more water if necessary, until all the blue color in the solution is fixed on the cloth.
Then add a piece of white woolen cloth, and boil the bath as before until all the yellow
color is fixed upon the cloth . Both the cotton and woolen cloths should show decided
colorB— the cottcm blue and the woolen yellow.
Intensity of color. — ^The denaturant solution, when observed in an eighth-inch cell
of Lovibond's tintometer, must show a color of an intensity not less than No. 24 yellow
combined with No. 3 blue.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue.
CoLLBOTOB Third District, Boston, Mass.
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62
(T. D. 1976.)
Income tax.
Supplemental regulations prescribing revised forms of certificates of ownerflihip, ex-
emption, and substitute certificates in lieu of such certificates now in use.
TBEAsmtT Depabthbnt,
Office of Commissioneb of Internal Bevenue,
Washington, D. C, May «, 1914.
The following certificates are prescribed in lieu of certificates now
in use, and are to be used in complying with the income-tax regula-
tions requiring the filing of certificates when presenting coupons
or interest orders for collection:
Revised Form 1000,
Ownership Certificate— InJivtrfua^-EXEMPTION NOT CLAIMED,
shall be in the following form and shall be printed on white paper:
OWNEBSHIP CeRTDIGATE — IndIYIDUAL — ^EXBMPTION NOT CLAnCBD.
(To be furnlahed with coupons or Interest orders showing ownership of bonds.)
Form
1000.
Revised.
(Oive name of debtor.)
(Fi]U description of bonds, giTii« name of isBW and interasl imt^
, 191. . Amount of coupon or regiatered interest, $. . . .
(Date of maturity oMnterest.)
I do solemnly declare that I am a citizen or resident of the United States
and am the owner of the above-described bonds from which were detached
the accompanying coupons, or from which I amentitled to the above-described
registered interest, and that all of the information as given in this certificate
is true and correct. I do not now claim exemption from having the normal
tax of 1 per cent withheld from said income by the debtor at the source.
Date, ,191..
* Note l.—To be filled in only when
duly authorized aeent executes this cer-
tificate for owner, in which case the name
and address of owner must b» given, and
collecting agent first receiving certificate
must stamp across face, "Satisfied as to
identity and responsibility of agent" «
(giving name and address of collecting
agent).
Note 2.— If securities are owned jointly
by several persons one may sign, and the
names, addresses, and proportion of owner-
ship of each, indorsed on the back hereof.
NOTE 3.— When numbers of bonds are
required to be given, same are to be en-
tered on back hereof.
(Usual business signature of owner of
bonds.)
(FuU postoiBoe address of owner.)
l»By Agent.
(Usual business signature of agent antbor-
ised to sign for owner.)
(FuU post-office address of agent.)
(signatures must bb clsaslt and lsoiblt wbhtbh.)
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63
On the back of said certificate there shall be printedi for tne use
of joint owners of bonds, the following form, to wit:
JOINT OWNBB8.
If securitiefi described on other side are owned jointly, the names and addresses of
owners and the proportion of ownership of each should oe given.
Names.
Full post-ofBoe addresses.
-
•
Kevised Form 1000 B,
Ownership Certificate— Jn(KimiuaZ— EXEMPTION CLAIMED,
shall be in the following form, and shall be printed on yellow paper:
Form Ownership Cbethtcatb — Individual— Exemfhon Claimed.
4"52u5 * (^o ^ furnished with coapons or interest orders showing ownership of bonds and amount of
Beyuea. exemption claimed under paragraph C of the Federal income-tax law.
g
H
a
i
« ^
(Give name of debtor.)
(Full description of bonds, giving name of issue and interest rata.)
^191..
(Date of maturity of mterest,)
Amount of coupon or registered interest, $
Total exemption allowed under paragraph C, I
Amount of exemption now claimed, I
I do solemnly declare that I am a dtizwi or resident of the United States
and am the owner of the above-deecribed bonds from which were detached
the accompanying coupons, or from which I am entitled to the above-
described registered interest, and that all of the informatiaQ as given in this
certificate is true and correct.
Date, ,191..
* Note 1.— To be filled in only when du-
ly authorized aeent executes this certificate
for owner, in which case the name and ad-
dress of owner must be given, and collect-
ing agent first receiving certificate must
stamp across face "Satisfied as to identity
and responsibility of agent'' (giving name .
and address of collecting agent).
Note 2.— If securities are owned Johitiy
by several persons one may sign, and the
names, addre^es, and proportion of own-
ership of each indorsed on the back hereoL
Note 3.— When numbers of bonds are
required to be given, same are to be
entered on beck hereof.
(Usual business signature of owner of
bonds.)
(Pull pos^offioe address of owner.)
W *By , Agent.
(Usnal business signature of agent authorised
to sign for owner.)
(Full post-office address of acent.)
(signatures MtJST BB CLSARLT AND LEGIBLY WBITTBN.)
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64
On the baCK ot said certificate there shall be printed, for the use
of joint owners of bonds, the following form, to wit:
JOINT OWNXBfi.
If flecurities described on other side are owned jointly, the names and addresses
of owners and the proportion of ownership of each should be given.
Names.
Fun po8t-offlce addresses.
owned.
X
1
1
1
1
1 ■
Revised Form 1001,
Ownership Certificate— FIRMS AND ORGANIZATIONS,
shall be in the following form, and shall be printed on yellow paper:
OwNEBSHip Certificate — ^Fibms and Orqanizations.
Form
1001.
Reiviaed.
(Showing ownership of bonds, which is to be furnished by firms or organizations not subject
to withholding of tax on interest at source.)
(Give name of debtor.)
(Full description of bonds, giving name of issue and Interest rate.)
, 191- . Amount of coupon or registered interest, $
(Date of maturity of interest.)
I do solemnly declare that the firm or organization named below, and of
which I am a member or an officer, is the owner of the above-described
bonds from which were detached the accompanying coupons, or upon
which there is due the above-described registered interest, and that under
the provisions of the Income Tax Law and Regulations said interest is
exempt from having the tax withheld at the source, and that all the informa-
tion given herein is true and correct.
Date, , 191 . .
(Name of firm or organization.)
(Signature of person duly authorised
to sign, and iiis oflicial position.)
By.
AddresB:
(Oive full post-offlce address of firm or
organization.)
Note.— When numbers of bonds are required to be given, same are to be entered on
back hereof.
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65
Revised Form 1002,
OERTIPIOATE FOR USE OF FIRST BANK OR COLLECTING AGENCY,
shall be in the following form, and shall be printed on green paper:
Form Cbbtifioatb of Bank ob CouaEoriNa Aobnot.
1002.
Revised ^'^^ ^ presented with coupons or interest orders when not aooompanied by cectifioate of
owners.)
H
ti
'^ 8
d
m M
(Give name of debtor.)
(Full description of bonds, giving name of issue and interest rate.)
,191..
(Date of maturity of interest.)
Amount of coupon or registered interest, $. . . .
^ I (we) do solemnly declare that the bank or collecting agency named be-
low has purchased or accepted for collection the accompanying coupons or
interest orders from
(Name of party from whom received.)
X' of.
(Full postoffioe address of said party.)
and that no certificate of ownership accompanied said coupons or interest
orders, and that I (we) have no knowledge as to who is the owner or owners
of the bonds (except as noted on back hereof)* upon which the above-
described interest is due, and the bank or collecting agency hereby acknowl-
edges responsibility of withholding therefrom the normal income tax of
1 per cent, in accordance with the regulations of the Treasury Department.
Date, ,191..
(Bank or collecting agency.)
By
(Signature of officer authorized to'sign and official position.)
(Full address of bank or withholding agency. )
*NoTE. — If the ownership of bonds is known to person signing this certificate, he must glvt
the name and address of the owner on the back hereof.
(signatures must bb olbably and legiblt wbitten.)
27776°--voL. 16—14 5
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66
Bevued Form 1004,
OwiimhipGertiiicat&-NONRESIDENT ALIENS,
shall be in the fonowing form, and shall be printed on yellow paper:
^^^ OWKSBSHIP CntnnCATS—NONBBSIDBlfT AUXNB.
BtfTlwd. n (To beftiniMiad wMi ooapoM detedMd from bopa$ or oClMr dtUg^tioBB owned by cJtiieiis
or lobjaeta, firms, oorporatloiis, or orgHDindooi of fonigB eo unti le i and who an not rest-
denti or the United Statei.)
3
I
(Ghrei
(Fon dBMffptkia ofboods, gfring I
I oftane and intarart nta.)
, 191. . Amount of coupon or registered intoest, $
(Date or maturity or intarert.)
I do solemnly dedaie that the owner d the bonds bom which were
detached the aeeompanyins coupons, or upon which theie matured the
sfo res ni d registered interest, is a nonresident alien in respect to the United
States, and is exempt from the income tax imposed on such income by the
United States Government under the law enacted October 3, 1913; that
no citizen of the United States wherever residing, or foreigner residing in
the United States or in any of its posBesBions, has any interest in said bonds;
and that all of the information as given in this certificate is true and cooect.
Date,
191..
(SigDatnre or owner or, if orguintioo, i
It)
(If
to sign, and official poritlM.)
(FuU post-offloe address of owner.)
NoTX.— When nmnlMrs of bonds are required to be given, same are to bo
(SIONATUBSS MUST BE CLSABLT AKD LBGIBLT WBimN.)
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67
Revised Form 1007,
CERTIFICATE CLAIMING EXEMPTION,
aUowed citizens and resident aliens under paragraph C, diall be in
the following form, and shall be printed on yellow paper:
EZBMFTION CbbTXFKGATB .
Fona
1007.
Revised.
I
I,
(For ftlatming ezemption at the souice as provided in paiagraph C of the Federal
law of October 3, 1913.)
To
(Give name of withholding agent.)
(Full post-offioe address.)
I hereby serve you with notice that I am single— married, with my (wile-
husband) Living with me, and that I now claim the benefit of ibe ezemp-
tion of $ ,88 allowed in paragraph C of the Federal income tuc law
of October 3, 1913 (my total exemption under said paragraph b^ng
I ).
Date, ,191.. Signed: \
Address:
(Fall po8tH>ffioe address.)
Note.— Claim for exemption on Form 1007 can be filed with the debtor or withholdfag aeent
at any time, not less than 30 days prior to March first next snooeeding the year ftr wikioh
ezemption is claimed.
(SIOXATUBES MUST BE GLBABLT AND LBGIBLY WBITTBN.)
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68
Beviaed Form 1016,
Ownenhip Certificate—FIDUOIABY, THE SOUBOE,
shall be in the following form, and shall be printed on yellow paper:
Fonn
1015.
Bellied.
SI
OwNEBSHiF Cbbtificatb— Fiduciary, The Soubgb.
(To be fUed with debtor or wtthhoULiiig agents by fldaclarles claiming ezemptiaa from witb^
holding at the sooroe.)
(Qive name of debtor.)
(Full description of bonds, giving name of issue and interast rate.)
, 191 . . Amount of coupqn or registered interest, $. . . .
(Date of maturity of interest.)
I (we) do solemnly declare that the estate or trust named below is the owner
of the above-described bonds from which were detached the accompanying
coupons, or upon which there is due the above-described registered int^est,
and acting for the estate or trust in the capacity herein stated, I (we) hereby
declare that I (we) do now claim exemption from having the nonnal tax of
1 per cent witteheld from said income by the debtor at the source. I (we)
hereby assume the duty and responsibility, imposed upon withholding
agents under the law, of withholding and paying the income tax due, for
which I (we) may be liable.
Date,
(Name of fiduciary.)
.,191.. For
(Capacity in which acting.)
(Name of estate or tnist.)
(Full po8t-«!ffioa address.)
NoTB.~Whfln numbers of bonds are required to be given, same an to be entend on the baok
hereof.
(signatures must be clearly and legibly wriitbn.)
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69
Revised Form 1019,
Certificate of Ownership— FIDUCIARY, NOT SOURCE,
shall be in the following form, and shall be printed on white paper:
OWMBBSHIP CbBTDIOATB. — ^FXDUGIABY, NOT SOUBOB.
Form
1019.
Seyind.
3
H O
(To beflJed withdebtororwithholding agents by fiduciaries when not daiming any «semptk»,
as an altematlve to the flUng of Form No. 1015 in which exemption is claimed.)
(Give name of debtor.)
(Full description of bonds, giving name of issue and interest rate.)
, 191. . Amount of coupon or registered interest, $. • . .
(Date of maturity of interest.)
I (we) do solemnly declare that the estate or trust named below is the
owner of the above-described bonds from which were detached the accom-
panying coupons, or upon which there is due the above-described registered
interest, and acting for the estate or trust in the capacity hereia stated, I (we)
hereby declare that I (we) do not now claim exemption from having the
normal tax of 1 per cent withheld from said income by the debtor at the
source.
Date,
(Name of fiduciary.)
.,191., For
(Capacity in which acting.)
(Name of estate or trust.)
(Full post-office address.)
NoTS.—- When numbers of bonds are required to be given, same are to be entend
on the back hereof.
(signatures hust bs clearly and legibly writtbk.)
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70
Form 1058,
Substitate Certificate— EXEMPTION CLAIMED,
shall be in the following form, and shall be printed on yellow paper:
Form
1058.
H
g
i ^
SUBSTITUTB CbHTDIGATB— EZEMFHON ClAIMBD.
(To be attached to intenst ooupoos when the coUectiiig agent's certificate Is salw U tuted for
the ceriflcate of owner in which exemptian was claimed.)
(Give name of debtcr.)
(Full description of bonds, giving name of issue and interest rate.)
, 191. . Amount of coupon or registered interest. $.
(Date of matozity of Interest.)
Total exemption allowed under paragraph C, |
Amount of exemption claimed, |
I (we) do solemnly declare that the owner of the above-described bonds
from which were det»ched the accompanying interest coupons has filed
with me (us) a certificate of ownerahipy Form No , duly executed
and filled in according to Treasury Begnlations, which cerdficate has been
indorsed by me (us) as required by Treasury Begulations, and that under
the provisions of the income tax law and regulations, said interest is exempt
from the withholding and payment of the income tax at the source^ ov
that exemption was claimed as stated herein; and I (we) do hereby promise
and pledge myself (ourselves) to forward the said certificate to the Com-
missbner of Internal Revenue, at Wadiington, D. C, not later than the
20th day of next month, in accordance with Treasury Regulations.
Date,
No.
., 191.
By
(Name of bank or collecting agency.)
(Signature of •petsoa authorized to sign, and his official position.)
(Full post-office address of collecting agen^.)
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71
Fonii 1059,
SubstitateCertifiGate— EXEMPTION NOT CLAIMED,
shall be in the following form, and shall be printed on white paper:
SUBSTTTUTB ObBTIFIGATB — ^EXEMFHON NOT ClAIHBD.
Fonn
1059.
(To be attached to IntereBt ooapoos when collecting agent's certificate Is satastitated for cectifU
cate of owner in which exemption was not claimed.)
(Give name of debtor.)
(Full description of bonds, givinf name of issue and interest rate.)
, 191. . Amount of coupon or registered interest, $
(Dale of maturity of Interest.)
I (we) do solemnly declare that the owner of the above-described bonds
from which were detached the accompanying coupons has filed with me (us)
a certificate of ownership, Form No , duly executed and filled in
according to Treasury Regulations, which certificate has been indorsed by
me (us) as required by Treasury B^;ulations, and which certificate did not
claim any exemption from having the normal tax of 1 per cent withheld by
the debtor at the source; and I (we) do hereby promise and pledge myself
(ourselves) to forward the said certificate to the Commissioner of Internal
Revenue at Washington, D. 0., not later than the 20th day of next month,
in accordance with Treasury Regulations.
Date,
.,191..
By
No.
(Name of bank or collecting agency.)
(Signature of person authorized to sign, and
htt official position.)
(FuU post-office address of collRfltfiig agency.)
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72
All certificates shall be, in size, 8 by 3i inches, and shall be printed
to read from left to right alon§ the 8-inch dimension.
All certificates daiming exemption shall be printed on yellow paper;
all certificates not claiming exemption shall be printed on white paper;
and certificate Form 1002, for use by the first bank or collecting
agency, shall be printed on green paper.
All paper upon which certificates shall be printed shall correspond
in weight and texture to white writing paper 21 by 32, about 40
pounds to the ream of 500 sheets.
Certificates heretofore authorized, when properly executed, will be
accepted up to October 1, 1914.
The revised certificates hereby provided will be printed by the
Government and furnished without cost for the use of bond owners.
All existing regulations which may be in conflict with the prescrip-
tions of this regulation are hereby superseded.
Individuals or organizations desiring to print their own certificates
may do so, but certificates so printed must conform in size and be
printed in similar type, upon the same color, shade, and weight of
paper as used by the Government.*
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasfwry.
(T. D. 1977.)
Income tax.
Ownership certificate to be executed by foreign banks, bankers, etc., claiming
exemption of nonresident alien from income tax on Interest on bonds owned
by 'said nonresident aUen, viz: Citizens or subjects, fiims, corporations, or
organizations of foreign countries who are not residents of the United States.
Treasuby Depabtment,
Office of Commissioner of Internal Revenue,
WasTmigUm, D. C, May S, 1914.
For the pm^ose of complying with income-tax regulations requir-
ing the filing of certificates of ownership of bonds when presenting
coupons or interest orders for collection of interest on bonds of
domestic corporations ' of the United States owned by nonresident
aliens as to the United States, a certificate in the form following is
1 Sample certificates showing size of type and color of paper can be secured from collectors of internal
revenue in their several districts or from the Commissioner of Internal Revenue at Washington, D. C.
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73
provided, which may be executed by responsible banks or bank-
ers in foreign countries for and in behalf of nonresident alien owners
of bonds of United States corporations:
Form
1060.
H
ii
Ownership Certificate — ^Nonresident Alien — ^To be Execxttbd
BT Banks, Bankers, Etc.
(For use by foreign banks or bankers, to accompany coupons detached from bonds or other
obligations owned by citizens or subjects, firms, corporatiens, or organisations of foreign
countries, and who are not residents of the United States.)
(Give name of debtor.)
(Full description of bonds, giving name of issue and interest rate.)
,191.. Amount of coupon or registered interest, S
(Date of maturity of Interest.)
I (we) do solemnly declare that the owners of the bonds from which were detached the accom-
panying coupons or upon which there matured the aforesaid registered interest are nonresident
aliens as to tne United States and are exempt £rom the income tax imposed on such income by
the United States Government under the law enacted October 3, 1913; that no citizen of the
United States, wherever residing, or foreigner residing in the United States or in any of its pos-
sessions, has any interest in said Bonds; and that all of the information as given in this certificate
is true and correct. I (we) hereby agree that if at any time within three years from the date of
^1- ^^*^in^*^ «. oitoii a<r^*wiai> <-i,«t f iiA hicome or any part thereof represented or covered by this
ca nal tax imposed by the United States, upon presentiatioB
of rom, or througih the Commissioner of Internal Revenue.
W id remit to the United States Government the amount of
ta reby further agree that whenever in the judgment of the
C( hall be necessary jn or to the administration of the income-
ta the said Conmiissioner of Intemal ReVenue, disclose and
fu les of the owners and the amounts of the bonds aforesaid.
Date, ,191..
(Name of banli or banker.)
By
(Signature of official authorized to sign.)
(6fflciaipos{tioii.y
(Fiiii postHiffice address of bank or banker.)
NoTS.— When numbers of bonds are required to be gtven, same are to be entered on baok
hereof.
(signatures must be clearly and legiblt written.)
When foreign banks or bankers shall use the foregoing certificate,
they may include in one certificate all the coupons from bonds of the
same class and same issue, and may include in one certificate all the
interest orders or checks for interest on registered bonds of the same
class and same issue.
The above certificate shall be in size 8 by 3J inches, and shall be
printed to read from left to right along the 8-inch dimension.
The certificate shall be printed on yellow paper and such paper
shall correspond in weight and texture to white writing paper 21 by
32, about 40 pounds to the ream of 500 sheets.
The revised certificate hereby authorized will be printed by the
Glovenmient and furnished without cost.
Individuals or organizations desiring to furnish their own certifi-
cates may do so, but certificates so printed must conform in size to
that prescribed above and be printed in similar type upon the same
color, shade, and weight of paper as used by the Grovemment.
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74
Sample certificates ahoiving size of type and color of paper can be
secured from collectors of internal revenue in their several districts,
or from the Commissioner of Internal Eevenue, Washington, D. C.
W. H. OSBOBN,
CammUsioner of Intemdl Revewae.
Approved:
W, G. MoAdoo,
Secretary of ike Treasury.
(T. D. 1978.)
Denatured cUcoTiol — Bromine absorption number.
In testing wood alcohol by the bromine absorption number, the rate of flow through
the burette shall not exceed 5 c. c. per minute.
Treasuby Depabtmbnt,
OFFrcB OF CoBfMissiomsB OF Intebnal Revenue,
WasUngUm, D. a, April SO, 1914.
Sm: This office is in receipt of various commtmications from you
concerning the bromine absorption test as used in the analysb of
wood alcohol submitted for denaturing purposes. Complaint was
made to you, as well as to this office, that the rate of flow through
the bturette which you were using was not fast enough.
After a careful investigation in the laboratory of this office it has
been decided that your contention was correct, and that the rate of
flow as used by your laboratory is satisfactory.
For the guidance of all authorized denatured-alcohol chemists, it
is hereby directed that in testing wood alcohol by the bromine ab-
sorption niunber tJie rate of flow through the burette shall not exceed
S e. c. per mimUe.
Respectfully,
W. H. Osbobn,
Commissioner of Intemdl Revenue.
Mr. .
(T. D, 1979.)
Claims — Decision of Court of Claims.
1. Clajub fob Rbfukd.
Claims for refund of taxes illegally collected must be presented to the Gommis-
sbner of Internal Revenue within two years after the cause ot claim accrues.
2. Claims Sued pob nr Codbt of Claims.
Siiits for the recovery of internal-revenue taxes alleged to have been illegally
collected not commenced within two years after the cause of action accrues can
not be prosecuted in the Court of Claims, notwithstanding the general statute of
limitations of actions in that court is six years.
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75
3. "RvhB OF Intbbpbetation.
Statutes in pari materia are to be construed together, and repeals by implication
are not &vored il the acts can reasonably stand together.
Treasuby Department,
Office of Commissioneb of Internal Revenue,
Washington, D. C, \May 9, 1914-
The appended decision of the Court of Claims of the United States
in the case of Fort Pitt Gas Co. v. United States is published for the
infonnation of internal-revenue officers and others concerned.
W. H. OSBORN,
Oammiasioner of Internal Revenue.
OouBT OF Claims of thb Unitbd States. No. 30191.
P>ecided Jan. 12, 1914.]
Fart put Qa» Co. v. United States,
Oampbbll, Chief Justice, delivered the opinion of the court:
Suit is brought to recover certain taxes assessed and paid under the provisions of
section 27 of the war-revenue act of 1898. The claim is that by reason of the character
of claimant's business the taxes were wrongfully or unlawfully collected and shotdd
be repaid.
TheDB was assessed against claimant upon the August list, 1900, for the months of
April and May of that year, by the proper internal-revenue collector upon its gross
rece^ktain excess of $250,000 the sum of $50.93, which, together with the added penalty
and interest of $18.85, or a total of $69.78, was paid on August 1, 1903, under protest
to the collector. There were also asMsssments against claimant by the assessment lists
during 1901 and up to and including June, 1902, and payments thereof made in the
aggregate sum of $2,299.04. The times of the several payments by claimant, other than
the payment first mentioned above, are not shown by the evidence.
The claimant having paid on August 1, 1903, said sum of $69.78 (tax, penalty, and
interest), filed its application with the Commissioner of Internal Revenue, praying
that the same be refunded. This application was filed August 28, 1903, and was dis-
allowed by the commissioner on November 10, 1905. Something more than a year
thereafter (November 20, 1906) claimant filed a second application with the commis-
sioner, wherein is set forth a numberof payments of taxes paid by claimant, amounting,
as therein stated, to $1,813.81, and its former application, which had been disallowed
as aforesaid, is referred to and made '*a part of this application.'''
The claimant thereupon ''makes application for the reopening of its said claims"
and prays that said sum of $1,813.81 be repaid to it.
The commissioner's action upon this second application was on May 22, 1907, when
he allowed the claim to the extent of $69.78, being the amount named in the first appli-
cation, and denied the balance upon the ground that the application was not made
within the time prescribed by section 3228, Revised Statutes.
The war-revenue act of 1898 ia large measure, and particularly section 27 thereof,
was repealed by the act of April 12, 1902, effective July 1, 1902 (32 Stat. L., 99), more
than one year before the alleged date of the payment of the tax penalty and interest
upon which the first application to the commissioner was predicated in August, 1903.
The method used to coUect this tax penalty and interest, $69.78, nearly three years
after its assessment for the months of April and May, 1900, and more tlian one year
after the repeal of the law under which it was assessed is not apparent from the record,
Digitized by VjOOQIC
76
but the commissioner found that no application for a refund of the other payments was
made in time and it appearing that no penalty or interest was collected upon the assess-
ments made subsequent to that for April and May, 1900, it is to be inferred that all of
the payments of the tax (except the $69.78) were made when they respectively became
due, which was during 1901 and 1902. But the case is not altered in our view if all the
pa3anents were made in August, 1903. Sections 3220 et seq., Revised Statutes, pro-
vide a method whereby taxes wrongfully exacted or collected may be refunded or suit
brought therefor. Section 3228 provides that claims for refundment of ' 'any internal-
revenue tax aU^;ed to have been erronebusly or illegally assessed or collected without
authority or of any sum alleged to have been excessive or in any manner wrongfuUy
collected must be presented to the Commissioner of Internal Revenue within two yean
next after the cause of action accrues.''
Section 3227 provides that no suit shall be maintained ' 'in any court'' for the recov-
ery of any internal-revenue tax alleged to have been erroneously or illegally assessed
or collected, or in any manner wrongfully collected, ' 'unless the same is brought within
two years next after the cause of action accrued. ' '
Section 3226 provides for an appeal to be made to the Commissioner of Internal
Revenue, "according to the provisions of law in that regard and the regulations of
the Secretary of the Treasury established in pursuance thereof, and a decision of the
commissioner has been had therein: Provided, That if such decision is delayed more
than six months from the date of such appeal, then the said suit may be brought,
without first having a dedsion of the commissioner, at any time within the period
limited" by section 3227.
Afl to the nature of the appeal contemplated by section 3226, we refer in this con-
nection to the Chesebrough Case. (192 U. S., 253, 263).
The general statute of limitations of actions in this court (sec. 156, Judicial Code)
prescribes that a claim is barred unless the petition be filed "within six years after
the claim first accrues." This statute, fixing a rule applicable to cases generally, is
not necessarily inconsiBtent with the sections of the Revised Statutes above men-
tioned, which ^ the limitation for a particular class of cases ''in any court." Statutes
in pari materia are to be construed together, and repeals by implication are not
favored if the acts can reasonably stand together. The Distilled Spirits (11 Wall.,
365); State v, StoU (17 Wall., 425, 436); Rodgers' Case (36 C. Cls., 266; 185 U. S., 83);
Petri V, Creelman Lumber Co. (199 U. S., 487, 497). "The general statute is read as
silently excluding from its operation the cases which have been provided for by the
special one." (Endlich Inter. Stat., sec. 223.) We deem it unnecessary to decide
the question as to whether a suit can be brought in this court under the statute appli-
cable to this court or should be brought in the class of cases under consideration
against the collector, because, under the view we take, the claimant's cause of action
is boned, even if the court have jurisdiction of such a suit brought in time. We hold
that the limitation fixed by section 3227, Revised Statutes, is applicable and not the
six-year limitation of section 156, Judicial Code. Christie-Street Com. Co. v. United
States (129 Fed., 506; 136 Fed., 326); Schwarzchild-Sulzbeiger & Co. v, Rucker,
collector (143 Fed., 656).
The cases of James r. Hicks (110 U. S., 272) and Stewart v. Barnes (153 U. S.,
456), to which we have been referred by counsel, are not opposed to the view we
have taken. In the first of these cases the cause of action arose prior to the act of
June 6, 1872 (now sec. 3227, Rev. Stat.), and came within the saving clause of the
proviso in section 3227. Similarly, the second of said cases involved taxes paid
in 1869 and was within the proviso of said section 3227. If the claimant could wait
for a decision by the commissioner upon his application, it yet appears that the first
application, filed August 28, 1903, was rejected by the commissioner November 10,
1905, and no action was brought in this court within two years thereafter. A second
application was made to the commissioner in November, 1906, to reopen the case^
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•77
and this second application was in part granted on April 29, 1907, but this application
or the granting of it did not have the effect of suspending the running of the limitation
plainly fixed by the statute. The commissioner had rendered his decision, and
whether the cause of action accrued at the end of six months from August 28, 1903,
as we hold it did, or at the date of the decision by the conmiissioner, in November,
1905, the acUon here is not in time.
It follows that the petition should be dismissed, and it is so ordered.
(T. D. 1980.)
OaugiTig instruments.
Evidence of breakage or unfitness for use to be furnished when application is made
for replacement.
Treasury Department,
Office of CoifMissiONER of Internal Revenue,
WaslmigUyny D. C, May 14, 1914-
To collectors of internal revenue:
Hereafter, when application is made to you by gauging officers for
additional gauging instruments to replace those aUeged to have been
broken, you will require the applicant to return the metal backs of the
thermometers and the labels from the bulbs of the hydrometer stems
to your office. Where hydrometer boxes or cups require replace-
ment because of their unfit condition, the box or cup or some por-
tion thereof should be returned to you.
In cases where it is impossible to submit ocular proof of the break-
age or unfit condition of the instrument or apparatus to be replaced,
the applicant should be required to file with the collector a written
statement, setting forth the circumstances in detail and giving the
reason why the usual evidence can not be produced.
W. H. OSBORN,
Commissioner of Internal Revenue.
(T. D. 1981.)
Denatured alcohol.
Modified special denaturant used in manufacture of smoking and chewing tobacco
to apply to both alcohol and rum.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. (7., May 14f 1914.
Sir: This office is in receipt of your letter of the 8th instant asking
if modified formula No. 4 (T. t). 1975) can be used in conaection with
the denaturation of alcohol.
In reply you are advised that as T. D. 1232 authorized the second
formida prescribed for the denaturation of rum to be used for the
denaturation of alcohol, a similar extension is hereby made with
respect to modified formula No. 4 authorized under T. D. 1975.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue.
Collector Third District, Boston, Mass.
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78 •
(T. D. 1982.)
Aqueovs extract ofopivm.
Aqueous extract of opium lield to be ''opium suitable for smoking purposes" within
the meaning of the act of January 17, 1914.
Tbeasttby Dbpabthbmt,
Office of Commissioner of Internal BEVENtTE,
Washington, D. C, May SI, 1914.
Sm: The Secretary of the Treasury has forwarded to this office
copies of your letter of May 15 and indosures relative to the manu*
facture of aqueous extract of opium by , and in reply you are
advised that in view of the fact that it has been shown that aqueous
extract of opiums while it may have some medicinal uses, may for all
practical medicinal purposes be supplanted by a powdered extract of
opium, and that such aqueous extract of opium is used to a consid-
erable extent by opium smokers in its original condition or with the
addition of a small amount of moisture, this office is of the opinion
that aqueous extract of opium is opium suitable for smotii^ purposes
within the meaning of the act of January 17, 1914, taxing such opium
and regulating its manufacture, and manufacturers patting out
aqueous extract of opium wiU hereafter be required to comply with
all the provisions of law relating to the manufacture of opium suitable
for smoking purposes, including payment of tax thereon.
Eespectfully, W. H. Osborn,
Commissioner of Internal Revembe.
Special Agent Acting in Charge, New Yorh
(T. D. 1983.)
Income tax — Decision of cowri.
1. CoNSTTrunoNALrrY.
The income tax law is not unconstitationaL
2. Injunction.
As the taxes, if coUected illegally, may be recovered back, there is no occasion
for interference of a court of equity by injunction.
3. Dismissal of Bill.
The motion for injunction was overruled and the biU of complaint dismissed with
costs.
Tbeasubt Department,
Office of Commissioneb of Internal Revenue,
WashinUm, D. C, May 28, 19U.
The appended decision of the Supreme Court of the District of
Columbia in the case of John F. Dodge and Horace E. Dodge v.
WilUam H. Osborn, Commissioner of Internal Revenue, is published
for the information of internal-revenue officers and others concerned.
W. H. Osborn,
Commissioner of Iniemai Revenue.
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79
StJPBEME OOUBT OF THB DISTRICT OF COLUMBIA HOLDING EQXJITT OoXJBT. No. 32515.
John F. Dodge and Horace E. Dodge y pMntiffs, v. WiUiam H, Osbom^ Commi89ioner
of Internal Revenue^ defendant.
Pedded May 14, 1914.]
Stafford, Judge: * * * In my best opmioii that act is not imconstitational in
^iher respect in which it is challenged by the plaintifb. I think the contentions
are satisfactorily met and answered in the brief filed in behalf of the Government,
so that I will not take the trouble to write an opinion in the case or go into it fully at
this time.
The plaintiffs are amply able to pay the tax, and I think the act provides a proper
and reasonable method for the recovery of any taxes illegally exacted under the act.
The defendant is proceeding in accordance with the explicit diiectionB of the statute,
and there is a provision that if the taxes are collected illegally they may be recovered
back; and inasmuch as no irreparable damage will be inflicted upon the plajntiffs
by the payment of such taxes, even if illegal, and subsequent recovery of them is
provided for by the statute, I think there is no occasion for the interference of a court
of equity by injunction. I make this statement because the same question may
arise in some future case with reference to the scope and effect of section 8224 of the
Kevised Statutes. So that this bill will be dismissed with costs.
Note. — Gounsel for the plaintiffs noted an appeal to the Oonrt
of Appeals of the District of Columbia.
(T. D. 1984.)
DisiiUers of brandy — Certain exemptions.
Exempting distillers of brandy from plums, pawpaws, persimmons, or wine or fruit
pomace residuum, where artificial sweetening has been used in the manufacture
of wine, from those provisions of law from which distillers of brandy from certain
other fruits have been exempted.
Treasuby Depabtment,
OfPIOE of COBfMISSIONEB OP InTEENAL ReVENUE,
WasUngton, D. C, May 19, 1914.
To coUectora of internal revenue and others:
Section 3255, Revised Statutes, as amended, and as further
amended by the act of March 2, 1911, reads as follows:
The Commiflmoner of Internal Revenue, with the approval (d the Secretary of the
Treasury, may exempt distillers of brandy made exclusively from apples, peaches,
grapes, pears, pineapples, oranges, apricots, berries, plums, pawpaws, persimmons,
prunes, figs, or cherries from any provision of this title relating to the manufacture oJE
spirits, except as to the tax thereon, when in his judgment it may seem expedient to
do so: Provided, That where, in the manufacture of wine, artificial sweetening hae
been used, the wine or the fruit pomace residuum may be used in the distillation of
brandy, and such use shall not prevent the Commissioner of Internal Revenue, with
the approval of the Secretary of the Treasury, from exempting such dbtiller from any
provision of this title relating to the manufacture of spirits, except as to the tax lliereon,
when in his judgment it may seem expedient to do so. .
1. By virtue of the authority contained in said section, as amended,
the Qommissioner of Internal Revenue, with the approval of the
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Secretary of the Treasury, does hereby exempt distillers of brandy
made from plums, pawpaws, persimmons, or from wine or the fruit
pomace residuimi, where, in the manufacture of wine, artificial sweet-
ening has been used, from the same provisions of law from which
distillers of brandy from the other fruits mentioned in said section
have heretofore been exempted, as set forth in Regulations No. 7,
revised September 17, 1908,
2. Wine or the fruit pomace residuum containing artificial sweet-
ening can be used as distilling material under the forgoing exemp-
tions only where the artificial sweetening has been used in the process
of the manufacture of wine.
3. The addition of artificial sweetening to fruit pomace residuum
after the mantif acture of^ne is complete is not permissible, nor is the
distillation of such a mash authorized under the foregoing exemptions.
Such a mash can only be made and distilled in a duly authorized grain
or molasses distillery.
4. Brandy produced from artificially sweetened wine or from the
fruit pomace residuum can not imder any circumstances be used in
the fortification of pure sweet wine imder the provisions of the act of
October 1, 1890, as amended. Brandy produced from artificially
sweetened wine will be marked by the ganger '* Brandy,'' and when
produced from artificially sweetened pomace residuimi he will prefix
to the word '^Brandy" the word 'Tomace.''
5. Until revised, the existing regulations relating to fruit distillers
will be in force; and the exenaptions from the above-mentioned
provisions of law will be subject to such further changes and future
regulations as may be deemed necessary to insure the collection of the
tax on all brandy produced.
6. Distillers who have qualified for the current bonded year before
proceeding to distill either plums, pawpaws, persimmons, or wine or
the fruit pomace residuum where artificial sweetening has been used,
must give a new notice on Form 27J and a new bond on Form 30i,
which shall provide for the use of the same in addition to those
printed in the forms.
7. A new survey must also be made in each of such cases in which
the spirit producing capacities of the different conditions of plums,
pawpaws, and persimmons will be ascertained and reported, and for
that purpose plums and persimmons may, for the present, be classed
with grapes and pawpaws with apples or peaches. In such new
surveys a special capacity will be reported for ''Wine artificially
sweetened'' and also for "Pomace residuum artificially sweetened.''
Such artificially sweetened wine or pomace residuum should be rated
higher in fixing the yield than ordinary unsweetened wine, pomace,
or cheese.
8. Until new blanks are provided, in all notices and bonds hereafter
given and in all reports of surveys made upon the blank forms no^r
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in use, the names of the new fruits and a particular description of the
artificially sweetened materials must be inserted in their proper order
with the names printed in said instruments. Similar changes will
also be made in the distillers' records and returns.
9. The system of closely supervising the operations of fruit dis-
tilleries, which has heretofore obtained, will be continued during the
approaching fruit distilling season, and collectors will exercise in-
creased vi^ance in order to secure a strict observance of the law
and regulations relating to fruit distilleries and payment of tax on all
brandy produced.
W. H. OSBORN,
Oiymmissioner of Internal Revemie.
Approved:
Charles S. Hamlin,
Acting Secretary offfie Treasury.
(T. D. 1985.)
Income tax.
Extensioii to October 31, 1914, of waiver of regulations providing for the filling in on
certificates used in connection with the income tax of the numbers of bonds of
corporations, etc.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. (7., May S8, 1914.
Notice is hereby given that T. D. 1955, issued May 10, 1914,
waiving until June 30, 1914, the requirement that the numbers of
bonds or other like obligations of corporations, etc., from which
interest coupons are detached or upon which registered interest is
to be paid, shall be filled in on the certificates to be used in connection
with the income tax is hereby extended to October 31, 1914.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
Charles S. Hamlin,
Acting Secretary of the Treasury.
(T. D. 1986.)
Income tax.
Execution of income tax substitute certificates 1058 and 1059 by banks or collecting
Treasury Department,
Office of Commissioneb of Internal Revenue,
Washington, D. C, May 29, 1914.
To collectors of internal revenue:
You are advised that as a convenience to banks and collecting
agents who desire to substitute their certificates, Forms 1058 and 1069,
27776**— VOL 16—14 6
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82
for the owner's certificate accompanying the coupons deposit>ed for
collection^ it is hereby provided that the name of the bank or collect-
ing agent may be printed or stamped, and that a facsimile of the
signature of ^e person authorized to sign the substitute certificate
for the bank or collecting agent may also be printed or stamped on
the certificate: Provided^ that in all cases the bank shall first file
with the Commissioner of Internal Revenue a certificate of its authori-
zation in substantially the form following:
(City.) (Date.)
The CoMMisBioNEB OF Intebnal Revenue,
WatMngtxm, D. C.
The undersigned hereby anthorizes the use of the facsimile signature shown below
upon all substitute income tax certificates issued in its name until this authorization
is revoked by written notice to you.
(Name of bank or collecting agent.)
By
(Signature of person authorieed to sign.)
(Facsimile signature of person au- (Official position.)
thorised to sign.)
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
Charles S. Hamlin,
Acting Secretary of the Treasury.
(T. D. 1987.)
/ncome tax — Fiduciaries.
Forms 1015 and 1019, revised, may be adapted so that but one certificate will be
required to be filed with coupons from the same issue of bonds the property of
different estates or trusts.
Trbasubt Depaktmbnt,
Office of CoifMissioNEB of Internal Revenue,
Washington, D. C, May 29, 1914.
To collectors of internal revenue:
Under Income Tax Regulations No. 33, articles 39 and 70, fidu-
ciaries are required to file certificates on Forms 1015 or 1019 (now
1015 and 1019, revised), according to the nature of the claim to be
made by the fiduciary, for each issue of bonds and for each trust.
It is therefore provided that where fiduciaries have the custody
and control of more than one estate or trust, and said estates or
trusts have as assets bonds of corporations, etc., of the same issue,
said fiduciaries may adapt certificates. Forms 1015 or 1019, revised,
by changing the words "estate or trust" in lines 1, 2, and 3 of said
forms to the plural, and writing on blank line provided for (the
name of the estate or trust) the words, "As noted on the back
hereof."
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In such cases the notation on the back of the certificate should
3how for each estate or trust —
(a) The name of the estate or trust.
(6) The amount of the bonds.
(e) The amount of the interest.
In all other respects the certificates should be filled out as indicated
thereon.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
Charles S. Hamlin,
Acting Secretary of the Treasury,
(T. D. 1988.)
Income tax — Certifieate of ownership of hands — Nonresident dUen.
Fonn 1060, provided to be executed by foreign banks or bankers, may be used
by domestic banks or bankers.
Tbbasubt Depabtbcent,
Oppiob op Commissioneb op Intbbkal Rbyenue,
Washingtouy D. (7., June S, 1914.
To collectors of internal revenue:
The provisions of T. D. 1977, permitting responsible banks or
bankers of foreign countries to execute certificates of ownership
(Form 1060) for nonresident alien owners of bonds of domestic cor-
porations; are hereby extended to and for the use of responsible
banks or bankers in the United States for and in behalf of nonresi-
dent alien owners of bonds of United States corporations.
W. H. OSBOBN,
Commissioner qf Internal Revenue.
Approved:
Chables S. Hamlin,
Acting Secretary of the Treasury.
(T. D. 1989.)
Income tax.
Designation of losses which are deductible from gross income within a taxable year.
Teeasuby Department,
Office of Commissioneb of Internal Revenue,
Washington, D. (7., June 2, 1914-
To collectors of internal revenue:
Several letters have been received in which inquiry has been made
as to whether losses resulting from the sale of real estate by indi-
viduals are properly deductible from gross income in the returns of
annual net income of individuals for the income tax. *'
Under paragraph B of the income tax law it is provided that among
the deductions to be allowed shall be "losses actually sustained during
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ihe year, incurred in trade or arising from fires, storms, or shipwreck,
and not compensated for by insurance or otherwise."
Losses arising from fires, storms, or shipwreck and not compen-
sated for by insurance or otherwise are easily ascertained and tiiere
would not appear to be any chance of an erroneous construction as
to these. Losses actually sustained during the year incurred in trade
are limited by the language of the act itself.
"In trade'' is synonymous with business.
"Business" has been defined as —
That which occupies and engages the time, attention, and labor of anyone for the
purpose of livelihoody profit, or improvement; that which is his personal concern or
interest; employment, regular occupation, but it is not necessary that it should be
his sole occupation or employment.
The doing of a single act incidentally or of necessity not pertain-
ing to the particular business of the person doing the same will not be
considered engaging in or carrying on the business.
It is therefore held that no losses are deductible in a return of income
save and only thoselosses permitted and provided for by the statute,
viz, those actually sustained during the year —
Which are "incurred in trade,"
Or which arise from "fires, storms, or shipwreck and not compen-
sated for by insurance or otherwise."
W. H. OSBOKN,
Commissioner of Internal Revenue.
Approved:
Charles S. Hamlin,
Acting Secretary of the Treasury.
(T. D. 1990.)
Income tax.
Use of certified checks and other forms of commercial exchange in payment of intenud-
revenue taxes.
Treasury Department,
Office of Commissioner of Internal Revenue,
'Washington^ D. C, June 1, 1914.
Sir: Your letter of the 28th ultimo has been received, in which you
quote a letter of the 27th idem, addressed to you by the president of
^e First National Bank of Abingdon, calling attention to the fact
that you are receiving from taxpayers in payment of income tax
certified checks from various points in your district. The bank
requests you to require the income tax to be paid in New York,
Washington, Baltimore, or Philadelphia funds which can be used in
New York at par, for the reason that they are required to remit
every day in New York funds.
You call attention to the instructions on Form 647, "Notice of
assessment of special excise and income tax,'' which you state
instruct taxpayers that they may remit by certified check and thai
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most of them are doing so. You ask what steps shall be taken by
you m case the bank declmes to accept certified checks for deposit.
In reply to your request as to what action should be taken in case
the bank decUnes to accept certified checks, your careful attention
is invited to the regulations published as Department Circular
No. 11, dated March 27, 1913, copy inclosed. You will note that
you are required to accept in payment of all internal-revenue taxes
certified checks drawn in your favor on national and State banks
and trust companies located in the city of Abingdon, and in addition
such **out of town" certified checks as you can cash without cost
to the Government. In the event that the depositary will not
accept for deposit ''out of town'' certified checks, you are not re-
quired by law or regulations to accept such checks in payment of
internal-revenue taxes.
The law does not specifically authorize the acceptance of any
form of exchange in payment of internal-revenue taxes other than
currency and such certified checks as are specifically described in
Department Circidar No. 11, reference to which is made above.
If, however, the collector elects to accept drafts or other medituns of
exchange not specifically authorized by law, he does so at his own
risk, but it may be said that, if the depositary bank will accept
such forms of exchange indorsed by the collector without recourse
and issue therefor regular certificates of deposit, the monetary
responsibility would appear to be shifted from the collector to the
depositary, inasmuch as the collector would be entitled to credit in
his accoimts by reason of the issuance of such certificates of deposit
(see sec. 3211, Rev. Stat., and notation found on page 108 of Com-
pilation of Internal Revenue Laws, 1911).
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue.
COIXEGTOB OF INTERNAL REVENUE,
Sixth District, Abingdon, Va.
(T. D. 1991.)
Special excise tax on corporations — Decision of court.
1. Taxes Due fbom Stockholdebs.
tinder the 8tate law, where banks pay the State tax imposed on shareholders,
but have a lien until reimbursed on the shares of stock and all dividends, the tax
is not imposed on the banks.
2. Taxes not Deductible.
8tate taxes so paid can not be legally deducted from gross income in returns
made by banks under ihe corporation tax act.— T. D. 1763 sustained.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, June 1, 1914.
The appended decision of the United States District Court, Eastern
Division of the Eastern District of Missouri, in the case of the Nation&l
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Bank of Cbmmercey of St. Louis, v. E. B. Allen, collector of internal
revenue, is published for the information of internal-revenue officers
and others concerned.
W. H. OSBORN,
Commissioner of Internal Revenue,
United States District Court, Eastern Division of the Eastern District of
\ Missouri. No. 4104.
National Batik of Commerce in St, Louis, j>lainUff, v,JE.B, Allen, United States collector
of internal revemtefor the first district of Missouri, defendant,
Dtsb, Judge: The question before the court and presently to be decided is raised
by the plaintiff's motion for judgment on pleadings. The plaintiff filed its petition
against the defendant to recover certain sums of money paid by it (under protest) to
the defendant, who was and still is the collector of internal revenue for the first
collection district of Missouri. The petition is in three counts. Under the first count
judgment is asked in the sum of $1,932.31, under the second count for the sum of
$1,870.43, and under the third count for the sum of $1,502.04. These several amounts
axe for taxes alleged by plaintiff to have been ill^;ally assessed against it by the Com-
missioner of Internal Revenue for the years 1909, 1910, and 1911, and ill^^y and
wrongfully demanded and collected of it by the defendant. The several counts in
the petition are in all respects the same, except in the amount claimed and the year
ior which the assessment was made. It will therefore be unnecessary to refer at length
to any more than the first count. That count, omitting the purely formal parts, is as
follows:
Plaintiff further states that in the year 1910 and on or prior to the Ist day of March,
1910, in the time and in the manner provided by section 38 of the act of Congress
approved August 5, 1909, relating to special excise tax on corporations, made due and
proper return to the Umted States Commissioner of Internal Kevenue of the entire
gross and net income received by it from all sources during the year 1909, together
with all other information required by said act of Congress: that in its said return
the plaintiff, as authorized by said act of Congress, deducted from the gross amount
of the income received by plaintiff during the year 1909 the sum of $193,230.98,
which it had paid within and for the year 1909 for taxes imposed under the authority
of the 8tate of Missouri, and as required by the provisions of chapter 117, Article II,
of the Revised Statutes of Missouri, 1909.
Thereafter said United 8tates Commissioner of Internal Revenue, in pursuance
of such return, dal^ and i)roperly assessed against this plaintiff the sum of $9,848.57
as and for the special excise corporation tax against this plaintiff on account of its
said net income tor the year 1909, which said sum was in due time, to wit, on or prior
to the 30th day of June, 1910, paid by this plaintiff to E. B. .Allen, Esq., United
States collector of internal revenue for the first district of Missouri, as aforesaid.
Plaintiff further states, however, that during the month of April, 1912, said United
States Commissioner of Internal Revenue made a new, additional, and unwarranted
assessment of a tax against this plaintiff in the sum of $1,932.31 as a special corporation
excise tax on account of its (plaintiff's) said net income for the year 190^, and that
thereafter this plaintiff received from said collector of internal revenue notice of
such additional assessment, which said notice (Form 647, list montii of April. 1912,
p. 1) notified this plaintiff that said sum of $1,932.31 had been assessed against it
by tne United States Commissioner of Internal Revenue as a special corporation excise
tax on account of its said net income for the said year 1909. and that the same had
been transmitted to said collector of internal revenue for collection and was due and
pa^ble on or before the 30th day of June, 1912, and required and demanded that this
plaintiff pay said collector of internal revenue said amount of said additional assess-
ment, to wit, the sum of $1,932.31.
Phontiff further says that said additional assessment was and is unwarranted and
unjiawf ul and contrary to the provisions of said act of Congress, and was made because
S9^d United States Commissioner of Internal Revenue and said collector illegally
claimed that this plaintiff in making its return of its gross and netincome received for
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the year 1909 had no right to deduct from the groBS amount of its income for the year
1909 theeum of $193,230.98 which plaintiff had actually paid within the year 1909 as
and for taxes imposed on plaintiff under the authority of the State of Missouri.
Whereas, in truth and in fact, said last-mentioned sum had been actually paid by
this plaintiff within said year of 1909 for taxes imposed on this plaintiff under the
authority of the laws of the State of Missouri, and as required by the provisions of
chapter 117, Article II, of the Kevised Statutes of Missouri, 1909, and was a sum
which plaintiff was compelled by law to pay, and was not a sum which this plaintiff
had any option to pay or refuse to pay, ana was a sum which plaintiff was entitled
under the provisions of said act of Congress to deduct from the gross amount of the
income of plaintiff for the year 1909.
Plaintiff further says that it has never received nor recovered back from anyone
said sum of 1193,230.98, so paid by it as aforesaid for taxes in compliance with thelaws
of the State of Missouri, and said sum never constituted any part of the net income of
this plaintiff for the year 1909.
The answer of the defendant is as follows:
Defendant further admits that prior to March 1, 1910, plaintiff made a return of its
fi;ros8 and net income received by it from all sources during the year 1909, as required
by the act of August 5, 1909, which said return was correct except as hereinafter stated;
that thereupon the Commissioner of Internal Revenue assessed against plaintiff the
sum of $9,848.57, as and for the special excise corporation tax which plamtiff should
pay on account of its net income for said year of 1909; that said tax was thereupon, as
alleged in said petition, paid to defendant; that thereafter the Commissioner of
Internal Revenue made a new and additional assessment of a tax against plaintiff in
the sum of $1^932.31 as a special corporation excise tax on account of plamtiff's net
income for said year 1909; that notice thereof was given and the t>ayment thereof
demanded, as alleged in plaintiff's petition; that thereafter plamtin paid said addi-
tional assessment oJf $1,932.31 under protest; that at the time plaintiff paid said addi-
tional assessment plaintiff notified the United States Commissioner of Internal Revenue
and said collector that plaintiff would take steps to recover the amount so paid by
plaintiff imder protest; that thereafter, on the 12th day of October, 1912, plaintiff did
appeal in writing to the United States Commissioner of Internal Revenue, and did
Claim that said sum so paid imder protest had been improperly paid; that the same
had been paid under protest and did demand that said sum be refunded to plaintiff;
that said claim and appeal was in writing and in due form as prescribed by the Secre-
tary of the Treasury ot the United States; that said Commissioner of Internal Revenue
denied and rejected said appeal and refused the same, and that no part of said $1,932.31
has beeh repaid to plaintiff.
Defendant further answering states that after plaintiff had made its said return of its
gross and net income for the year 1909, as required by the act of August 5, 1909, and
after the Commissioner of Internal Revenue had made said assessment based upon the
net income of plaintiff for the year 1909, as shown by said return, evidence was pro-
duced before the Commissioner of Internal Revenue which in his opinion justified
the belief that said return of the plaintiff was incorrect, in this, that in making said
return plaintiff had unlawfully and wron^lly deducted from its gross income the sum
of $193,230.98, which said sum had been during the year 1909 paid out by plaintiff (and
never received or recovered back by plaintiff) on account of taxes assessed against the
share and shareholders of plaintifrs capital stock under the provisions of article 2,
chapter 117, of the Revised Statutes of Missouri, 1909, no part of which said sum of
$193,230.98 had been assessed against plaintiff. And defendant says that in truth and
in fact plaintiff during the year 1909 was required to pay and aid pay the sum of
$193,230.98 on account of taxes imposed under the provisions of article 2 of chapter
117 of the Revised Statutes of Missouri, 1909, no part of which said sum has ever been
repaid to it; and plaintiff's net income for the year 1909, as reported in its said return,
was arrived at by deducting from its ^pross income the said sum of $193,230.98, so paid
out by it. But defendant says that said taxes so paid out by plaintiff were not assessed
against the plaintiff or the property of the plaintiff, but on the contrary were taxes
assessed a^inst the shares and shareholders of plaintiff's capital stock, and were as-
sessed and collected imder the provisions of article 2 of chapter 117 of the Revised
Statutes of Missouri, 1909, and particularly under sections 11357, 11359, and 113({0 of
said statutes.
Thereupon the Commissioner of Internal Revenue duly amended plaintiff's return
theretofore made and added to the net income of plaintiff on said return the said sum
of $193,230.98, so wrongfully deducted by plaintiff, and thereupon assessed against
plaintiff said additional tax of $1,932.31, the same being 1 per cent upon said additional
net income amounting to $193,230.98, as aforesaid.
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It IB upon these pleadings that the plaintiff askB judgment.
The leal, substantial, and controlling question raised by the petition and answer is
this: Had the plaintiff the right, in reporting its net income, to deduct from its gross
income the taxes assessed against its shareholders and paid by it under the provisions
of sections 11357 and 11359 of the Kevised Statutes of Missouri, 1909?
These two sections are as follows:
Sec. 11S57, Assessment of rrumufacturirvg and lusiness companies and stock in other
corporations, — ^The property of manufacturing companies and other corporations
named in Article Vll, chapter 33, and all other corporations, the taxation of^which is
not otherwise provided for by law, shall be assessed and taxed as such companies or
corporations in their corporate names. Persons owning shares of stock in banks, or
any joint stock institution or association doing a banking business, or any uuurance
company, whether of fire, marine, life, health, accident, or other insurance, incorpo-
rated under or by any law of the United States or of this State, shall not be required
to deliver to the assessor a list thereof, but the president or other chief officer of such
corporation, institution, or association, shall, under oath, deliver to the assessor a
list of all shares of stock held therein, and the face value thereof, the value of all real
estate, if any, represented by such snares of stock, together with all reserved funds,
undivided profits, premiums or earnings, and all other values belonging to such corpo-
ration, company, institution, or association ; and such shares, reserved fimds, undivided
profits, premiums or earnings, and all other values so listed to the assessor, shall be
valued and assessed as other property at their true value in monev, less the value
of real estate, if any, represented dv such shares of stock. Private bankers, brokers,
money brokezs, and exchange dealers shall make Hke returns, and be assessed and
taxed thereon in like manner, as hereinbefore provided. Insurance companies, or
any corporations or associations doing business on the mutusd plan, without capital
stock, shall make like returns of the net value of all assets or value belonging thereto,
which net value shall be assesaed and taxed in the manner hereinbefore provided;
provided, however, that the license hereafter required to be paid by any such bankers,
orokeiB, and dealers, in addition to such taxes, Bhall not exceed one hundred doliara
per annum. It is hereby made the duty of the county clerk to include in his abstract
of the assessor's books required to be sent to the State auditor, valuation of all property
assessed under this section, under the head of "corporate companies," and m addi-
tion thereto he shall make out from the lists delivered to the assessor as above provided
and send the same to the state auditor to be laid before titie state board of equaliza-
tion, on or before the 20th day of February in each year, an abstract of the assessment
of all corporations or persons doing a banking or msurance business in his county,
showing the name of each baoik and insurance company, the number of the shares of
stock and their face value, amount of reserve funds, undivided profits, premiums or
earnings, and all other value, together with the assessed value thereof, also the value
of real estate deducted as above provided, and the assessed value of such real estate
as shown by the real estate book.
Sec, 11S69, Such taxes, how pai<i and covered. — ^The taxes assessed on shares of
stock embraced in such list shall be paid by the corporations, respectiv<
y, and they
may recover from the owners of suclT shares the amount so paid by them, or deduct
the same from the dividends accruing on such shares^ and me amount so paid shall
be a lien on such share, respectively, and shall be paid before a transfer thereof can
be made.
Section 38 of the act of Congress, approved August 5, 1909, contains, among others, the
following provisions:
^ Sbo. 38. That every corporation * * * shall be subject to pay annually a spe-
cial excise tax * * * upon the entire net income over and above |5,000 received
by it from all sources during such year * * *.
Second. Such net income shall be ascertained by deducting from the gross amount
of the income —
(1) All the ordinary and necessary expenses actually paid within the year out of
income in the maintenance and operation of its business and properties.
(4) All sums paid by it within the year for taxes imposed under the authority of the
United States or any State.
It is upon this latter provision, I take it, that the plaintiff chiefly relies.
Can it be successfully claimed that the tax imposed by the State upon the share-
holders of a bank is in any wise a tax imposed upon the bank itself? True, the bank
is required to pay, i. e., advance the amount of the tax, but it is given a lien upoQ
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89
the Bhares of stock and all dividends thereon, until it is hilly leimbuised b> the share-
bolder. The shareholder is not allowed to get a transfer of his holdings so as to cut
the bank out of its lien.
The Supreme Court of Missouri in the case of State ex rel Brinkop (23S Mo., p. 298)
convincingly says:
Under our statute, stock in a bank, Federal or State, is assessed against the share-
holder, but the tax is paid in the first instance by the bank, and the bank is reim-
bursed by the shareholder. That is merely a mode of convenience in collecting
the tax, the effect is the same as if the shareholder paid it in the first instance.
The plaintiff had no right to deduct from its gross income the taxes assessed against
its shareholders under the State statutes. By doing so it did not correctly state its
net income and for that reason the Commissioner of Internal Revenue acted well
within his rights and duties in making the assessments complained of in plaintiff's
petition.
In reaching the conclusion above stated, the court is well supported by the decision
of the United States District Court of Massachusetts in the case of Eliot National
Bank v. Gill, recently decided.
The motion of plaintiff for judgment on the pleadings is denied.
Note. — ^An appeal has been taken.
(T. D. 1992.)
Income tax.
Bonds of foreign corporations payable, as to interest, wholly within the United States,
or within or without the United States, at the option of the owner of the bonds,
to be treated for income-tax purposes] as domestic bonds when accomiMmied by
certificates of ownership properly executed.
Tbeasuby Depabtment,
Office of CJommissioker of Internal Revenue,
Washington, D. C, June 4, 1914.
To collectors of internal revenue:
Where foreign corporations have an issue of bonds, the interest
upon which is payable wholly within the United States, or within
or without the United States, at the option of the owner of the boixds,
in all cases where said foreign corporations have fiscal agents within
the United States and the said bonds are owned by citizens of the
United States or aliens resident within the United States, the col-
lection of interest on said bonds shall be considered to be and be
treated as a domestic transaction upon the filing with said coupons
certificates of ownership properly executed: Provided, That whenever
coupons from foreign bonds not accompanied by certificates of
ownership are presented for collection they shall be treated as for-
eign items, and the first bank or collecting agency receiving or
accepting the same for collection or otherwise shall deduct, withhold,
and pay the tax as provided by income-tax regulations for the col-
lection of foreign income.
Digitized by VjOOQIC
90
Where a foreign corporation has an issue of registered bonds, the
interest on which is payable through a fiscal agent in the United
States, certificates of exemption may be filed vnih said fiscal agent
in manner and form as prescribed by T. D. 1974 and payment by said
fiscal agent shall be made in accordance Mdth the provisions of T. D.
1974.
W. H. OSBOBN,
Commissioner of Internal Re^yenue,
Approved.
W. G. McAdoo,
Secretary of {he Treasriry.
(T. D, 1993.)
Incow£ tax.
Interest paid on indebtedness wholly secured by collateral the subject of sale in the
ordinary business of a corporation may be deducted as a part oi Its expense of
doing business.
Tebasuby Depabtment,
Office of Comicissioneb of Intebnal Revenue,
Washington, D. (7., Jun£ S, 1914-
To coUedors of internal revenue:
This office is in receipt of numerous letters asking a ruling of this
office as to the appUcation of (he following proviso quoted from sub-
division (b) of subsection 6 of section 2, act of Congress approved
October 3, 1913, to wit:
Provided f That in the case of indebtedness wholly secured by collateral the subject
of sale in the ordinary business of such corporation, joint-stock company or association,
the total interest secured and paid by such company, corporation, or association,
within the year on any such indebtedness may be deducted as a part of its expense
of doing businesB.
Many of these inquiries come from corporations engaged in buying
and selling real estate, which real estate is pledged for the payment
of indebtedness, and the question submitted is whether or not sucli
real estate is "collateral" within the meaning of the proviso quoted,
and whether or not corporations paying interest on indebtedness
wholly secured by such collateral may deduct from gross income a^
"an expense of doing business'' the amount of interest paid on such
indebtedness.
Relative to this you are informed that "collateral," as used in
this proviso, comprehends and includes real estate or any form of
physical or tangible property bound for the performance of certain
covenants, the payment of certain obligations, and if such real
estate or other physical or tangible property is the "subject of sale
in the ordinary business of the corporation" owmng the same, tli&t
Digitized by VjOOQIC
91
iS; if such corporation is, as a matter of its ordinary business, en-
gaged in buying and selling, or dealing in such property, the interest
actually paid within the year on indebtedness wholly secured by
such collateral (a mortgage on such property) may be allowably
deducted from gross income under item 4 (a) of the return form
as an expense of doing business, without r^ard to the limit of
deductible interest as set out in subdivision ''Third," paragraph (h),
subsection G of the Federal income tax law hereinbefore cited.
This construction of the proviso quoted is not intended to and
does not authorize the deduction as ''an expense of doing business''
of any interest paid or indebetdness secured by property, real or
personal, which is not the "subject of sale in the ordinary business
of the corporation," but which is held by it for the purpose of, or as
an instrument in carrying on, its ordinary business — such as the
rights of way and other property of pubhc utihty companies, per-
manent office buildings and property of like character held or occu-
pied for their own particidar use or purpose in the furtherance of
the objects of the corporation, but which property is not the sub-
ject of sale in their ordinary business, and which is simply occupied
or used as an instrument or means of, or essential to, the carrying
on of the ordinary business for the transaction of which they are
organized. The fact that such property may be subject to sale
under extraordinary or peculiar conditions does not qualify, but
rather disqualifies, it as "collateral" such as is contemplated by
this provision of the act cited.
The only corporations, joint-stock companies, or associations
which will be allowed under this proviso as herein interpreted to
deduct as "an expense of doing business" interest paid on indebted-
ness wholly secured by mortgage on real estate, or other physical
and tangible property, are those corporations, joint-stock com-
panies, or associations which are organized and operated for the
exclusive purpose of buying, selling, and dealing in the particular
kind of property upon which the mortgage is given, and the particular
property pledged for the debt upon which the interest is paid must
be the "subject of sale in the ordinary business of the corporation."
Any corporation whose indebtedness is secured by a trust, mort-
gage, or by any form of indenture which covers and includes in the
lien any property which is not the subject of sale in the ordinary
business of such corporation, will be and is excluded from the benefit
of this proviso, as hereinbefore construed, and its interest deduction
will be limited to the amount authorized in subdivision "third"
above referred to — that is, the interest actually paid within the
year at the contract rate on an amount of bonded or other indebted-
ness at no time within the year in excess of a sum ascertained by
adding to the paid-up capital stock outstanding at the close of the
Digitized by VjOOQIC
92
year one-half of the total amount of the interest-bearing indebted-
ness also then outstanding.
Corporations which under this ruling are entitled to deduct as '' an
expense of doing business" the total amount of interest paid within
the year on '^indebtedness wholly secured by collateral the subject
of sale in the ordinary business of such corporations/' are required to
state separately in their returns the amoujxt of indebtedness upon
which such interest is paid, segregating it from the indebtedness not
so secured and upon which the interest paid is taken credit for or
deducted under item 6 (a) of the return form. The interest-bearing
indebtedness stated under item 2 of the return form as one of the
bases for determining the amount of interest which may be allow-
ably deducted under item 6 (a) must not include any '' indebtedness
wholly secured by collateral the subject of sale in the ordinary busi-
ness of the corporation." Failure to segregate the two forms of
indebtedness will render the interest deduction under item 6 (a)
subject to suspension and disallowance.
W. H. OSBORN,
Cmnmissioner of Internal Revenue,
Approved:
W. G. McAdoo, Secretary of the Treasury.
(T. D. 1994.)
Revised list of alcoholic medicinal preparations for the sale of which
special tax is required.
Treasuet Depabtmbnt,
Office of Commissioner of Internal Beyentte,
Washington, D. C, June 6, 191j^.
To collectors of internal revenue, revenue agents, and others:
The accompanying list of alcoholic medicinal preparations which
have been examined by this office and held to be insufficiently medi-
cated to render them unfit for use as a beverage is published for the
information of all concerned.
Special tax will be required for the sale of any of the preparations
herein named, even though such sales are for medicinal use. The
liabilities of dealers for sales /or medicinal use of any of the prepara-
tions marked with an asterisk C*") will, however, be held to date from
and after August 1, 1914.
The names of most of the preparations heretofore given on the
various lists which have been published will be found included in
this list, the only exceptions being those the manufacturers of which
have revised their formulas to meet the requirements of this office
or which are no longer on the market.
Digitized by VjOOQIC
93
Special tax should riot, therefore, he required for the sale for medicinal
use of am/ alleged medicinal compound not on this list until this office
has heen communicated with and specific instructions received.
The preceding paragraph does not, however, apply to the class of
compounds usually described by the term "cocktail bitters," which
are suitable for and usually used as beverages.
It having been found in various instances that there are several
preparations of the same name on the market, the names of the
manufacturers of the preparations examined by this office are here
given, and it should be understood that only the preparations as
compoimded by the manufacturer whose name is given is embraced
in this list.
Special tax will be required for the manufacture and sale of beef,
wine, and iron, imless it contains at least the percentages of beef and
iron given in the formula on page 1821 of the nineteenth edition of
the United States Dispensatory or is otherwise sufficiently medicated
to be unsuitable for use as a beverage. Special tax will also be
required for the sale of the compound ordinarily sold under the name
of rock, rye, and glycerin.
Collectors and revenue agents should continue to secure and for-
ward to this office samples of preparations which they have reason
to believe are or may bemused as a beverage.
List of alcoholic medicinal preparations.
Name.
Manufacturer.
Ale and Beef
Allen's Restoratiye Tonio
Alps Bitten
American Alimentary Elixir
Amerioan EUxlr ,
Amerioan Stomaeh Bitters
AmerPiooQ ,
Angostnza Aromatio Tincture Bitters..,
Apshinte
Arbaogh's Newport Bitters
Aroma Bitters
Aromatio Bitters
Aroma Stomach Bitteis
Aromatio Bitters
Aromatio Stomach Bitters
Atwood's La Grippe Specific
Angaaer Bitters
Angaaer Eidney-Aid
AugostiDer Health and Stomach Bitters
Beef, Iron and Wine
Beef, Iron and Wine
Beef, Iron and Wine
Beef, Iron and Wine
<*Beef, Wine and Iron
Ale A Beef Co., Dayton, Ohio.
Faxon A Gallagher Drug Co., Kansas City, Mo.
Peter Rostenkowski, Chicago, HI.
American Drug Store, 1115 Canal Street, New Orleans, La.
Beggs Monufocturing Co., Chicago, Jll.
American Drug Store, New Orleans, La.
G. Pioon (imiKirted).
E. R. Behlers, St. Louis, Mo.
The Cordial Panna Co., Cleveland, Ohio.
Daniel Stewart Co., Indianapolis, Ind.
V. Gautier, 287 Hudson Street, New York.
Hanigan Bros., Denver, Colo.
7. S. Smith <& Co., Burlington, Iowa.
C. N. Prior, Middletown, N. Y.
The S. Holtsman Co., Johnstown, Pa.
Excelsior Medicine Co., Chicago, HI.
Angauer Bitters Co., Chicago, HI.
Do.
A. M. August, liilwaukee, Wis.
Crown Supply Co., Pittsburgh, Pa.
The Tarmuth Co., Providence, R. I.
Lion Drug Co., Buflialo, N. Y.
Owl Drug Co., San Francisco, Cal.
Chas. C. Miller, Chicago, 111.
Digitized by VjOOQIC
94
List of alcoholic medicinal preparations — Continued.
Name.
Manufacturer.
Beef, Wlneandlron
Ben Hur Kidney and Liver Bitters..
Berg's Hawkeye Bitters
Belvedere Stomach Bitters
Bismark Laxative Bitters
Bismarck's Royal Nerve Tonic
Bitter Wine
Bitter Wine
Bitters
Blackberry
Blackberry Cordial
Blackberry Cordial
Blackberry Cordial
Blackberry and Ginger Cordial
♦Black Hawk Bitters
Black Tonic..*.
Bonekamp Stomach Bitters
Bonekamp Bitters
Botanic Bitters
*Bracer Bitters
Bradenberger's Colocynthis
Brod's Celery Pepsin Bitters
Brown's Aromatic Cordial Bitters. . .
Brown's Utryme Tonic
Brown's Vin Nerva Tonic
Buckeye Bitters
Carpathian Bitters
*Cascara Roots
Celery Bitters and Angostura
Celery Extract
Clarke's Rock Candy Cordial
Clayton <& Russell's Stomach Bitters
Clifford 's Cherry Cure
Clifford's Peruvian Elixir
Cinchona Bitters
Coca Wine
Cocktail Bitters
Colasaya
Columbo Elixir
Columbo Peptic Bitters
Columbo Tonic Bitters
Cooper's Nerve Tonic
Cordial Panna
Crescent S tar Jamaica Ginger
Crescent Tonic Bitters
Cross Bitter Wme
Damana Gentian Bitters
Dandelion Bitters
Dandy Braoer
De Witt's Stomach Bitters.
Didier's Bitters
Dr. Bergelt's Magen Bitters
Dr. Brown's Blackberry Cordial
Waudby, Son & Co., Pittsburgh, Pa.
Fred. Reynolds, Detroit, Mich.
Berg Medicine Co., Des Moines, lows.
Loewy Drug Co., Baltimore, Md.
C. Lange & Co., Chicago, IlL
R. A. Smith & Co., Pana, HI.
Stnuynski Bros., Chicago^ HL
Aug. W. Buiggraf, Johnstown, Pa.
The Atlantic Vhieyard & Wine Co., Philadelphia, Pa.
Karles Medicine Co., Aberdeen, S. Dak.
International Extract Co., Philadelphia, Pa.
Inmdequoit Wine Co., Rochester, N. Y.
Strother Drug Co., Lynchburg, Va.
Standard Chemical Co., Fort Smith, Ark.
Meyer Bros. Drug Co., St. Louis, Mo.
Albert Nlggenumn, St. Louis, Mo.
Geo. 7. Fixmer, Springfield, HI.
J. S. Smith & Co., Burlington, Wis.
F. E. Mayhew & Co., San Francisco, Gal.
Bracer Bitters Co., Chicago, HI.
Standard Chemical Co., Fort Smith, Ark.
Jno. Brod Chemical Co., Chicago, HI.
Chas. Leich & Co., sole agents, Evansv Ue, Ihd.
A. £. A E. V. Brown Co., Mobile, Ala.
Brown Chemical Co., Nashville, Term.
Geo. Albert, Mflwaukee, Wis.
L. J. Sulak Land Co., West, Tex.
American Bitter Wine Co., Chicago, ID.
Frank J. Maus, Kalamazoo, Mich.
The P. S. Abbey Co., Kalamasoo, Mich.
Colbum, Birks ^ Co., Peoria, HI.
Adams & Co., New York City.
Standard Chemical Co., Fort Smith, Ark.
Do.
Morris & Dickson, Shreveport, La.
AmeriGan Drug Store, 111£ Canal Street, New Orkus, 1
Milbum & Co., Baltimore, Md.
Zwart's Pharmacy Co., St Louis, Mo.
Columbo Elixir Co., Philadelphia, Pa.
L. £. Jong & Co., New Orleans, La.
Her & Co., Omaha, Nebr.
Muller & Co., Baltimore, Md.
The Cordial Panna Co., Qeveland, Ohio.
Gulf Manufacturing Co., New Orleans, La.
Parker Blake Co., New Orleans, La.
Eugene Parisek Co., Chicago, HI.
MUbum & Co., Baltimore, Md.
Beggs Manulactm'ing Co., Chicago, HL
Dandy Bracer Co., Philadelphia, Pa.
E. C. De Witt <& Co., Chicago, HI.
J. A. Didier, Bmghamton, N. Y.
Imported.
Texas Drug Co., Dallas, Tex,
Digitized by VjOOQIC
95
Li9t of alcoholic medicinal preparatiom — Gontmued.
Name.
Manufacturer.
Dr. Brown's Tonio Bitters
Brown Chemical Co., Nashville, Tenn.
Dr. Bouvier's Specialty Co., Louisville, Ky.
Meat & Malt Co., LouisviUe, Ky.
Central Botanical Co., Cherry Creek, N. Y.
F. Trandt, St. Louis, Mo.
F. S. Amidon, Hartford, Conn.
Dr. Hortenbaoh, Minneapolis, Mhm.
Rattinger'8 Medical Co., Sapphigton, Mo.
Des Moines Phannaoal Co., Des Moines, Iowa.
Dr. V. Stjvki & Co., New Philadelphia, Ohio.
J. D. Heimsoth, Chicago, HI.
Bitter Apple Bitters Co., Hattiesburg, Miss.
P. H. Drake & Co., Brooklyn, N. Y.
Imported.
Do.
Do.
Duffy Malt Whiskey Co., Rochester, N. Y.
M. P. Kappd & Co., Chicago, BI.
Pleasant Ton c Bitters Co., Chicago, BI.
V.Bokr, Chicago, m.
Reid, Yeomans & Cubit, New York City.
Zwarts Pharmacy Co., St Louis, Mo.
The Schuster Co., Cleveland, Ohio.
Iowa Drug Co., Des Moines, Iowa.
Des Moines Drug Co., Des Mohies, Iowa.
Carmeiiter Bitters Co., New York, N. Y.
Fabiani's Pharmacy, Philadelphia, Pa.
Faxon, Williams & Faxon, Buffalo, N. Y.
C. Carlisi Co., New York City.
Luis FecTi, Butte, Mont.
Basflea A Calandra, New York City.
W. P. BemagosKi, New York City.
(Felloe BIsderi) Imported.
Vittorio Blotto, New York City.
C. Carlisi Co., New York City.
G. Citio 4e Co., Hoboken, N. J.
Columbia DistilUng Co., Albany, N. Y.
G.Matalone, Chicago, m.
Lange Bros., New York City.
Marrone & Loter, Utica, N. Y.
Italo-American Liquor Mf^. Co., New York.
Gemiaro T. Manlio, Philadelphia^ Pa.
Basflea <& Calandra, New York City, f
Imported.
Stehihardt Bros. & Co., New York City.
D. P. Rossi, San Francisco, Cal.
The P. S. Abbey Co., Kalamatoo, Mich.
Stnuynski Bros., Chicago, BI.
M. D. Folger & Sons, Grand Rapids, Midi.
Reed, Robb & Breiding, WheeUng, W. Va.
Dr. Bouvier's Buohii Qln
Dr. Fowler's Meat and Malt
Dr. Oray's Tonic Bitters
Dr. Hoffman's Golden Bitters
Dr. Hopkins Union Stomach Bitters
Dr. Hortenbach's Stomach Bitters
Dr. Rattinsfw's Bittws
Dr. Sherman's Penivian Tonic and Sys-
tomatixer.
Dr. Sterki's Ohio Bitters
Dr. Worme'sGesundheit Bitters
Dozier's Apple Bitters
Drake's Plantation Bitters
■Dflix»nnf»tWine.......x. ... .
Dubonnet .
Dncro's Allmwitary Klizir ,,
Dnffy's Malt Whiskey
•Elderberry Tonic
FIIt'T of Bl^iir ^liift,
Elixir of Bitter Wine
Elixir Callsaya
Eucaljrptus Cordial
•EuoUd Laxative Kidney and Liver Bitters .
Eureka Stomach Bitters ......... ......
•FxCf»l8*Or Bltt^iPS
E. Z. lAXfttive BIttflrs
♦Fabiani's Marsala Chinato
Famous Wiener Bitters
Faxon's Beef. Tron and Wine
Femet-Carlisi Fernet Bitters
♦Ferrl Rheumatic dm
Ferro-Ohina Bascal
Ferro-^^na Bema
Ferro-'^^fTiA' Bissleri - ,
Ferro-China-Blotto
Ferro-ChinaCarlisi Tonic Bitters
Ferro-China<]litro Bitters
FentM^invOohimbia t .
*Ferro-^hiniuDernA . . ...
Ferro-ObiTia di Harlo
Ferro-^'^ina Tde«l
Ferro-OhlnftJUJus
FwTO-f'.^«nfV Tito Vftnl*0 ,
Ferro-China-TrioTxfo
Ferro-China Universale
Ferro-^^fna Vitanova. .... .....
F^rro-Qnina Bitt4ffs
Fine Old Bitter Wine
F. Miller «fc Co.'s Stomach Bitters
Folger's Aromatic Bitters
Fort Henry Ginger Ckunpound
Digitized by VjOOQIC
96
iA9t of alcoholic medteinal preparatiom — Continued.
Name.
Manufticturer.
Oastrophan
Gentian BittccB
Genuine Bohemian Malted Bitter Wine
Tonic.
Germania Herb, Boot and Fruit Tonic Bit-
ters.
German Btomaoh Bitters
German Stomach Bittera
Ginger Tonic
Ginseng Cordial
Glycerin Tonic (Elixir Pepsin)
Graham's Brand Orange Bitters
Green's Chill Tooic
Greiner's Blackberry Cordial
Gross Bros. Blood and Liver Tonic
Harrison's Qoittiiie Tanks.
Health Bitters.
Health Bitters.
Herb Bitters
Herbs Bitters....
Herbton ,
Heubleln'sCalisaya Bitters ,
Hop Bitters
Horke Vino Bitter Wine
Indian Stomadi Bitters
LX.L. Bitters
Jack Pot Laxative Bitter Tonic
Jack's Indian Tonic
Jafle's intrinsic Tonic
Jerome's Dandelion Stomach Bitters
Jcdmston's Cherry Elixir
Jones Stomach Bitters
Jime-Kola
Juniper Kidney Cure
Kahn's Iron and Malt Whiskey
Karle's German Stomach Bitters
Earlsbader Stomach Bitters
Katamo
K.K.K
♦Kernel Stomach Bitters
Koehler's Stomach Bitters
Kennedy's East India Bitters
KidniweU
Ko-Ca-Ama
Kola and Celery Bitters
KoiaWine
Kreu£berger's Stomach Bitters
Krummel's Bonekamp Maag Bitters
Kudros
Edward Rimsa, Chicago, BI.
Evans Smith Drug Co., Kansas City, Kans.
Edward BinuBy Chicago, 111.
Dr. F. G. Kocdman, Chicago, BI.
Geo. Kuevees, Granite City, BI.
Wm. W. Torge, Waukesha, Wis.
Loewy Drug Co., Baltimore, Md.
American Ginseng Medical Co., Syracuse, N. Y«
W. P. Underbill, Concord, N. H.
^ has. Jaoquin, New York City.
M. V. Green, Son <b Co., Selma, N. C.
Greiner-Keily Drug Co., Dallas, Tex.
Gross Bros., Illinois.
I. X. L. Chemical Co., Chicago, Sinois, HI.
H. Bitzegeio, Chicago, BI.
Jos. G. Sporrer & Co., Toledo, Ohio.
Otto F. Lenzt, Petersburg, HI.
Herb Medicine Co., Reading, Pa.
Hooper Medical Co., Hillsboro, Tex.
G. F. Heublein & Bro., New York City.
Hop Bitters Mtg, Co., Rochester, N. Y.
Michael Bosak, Scranton, Pa.
Dr. D. Winegardner, Hanna, Oida.
L X. L. Chemical Co., Chicago, BL
J. B. Scheoer Co., Chicago, BL
W. L. B. Jack, Portsmouth, Ohio.
Jaffe Wine Co., Sacramento, Cal.
Jerome Chemical Co., St. Louis, Mo.
Parker Blake Co., New Orleans, La.
Natches Drug Co., Natches, Miss.
Beggs Manufacturing Co., Chicago, BI.
Juniper Kidney Cure Co., Fort Smith, Ark.
Kahn Brothers, New York City.
Karle German Bitters Co., Aberdeen, S. Ds^
Jos. Landshut, Pittsburgh, Pa.
Katamo Co., New York City.
Morris <& Dickson Co., Shreveport, La.
Meyer Bros. Drug Co., St. Louis, Mo.
Koehler Bitters Co., New York City.
Ber <& Co., Omaha, Nebr.
Brown Drug Co., Sioux Falls, S. Dak.
The Wm. Brooks Medicine Co., Russellvllle, Ark,
MUbum & Co., Baltimore, Md.
Reid, Yeomans & Cubit, New York City.
R. Kreuzberger, Logansport, Ind.
Hry. Krummel, New York City.
A. M. Hellmann & Co., St. Louis, Mo.
Digitized by VjOOQIC
97
List of alcoholic medicinal preparations — Continued.
Name.
Manufacturer.
Laxa Bark Tonic
Lee's Celebrated Stomach Bitters..
Lekko Stomach Bitters
Lemon Ginger
Liverine ,
Lutz Stomach Bitters
Lyons Stomach Bitters ,
Magador Bitters
Magen Bitters
Magen Bitters
Marks' Famous Stomach Bitters
MoCk>rrison's Compound of Golden Seal
MetaMulta
Mexican Stomach Bitters
Mikado Wine Tonic
Milbum's Kola & Celery Bitters
Miller Brand Bitters
Miod Honey Wine
♦Native Herb Bitters
Nature's Remedy for Kidney Troubles and
Blood Poisoning.
Neuropin.
♦New Tonic Bitters
Newton's Nutritive Elixir
Novak's Stomach Elixir
Obermuller's Bitters
O'Hare's Bitters
Old Dr. Scroggin's Bitters
Old Br. Jaques Stomach Bitters .
Orange Bitters
Our Ginger Brandy
Ozark Stomach Bitters
Pale Orange Bitters
Panama Bltteiis
Panama B itters
♦Parker's Bitters
Pepsin Stomach Bitters
Peptonic Stomach Bitters
Peruvian Bitters
Peter Paul Stomach Bitters
Peychaud's Bitter Wine Cordial.
Pilsener Bitter Wine
Pioneer Ginger Bitters
Pond's Ginger Brandy
Pond's Rock and Rye
♦Purola Stomach Bitters
Quinquina Dubonnet .
♦Rex Elixir of Bitter Wine
Rex Ginger and Brandy Tonic. .
27776®— VOL 16—14-
Natchez Drug Co., Natchez, Miss.
Lee's Anti-Trust Medicine Co. Joplin,Mo.
Struzynski Bros., Chicago, 111.
Ballard Snow Liniment Co., St. Louis, Mo.
T. S, Mitchell Co., Providence, R. I.
Chas. M. Lutz, Reading, Pa.
Lyons Bitters Co. Chicago, 111.
E.J.Rose & Co. Tacoma,Wash.
A. J. Waberksy, Chicago, HI.
Mrs. Ingeborg Rosmer, Milwaukee, Wis.
R. Marks, Mil^waukee, Wis.
O. S. MoCorrison, Union, Me.
Ber-heim Distilling Co., Louisville, Ky.
Her & Co., Omaha, Nebr.
Mikado Medicine Co., West Manchester, N. H.
Milbum & Co., Baltimore, Md.
Pure Food Cordial Co., New York City.
Struzynski Bros., Chicago, 111.
Chapman Drug Co., Knoxville, Tenn.
Dr. J. T. Sumpter, Bowling Green, Ky.
J. B . Soheuer Co., Chicago, 111.
Chas. C. Miller, Chicago, HI.
Parker-Blake Co., New Orleans.
Jno. Novak, Chicago, 111.
Jos. Bollenbeck, Madison, Wis.
O'Hare Bitters Co., Pittsburgh, Pa.
A. J. Adye, Adyeville, Ind.
D . F. Giles & Co., Concord, N. H.
A. L. Joyce, Traverse City, Mich.
Rex Bitters Co., Chicago, 111.
Lee's AntirTrust Medicine Co., Joplin, Mo.
Field, Son & Co., London, England.
Richardson Drug Co., Omaha, Nebr^
W. R. Reeve, Dorchester, Mass.
Louisiana Distillery Co. (Ltd.), New Orleans, La.
(E . L. Arp) Imported.
Ross, Flowers & Co., Chicago and New York,
Reed, Robb & Brelding, Wheeling, W. Va;
Paul P. Fasbender, Detroit, Mich.
L. E. Jung & Co., New Orleans, La.
Prenstat Bitters Co., West, Tex.
Dr. Koehler Medicine Co., Appleton, Wis.
Pond's Bitters Co., Chicago, 111.
Do.
Blumauer-Frank Drug Co., Portland, Oreg.
Imported.
Rex Bitters Co., Chicago, 111.
Do.
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98
Lift ofalcohoHe medicinal preparatUyM — Contlniied.
Name.
Manufacturer.
Rex Ginger..*
*Rez Hoarhound Tonio
Rheinstrom's Stomach Bitters
•Richard's Celebrated Tonic Bitters
Riley's Kidney Cure
RJmsoYO Malto-Sove Vino Chino
Rockandy Cough-Cure
Rosolio
Royal Pepsin Tonic
Royal Pepsin Stomach Bitters
*S. B . C. Essence of Peppermint
*S. B . C. Extract of Jamaica Ginger
*S. B. C. Ginger and Brandy Comi>oand
♦S. B.C. Wild Cherry Tonic.
*Salutari8 Stomach Bitters
^Sanitas Stomach Bitters....'.
*Sanque Nerve Remedy
Sarasina Stomach Bitters
St. Rafael Quinquina
Scheetz Bitter Cordial
Schier's Famous Bitters
Sohmit's Celebrated Strengthening Bitters . .
Schroeder's German Bitters
*S6huster's Bitters with Pepshi
Simon's Aromatic Stomach Bitters
Sirena Tonic
Smart Weed.
Smith's Bitters
Smith's Vltallrfng Bitters
Steinkonig's Stomach Bitters
Stomach Bitters
Stoughton Bitters
Straoss Exfailarator
Sure Thing Tonio
Tatra
Tokay Quinine Iron Wine
Tolu Rock and Rye
*Tolu Rock Candy Cordial
Trae's Magnetic Cordial
U-Go
Uncle Josh's D yspepsia Cure
Underberg's Boonekamp Maag Bitters
Vigo Bitters
Vinde Michael
♦VinHepatica
Vin Marian!
Vino-Kolafra
Walker's Tonic
*Walther'8 Peptonized Port
Warner's Stomach Bitters
Rex Bitters Co. , Chicago, III.
Do.
Rheinstrom Bros., Cincinnati, Ohio.
Minneapolis Drag Co., Minnet^lis, Minn.
Jas. S. Riley, Hayne, N. C.
Ed. Rimsa, Chicago, HI.
The Cordial Panna Co., Cleveland, Ohio.
L. & A. Schaill, St. Louis, Mo.
Do.
Star Bitters Co., Saonmento, Cal.
Do.
Do.
Do.
Salutarfs Reenforoe Tonic Medidne Co., Chicago, HL
Sanitas Tonic Medicine Co., Chicago, HI.
F. A. Tenda, Bastrop, La.
Wm. Blech, New York City.
Imported— Scbeetz.
Percy R. Hentz, Pittsburgh, Pa.
Wendeiin Schier, Alexandria, Ind.
Geo. W. Tepe, EvansviUe, Ind.
Mllbum A Co., Baltimore, Md.
The Schuster Co., Cleveland, Ohio.
Samuel B. Schein, St. Paul, Minn.
Sirena Manufactoring Co., New York City.
Francis Cropper Co., Chicago, HI.
Van Natta Drug Co., St. Joseph, Mo.
Ben Smith, Scranton, Pa.
Adam Steinkonig, Cincinnati, Ohio.
Imported by J. G. & J. Boker, New York City.
A. L. Joyce, Traverse City, Mich.
Wm. H. Strauss, Reading, Pa.
Furst Bros., Cincinnati, Ohio.
B. Zeman, Chicago, HI.
Burger & Erdeky, Chicago, HI.
Meyer Bros. Drag Co, St. Louis, Mo.
Standard Chemical Co., Fort Smith, Ark.
Fritz T. Schmidt & Sons, Davenport, Iowa.
Dr. Worthington's Drug Co., Birmtng^am, Ala.
Imported by Luyties Bros., New York City.
F. C. Altmeier & Co., Chicago, HI.
Imported.
The Miller-Addison Co., Dayton, Ohio.
Marian! & Co., New York City.
Mead, Johnson & Co., Jersey City, N. J.
Dreyfass, Veil & Co., Paduoah, Ey.
Walther-Robertson Drug Co., Pittsbofgh, Pa.
Warner, Fii^y & Co., Sloox City, Iowa.
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99
IaH ofakohoUe medicinal preparations — Continued.
Name.
ManufMturer.
Webb'sANo-lTonio
Westphalia Stomach Bitters
White Cross Bitters
White's Dyspepsia Bemedy
Win Do
Williams Kidney Relief
WinaofChenstohow
Wine of Pomelo, with Beef and Iran
•Wine Tonic
♦WineZdrowia
Woodbury Brand Bitters
Zeman's Medicinal Bitter Wine
Ziea Stomach Bitters
Zig-Zag ,
Webb's Cooperative Co., Sacnmento, GaL
E. R. Behlers, 8t. Louis, Mo.
V. Gautier, New York City.
W. L. White dc Co., Louisville, Ky.
The Will Do Co., Detroit, Mich.
Parker, Blake & Co., New Orleans, La.
Skanynski & Co., Buffalo, N. Y.
Inmdequoit Wine Co., Rochester, N. Y.
Wladyslaw ErysBewski, Jersey City, N. J.
American Bitter Wine Co., Chicago, HI.
Steinhart Bros. & Co., New York City.
B. Zeman, Chicago, HL
Zien Bros., Milwaukee, Wis.
Walker's Tooio Co., Paduoah, Ky.
W. H. OSBOBNy
Commissioner of IrUemal Revenue.
(T. D. 1995.)
Assessed taxes — Notice and dem/md, Form 17.
Notice of and demand for afiseseed taxes to be issued promptly to secure tax lien,
penalty, and interest in case of nonpayment.
Treasury Department,
OrFiCE OF Commissioner of Internal Revenue,
Washington, D. C, June 12, 1914.
To collectors of internal revenue:
It appears that certain collectors hold that notice of assessment
and demand, Form 17, is not necessary to create a liability to 6 per
cent penalty and interest at 1 per cent per month in the case of in-
come tax remaining unpaid after June 30 or other due date. This
view as to the requirements of the law is clearly wrong and contrary
to the instructions (art. 197, Regs., 33) issued on the subject.
The necessity of issuing Form 17 is twofold — ^first, to determine the
date when 5 per cent penalty accrues and interest at 1 per cent per
month begins to run, and, second, to complete the Government's
lien on property belonging to the taxpayer.
In special excise and income-tax assessments a notice on Form 647
is required to be given in all cases where the required return is filed
in due time. . This, however, is simply a preliminary notice of assess-
ment, to be followed, in case of nonpayment, by a formal notice and
demand which the law clearly contemplates and which the courts
hold to be necessary before the delinquent taxpayer becomes charge-
able with penalty and interest.
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100
In all cases, therefore, where an assessed tax remains unpaid after
it becomes due a notice on Form 17 should be at once issued, to be
followed, when necessary, by Forms 21 and 69, in their order. The
fact that a claim for abatement is pending or the tax is in litigation
does not relieve the collector from issuing the notices, demands, etc.,
required by law.
A misunderstanding on the part of certain collectors as to these
requirements has occasioned a considerable loss to the Government
of penalty and interest, especially where claims for abatement were
pending.
W. H. OSBOBN,
Commissioner of Internal Revenue.
(T. D. 1996.)
Income tax.
Cooperative dairies and like oiganizatLona do not fall within the claases of oiganisa-
tionfl enumerated in subsection G, section 2, act of October 3, 1913, as exempt,
and are requiied to make returns of annual net income.
Teeasuby Department,
Office of Commissioneb of Intebnal Reyenue,
Washinffton, D. (7., June IB, 1914-
To collectors of internal revenue:
Attention i3 called to article 92 of Regulations No. 33, approved
January 5, 1914, in which it is provided that cooperative dairies not
issiung stock and allowing patrons dividends based on the percentage
of butter fat in milk furnished are not liable to the requirements of
section 2, act of October 3, 1913.
This article is amended to the effect that cooperative dairy associa-
tions, whether issuing capital stock or not, are required to make re-
turns of annual net income pursuant to the requirements of this act.
The only corporations, joint-stock companies or associations, or
insurance companies, exempt from the requirements of this act are
those which fall within one or another of the classes specifically
enumerated in the first proviso of subsection G of the act cited as
exempt.
Cooperative dairies, no matter how organized, do not appear to fall
within any of these exempted classes, and will, therefore, be required
to make returns.
In the preparation of their returns, cooperative dairies may inclucle
in their deductions from gross income the amoimt actually paid to
members and patrons for milk, but any amotmt retained at the end
of the year over and above expenditures will be returned as net
income, upon which the tax wiU be computed and assessed.
In so far as article 92, hereinbefore referred to, is in conflict with
this rulii^, it is hereby revoked, and collectors will require all organi-
zations of this character to make returns of annual net income and
Digitized by VjOOQ IC
101
in other respects comply with the requirements of the Federal income
tax law as it applies to corporations, joint-stock companies or asso-
ciations, and insurance companies.
In so far as appHcable, this ruling also apphes to mutual or coop-
erative telephone companies, farmers' insurance companies, and like
organizations.
W. H. OSBOBN,
Commissioner of Internal Befoenue.
Approved:
W. G. McAdoo,
Secretary oftJie Treasury.
(T. D. 1997.)
iTicome tax.
Monthly list returns not to be made imder oath.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, June 16, 1914,
To collectors of internal revenue:
The requirement that monthly list returns be made imder oath (as
provided by articles 35, 50, 53, and 59, Income Tax Emulations No.
33, when filed by withholding agents on or before the 20th of* the
month following that in which withholding occurred) is hereby waived
In all cases the annual list return required of withholding agents (of
which the monthly Ust returns will form a part as required by r^u-
lations) will be made, sworn to, and filed as now required by existing
regulations, and the jurat for the annual Kst return will cover the
entire return as thus made up.
W. H. OSBORN,
Commissioner of Internal Revemie,
Approved:
W. G. McAdoo,
Secretary of the Trea^sury.
(T. D. 1998.)
Income tax.
Exemption certificate provided for use of firms, organizations, and fiduciaries claiming
exemption from withholding of tax at source on income other than interest on
bonds.
Treasury Department,
Oppiob of Commissioner op Internal Revenue,
Washington, D. C, June 16, 1914.
To collectors of internal revenue:
The following certificate is hereby provided for use of firms, organi-
zations, and fiduciaries for the purpose of establishing their identity
Digitized by VjOOQIC
102
and nonliability to withholding at the source of income (other than
interest on bonds) payable to them. Said certificates shall be of the
size and be printed on yellow paper of the weight and texture all
as provided by T. D. 1976, the requirements of which are hereby made
applicable to the certificate hereby provided.
(Form 1068.)
ExBMFnoN Certificate — Firms, Organizations, or Ftouciaries.
(For OM of flrmf, orgaaliatloiis, or fldodvios entitlfld to receive income other than from inierut on Umdt
to estabUflh their identity and nonliability to withholding at the Bonroe.)
(Give name of debtor.)
(Cancaotar of income, other than interest on bonds, as rent, dividends tram foreign oarporationa^ etc)
I do solemnly declare that the finn, oiganization, or person named below is entitled
to receive the above-described income and that under the provisions of the income
tax law and regulations said income is exempt from having the tax withheld at the
source, and that all the information given herein is true and correct.
Date, , 191..
(Name of firm, organization, or fidadary.)
By :
(Signature of person duly authorized to sign for firm
or organization and his official position or name
oftinst.)
Address
(Give full post-office address of firm or oiganlzatlon
or fiduciary.)
'fhe exemption certificate provided for the use of individuals is
Form 1007, which will be used by individuals in all cases except
for interest on bonds, for which forms 1000 and lOOOB are provided.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 1999.)
Special excise tax on corporations — Leased railroads — Decision oj court.
1. ExBRCisiNO Power of Eminent Domain.
A laUroad corporation which has leased its property for a term of years, but
continued in possession of its corporate powers and exercised the power of eminent
domain conferred by its charter by making application for the condemnation of land
and filing locations therefor, is subject to the tax.
2. Issue of Bonds bt Lessor.
The lessor compuiy, by issuing bonds to pay for extensions and improvements,
engages in business and becomes subject to the tax.
Tbeastjbt Department,
Office of Cobocissionee of Internal Revenue,
Washington, D. C, June 24, 1914.
The appended decision of the United States District Court for the
District of Massachusetts in the case of New York Central & Hudson
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103
Biver Railroad C!o. and Boston & Albany Railroad Co. v. Gill, col-
lector, is published for the information of intemal*reyenue officers
and others concerned.
W. H. OSBORN,
Commissioner of Internal Revenue.
DiBTBIGT OOUBT OF THE UnITBD StATES, DiSTBICI OF MasSAGHUSBTTS. No. 284.
New York Central A Hudson River Railroad Co. and the Boston <k Albany Railroad
Co. V. JoTnes D. GUI, Collector.
[June 10, 1914.]
Bingham, Judge: I am of the opinion that the Boston & Albany Baihoad Co. dur-
ing the year 1909 was a corporation engaged in business within the meaning of the
corporation tax law of 1909 (sec. 38, 36 Stat., ch. 6) and was subject to the imposition
of Uie tax therein authorized. In addition to maintaining its corporate organization,
collecting rentals, paying rentals, transferring stock, maintaining an office force, invest-
ing fimds, and paying dividends to its stockholders, it exercised the power of eminent
domain conferred upon it by its charter by making application on four different occa^
sions during the year for the condemnation of land with which to extend its lines in
the State of Massachusetts, and filed locations therefor as required by law. And to
pay for these extensions and improvements it authorized and issued bonds to the
amount of $4,500,000, dated May 1, 1909, payable in 25 years, with interest at 4 per
cent. McCoach v. Minehill Railway Co. (228 U. S., 295).
Judgment will be entered for the defendant, with costs.
(T. D. 2000.)
Speddl excise tax on corporations — Leaded railroads — Decision oj court,
1. Issue of Bonds by Lessor.
A railroad corporation, which has leased its property for a term of years, but con-
tinued in possession of its corporate powers and issued bonds to pay for additidns»
improvements, and betterments of its property in accordance with the terms of the
lease, engages in businesB and is liable for the tax.
2. Reduction of CAPrrAL Stock.
The issuing or reduction of capital stock is the exercise of corporate power. Re-
ducing capital stock is a matter between the stockholders and the corporation, and
does not concern the public, and is not engaging in business so as to require pay-
ment of tax.
3. Suit in Name of Lessor.
The bringing of a suit by lessee in name of lessor to establish right to croias tracks
of another company is, under the circumstances stated, held not to ccmstitute en-
gaging in business.
4. Exchange OF Real Estate.
The joining by lessor in a deed for the sale of property and taking a conveyance
constituted the transaction of business.
5. Single Act.
The doing of a single act of business, accompanied with a purpose to perform other
corporate acts of the same kind, held to constitute the doing of business.
Teeasuby Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, June 25, 1914.
The appended decision of the United States District Court for the
Southern District of Ohio, Western Division, in the cases of the Day-
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104
ton & Western Traction Co. v. GiUigan, collector, et al., is published
for the information of internal-revenue officers and others concerned.
RoBT. Williams,
Acting Commissioner of Internal Revenue.
United States District Court, Southern District op Ohio, Western Division.
Nos. 2319-22 and 2347.
Dayton ds Western Traction Co. v. Andrew C. GilUgan, Collector oj Internal Revenue
(No. 2319); Fort Wayne, Van Wert <k Lima Traction Co. v. Sam4 (No. 2320); Colum-
hu8, Newark ds Zanesville Electric Railway Co. v. Same (No. 2321); Indiana, Colum-
bus <k Eastern Traction Co. v. Same (No. 2322); and Cincinnati Street Railway Co.
V. Same (No. 2347).
CHARGE to the JURY.
Sater, District Judge: Gentlemen of the jury, in case No. 2319 there is no evidence
that the plaintiff transacted any business in either of the years 1910 or 1911, and it
is therefore entitled to judgment on the first cause of action for $823.50, with interest
from June 30, 1912, and on the second cause of action for $823.50, with interest thereon
from October 23, 1913.
In case No. 2320 the plaintiff sues to recover for the corporation tax paid for the
year 1911 and for the year 1912. The agreed statement of facts shows ^hat in June,
1911, the plaintiff issued $70,000 reserve bonds for additions, improvements, and
betterments to and of its property, in accordance with the terms of its lease. It does
not appear that it did any business in the year 1912. It therefore follows that on the
first cause of action the verdict should be for the defendant. On the second cause of
action the verdict should be for the plamtiff in the sum of $450, with interest from
October 23, 1913.
In case No. 2321 the plamtiff sues to recover for the corporation tax paid in the
years 1911 and 1912, respectively. In 1911 it reduced its capital stock from $6,250,000
to $2,025,000. In 1912 it issued $250,000 bonds for additions, improvements, and
betterments to and of its property. The issuing or reduction of capital stock is the
exercise of corporate power. (Thompson on Corporations, 1st ed., sec. 1061.) The
reduction or increase of capital stock is a transaction had between the corporation
and its stockholders and not between the corporation and the general public or its
lessee. A lessee may hold stock in the lessor, but its attitude as a stockholder is no
different from that of any other stockholder. The stock of a corporation is not its
tangible property. (Thompson on Corporations, sec. 1062; 10 Cyc, 365.) It is a
chose in action, giving the right to participate in the electi(Hi of corporate ofllcers
to be eligible to the officer or director, to receive dividends, and, after payment of
the debts, to receive a proportional share of the corporate assets, if the corporation
be wound up. (Thompson on Corporations, sec. 1070.) It is not shown that any
creditors have been prejudiced by ot were interested in the reduction or in any manner
aided the business of either the lessof or the lessee. I infer from the McCoach case
(228 U. S., 295) that if the assets of the corporation, through losses or otherwise, had
depreciated so that the value of shares of outstanding stock had diminished, the
charging off by the corporation of the loss would not constitute doing business.
Whether, by arrangement between the stockholders and the corporation, the stock-
holders should retain the stock theretofore issued to them depreciated in value on
account of such losses, or whether by common consent or acting under the statute
they should surrender such stock and take in lieu thereof a less number of shares
worth par in view of the changed conditions, would be a matter wholly for the de-
termination of the stockholders and the corporation. What should be done in such
Digitized by VjOOQIC
105
a situation in the absence of prejudice to creditors is to be determined wholly by the
stockholders and the company, and is, so to speak, so far a family arrangement as
not to concern the public or to be an engaging in business. I therefore hold that the
plaintiff did not engage in business in the year 1911 and that it should have judgment
on the first cause of action for $339.88, with interest from June 30, 1912. As to the
second cause of action, judgment is directed for the defendant.
In case No. 2322 it appears that in 1911 the plaintiff reduced ita capital stock from
112,000,000 to $4,025,000. This was not an engaging in or doing of business within the
terms of the law. By paragraph 1 of the lease it was covenanted that the lessee
might use the name of the lessor in bringing, prosecuting, or defending any suils or
proceedings at law or in equity necessary or proper in the opinion of the lessee for the
protection, preservation, and full enjoyment by the lessee of the property, rights,
and privileges leased, and from time to time might at its own expense apply for and
operate In the lessor's name and right further rights to lay and maintain tracks and to
erect and maintain poles, wires, etc., holding always the lessor harmless and indemni-
fied £^inst all loss, cost, damage, and expense whatsoever. Under paragraph 11 the
lessee accepted all of the property leased and agreed that it would from time to time
at its own expense, except as otherwise provided in paragraph 3, make all extensions,
additions, alterations, improvements, renewals, and betterments necessary to make
and maintain the property leased, and that all lands, structure, improvements, better-
ments, and renewals added to or made upon the demised premises, and all right,
privileges, and franchises acquired by the lessee upon payment therefor, as provided
in the lease, should become the property of the lessor. It also stipulated in paragraph
15 to perform all the obligations imposed upon the lessor by law or by the provisions
of the lessor's grants from or contracts with any State, city, town, or county, in relation
to the leased property, and not to do or suffer to be done or omitted any act or thing
which should be a ground of forfeiture.
The lessor's road stopped at the city limits of Defiance, Ohio. To get into the
city, for entrance into which it had a franchise but no constructed road, it was neces-
sary to cross the Baltimore & Ohio Railroad Co.'s tracks. As the plaintiff and the
last-named company were not able to agree, the lessee's attorney at Defiance was
directed to bring a suit in the lessee's name imder the Ohio statute against the Balti-
more & Ohio Eailroad Co. to establish its ri^t to cross such company's tracks. An
overhead or underground crossing was impracticable. The attorney, notwithstanding
his instruction and in disregard of it, brought the suit in the name of the plaintiff,
a fact which did not become known to plaintiff until long afterwards. The lessee is
conducting the litigation, has control of it, and is required to bear all the expense
of it. Although the plaintiff, after learning that the suit was instituted in its name,
did not forbid its continuance, it does not appear to have taken any part in it, and
I do not think, under the circumstances, that the plaintiff, by reason of such liti-
gation, should be held to have engaged in business. The intention to do business
was wanting.
In each of the years 1911 and 1912 the plaintiff joined in the exchange of certain
real estate theretofore owned by it in Springfield, Ohio, for other real estate, cod-
veying the former and taking a deed for the latter. Its action was governed by the
third paragraph of its lease. In each of these years it engaged in the transaction of
business. A verdict is therefore directed in favor of the defendant on both the first
and the second causes of action. The reason for directing a verdict in favor of the
defendant in such case is in pursuance of the views heretofore indicated in the charge
delivered by this court on March 4, 1914. As there stated, the doing of a single act
of business, accompanied with a purpose to perform other corporate acts of the same
kind or other corporate business may very properly he held to constitute the doing
of business. To the authorities then cited may be added International Text Book
Co. V. Pigg (217 U. S., 91, 104, 105), and Deere v. Wyland (69 Kans., 285). Cook
on Corporations (7th ed., sec. 696, p. 2351) states that a much broader meaning than
Digitized by VjOOQIC
106
ordinary is given to the words "doing business" irnder a tax statute, citing in support
Flint V, Stone Tracy Co. (220 IT. S., 107, 171), on which last page it is said:
''Business" is a very comprehensive term and embraces eyerythinff possible about
which a person can be employed; * * * that which occupies the time, atten-
tion, and labor of men for the purpose of a livelihood or profit.
From the agreed statement of facts submitted in. case No. 2347 and from the lease
in evidence, it appears that paragraph 17 of the lease provides that whenever any of
the real estate leased shall become unsuitable or xmnecessary for the operation of the
railroads, or any of them, mentioned in such lease, the lessee may sell and dispose of
the same with the concurrence of the lessor as to the advisability of the sale and the
price to be paid, to be evidenced by its uniting in the deed or other instrument of
conveyance, and the proceeds of sale in. every such case shall be applied to the pur-
chase of other property to be mutually agreed upon by the lessor and lessee, the title
to the same to be taken in the name of the lessor and the property purchased to be
treated and used as a part of the leased property. A railway system as extensive as
that of the plaintiff must necessarily have various pieces of real estate. Theie is in
this provision a purpose to transact business from time to time and it brings the case,
in my judgment, within the rule announced in the Pigg case, page 91. The location
of stations, power plants, car bams, and other structures used in and about the opera-
tion of the road is frequently a matter not only of great convenience to the public,
but of wise business policy and is of consequence in the transaction of a carrier's busi-
ness. Under the paragraph mentioned the plaintiff may seldom be called upon to
act. On the other hand, the shifting of residential or business districts, the growth
of the city in sections unpopulated or sparsely ix)pulated, and the general convenience
of the public and of the lessee may require the frequent sale of present properties and
the purchase of others to a considerable extent. Considering that section, I am of
the opinion that the plaintiff's joining in a deed for the sale of property in the year
1911 constituted the transaction of business and that for that reason the verdict as
r^^ards the tax levy for that year should be for the defendant. The view above ex-
pressed makes it unnecessary to determine whether the assent of the plaintiff to the
contract between the Cincinnati Street Railway Co. and the Cincinnati & Hamilton
Traction Co. involved the doing of business or not.
Note. — ^The railway companies intend to appeal these cases to the
Circuit Court of Appeals.
(T. D. 2001.)
Income taa.
Corporations desiring to make returns of annual net income on the basis of a fiscal
year must give notice in writing to the collectoi; not less than 30 days prior to
March 1, designating in such notice the last day of some month as the close of the
fiscal year. Failure to give such notice at least 30 days prior to March 1, or to
make return for the preceding calendar year on or before March 1, renders cor-
porations liable to additional tax and penalty.
Tbeasuky Depabtment,
Ofpicb of Commissioner op Internal Revenue,
Washington, D. C, June SS, 1914.
To collectors of internal revenue:
Your attention is called to the following provision quoted from
paragraph O, subsection G of section 2, act of October 3, 1913 :
The tax herein imposed shall be computed upon its entire net income accrued
within each preceding calendar year ending December thirty-first; * * * JProvidcd
Digitized by VjOOQIC
107
Hwrth&r^ That any corporation, etc., subject to' this tax may designate the last day of
any month in the year as the day of the closing of its fiscal year and shall be entitled
to have the tax payable by it computed upon the basis of the net income ascertained
as herein provided for the year ending on the day so designated * * * and it
shall give notice of the day it has thus designated as the closing of the fiscal year to
the collector of the district in which its principal business ofi&ce is located at any time
not leas than thirty days prior to the date upon which its annual return shall be filed.
Except as provided in the act, all corporations are required to
make their returns of annual net income on the basis of the calendar
year and to file such returns on or before the 1st day of March next
following. March 1 is, therefore, the primary due date for the
returns of all corporations. This due date can be postponed only
in accordance with some legal or authorized action. Unless such
action is taken withia the prescribed time, or the returns filed on or
before March 1, all corporations in existence at the preceding Decem-
ber 31 and failing to take such action, or so file their returns for the
period ended December 31, will be held to be delinquent, and will be
subject to 50 per cent additional tax and the penalty of the law.
TTie filing of returns at any date other than on or before March 1
and on a basis other than the calendar year can be authorized only
in cases wherein corporations, not less than 30 days prior to March 1,
give notice in writing to the collector of the district in which are
located their principal places of business, designating in such notice
the last day of some month as the close of their fiscal year. In this
case the corporations will make their returns for the year so estab-
lished, and will file their returns on or before the last day of the 60-day
period next following the date designated as the close of the fiscal
year.
For the purpose of the income tax law, a fiscal year, when desig-
nated, must be so designated that the return made on this basis will
not comprehend a period greater than 12 consecutive months. If
the required notice is delayed until it can not be given at least 30
days prior to March 1, or if the date designated as theV close of the
fiscal year comprehends a period greater than 12 months from the
close of the period for which the last prior return was made, the
returns must be made as of the calendar year and must be filed on
or before March 1 until such time as a fiscal year for this purpose can
be legally established.
. If a corporation which shall have filed, on or before March 1, its
return for the preceding period ended December 31, desires to estab-
lish, as a basis for making future returns, a fiscal year ended at some
date prior to the next December 31, it may do so by filing, at least
30 days prior to the date when its returns, on a fiscal year basis, will
be due, a notice with the collector designating the last day of some
month as the close of its fiscal year. It will then, on or before the last
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day of the 60-day period next following the date so designated, file a
return covering the period from January 1 to the date so designated
in the same year, and thereafter its returns will be made for each 12-
month period next following such date.
The above rulings will apply to corporations which began business
within the year, as well as to those which were in existence and trans-
acted business throughout the year.
Any ruling or Treasury decision heretofore issued and in conflict
with this decision is hereby recalled and revoked.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
Wm. G. McAdoo,
Secretary of the Treaswry,
(T. D. 2002.)
Raisin wine.
T. D. 1949 applies to so-called raisin wine only where such product is made from a
mash to which artificial sweetening is added.
Treasuey Department,
Office of Commissioner of Internal Revenue,
WasTiin^gton, D. (7., June 29, 1914.
To collectors of internal revenue and others concerned:
Where so-called raisin ''wine" is made solely by the fermentation
of dried grapes and water, without the addition of sugar or othei
artificial sweetening, it is held that the same is not made from a
mash ''fit for distillation'' within the purview of section 3282, Re-
vised Statutes, and T. D. 1949 of February 16, 1914.
Where, however, the addition of sugar or other artificial sweetening
is necessary to perfect such product, the same may bo added, but
only after the fermentation of the product has been completed, as
otherwise the addition of such fermentable material to a mash from
which spirits may be obtained would render the mash fit for distillar-
tion within the contemplation of the statute.
The addition of sugar or spirits to such so*jcalled wine, after fer-
mentation, will, however, constitute rectification, and render the
person so rectifying liable to the special tax imposed by section 3244,
Revised Statutes.
Dealers in such so-called wines, including the manufacturers
thereof, will also incur a special-tax liability as wholesale dealers or
retail dealers, as the case may be, without reference to whether or
not sugar or spirits have been added to such wine.
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The deaignation and branding of such product will be subject to
such regulations as may be issued by the Department of Agriculture
under the pure food and drugs act.
W. H. OSBORNj
Commissioner of Internal Revenue.
(T. D. 2003.)
Assessments.
Demand and noticei Form 17, to be served on July 1, unless payment of asBessments
is not made on or before June 30, or on the day following the termination of the
120-day period in the case of corporations which have designated fiscal years,
held to apply in case of delinquenta where their returns are filed prior to the date
on which taxes are to be paid in the ordinary course.
Tbeasury Dbpabtmbnt,
Office op Commissioner of Internal Revenue,
Washington, D. C, June 26, 1914.
CSoLLEOTOR, Second District, New YorJc, N. Y.
Sm: This office is in receipt of your letter of the 16th instant,
relative to the collection of the 5 per cent penalty against the
Co. for failure to pay the income tax and 50 per cent penalty within
10 days after the service of demand and notice on Form 17.
You were advised under date of June 12 that the 6 per cent penalty
does not attach until 10 days after the service of the demand and
notice and in no event until 10 days after June 30, and you call
attention to Mim. 991, under date of January 22, 1914, in which
collectors are directed to issue promptly Form 17 in cases of assess-
ments for special excise and income taxes where the tax assessed is
for overdue or additional taxes or where the required return is not
filed within the time specified in the statute, as in such cases the right
to 30 days' notice (Form 627) has been forfeited.
You are advised that this office is of the opinion that the cases
referred to in the law where the assessments should be made by the
Commissioner of Internal Revenue and paid immediately upon
notification of the amount of such assessment relate to delinquent
corporations who have failed to file returns imtil after the final day
on which taxes should be paid in the regular course, viz, June 30.
Under this construction, therefore, it will be seen that in cases of
individuals and corporations whose delinquency was disclosed prior
to July 1 or prior to the termination of the 120-day period following
the day when the return was due to be filed, the demand and notice
on Form 17 should not be served until July 1 or on the day following
the termination of the 120-day period after the return was due and
the 5 per cent penalty should not be demanded until the expiration
of the 10-day period following the serving of such demand and
notice. Where, however, such demand and notice has been served
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110
and payment of the 5 per cent penalty made before the termination
of the 10-day period following Jmie 30, the corporations by whom
such payments have been made should be advised of their privilege
to file claim for refund.
All rulings or decisions in conflict with the above are hereby over-
ruled.
KespectfuUy, W. H. Osbobn,
Ccmimiagioner of Irdemal Revenue.
Approved:
W. G. McAdoo,
Secretary cfthe Treasury.
(T. D. 2004.)
Oleomargarine.
Supplement 1 to Regulations No. 9, revised July, 1907, conceming Government
record to be kept by manufacturers of and wholesale dealers in oleomargarine.
Treasury Dbparthent,
Office of Commissioner of Internal Revenue,
Washington, D. O., Jv/neS7,J914.
To internal-revenue officers and others concerned:
B^ulations No. 9, pages 46 and 47, and pages 56 and 67, concern-
ing Qovenunent records to be kept by manufacturers of and whole-
sale dealers in oleomaigarine are hereby amended as follows:
All transactions involving the withdrawal or sale of oleomargarine must be entered
by the manuhwrtnrer or wholesale dealer on Government record, books 60 or 61, as
the case may be (or Forms 216 or 217 if substituted for records 60 and 61), in the order
and at the time they occur.
Where the proper entries in these records can not, for any good and sufficient reason,
be made immediately following each transaction, the manufacturer or wholesale
dealer, upon request from any internal-revenue officer, shall produce for his inspection
such invoices, sales, or delivery slips, or other records covering any or all sales or
deliveries of oleomargarine up to that time as may be required.
Failure on the part of a manufacturer or wholesale dealer to make necessary entries
on the Government records at the time of transaction, or where such entries can not
be made immediately, the refusal to produce other records requested by any internal-
revenue officer is a violation of section 5, act of August 2, 1886, on the part of the
manufacturer, and of section 6, act of May 9, 1902, on the part of a wholesale dealer, and
the regulations thereunder, and should be reported by the officers making the inveKti-
gation.
The regulations as amended herein are effective on and after July
15, 1914.
W. H. OSBOBN,
Commissioner of Internal Revenue. ^
Approved:
W. G. McAixK),
Secretary of the Treasury.
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(T. D. 2005.)
Income tax.
Instructions and rules for determining what amount is to be allowed as a deduction
for loss in a return of income. — ^Depredation allowed by law does not include
shrinkage in value of stocks, bonds, etc.
Treasury Department,
Office of Commissioner of Internal Revenue,
Wdshington, D. (7., Jvly 5, 1914-
To collectors of internal revenue and revenue agents:
For the purpose of checking up returns and ascertainmg the amount
of taxable income of individuals and corporations you are given the
following instructions and rules for use in determining the amount of
deductible loss allowable to individuals and corporations under the
fourth deduction (par. B, p. 5), Regulations No. 33, and second
deduction, for domestic corporations (par, G, p. 14), and second
deduction, for foreign corporations (par. G, p. 16), Regulations No. 33.
The loss considered here has in it no element of ''depreciation,'* or
"allowance for wear and tear/' or ''compensation from insurance or
otherwise." It is to be such loss as is absolute and complete and
which has beon actually sustained.
Depreciation as an allowable deduction in ascertaining annual net
income for the income tax is separately provided for and is not to be
confused with loss. The depreciation provided to be taken as. a
deduction in a return of income is the value assigned to the deteriora-
tion of physical improvements or assets, such as are susceptible of
having their value lessened through wear and tear, use or obsolescence.
The depreciation referred to in the income-tax law does not relate
to evidence of a right or interest in property, and hence any shrinkage
in the value of bonds, stocks, and like securities due to fluctuations
in their market value is not deductible in a return of income as depre-
ciation or loss.
Losses may be sustained by individuals or corporations on personal
or real property. Only those losses are deductible which are sus-
tained during lite tax year "in trade" — that is, the business which
engages the time, attention, and labor of anyone for the purpose of
livelihood, profit, or improvement. Loss to be deductible must be an
absolute loss, not a speculative or fiuduating valuation of continuing
investment, but must be an actual loss, actually sustained and ascer-
tained during the tax year for which the deduction is sought to be
made; it must be incurred in trade and be determined and ascertained
upon an actual, a completed, a closed transaction.
Losses sustained by individuals or corporations from the sale of or
dealings in personal or real property growing out of ownership or use
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of or interest in such property will not be deductible at all unless they
are an incident of, connected with, and grow out of the business of the
individual or corporation sustaining the loss, and are ascertained,
determined, and fixed as absolute in the above sense within the tax-
able year in which the deduction is sought to be made. When loss
under this heading is ascertained to be deductible, the entire amount
of the loss will be deductible except where the property in connection
with which the loss occurred was acquired prior to March 1, 1913, in
the case of individuals, and prior to January 1, 1909, in the case of
corporations, and then and in such event the loss ascertained will be
prorated over the whole time the property was held, and that part of
the whole loss apportioned to the taxable period will be taken into
account in annual returns of income. In prorating, fractional parts
of years wiQ not be considered.
Loss is the diflPerence between selling price and cost where the sell-
ing price is less than cost.
Cost of property purchased prior to the incidence of the special
excise tax (Jan. 1, 1909), or the incidence of the income tax (Mar. 1,
1913), wiQ be the actual price paid for the property, including the
expense incident to the procurement of the property in the first
instance and its sale thereafter, together with carrying charges of
interest, insurance, and taxes actually paid prior to the incidence of
tax (special assessments, if any, ''actually paid" as ''local benefits"
in connection with real estate); provided that where, up to the inci-
dence of the tax, the expense of carrying property has exceeded the
income from it, the difference between the expense of carrying and the
income from the property shall be added to the purchase price and
the sum thus ascertained shall be the cost of the property; and pro-
vided further, that in the case of property purchased prior to the
incidence of the tax and sale thereof subsequent to the incidence of
the tax there shall be excluded from consideration in ascertaining
cost any items of income, expense, interest, and taxes previously
taken into account in preparing a return of annual net income.
The cost of property acquired subsequent to the incidence of the
tax wiQ be the actual price paid for it, together with the expense inci-
dent to the procurement of the property in the first instance and its
sale thereafter and the cost of improvement or development, if any.
All existing rulings and regulations in conflict herewith are hereby
annulled and superseded.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. McAnoo,
Secretary of the Treasury,
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Cr. D. 2006.)
Income tax.
Definition of "foreign corporation" and "fiscal agent" as used in T. D. 1992, and
further explanation of method of handling collection of income from bonds of
such foreign corporations and foreign countries having fiscid agents in the United
States.
Treasxjby Department,
Office of Commissioner of Internal Revenue,
WdshingtoUj D. C, Jvly 16, 1914.
To collectors of internal revemie:
Doubt haying arisen as to the comprehensiveness of the term
*'fore^ corporation,'' and the duties under the income-tax law of
''fiscal agents,'' as provided in T. D. 1992, you are advised that
' 'foreign corporations" asg^ised in said decision was intended to in-
chide municipal and private corporation^ holding charters imder
laws of countries foreign to the United States, and ''fiscal agents"
refers to financial agents in the ordinary sense, upon whom the law
casts the same duties with reference to withholding and paying the
tax as are imposed upon withholding and paying agents of domestic
corporations by appointment.
Where a foreign government has a fiscal agent in the United
States for the purpose of paying the interest on its obligations, such
fiscal agent will be charged with the duty of withholding and paying
the tax on such interest payments, except to the extent of exemption
claimed.
Where such foreign countries or corporations have an issue of
bonds payable wholly within the United States or within or without
the United States, at the option of the owner of the bonds, and where
the coupons from such bonds are presented for payment to the fiscal
agent in the United States of such foreign countries or corporations,
or for collection to a bank or collecting agency whether licensed or
not, with ownership certificate attached, then and in all such cases
said coupons shall be treated as domestic items and the aforesaid
fiscal agents will be charged with the duties and responsibilities of
withholding and paying agents, and will make return on Form 1012,
as provided by income tax regulations.
Where, however, such coupons are not presented with such owner-
ship certificate attached, they shall be received only by a licensed
bank or collecting agency, and when so received shall be considered
to be and be treated as foreign items, in accordance with the regula-
tions for the collection of foreign income.
This ruling is made in explanation and amendment of T. D. 1992
and other applicable regulations.
W. H. OSBOBN,
Commiaeioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
27776°— VOL 16—14 8
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(T. D. 2007.)
Substitution.
Modification of T. D. 1872 of Augiufc 26, 1013.
Tebasxtby Depabtment,
Office of Commissioner of Internal Reyenue,
WasUngtony D, a, July 21, 1914.
To collectors of internal reverme, revefme agenta, cmd others concerned:
The continued practice of substitution in double-stamp packages,
notwithstanding the provisions of T. D. 1872, renders it necessary to
modify said decision in order to secure a full compliance with, and a
proper enforcement of, the law in Hiat b^alf .
Notice is therefore hereby given that not only will that decision be
strictly adhered to as to seizures made hereafter, but that this office
will also recommend criminal prosecution in every case where there
is any evidence pointing to the guilty party.
Compromises, even when an amount is offered fully equal to what
the spirits will bring at forfeiture sale, will not be accepted, as such a
course is evidently not sufficient to deter -unscrupulous dealers and
entirely prevent this continued violation of law.
W. H. OSBOBN,
Commissioner of Internal Beven/ae.
(T. D. 2008.)
Equalizmg losses of honied spirits.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, July £4, 1914.
To collectors of internal revenue and others concerned:
The attention of this office has been recently called to the ill^al
practice prevailing at many distilleries of concealing excessive losses
of bonded spirits by ''equaUzing" or by refilling packages, thereby
enabling the distillers to evade the tax on the spirits do lost.
Section 3267, Revised Statutes, provides:
Whenever any person engaged in carr3dng on the busmesB of a distiller defrauds
or attempts to defraud the United States of the tax on the spirits distilled by him,
or any part thereof, he shall forfeit the distillery and distilling apparatus used by
him, and all distilled spirits found in the distillery and on the distillery pcemiaea,
and shall forfeit not less than five hundred dollars nor more than five thousand doUara
and be. imprisoned not less than six months nor more than three yean.
Notice is hereby given that hereafter in every case where equal-
izing or refilling packages of bonded spirits is discovered the property
subject to forfeiture under the above quoted provision of law will be
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at once seized and that criminal proceedings will be at once in-
stituted against the distiller so offending.
Collectors will see that all distillers in their respective districts are
furnished with a copy of this circular.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 2009.)
Stamp tax on m^irine^insurance policies under the war^revenue act —
Decision of court.
1. PoucisB OF Marine* Insurance.
Insuiaace policies as documents are not exports.
2. Stamp Tax on Poucibs of Marine Insurangb.
The stamp tax on policies of marine insurance on^exported .products was not
unconstitutional as a tax on exports. The case distinguished from tax on expMt
bills of lading, Fairbanks v. United States (181 U. S., 283; T. D. 339), and on mani*
fests, United States v. New York and Cuba Mail Steamship Co. (220 U. S., 488).
Tkeasury Department,
Office of Commissioner of Internal Kevenue,
Washington, D. C, July £7y 1914.
The appended decision of the United States District Court for the
Southern District of New York, in the case of the Thames & Mersey
Marine Insurance Co. v. United States, is published for the informa-
tion of internal-revenue officers and others concerned.
W. H. OsBOBN,
Commissioner of Internal Revenue.
United States District Court, Southern District of New York, June 17, 1914.
The Thames A Mersey Marine Innarance Co, (Ltd,) v. UniUd States of America
STATEMENT.
This case comee up on a demurrer to a petitian under the Tucker Act to recover
the sum of $5,500, alleged to have been ille^lly exacted from the petitioner for the
payment of stamp taxes on policies of marme insurance imderwntten by it. The
tax was levied under the war-revenue act of 1898, which provided that after July 1
of that year there should be levied in respect of the documents thereinafter mentioined
taxes as set down in the several schedules. Schedule A provided :
^^ Insurance (marine, inland, fire): Each policy of insurance or other instrument,
by whatever name the same shall be called, by which insurance be made or renewed
upon property of any description (including rents or profits), whether against pNeril
by sea * « * or other peril, made by any person, association or corporation,
upon the amount of the premium charged * * *.''
The theory of the complaiat is that this act is unconstitutional because it violated
section 9, Article I, of the Constitution —
"No tax or duty shall be laid on articles exported from any State."
This is the sole question which is raised by this demurrer, for although the United
States raises questions of the jurisdiction of this court under the Tucker Act, yet the
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d6ciai(ni of Jud^ Noyes in Hvoslef v. United States is conceded to be conclusive in
this court at this time.
The petition alleges that the plainti^ affixed all the stamps in accordance with the
law and the requirements of the collector of internal revenue and canceled them over
a period of time therein stated. Each of the policies effected marine insurance of
certain exported products or merchandise during their transit by sea from the United
States to various ports and the products and merchandise so msured were actually
exported fiom the United States to various pprts. The policies themselves were re-
quired by the custom and usage of business in the export trade, and they accom-
panied drafts and bills of lading drawn by the exporter against his consignee.
Hand, District Judge: The policies of marine insurance in this case may be viewed
from two quite separate aspects — ^first, as necessary incidents of the business of export-
ing, and, second, as exports themselves by virtue of the allegation that they were
sent along with the biUs of lading and the drafts to foreign ports. Fairbanks i;. United
States (181 U. S., 283) decided that a tax on a bill of lading was within the prohibi-
tion, and the same with respect to manifests was conceded in United States v. New
York and Cuba Mail Steamship Co. (200 U. S., 488). In Judge Noyes's decision the
same ruling was applied to charter parties. Almy v. CaUfomia (24 How., 169)
applied the same rule to the taxation by a State of bills of lading of gold and silver
exported from the State. These cases extend the meaning of the clause beyond the
taxation of the exported goods themselves to the documents which contain the con-
tracts of carriage or the evidence that they are being carried. A marine policy is
neither of these; it is a contract to pay a sum of money in the event of their loss and
does not concern their carriage in any respect, except that it presupposes that the
exportation will take place. The true rule seems to me to be that the taxation of
only such contracts is forbidden as involve in their performance some part of the move-
ment of the exports out of the country or of such documents as record that movement.
The goods themselves do not become exports until their movement begins (Cornell
V. Coyne, 192 U. S., 418), and it would seem by analogy that documents recording
transactions which touch them should not fall within the clause unless the recorded
tsalisactions were a part of the same movement or at least called for it in their com-
plete execution if they were promissory in character. I should regret to base the dis-
tinction upon whether the transaction directly or indirectly affected exportation,
for that involves a kind of casuistry which generally proves very troublesome in
application and conceals the real ground of the decisions.
Nor can I accept the test of whether the tax burdens exportation, provided that the
burden is only a part of what goods of the same class bear while within the country.
To this Cornell v. Coyne, supra, is a distinct answer; and shows that any language in
Fairbanks v. United States, «upra, to the contrary was not meant to apply imiversally.
A tax upon articles generally though some of them may be exported may have a final
economic incidence upon the exxx)rt, but only along with the rest of its class, and is
certainly not what the Constitution was aiming at. Whether such a tax as thia levied
only upon policies insuring exports would be within the clause is quite another matter.
To impose burdens upon exports even in such a roundabout way which other goods
do not bear may well be within the clause. Coe v. Errol (116 U. S., 517, 526).
In passing I may state that I can not regard the cas€» relied upon by the United
States and holding that the usual insurance business is intrastate as at all in point.
None of those cases involved the insurance of goods in interstate commerce, and Con-
gress may well have control over such contracts. The grant of power over interstate
commerce is not to be confused with the clause here in question.
There remains the question of whether the insurance policies as documents are
themselves exix)rts. This contention is answered by the second reason given for the
decision in Turpin v. Burgess (117 U. S., 504), and by the decision in Cornell v. Coyne,
mpra, holding that the eventual destination of goods did not make them exports until
they b^an to move. In the case at bar, though the policies were all along destined
for export, the stamps were affixed before they were issued . After delivery they were
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sent by the assured along with the other documents to foreign countries^ but until
that time they could at any time be recalled, and they remained a part of the g^ieral
mass of goods in the country.
The demurrer is sustained, and unless the plaintiff amends within 10 days, judg-
ment will be entered dismissing the complaint uxx)n the merits.
(T. D. 2010.)
Medicinal preparation.
List of alcoholic medicinal preparations amended removing from T. D. 1994 the name
» of "Beef, Iron, and Wine," produced by the Owl Drug Co.
Treasury Department,
Office of Commissioner of Internal Kevenue,
Washington, D. G,, August 4, 1914-
To collectors of internal revenue, revenue agents, and otkers:
"Beef, Iron, and Wine," produced by the Owl Drug Co., of San
Francisco, Cal., was listed, through error, in T. D. 1994, revised list of
alcoholic medicinal preparations for the sale of which special tax is
required.
The above preparation as now prepared has been classed by this
office as a medicinal compound, for the sale of which, solely in good
faith for medicinal use, special-tax liability is not incurred.
RoBT. Williams, Jr.,
ActiTig Commissioner of Internal Revenue,
(T. D. 2011.)
Income tax.
Taxability of commifisions od renewal premiums for insurauce.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D, C, July 28, 1914,
To collectors of internal revenue:
Commissions on renewal premiums for insurance are income when
received and income for the period in which received. Therefore,
commissions on renewal premiums received between March 1 and
December 31, 1913, are taxable income for that period and should be
included in returns of income for 1913.
Where commissions on renewal premiums received by individuals
between March 1 and December 31, 1913 (including commissions on
renewal premiums on business written prior to March 1, 1913, ^nd
payable and paid subsequent to that date), were not included in
returns of income of such individuals for 1913, they should file
amended returns and include in such amended returns the amount of
said commissions on renewal premiums.
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Where returns of annual net income were not made by individuals in
receipt of commissions on renewal premiums because of insufficient
income to require a return of income, and such showing of insufficient
income was caused by the exclusion from the return of said commis-
sions on renewal premiums, such individuals should make and file
returns of income and include therein the commissions received by
them on renewal premiums within the period from March 1 to Decem-
ber 31, 1913.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of (he Treasury.
(T. D. 2012.)
Income tax.
Extending exemptioD certificate No. 1063, as prescribed in T. D. 1998, to nomesident
alien individuals.
Treasury Department,
Ofpiob op Commissioner of Internal Revenue,
Washington, D. C, July SO, 1914.
To collectors of internal revenue:
Exemption certificate 1063, as provided in T. D. 1998, is hereby
extended to and made applicable to the use of persons who are non-
resident aliens in claiming exemption from income tax on dividends
payable in the United States from stock of foreign corporations.
W. H. OsBORN,
Commissioner of Internal Revenue.
Approved:
Charles S. Hamlin^
Acting Secretary of {he Treasury.
(T. D. 2013.)
Income tax.
Nonresident aliens— Amendment of article 8 of Regulations 33, providing far the
collection of tax on income of nonresident aliens derived from trades or profes-
sions in the United States.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, August 12, 1914-
To cdUedors of internal revenue:
Article 8, Income Tax Regulations 33, is hereby amended by
adding thereto the following:
The person, firm, company, copartnership, corporation, joint-stock company or
asBociatiosi, and insurance company in the United States — citizen or resident alien —
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In whatever capacity acting, having the control, receipt, disposal, or paymestt of
fixed or determinable annual or periodical gains, profits, and income, of whatever
kind, to a nonresident alien, under any contract or otherwise, and which payment
shall represent income of a nonresident alien from the exercise of any trade or pro-
feflBion within the United States, shall make return for such nonresident alien on
Form 1040 and shall pay any and all tax— normal and additional tax — chazgeable
upon the said income of such nonresident alien.
So that article 8 as amended shall read:
Abt. 8. The income of nonresident aliens subject to the normal tax of 1 per cent
shall consist of the total gains, profits, and income derived from all property owned
and from every business, trade, or profession carried on within the United States
(to be designated as gross income), less deductions (1 to 8, inclusive) specifically
enumerated in paragraph B of Ihe act (see art. 6), in so far as said deductions relate
to said gains, profits, etc.
The specific exemption in paragraph of the act can not be allowed as a deduction
in computing the normal tax of nonresident aliens.
Nonresident aliens are subject to additional or surtax the same as prescribed in the
case of citizens of the United States or persons residing in the United States.
The responsible heads, agents, or representatives of said nonresident aliens who
are in change of the property owned or business carried on shall make full and com-
plete return of said income and shall pay the tax as provided herein.
The person, firm, company, copartnership, corporation, joint-stock company or
association, and insurance company in the United States — citizen or resident alien —
in whatever capacity acting, having the control, receipt, disposal, or payment of
fixed or determinable annual or periodical gains, profits, and income, of whatever
kind, to a nonresident alien, under any contract or otherwise, and which payment
shall represent income of a nonresident alien from the exercise of any trade or pro-
fession within the United States, shall make return for such nonresident aUen on
Form 1040 and shall pay any and all tax — ^normal and additional tax — chargeable
upon the said income of such nonresident alien.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of (he Treasury.
(T. D. 2014.)
Wholesale liquor dealers.
Distillers not liable to special tax as wholesale liquor dealers for sales of spirits of
their own production at the place of storage in bond after the expiration of their
bonds as active distillers.
Tebasubt Department,
Offiob of Commissioneb of Iktebnal Revenue,
Washington, D. C, August IS, 1914*
To ccUectors of internal revenue and others concerned:
Subsection 4 of section 3244, Revised Statutes, provides:
But no distiller who has given the required bond and who sells only distilled spirits
of his own production at the place of manufacture, or at the place of storage in bond,
in the original packages to which the tax-paid stamps are affixed, shall be required to
pay the special tax of wholesale liquor dealer on account of such sales.
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The manifest purpose of this provision is to enable distillers to sell
their own production at any time within the bonded period without
incurring further burdens.
The distiller gives the required bond when he produces the spirits
and also gives the required warehousing bond when said spirits are
placed in the warehouse where the same is held in the joint custody
of the distiller and the Government. No additional security is ob-
tained by requiring a distiller's bond to be given after the distiller has
ceased active operations as a distiller and is therefore unnecessary.
Collectors will not require annual bonds of distillers who do not
continue in the business of distilling nor^will such distillers inciu:
special tax as wholesale liquor dealers by reason of sales of spirits of
tlieir own production at the place of storage in bond after the distiller
has ceased active operations as a distiller.
All instructions in conflict herewith are revoked.
G. E. Fletchee,
Acting Commissioner oj Internal- Revenue.
(T. D. 2015.)
Income tax.
Oompromifies — ^Minimum amounts which will be accepted.
Treasury Department,
Office op Commissioner of Internal Revenue,
Waahingtony D, (7., August IS, 1914.
To collectors of internal revenue:
The fact has been developed that a great number of individuals and
corporations failed to make returns of annual net income for the in-
come tax, either through ignorance of the requirements of the law or
through a misunderstanding of its requirements, find it has been
determined by the Treasury Department to accept offers in compro-
mise of the specific penalty for failure to file returns within the
period prescribed by law in a minimum sum, as follows: $5 from
individuals, $10 from corporations which are organized for profit.
In the cases of all corporations not organized for profit, the specific
penalty will not be asserted this year, provided the required return
has been or shall be filed before December 31, 1914. The United
States district attorney should be requested not to institute pro-
ceedings in such cases.
The foregoing applies only to those cases where there was no intent
to evade the law or escape taxation.
In all cases, however, wherein a return-is not made until the liability
to make a return is discovered by investigation of collectors of internal
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revenue or revenue agents, the above schedule will not necessarily
apply, but each individual case will be decided upon its own merits
and the amount of the offer in compromise which may be favorably
considered will be determined accordingly.
RoBT. Williams, Jr.,
Acting Commissioner of Intemai Revenue.
Approved:
W. G. McAdoo,
Secretary of {he Treasury.
(T. D. 2016.)
Income tax.
Inspection of income-tax returns — Executive order — Regulations.
Treasuby Department,
Office of Commissioner of Internal Revenue,
Waslrnigton, D. C, August 18, 1914.
To intemal^evenue officers and others concerned:
The following Executive order, together with regulations signed
by the Secretary and approved by the President, relative to the pub-
licity feature of section 2 of the act of October 3, 1913, imposing an
income tax, is hereby published for your information.
W. H. OSBORN,
Commissioner of Internal Revenue.
ExBcurnrE Ordbr.
Pursuant to the provisions of Section 2 of the Tariff Act of October 3, 1913, said
section providing for an income tax, and which contains in pangmph G, 8a1>-para-
graph (d) the following provision,
When the assessment shall be made, as provided m this section, the returns, together
with any corrections thereof which may nave been made by the Commissioner, shall
be filed in the office of the Gonmiissioner of Intemai Revenue and shall constitute
public records and be open to inspection as such: Provided, That any and all such
returns shall be open to mspection only upon the order of the President, under rules
and regulations to be prescribed by the Secretary of the Treasury and approved by
the President: Provided further , That the proper oflicers of any State imposing a gen-
eral income tax may, upon the request of the governor thereof, have access to said
returns or to any abstract thereof, showing the name and income of each such cor-
poration, joint stock company, association or insurance company, at such times and
m such manner as the Secretary of the Treasury may prescribe,
it is hereby ordered, that all such returns shall be subject to inspection in accordance
and upon compliance with rules and regulations prescribed by the Secretary of the
Treasury and approved by the President, bearing even date herewith.
WooDROw Wilson
Thb Whitb House, JvJy £8, 1914.
[No. 1999.]
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INBPBCTXON OF RBTURNS.
Regtdations governing the impeetion of returns of oorporationa, joint-Hock eompanU9,
associations, or insurance companies, made in compliance with the requirements of
section 2, act of October 3, 1913. Returns of individuals are not open to the inspec-
tion of anyone except the proper officers ana employees of the Treasury Department.
Tbeasury Department,
Washington, D. C, July S8, 1914.
By section 2 of the act of October 3, 1913, CoDgreBs imposed a tax upon the entire
net income arising or accruing from all sources, to every citizen of the United States,
whether residing at home or abroad, and to every person residing in the United States,
though not a citizen thereof, and upon the entire net income from all property owned
and of every business, trade, or profession carried on in the United States by persons
residing elsewhere, and ui>on every corporation, joint-stock company or association,
and every insurance company, with certain exceptions, engaged in business in the
United States, and prescribed the method of handling the returns of annual net
income filed in compliance with said law, as follows:
(d) When the assessment shall be made, as provided in this section, the returns,
together with any corrections thereof which may have been made by the Commis-
sioner, shall be filed in the office of i^e Commissioner of Internal Revenue and shall
constitute public records and be open to inspection as such: Provided, That any and
all such returns shall be open to inspection only upon the order of the President,
under rules and relations to be prescribed bv the Secretary of the Treasury ana
approved by the rresident: Proviaed further, That the proper officers of any State
imposing a general income tax may, upon the request of the governor thereof, have
access to said returns or to an abstract thereof, diowing the name and income of each
such corporation, joint stock comp&ny or association or insurance company, at such
times and in such manner as the Secretary of the Treasury may prescribe.
For the purpose of making effective the legislative intent thus expressed, the Presi-
dent has ordered that such returns shall be open to inspection under the following
rules and regulations. The word ''corporation," when used alone her^n, shall be
construed to refer to corporations, joint stock companies or associations, and insurance
compsaden.
1. The return of every individual, and of every corporation, joint stock company
or association, and every insurance company, whether foreign or domestic, shall be
open to the inspection of the proper officeis and employees of the Treasury Depart-
ment. Returns of individuals shall not be subject to inspection by anyone except
the proper offiksen and employees of the Treasury Department.
2. Where access to any return of any coipon^on is desired by an officer or employee
of any other department of the Government, an application for permission to inspect
such return, setting out the reasons therefor, shall be made in writing, signed by the
head of the executive department or other Government establishment in which such
officer or employee is employed, and transmitted to the Secretary of the Treasury.
If the return of a corporation is desired to be used in any legal proceedingB other than
those to which the United States is a party, or to be used in any manner by which any
information contained in the return could be made public, the application for per-
mission to inspect such return or to furnish a certified copy thereof shall be referred
to the Attorney General, and if recommended by him transmitted to the Secretary <^
the Treasury.
3. An returns, whether of persons or of corporations, joint stock companies or associa-
tions, or insurance companies, may be furnished, upon approval of the Secretary of
the Treasury, for use, either in the original or by certified copies thereof, in any l^;al
proceedings before any United States grand jury or in the trial of any cause to which
both the United States and the person or corporation or association rendering the
return are parties either as plaintiff or defendant, and in the prosecution or defoise
or trial of which action, or proceeding before a grand jury, such return would con-
stitute material evidence, but in any case arising in the collection of the income tax.
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the GommisBicmer of Internal Revenue may furnish for use to the proper officer either
the original or certified copies of returns without the approval of the Secretary of the
Treasury. In all cases where the use of the original return is necessary, it shall be
placed in evidence by the Commissioner of Internal Revenue or by some officer of
the Bureau of Internal Revenue designated by him for that purpose, and after such
original return has been placed in evidence it shall be returned to the files in the office
of the Commissioner of Internal Revenue at Washington, D. C.
4. The Secretary of the Treasury, at his discretion, upon application to him made,
setting forth what constitutes a proper showing of cause, may permit inspection of
the return of any corporation, by any bona fide stockholder in such corporation.
The person desiring to inspect such return shall make application, in writing, to the
Secretary of the Treasury, setting forth the reasons why he should be permitted to
make such inspection, and shall attach to his application a certificate, signed by the
president, or other principal officer, of such corporation, countersigned by the secre-
tary, under the corporate seal of the company, that he is a bona fide stockholder in
said company. (Where this certificate can not be secured, other evidence will be
considered by the Secretary of the Treasury to determine the fact whether or not the
applicant is a bona fide stockholder and, therefore, entitled to inspect the return
made by such company.) Upon receipt of such application the corporation whose
return it is desired to inspect shall be notified of the facts and shall be given oppor-
tunity to state whether any legitimate reason exists for refusing permission to inspect
its returns of annual net income by the stockholder applying for permission to make
such inspection. The privilege of inspecting the return of any corporation is personal
to the stockholders, and the permission granted by the Secretary to a stockholder to
make such inspection can not be delegated to any other person.
5. The returns of the following corporations shall be open to the inspection of any
person upon written application to the Secretary of the Treasury, which application
shall set forth briefly and succinctly all facts necessary to enable the Secretary to act
upon the request:
(a) The returns of all companies whose stock is listed upon any duly organized and
recognized stock exdian^e within the United States, for the purpose of having its
shares dealt in by the public generally.
(b) All corporations whose stock is advertised in the press or offered to the public
by the corporation itself for sale. In case of doubt as to whether any company falls
within the classification above, the person desiring to see such return should make
application, supported by advertisements, prospectus, or such other evidence as he
may deem proper to establish the fact that the stock of such corporation is offered
for general public sale.
Returns can be inspected only in the office of the Commissioner of Internal Revenue,
in Washington, D. C. In no case shall any collector, or any other internal revenue
officer outside of the Treasury Department in Washington, permit to be inspected any
return or furnish any information whatsoever relative to any return or any informa-
tion secured by him in his official capacity relating to such return, except in answer
to a proper subpoena, in a case to which the United States is a party.
6. Returns of individuals shall not be open to the inspection of any person other
than the proper officers and employees of the Treasury Department or person render-
ing the same, and are under no conditions to be made public, except where such pub-
licity shall result through the use of such returns in any legal proceedings in which
the United States is a party.
7. Upon request of the governor of a State imposing a general income tax, the proper
officer of such State, to be designated by name and official position by the governor
of such State in his application to the Secretary of the Treasury, may have access to
the returns or to abstracts thereof showing the name and income of each corporation,
joint stock company or association, or insurance company, at such times and in such
manner as the Secretary of the Treasury may prescribe. Such application shall be
made in writing, addressed to the Secretary of the Treasury and shall show (first)
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124
that the State, whoee governor makes the reqtiest, imposes a general income tax;
(second) the name and address of each corporation, etc., to which access is desired;
(third) why permission to inspect the returns of the corporations, etc., named in the
request is desired, and (fourth) what officer or officers are designated to make the
desired inspection, giving their names and official designations. Such request must
be signed by the governor of the State and sealed with the seal thereof, and shall be
transmitted to the Secretary of the Treasury for his consideration and action thereon.
No provision is made in the law for furnishing a copy of any return to any person
or corporation, and no copy of any return will be furnished to any other than the
person or corporation making the return, or their duly constituted attorney, except as
hereinbefore authorized.
The provisions herein contained shall be effective on and after the 1st day of Sep-
tember, 1914.
W. G. McAdoo,
Secretary of ike Treasury,
Approved:
WooDBOw Wilson,
The White Housey July ttS, 1914.
(T. D. 2017.)
Income tax.
Nontaxability of interest from bonds and dividends on stock of domestic corpora-
tions owned by nonresident aliens.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, August 25, 1914-
To eoUedar^ of internal revenue:
Interest on bonds of domestic corporations and dividends on stock
of domestic corporations own.ed by nonresident afiens, and whether
such bonds and stock be physically located within or without the
United States, are not subject to the income tax.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 2018.)
Withdrawal of distilled spirits for export.
Form 179 not required in cases of withdrawal of distilled spirits for export.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, August 27, 1914.
Sir: This office is in receipt of your letter of August 18, 1914, with
inclosure, requesting advice as to the filing of Form 179 in connection
with withdrawals of distilled spirits for export.
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In reply, you are advised that as the application of the owner and
the distiller of spirits on Form 206 for the regauge and withdrawal
of such spirits for export answers every requirement of law and the
regulations of this department, Form 179 need not be filed in con-
nection with the regauge and withdrawal of spirits for export.
G. E. Fletcher,
Acting Commissioner of Internal Revenue.
Collector, Fifth District, Loui&viUe, Ky,
(T. D. 2019.)
Use of tank cars to transfer brandy for fortification purposes.
TreasurIt Department,
Office of Commissioner of Internal Revenue,
WasUngton, D. C, August 26, 1914.
To collectors of internal revenue:
(1) Attention of the department has been called to certain parts of
Article 14A of Regulations No. 28, revised May 14, 1913, which are not
clear or do not cover all the contingencies that may arise in transport-
ing brandy for fortification purposes by tank car.
When a tank car is registered with the collector, the net wine-gallon
capacity when filled so as to include 2 inches of the expansion
dome (which point will be permanently marked in the dome) will be
stated. This capacity will be verified by the collector, which capacity
will thereafter be regarded as the of&cial gauge of the car or imtil there
is reason to believe that said gauge is inaccurate, when a regauge of
the car will be made. These official gauges should be established by
actual Kquid measurements and not by computation. The net wine-
gaUon capacity will be legibly painted or stenciled on the side or dome
of the car near the serial number and other designating marks on
the car.
(2) All pumps, pipes, or other appliances when used in withdrawing
brandy from the distillery to the tank cars and from the tank cars to
the fortifying room must be above ground and in plain sight and under
the control of the officer assigned to the work. Such appliances to be
considered in use during the time of filling or emptying of the tank cars.
(3) In making application on Form 257 for withdrawal by tank car
the distiller, in addition to the information now required, will state in
said application the official gauge of the car to be used.
The ganger at the distillery will inspect the car to see that the same
is in proper condition, as required by Article 14 A, and that the serial
number of the car and the net wine-gaUon capacity as marked on
the car agree with Form 257. It will not be necessary to take the
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dimensions of the car nor to enter said dimensions on Form 59^ nor
Form 257.
Tank cars may be held on the railway spur or siding alongside the
fortifying room^ or near enough to said fortifying room to enable the
ganger in charge of said room to have surveillance of both car and foiv
tifyiDg room, and said tank car with lock and pipes leading therefrom
entirely under his control. Said tank cars will be considered as tem-
porary brandynstorage tanks situated within the fortifying room, pro-
viding no rule or order of the railway conmiission of the State is
violated. When tank cars are regarded and designated as brandy-
storage tanks as a part of the fortifying room, a cylindrical metal
measuring tank of small diameter equipped as directed in Article 14
should be installed within the fortifying room. Only the proper
quantity required to fortify one tank of wine material can be drawn
directly into this tank from the tank car and thence to the tank of
wine material to be fortified. Any brandy found in the dome when
received will be allowed to drain back into the cylinder of the car
when the dome is opened.
The use of tank cars as storage tanks is only for emergency cases,
where the fortifying room is not now properly equipped with brandy-
storage tanks. All wine makers who propose to avail themselves of
the privilege of using tank cars will be expected to install within
their fortifying room a tank or tanks of sufficient capacity to contain
brandy so received before another season begins.
In all cases where tank cars are to be used as brandy-storage tanks
such fact should be set forth in Form 605 on the back of Form 256,
bond of wine ogiaker, and the plat should show the position of the car
with reference to the location of the fortifying room.
Collectors will use due diligence in supervising the use of tank cars,
and especially when said tank cars are to be used as brandy-storage
tanks, and in every case the consent of the surety on the bond must be
obtained. Such tank cars will remain locked with a Govenunent lock
when used as a temporary storage tank.
On page 35, after the words '^ serial number of car," insert ^'net
wine-gallons capacity."
The officer supervising the fortification will enter on supplemental
Forms 257 and 275 the indication, temperature, proof, wine and proof
gallons, and will add to said forms the words ''Above brandy used
from tank car No. , received from distillery No. 4, District
of ."
For the adjusting of variances of gauge one-fourth of 1 per cent
wiU be allowed; that is, if the proof as ascertained by the ganger
at the winery is found to be more or less than that of the ganger at
the distillery an adjustment will be allowed as above, to be added to
or taken away, as the case may be. No allowance will be made for
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shrinkage from any cause, and the receiving ganger will notify the
collector of any loss, and the payment of the tax at $1.10 per tax
gallon on all such loss will in all such cases be required.
The foregoing is a modification of, and not a substitute for, Article
14A of Regulations No. 28.
G. E. Fletcher,
Acting Commissioner of Internal Revenue,
Approved:
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 2020.)
Old forms of certificaies of ovmership.
Use of old forms of ownership certificates, which have been executed prior to October 1,
will be accepted.
Tbeasubt Department,
Office of Commissioneb of Internal Revenue,
Washington, D. C, September 25, 1914.
To collectors of internal revenue:
When coupons from bonds due on or subsequent to October 1, 1914,
are accompanied by certificates of ownership which were properly
executed on or prior to October 1, 1914, on the old forms prescribed
prior to May 2, 1914, such certificates wiU be accepted.
W. H. OSBOBN,
Commissioner of Internal Revewae.
Approved:
W. G. McAsxyo, •
Secretary of the Treasury.
(T. D. 202L)
Oleomargarine.
Supplement 2 to Regulations No. 9, revised July, 1907, ccmceming destruction of
oleomargarine returned to manufacturers or wholesale dealers.
Treasuby Department,
Offiob op Commissioner op Internal Revenue,
Washington, D. C, September 28, 1914.
To collectors of internal revenue:
Regulations No. 9, page 47, paragraph 4, concerning the destruc-
tion of oleomargarine returned to manufacturers or wholesale
dealers, is hereby amended as follows:
If any ''returned'' oleomaigarine is sold again intact, or destroyed, dumped for
grease, or taken up in the material account to be worked over, all the details
should likewise be entered in this book under the special heading ' 'Withdrawal of
returned oleomargarine.'' But ''returned" oleomargarine, unless sold again intact^
should not be disposed of except \mder the inspection of an internal-revenue officer.
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Where, however, for any good reason, it is not practicable for such
oflBicer to witness the destruction at factories or wholesale dealers'
establishments, over which the Department of Agriculture exercises
inspection, the inspector of that department who witnesses the
destruction may certify to the same, and his certificate, if in con-
formity with the regulations, will be accepted.
W. H. OSBORN,
Commissioner of Intemdl Revenue,
Approved:
W. G. MoAdoo,
Secretary of the Treasury,
(T. D. 2023.)
Income tax.
Waiver until further notice of regulation requiring the filling in on certificates of
numbers of bonds.
Treasury Department,
Office of Commissioner of Internal Revenue,
WasUngtony D. C, October 5, 1914.
Notice is hereby given that regulation requiring the filling in on
certificates of numbers of bonds or other like obligations of corpora-
tions, etc., from which interest coupons are detached or upon which
registered interest is to be paid — which was extended to October 31,
1914, by T. D. 1985, issued May 28, 1914 — ^is hereby waived until
further notice.
RoBT. Williams, Jr.,
Acting Commissioner of Internal Revenue.
Approved:
^ W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 2023.)
Income tax.
Amending article 68, Income Tax Regulations 33, requiring indorsement or stamp
on foreign coupons, checks, bills of exchange, etc.
Teeasubt Depabtment,
Oppiob of Comhissiokeb of Intebnal Revenue,
Washington, D. C, October 12, 1914.
To collectors of internal revenue:
Article 58, Income Tax Regulations 33, is hereby amended to read
as follows:
Article 58. The licensed person, firm, or corporation first receiving such foreign
items for collection, or otherwise, shall withhold therefrom the normal tax of 1 per
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129
cent, and will be held responsible therefor. If the foreign item is in the form of a
check or bill of exchange, the words " Income tax withheld by " (giving name,
address, and date) 43hall be indorsed or stamped thereon by such licensee; but if the
item is represented by a coupon or couxK)nB from bonds, the licensee i^ll attach
thereto a statement identif^g the same, and the indorsement or stamp showing the
tax withheld shall be placed on the statement instead of the coupon or coupons.
Said indorsement or stamp shall be sufficient evidence of tax withheld to relieve
subsequent holders or purchasers from the obligations of withholding.
RoBT. Williams, Jr.,
Acting Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 2024.)
Income tax.
Amendmentjof article 192 of K^^lations No. 33, providing that collectors should not
retain copies of returns in their offices.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. (7., October 16, 19H.
To collectors of internal revenue:
Referring to article 192 of Regulations No. 33, wherein it is pro-
vided that —
Where in any case the collector has reason to believe that any return rendered is
&lse or fraudulent, he will prepare and retain in his office a copy of such return, and
will note on the original and imder the head of *^ Remarks " of his assessment list the
words ''Investigation pending/' He will in all such cases make his investigation in
the manner prescribed in section 3173, Revised Statutes, and paragraph D of said act
of October 3, 1913; and he will report the results of his investigation to the Commis-
sioner of Internal Revenue, referring to the list, foUo, and line on which the assessment
was reported,
you are informed that inasmuch as these investigations are to be
made by the revenue agents' force, the portion of the article of
Emulations No. 33 quoted above is hereby annulled.
Collectors should not under any conditions retain copies of returns
in their offices, but when information relative to any return of annual
net income filed by any taxpayer is necessary in coimection with the
assessment and collection of the income tax the same may be secured
from the Commissioner of Internal Revenue at Washington.
W. H. OSBOBN,
Commissioner of Internal Revenue,
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
27776**— VOL 16—14 9
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130
(T. D. 2025.)
Leaf dealers to report m Book 69 fa^dmy n/umbers of rnanufacturera to
whom sales are made. "
Bequiring dealers in leaf tobacco to fill in column headed '^ BuonesB '' in Book 59, to
show the kind of &ctory (cigar or tobacco) and fiictory number of the manufac-
turers to whom sales of leaf tobacco are reported or from whom tobacco is re-
turned, and instructing manufacturers in ordering tobacco to indicate whether
same is to be charged to cigar or tobacco factory, giving the &ctory niunber.
Teeasury Depabtment,
Office of Commissiokeb of Intebnal Revenue,
Washington, D. C, October 15, 1914.
To collectors of internal reverme:
In order to facilitate the checkifig of sales of leaf tobacco reported
in Book 59 of dealers in leaf tobacco to manufacturers of cigars and
tobacco, you will require dealers in leaf tobacco to supply in Book 59,
in the column headed "TSusiness," the number of the factory oper-
ated by the manufacturer to whom each sale is entered and imme-
diately preceding the number the letter "C" or "T" for ''cigar" or
"tobacco" factory, as the case may be. When tobacco is returned
and debit is made of same in red ink on Book 59, column headed
"Business" shall be fiUed in also in accordance with the above in-
structions.
Manufacturers of cigars and tobacco, in ordering leaf tobacco from
dealers in leaf tobacco, should be required to give their factory num-
ber and to indicate by letter "C" or "T" whether the tobacco is to
be charged to a cigar or tobacco factory. Manufacturers of tobacco
and cigars instructing dealers in leaf tobacco as above will be required
to account for the tobacco in accordance with said instructions upon
their books and monthly returns, and the tobacco must actually be
received upon the premises of the factory to which charged.
Extra copies of this decision will be printed and a sufficient supply
sent to each collector of internal revenue for distribution to each
dealer in leaf tobacco and manufacturer of tobacco and manufac-
turer of cigars in his district.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
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(T. D. 2026.)
FermerUed liquors — Additional tax on liquors on storage^ and
increase in rate of tax under act of October 22, 1914.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington^ D. C, October 2-J, 1914^
To collectors of internal revenue and others concerned:
The act approved October 22, 1914, imposes a tax of $1.50 a barrel
on fermented liquors, and provides for the assessment and collection
of the additional tax at the rate of 50 cents a barrel on all fer-
mented liquors removed from the brewery premises prior to the date
when the act took effect and which on that date were stored in ware-
house, and to which a stamp denoting the tax at the rate of $1 per
barrel had been affixed at the time of removal. This provision for
additional tax on beer stored in warehouse is held to apply to all
fermented liquors in the possession of brewers or their agents,
whether contained in ordinary packages or in bottles, when the act
took effect. For the purpose of assessing and collecting such addi-
tional tax, every brewer or agent of a brewer having stored in ware-
house any fermented liquors which had been removed from the
brewery where produced prior to October 23, 1914, bearing the proper
stamp at the rate of $1 per barrel shall make and render to the col-
lector of the district a return, in duplicate, under oath, .on Form
417, Revised October 23, 4914, of the quantity therof so held. Per-
sonal investigation will be made in each case by a deputy collector,
who will certify to the accuracy of the return, or if he is not satisfied
as to its accuracy, he will so state, and indicate the quantity which
he believes to be correct. In case of substantial disagreement be-
tween the return and the deputy collector's statement the collector
will make further investigation to satisfy himself as to the proper
quantity and enter the same accordingly on his list. Form 23.
Collectors will at once furnish blank Forms 417 to each brewer, or
agent of a brewer, in their respective districts, and require the re-
turns to be made in accordance with the printed instructions thereon.
The return must show the quantity of fermented liquors on hand on
the morning of October 23, 1914, before the commencement of busi-
ness. If any liquors subject to the additional tax have been removed
in the interval between that time and the time when the return is
actually made, the quantity returned will be the quantity of such
liquors on hand when the return is made, together with the quantity
of such liquors removed in the interval.
One copy of the return with the deputy collector's certificate is to
be filed in the collector's office, and the other is to be forwarded to
the Commissioner of Internal Revenue, and the additional tax foimd
Digitized by VjOOQIC
132
to be due as shown by the return will be entered by the collector on
his next list, Form 23.
In making up Form 18 for October, 1914, brewers will show sepa-
rately, by interlineation, the quantities of fermented liquor sold or
removed for consumption or sale by pipe line (where pipe lines
exist) and by the package for the two portions of the month, viz,
the portion before the 23d and the portion commencing with the 23d.
In the stamp account on Form 18 brewers will also show separately,
by interlineation, the number and kind of stamps purchased by them
at the old and new rates, and the number and kind of stamps used
at the old and new rates on beer transferred by pipe line (where pipe
lines exist) and by the package, and also the number and kind of
stamps at the old and new rates remaining on hand in their possession
at the close of the month. Instead of one return. Form 18, for the
month of October, the brewer may at his option render two returns,
one for the portion of the month prior to the 23d and the other for
the remaining portion, care being taken to show in the stamp account
the number and kind of stamps, at the rate of $1.50 per barrel, pur-
chased, used, and on hand. Brewers will also make entries in the
account of " Stamps purchased " on Record Form 104 in such a way
as to distinguish between those at the rate of $1 and those &t the
rate of $1.50.
The attention of collectors is called to the fact that the increase
in the rate of tax is likely to make necessary the giving of new bonds
by brewers, in increased amounts, in order to satisfy the require-
ments of section 3336, Revised Statutes. Each new bond given oo
and after December 1, 1914, will by the terms of the act, while the
same is in force, require a documentary stamp of the value of 50
cents.
Collectors will supply brewers and their agents with copies of
this Circular.
W. H. OSBORN,
Approved : Gonmiissioner of Internal Revenue.
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 2027.)
Domestic and imported wines, liqueurs, cordials, etc.
Dealers to keep an account of sales pending receipt of appropriate tax stamps.
Tbeasukt Dbpaktment,
OmcB OF Commissioner of Internal Revenue,
Washington, D. C, Octoler £4, 19U.
To eoUectora of internal revenue and others concerned:
In view of the fact that the provisions of the revenue law, ap-
proved October 22, 1914, relating to the stamp taxes imposed on
Digitized by VjOOQIC
133
domestic and imported wines, cordials, etc., went into effect October
23, 1914, and that appropriate stamps for the payment of such taxes
have not yet been provided, retail dealers in such unstamped wines,
and wholesale dealers selling such wines to persons other than
dealers must, until such stamps may be procured, Veep a strict ac-
count of all such unstamped wines sold by them on and after October
23, 1914; and, upon procuring the necessary stamps, must at once
render to the collector of the district a sworn statement of all such
sales made by them and must transmit with such statement can-
celed stamps showing payment of tax on all such wines so sold. The
required statement should be in the following form :
DealerB* return of sales of unstamped toines taxable under the revenue act, ap-
proved October 22, 1914,
Special-Tax Stamp No. . District of , ,
The undersigned a
district of
liquor dealer, doing business at
- 19H.
- in the
— , on oath states that the following is a fuU and true
account of all unstamped domestic and imported wines taxable under the pro-
visions of an act of Ck)ngre8S, approyed October 22, 1914, sold by him (or them)
on and after October 23, 1914, up to and including the day of ,
1914; and that the attached canceled stamps cover all taxes due on the un-
stamped wines so sold.
Rate of
tax per
quart.
Number of bottles or containers.
Kindiof win*.
Not more
than one-
fodrtu ni&t*
Not more
than one.
half pint.
Not more
than one
pint
Not more
than one
quart
l00S.a
Amount
oftaac
fitfll winM
Cems.
3
20
6
•-..
dally carbonated
wjnes
LJqaeors, cordials, or
other similar com-
Dounds — —
a In bottleo or containers not otherwise here designated.
Subscribed and sworn to before me this day of , 1914.
Dealer.
[Sbal.]
Upon receipt of this circular, collectors will see that a copy thereof
is at once furnished to each wholesale and retail liquor dealer in
their respective districts; and that on receipt of the dealers' state-
ments herein required, the same, with the canceled stamps (in sealed
envelopes) securely attached, should be at once forwarded to the
Commissioner of Internal Revenue.
W. H. OSBORN,
Approved : Comrnissioner of Internal Revenue.
W. G. McAdoo,
Secretary of the Treasury.
X " Wholesale '* or " retail."
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134
(T. D. 2028.)
Income tax — Five per cent penalty and interest an delayed payments.
The 5 per cent penalty and interest on delayed payment of assessed Income taxes
in the case of persons absent in foreign countries held to be due unless pay-
ment is forwarded within ten days after notice and demand, Form 17,
should have been received in the ordinary course of the mails. — ^T. D. 1660
modified.
Treasitrt Departmekt,
Office of Commissioner of Internal Kevbnub,
Washington^ D. (?•, Octoher ^4, 19H.
To collectors of internal revenue:
In the last sentence of paragraph E of section 2 of the act of Octo-
ber 3, 1913, it is provided:
* * * And to any sum or sums due and unpaid after the thirtieth day of
June in any year, and for ten days after notice and demand thereof by the
collector there shall be added the sum of 6 per centum on the amount of tax
unpaid, and interest at the rate of 1 per centum per month upon said tax from
the time the same becomes due, except from the estates of insane, deceased, or
insolTent persons.
By reason of absence in foreign countries or on account of travel-
ing abroad, it is impossible for many individuals, to receive notice
and demand on Form 17 and make payment of the taxes assessed
thereon so the same can be received by the collector within the 10-day
period following June 80 or within the 10-day period following the
service of the notice. You are requested, therefore, to enter on Form
17, as the date on which such assessed tax becomes due and payable,
as near as possible, a date 10 days subsequent to the time that said
notice should be received in the ordinary course of the mails b;
the taxpayer, and where it appears that the full amount of tax as-
sessed was placed in the mails within the 10-day period after the
receipt of Form 17, or in case notice so sent is not delivered in due
time by reason of delay in the mail and satisfactory evidence of that
fact is furnished the penalty and interest in such cases will not be
collected. In the latter cases the envelope inclosing the notice and
bearing the postmark of the receiving office should be forwarded
to the collector and by him transmitted to this office with Form 326
as evidence of delay in the delivery of notice so sent.
This ruling applies solely to the collection of income tax from
individuals and includes Government officers. T. D. 1659 is modified
accordingly.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved :
W. G. McAdoo,
Secretary of the Treasury.
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135
(T. D. 2029.)
Income taw.
Corporations desiring to make returns of annual net income on the basis of
a fiscal year must, not less than 30 days prior to the first day of March,
give notice in writing to the collector, designating in such notice the last
day of some month as the close of the fiscal year, in which case the fiscal
year return will cover a 12-months period. The return for that por-
tion of the calendar year preceding the beginning of the fiscal year will
be filed on or before March next following.
Treasubt Department,
Office of Commissioner of Internal Bevenue,
Washington^ D. (7., October ^4, 19H.
To collectors of internal revenue:
Beference is made to T. J). 2001, relative to the designation by
corporations of a fiscal year other than a calendar year as a basis for
making returns of annual net income.
You are informed that every corporation amenable to the income-
tax law in existence at the close of a calendar year is required to
file a return covering all or any part of the preceding calendar year
during which it may have been in existence on or before March 1,
provided such corporation has not established or does not establish
a fiscal year.
In order to establish a fiscal year it is necessary for the corporation
to give notice to you in writing designating the last day of some
month as the close of its fiscal year. This notice must be filed not less
than 30 days prior to March 1 of the year in which the fiscal-year
period of 12 months closes. A return for that portion of the calen-
dar year preceding the commencement of the fiscal period of 12
months is required to be filed on or before March 1 of the year next
following the calendar year of which it is a part, and the return
for the first full fiscal year is required to be filed on or before the
last day of the 60-day period following the close of the fiscal year.
Example: A corporation desiring to establish its fiscal year as
ending on June 30, 1915, must file notice not less than thirty (30)
days prior to March 1, 1916, on or before January 29, 1916. A re-
turn for the period January 1 to June 30, 1914, must tten be filed
on or before March 1, 1915, and a return for the first fiscal year
period (July 1, 1914, to June 30, 1915) must be filed on or before
August 29, 1915.
That portion of the year preceding the beginning of an estab-
lished fiscal year is held to be a fractional part of the calendar year,
and as the return of a calendar year is not required to be filed until
on or before the first day of March next following, there is no pro-
vision of law whereby the return covering a fraction of a calendar
year is required to be filed earlier than "on or before" the next
Digitized by VjOOQIC
136
March 1st, though it is preferred that the return for this fraction
shall be filed as early as possible after the dose of the period.
The above instructions are supplemental to T. D. 2001, and rulings
or decisions heretofore issued in conflict with the foregoing are here*
by revoked.
W. H. OSBORN,
Conmussioner of Internal _ Revenue.
Approved :
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 2030.)
Income tax.
Exemption certificate provided for use of banks and bankers, either foreign or
domestic, claiming exemption from income tax on dividends from stock of
foreign corporations owned by nonresident aliens.
Treasury Department,
OrncE OF Commissioner of Internal REVENtnE,
Washington^ D. <7., October 13^ 19H.
To collectors of internal revenue:
The following certificate is hereby provided, which may be exe-
cuted by responsible banks or bankers, either foreign or domestic,
for and on behalf of nonresident oiyners of stock of corporations of
foreign countries, for the purpose of claiming exemption from the
income tax on dividends from such stock :
Digitized by VjOOQIC
Fonn
8
to
I
137
Fonn .
EXBMPTION CEETIFIOAIS — BANKS OB BANKERS, BiTHEB FOBEIGN OB
DOMBSTIO.
(For the use of responsible banks or bankers, either foreign or domestic, for
and on behalf of nonresident owners of stock of corporations of foreign
countries.)
(Give name of foreign corporation.)
(Full description of stock, stating whether common or preferred, or both.)
Amount of dividends, |
I (we) do solemnly declare that the owners of the stock of for-
eign corporations upon which the aforesaid dividends were declared
are nonresident aliens as to the United States and are exempt from
the income tax imposed on such income by the United States Oovem-
ment under the law enacted October 8, 1913; that no citizen of the
United States, wherever residing, or foreigner residing in the United
States, or in any of its possessions, has any interest in said stock;
and that all of the information as given in this certificate is true
and correct I (we) hereby agree that if at any time it shall appear
that the income or any part thereof represented or covered by this
certificate was, or is, subject to the normal tax imposed by the
United States, upon presentation of proof of that fact to me (us)
by, from, or through the Commissioner of Internal Revenue, Wash-
ington, D. C, I (we) will pay and remit to tl^e United States Gov-
ernment the amount of tax claimed to be due; and I (wp) hereby
further agree that whenever in the judgment of the Oommissioner of
Internal Revenue it shall be necessary in or to the administration
of the income-tax law, I (we) will, upon request of said Ck>mmis-
sioner of Internal Revenue, disclose and furnish to him the names
and addresses of the owners and the amount of the stock aforesaid.
Date.
-, 191
(Name of bank or banker.)
By
(Signature of official authorised to sigii.)
(Official position.)
(Full post-offlce address of bank or
banker.)
(SIONATUBES MUST BE OLEABLY AND LEGIBLY WBITTBN.)
The above certificate shall be in size 8 by 3^ inches, and shall be
printed to read from left to right along the 8-inch dimension.
The certificate shall be printed on yellow paper, and such paper
shall correspond in weight and texture to white writing paper, 21 by
82, about 40 pounds to the ream of 500 sheets.
Digitized by VjOOQIC
138
The certificate hereby authorized will be printed by the €k>vem-
ment and furnished without cost.
Banks or bankers desiring to furnish their own certificates may
do so, but the certificate so printed must conform in size to that
prescribed above and be printed in similar type upon the same
color, shade, and weight of paper as used by the Govemment
Sample certificates showing size of type and color of paper can
be secured from collectors of internal revenue in their several dis-
tricts or from the Commissioner of Internal Bevenue, Washing-
ton, D. C.
W. H. OSBORN,
Gommiasioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury.
(T. D. 2031.)
Report on Form g£.
Instructions relative to reporting collection of additional taxes provided for by
the act of October 22, 1914.
Treasury Department,
Office of Commissioner of Internal Eevenub,
WasMngtony D. (7., October £6, 19U.
To collectors of internal revenue:
For reporting collection of certain taxes on Form 22 for the month
of October and imtil a revision of said blank form may be had,
under provisions of act of October 22, 1914, " to increase the internal
revenue, and for other purposes," the following instructions are
issued:
Interline and enter on present form under classification of ^^Dis-
tilled spirits" and "Fermented liquors," respectively, as follows:
Abstract
namber.
41 StiU wines (2 cents a quart) ; cliampagne and other sparkling
wines, including all artificially carbonated wines (20 cents a
quart) ; and liqueurs, cordials, or similar compounds (6 cents a
quart)— domestic and imported.
121 Grape brandy used in fortification of sweet wine, per taxable
gallon $0. 66
(As to reporting tax on wines, see T. D. No. 2027, dated October
24,1914.)
201 Fermented liquors, per barrel 1. 60
211 Fermented liquors (stored in warehouse), per barrel .60
Digitized by VjOOQIC
139
The tax on only the above-mentioned articles became effective on
October 23, 1914. These articles, with their original rates of tax as
enumerated opposite abstract numbers 13 and 21, will be retained
in the revised Form 22 for the remainer of the current fiscal year.
Form 22, now in course of revision, will provide for reporting all
taxes collected under the recent act, and a supply of the new blanks
should be received by collectors in time for the November reports. It
may be further stated that collections of all special taxes provided
for in the act are required to be reported separately.
Such entries relating to the collection of these special taxes and
other taxes provided for should be made daily in Becord 85 — ^tickler
for Form 22 — ^as will facilitate the assembling of the data for the
report (Form 22) at the close of the month.
Each collector will please acknowledge receipt of this letter.
W. H. OSBORN,
Comrrmsioner of Internal Revenue.
(T. D. 2082.)
Certificates of deposit {Forms Ji9^ BIB^ and 79^ and Record 9).
Instructions relative to the manner of accounting for collections, etc., under act
of October 22, 1914.
Treasury Department,
Office of Commissioner of Internal Revenue,
' Washington^ D. C, October jR?, 19U.
To collectors of internal revenue:
In view of the provisions of the act of October 22, 1914, "An act
to increase the internal revenue, and for other purposes," the follow-
ing instructions are issued relative to the manner of accounting for
collections made under said act:
On the daily deposit slips and certificates of deposit such collec-
tions will be included in the " ordinary " collections and accounted
for on Form 49 in column 5, " Ordinary collections."
All taxes imposed by said act which are collectible by assessment
will be assessed on the regular lists or a special bankers' list, and will
be accounted for on Form 51B in the statement of " Regular lists."
The stamps for special taxes payable by stamps will be included in
the statement of special-tax stamps, fermented-liquor stamps, at the
increased rate in that of fermented-liquor stamps; documentary and
proprietary stamps. Schedules A and B, in a single statement on
the line below that for "Mixed flour"; and all wine stamps in a
single statement on the second line below that for " Mixed flour."
Digitized by VjOOQIC
140
On Form 79 documentary and proprietary stamps will be ac-
counted for in the first column to the right of that for " mixed flour
stamps," and wine stamps in the second column to the right.
The discoimt of one (1) per cent allowed on the sale of docu-
mentary and proprietary stamps, Schedules A and B, in quantities
of not less than $100 of face value, as provided for in section 22 of
said act, will be entered on Form 51B in column 5, and oh Form 79
on line 8.
The credit authorized by S. Mim. 1094, dated October 23, 1914,
amounting to 25 cents per barrel on " Emergency tax " stamps for
fermented liquor, invoiced and receipted for at the rate of $1.75 per
barrel, will be entered on Form 61B in column 5, and on Form 79
on line 8.
In Record 9 collections on account of sales of documentary and
proprietary stamps will be entered in the first column to the right of
that for ^ Mixed flour," and of wine stamps in the second column.
W. H. OSBORN,
Commissioner of Internal Revenue.
(T. D. 2033.)
Internal-revenue act of October 2^, Wlji..
Treasury Department,
omcb of c!ommission£r of internal revenue,
Washington^ D. (7., October 2^, 19U.
The following act, entitled "An act to increase the internal revenue,
and for other purposes," approved October 22, 1914, is published for
the information of internal-revenue officers and others concerned.
W. H. OSBORN,
Comandssioner of Internal Revenue.
[PuBuo— No. 217— 63d Congress.— H. R. 18891.]
An Act To increase the Internal re7enae, and for other pnrposes.
Be it enacted by the Senofte and House of Representatives of the United
States of America in Congress assembled^ That there shaU be levied, coUected,
and paid in lieu of the tax of fl now imposed by law, a tax of $1.50 on all beer,
lager beer, ale, porter, and otlier similar fermented liquor, brewed or manu-
factured and sold, or stored in warehouse, or removed for consumption or sale,
within the United States, by whatever name such liquors may be called, for
every barrel containing Bot more than thirty-one gallons; and at a like rate
for any other quantity or for the fractional parts of a barrel authorized and
defined by law. And section thirty-three hundred and thirty-nine of the
Hevised Statutes is hereby amended accordingly : Provided, That the additional
tax im(posed in this section on all fermented Uquors stored in warehouse to
Digitized by VjOOQIC
141
which a stamp has been affixed shall be assessed and collected in the manner
now provided by law for the collection of taxes not i)aid by stamp: Provided
further, That until appropriate stamps are prepared and furnished, the- stamps
heretofore used to denote the payment of the internal-revenue tax on fermented
liquor may be stamped or imprinted with a suitable device to denote the
new rate of tax herein imposed, and shall be affixed to all packages containing
such liquors on which the tax imposed by this Act is paid. Any person having
possession of unaffixed stamps heretofore issued for the payment of the tax
on fermented liquors shall present the same to the collector of the district,
who shall receive them at the price paid for such stamps by the purchaser
and issue in lieu thereof new or imprinted stamps at the rate provided in
this Act.
Sec. 2. That upon all still wines, domestic and imported, when sold or offered
for sale or consumption, there shall be levied and collected taxes as follows:
On each bottle containing one- fourth pint or less, one-fourth cent; on each
bottle containing more than one-fourth pint and not more than one-half pint,
one-half cent; on each bottle containing more than one-half pint and not more
than one pint, 1 cent ; and on each bottle containing more than one pint and not
more than one quart, 2 cents; and on still wines in all other containers, not
herein specially provided for, the tax shall be at the rate of 8 cents per gallon.
That upon all domestic and imported champagne and other sparkling wines,
and upon all artificially carbonated wines when sold or offered for sale or con-
sumption, there shall be levied and collected taxes as follows : Upon each bottle
containing one-half pint or. less, 5 cents; on each bottle containing more than
one-half pint and not more than one pint, 10 cents; on each bottle containing
more than one pint and not more than one quart, 20 cents; and on other all
containers at the rate of 20 cents per quart; and on all liqueurs, cordials, or
similar compounds, domestic and imported, by whatever name sold or offered
for sale, there shall be levied and collected a tax on each bottle containing not
more than one-half pint, 1} cents; more than one-half pint and not more than •
one pint, 3 cents; more than one pint and not more than one quart, 6 cents;
and on larger containers a tax at the rate of 24 cents per gallon.
All of the taxes imposed in the preceding paragraphs of this section shall be
paid by stamps to be affixed to each bottle or container in which such still
wines, champagne wines, carbonated wines, liqueurs, or cordials, or similar
compounds are sold or offered for sale: Provided, That when such still wines,
champagne wines, carbonated wines, liqueurs, cordials, or similar compounds,
taxable under the provisions of this section, are sold or delivered by the pro-
ducer, importer, or dealer in wholesale quantities to other dealers, including
rectifiers, manufacturing chemists, and druggists, the dealer receiving and
selling, or offering the same for sale or consumption to any person other than
a dealer, shall affix thereto the stamps hereinbefore prescribed: And provided
further. That the stamp tax herein imposed shall not be collected on any still
wine used by any rectifier, manufacturing chemist, or druggist in the manufac-
ture of any liqueur, cordial, or compound subject to any internal-revenue tax
imposed by this Act.
The Commissioner of Internal Revenue shall cause to be prepared suitable
and special stamps denoting the tax herein imposed, to be affixed and canceled
in such manner as he, with the approval of the Secretary of the Treasury, may
prescribe ; and in the absence of such stamps from any bottle or container con-
taining wine, liqueur, cordial, or compound taxable under the provisions of this
section, sold or offered for sale or consumption, shall be prima facie evidence
that the tax thereon has not been paid, and all such wines, liqueurs, cordials, or
compounds shall be forfeited tP the United States.
Digitized by VjOOQIC
142
There shall be levied and assesBed against the maker or producer of all wines
fortified under the provisions and conforming to the requirements of the sec-
tions of the tariff Act of October first, eighteen hundred and ninety, relating to
the fortification of pure sweet wines, as amended, and as further amended by
this Act, a tax of 65 cents on each taxable gallon of grape brandy or wine
spirits used by him in the fortification of such wines : Provided, however, That
the maker or producer of such fortified wines shall, under regulations and suit-
able bonds, to be prescribed by the Commissioner of Internal Revenue, with the
approval of the Secretary of the Treasury, have assessed against him monthly
the said tax of 55 cents on each taxable gallon of grape brandy or wine spirits
used by him during the preceding month, which assessment shall be paid within
ninety days from the date of notice thereof: Provided further. That nothing
herein contained shall be construed as exempting any still wines, cordials,
liqueurs, or similar compounds from the .payment of any stamp tax provided
for in this section.
The CJommissioner of Internal Revenue, with the approval of the Secretary
of the Treasury, is hereby authorized to make all necessary regulations to make
effective the provisions of this section.
That sections forty-two, forty-three, forty-five, forty-six, and forty-nine of
the Act of October first, eighteen hundred and ninety, as amended by section
sixty-eight of an Act approved August twenty-eighth, eighteen hundred and
ninety-four, and by an Act approved June seventh, nineteen hundred and six,
are further amended to read as follows :
" Sec. 42. That any producer of pure sweet wines may use in the preparation
of such sweet wines, under such regulations, and after the filing of such notices
and bonds, together with the keeping of such records and the rendition of such
reports as to materials and products as the CJommissioner of Internal Revenue,
with the approval of the Secretary of the Treasury, may prescribe, wine spirits
produced by any duly authorized distiller, and the Commissioner of Internal
Revenue in determining the liability of any distiller of wine spirits to assess-
ment under secton thirty-three hundred and. nine of the Revised Statutes, is
authorized to allow such distiller credit in his computations for the wine spirits
withdrawn to be used in fortifying sweet wines under this Act : Provided, That
such wine containing after fortification more than twenty-four per centum of
alcohol, as defined by section thirty-two hundred and forty-nine of the Revised
Statutes, shall be forfeited to the United States.
" Sec. 43. That the wine spirits mentioned in section forty-two of this Act Is
the product resulting from the distillation of fermented grape Juice, to which
water may have been added prior to, during, or after fermentation, for the sole
purpose of facilitating the fermentation and economical distillation thereof, and
shall be held to include the product from grapes or their residues commonly
known as grape brandy, and shall include commercial grape brandy which may
have been colored with burnt sugar or caramel ; and the pure sweet wine which
may be fortified with wine spirits under the provislons^of this Act is fermented
or partially fermented grape juice only, with the usual cellar treatment, and
shall contain no other substance whatever introduced before, at the time of, or
after fermentation, except as herein expressly provided: Provided, That the
addition of pure boiled or condensed grape must or pure crystallized cane or
beet sugar, or pure dextrose sugar or water, or any or all of them, to the pure
grape Juice before fermentation, or to the fermented product of such grape
Juice, or to both, prior to the fortification provided In this Act, either for the
purpose of perfecting sweet wines according to commercial standards or for
mechanical purposes, shall not be excluded by the definition of pure sweet wine
Digitized by VjOOQIC
143
aforesaid: Provided, however. That the cane or beet sugar, or pure dextrose
sugar so used shall not be in excess of eleven per centum of the weight of the
wine to be fortified under this Act : And fn-ovided further. That the addition of
water herein authorized shall be under such regulations and limitations as the
Ck>mmlS8ion6r of Internal Beyenue, with the approval of the Secretary of the
Treasury, may from time to time prescribe: Provided, however. That records
kept in accordance with such regulations as to the percentage of saccharine,
acid, alcoholic, and added water content of the wine offered for fortification
shall be open to inspection by any official of the Department of Agriculture
thereto duly authorized by the Secretary of Agriculture; but in no case shall
such wines to which water has been added be eligible for fortification under the
provisions of this Act, where the same, after fermentation and before fortifica-
tion, have an alcoholic strength of less than five per centum of their volume. .
" Sec. 45. That under such regulations and official supervision, and upon the
execution of such entries and the giving of such bonds, bills of lading, and other
security as the Commissioner of Internal Revenue, with the approval of the
Secretary of the Treasury, shall prescribe, any producer of pure sweet wines as
defined by this Act may withdraw wine spirits from any special bonded ware-
house in original packages or from any registered distillery in any quantity
not les9 than eighty wine gallons, and may use so much of the same as may be
required by him under such regulations, and after the filing of such notices and
bonds and the keeping of such records and the rendition of such reports as to
materials and products and the disposition of the same as the Commissioner of
Internal Revenue, with the approval of the Secretary of the Treasury, shall
prescribe, in fortifying the pure sweet wines made by him, and for no other
purpose, in accordance with the foregoing limitations and provisions; and the
Commissioner of Internal Revenue, with the approval of the Secretary of the
Treasury, is authorized whenever he shall deem it to be necessary for the pre-
vention of violations of this law to prescribe that wine spirits withdrawn under
this section shall not be used to forti^ wines except at a certain distance pre-
scribed by him from any distillery, rectifjring house, winery, or other establish-
ment used for producing or storing distilled spirits, or for making or storing
wines other than wines which are so fortified, and that in the building in which
such fortification of wines is practiced no wines or spirits othfsr than those per-
mitted by this regulation shall be stored in any room or part of the building in
which fortification of wines is practiced. The use of wine spirits for the fortifi-
cation of sweet wines under this Act shall be under the immediate supervision
of an officer of internal revenue, who shall make returns describing the kinds
and quantities of wine so fortified, and shall affix such stamps and seals to the
packages containing such wines as may be prescribed by the Commissioner of
Internal Revenue, with the approval of the Secretary of the Treasury ; and the
Commissioner of Internal Revenue shall provide by regulations the time within
which wines so fortified with the wine spirits so withdrawn may be subject to
inspection, and for final accounting for the use of such wine spirits and for
rewarehousing or for payment of the tax on any portion of such wine spirits
which remain not used in fortifying pure sweet wines.
"Sec. 46. That wine spirits may be withdrawn from special bonded ware-
houses at the instance of any person desiring to use the same to fortify any
wines, in accordance with commercial demands of foreign markets, when such
wines are intended for exportation, without the payment of tax on the amount
of wine spirits used in such fortification, under such regulations, and after mak-
ing such entries, and executing and filing with the collector of the district from
which the removal is to be made such bonds and btils of lading, and giving such
Digitized by VjOOQIC
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other additional security to prevent the use of such wine spirits free of tax
otherwise than in the fortification of wine intended for exportation and for the
due exportation of the wine so fortified, as may be prescribed by the CJommls-
sioner of Internal Revenue, with the approval of the Secretary of the Treasury ;
and all of the provisions of law governing the exportation of distilled spirits
free of tax, so far as applicable, shall apply to the withdrawal and use of wine
spirits and the exportation of the same in accordance with this section ; and the
Commissioner of Internal Revenue Is authorized, subject to the approval of the
Secretary of the Treasury, to prescribe that wine spirits intended for the fortifi-
cation of wines under this section shall not be introduced into such wines except
under the immediate supervision of an officer of internal revenue, who shall
make returns describing the liinds and quantities of wine so fortified, and shall
affix such stamps and seals to the packages containing such wines as may be
prescribed by the Commissioner of Internal Revenue, with the approval of the
Secretary of the Treasury. Whenever transportation of such wine is to be
effected by land carriage the Commissioner of Internal Revenue, with the ap-
proval of the Secretary of the Treasury, shall prescribe such regulations as to
sealing packages and vehicles containing the same, and as to the supervision of
transportation from the point of departure, which point shall be determined as
the place where such wine spirits may be introduced Into such wines to the
point of destination as may be necessary to insure the due exportation of such
fortified wines: Provided, That where, in accordance with regulations of the
Commissioner of Internal Revenue, with the approval of the Secretary of the
Treasury, wines fortified under the provisions of this Act with brandy taxable
at 55 cents per proof gallon are exported directly from the winery where forti-
fied, there shall be allowed an abatement or refund of tax equivalent to 55 cents
per gallon on each proof gallon of wine spirits contained in such wine at the
time of exportation, which amount of wine spirits shall be ascertained by the
Commissioner of Internal Revenue under regulations approved by the Secretary
of the Treasury : Provided, That such wine spirits on which abatement or refund
of tax is allowed shall not exceed the total amount of alcohol in such wine over
and above fourteen per centum thereof.
" Sec. 49. That wine spirits used in fortifying wines may be recovered from
such wines only on the premises of a duly authorized grape-brandy distiller,
and for the purpose of such recovery wine so fortified may be received as
material on the premises of such a distiller, on a special permit of the collector
of internal revenue in whose district the distillery is located; and the distiller
will be held to pay the tax on the product from such wines as will include
both the alcoholic strength therein produced by the fermentation of the grape
juice and that obtained from the added distilled wine spirits: Provided, That
when application for such special permit for redistillation shall be made by the
producer of any wines fortified with brandy subject to the tax of 55 cents per
proof gallon, before such wine shall have been moved from the premises of
the winery where fortified and the redistillation is had under regulations made
by the Commissioner of Internal Revenue, with the approval of the Secretary
of the Treasury, an abatement or refund of the tax assessed against said pro-
ducer shall be allowed equivalent to 55 cents per proof gallon of brandy con-
tained in said spirits at the time of redistillation, which amount of brandy
shall be ascertained by the Commissioner of Internal Revenue, under regula-
tions approved by the Secretary of the Treasury, and wine spirits so recovered
may be used in the manner provided by law for the fortification of other wine :
Provided, That such wine spirits on which abatement or refund of tax is
allowed shall not exceed the total amount of alcohol in such wine over and
above fourteen per centum thereof."
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That section three and section six of the Act of June seventh, nineteen hun-
dred and six, amending the laws relating to the fbrtiflcatipn of pure sweet wines,
are hereby amended to read as follows :
" Sbc. 3. That the Ck)mmissioner of Internal Revenue is hereby authorized to
assign at each winery where wines are to be fortified such number of gangers
or storekeeper gangers, in the capacity of gangers, for special duties as may be
necessary for the proper supervision of the making and fortifying of such wines,
and the compensation of such officers shall not exceed $5 per diem while so
assigned, together with their actual and necessary traveling expenses, and also
a reasonable allowance for their board bills, to be fixed by the Ck)mmissioner
of Internal Revalue, but not to exceed $2 per diem for said board bills. That
bonds hereafter given under the provisions of the aforesaid Act of October first,
eighteen hundred and ninety, as amended, shall be conditioned for the paym^it
of the tax on all brandy removed thereunder and not used and accounted for
within the time and in the manner required by law and regulations, and for
the payment of all taxes imposed on the brandy so withdrawn and used for for*
tifications ; and the said bonds shall contain such other conditions as the Com-
missioner of Internal Revenue, with the approval of the Secretary of the Treas-
ury, may by regulation prescribe.
** Sec. 6. That any person who by any process recovers from wines fortified
under the provisions of the aforesaid Act approved October first, eighteen hun-
dred and ninety, as amendments thereto, any brandy or wine spirits used in the
manufacture or fortification of said wine, otherwise than is provided for in said
Act and its amendments, or who shall rectify, mix, or compound with distilled
spirits or other materials, except as provided in this Act, such grape brandy,
fortified wines or wine spirits unlawfully recovered therefrom, shall, on convic-
tion, be punished for each such offense by a fine of not less than $200 nor more
than $1,000. But the provisions of this section and the provisions of section
thirty-two hundred and forty-four of the Revised Statutes of the United States,
as amended, relating to rectification, or other internal revenue laws of the United
States, shall not be held to apply to or prohibit the mixing or blending of pure
sweet wines fortified under the provisions of this Act with each other or with
other wines : Provided, That the pure sweet wines fortified under the provisions
of this Act may be used in the manufacture of cordials, liqueurs, and similar
compounds on which an internal revenue tax of 24 cents a gallon is imposed,
and otherwise the provision of section thirty-two hundred and forty-four of the
Revised Statutes of the United States shall remain in full force and effect"
SPECIAL TAXES.
Sec. 3. That on and after November first, nineteen hundred and fourteen,
special taxes shall be, and hereby are, imposed annually as follows, that is
to say :
first. Bankers shall pay $1 for each $1,000 of capital used or employed, and
in estimating capital surplus and undivided profits shall be included. The
amount of such annual tax shall in all cases be computed on the basis of the
capital, surplus, and undivided profits for the preceding fiscal year. Every
person, firm, or company, and every Incorporated or other bank, having a place
of business where credits are opened by the deposit or collection of money or
currency, subject to be paid or remitted upon draft, check, or order, or where
money is advanced or loaned on> stocks, bonds, bullion, bills of exchange, or
promissory notes, or where stocks, bonds, bullion, bills of exchange, or promis*
sory notes are received for discount or sale, shall be a banker under this Act:
Provided^ That any postal savings bank, or savings bank haviog no capital stock,
27776*--voL Id— 14 10
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146
and whose business Is confined to receiying deposits and loaning or investing
the same for the benefit of its depositors, and which does no other business of
banking, shall not be subject to this tax.
Second. Brokers shall pay $80. Every person, firm, or company, whose busi-
ness it is to negotiate purchases or sales of stocks, b<mds, exchange, bullion,
coined money, bank notes, promissory notes» or other securities, for themselves
or others, shall be regarded as a broker: Provided, That any person having
paid the special tax as a banker shall not be required to pay the special tax
as a broker.
Third. Pawnbrokers shall pay $50. Bvery person, firm, or company whose
business or occupation it is to take or receive, by way of pledge, pawn, or
exchange, any goods, wares, or merchandise, or any kind of personal property
whatever, as security for the repayment of money loaned thereon, shall be
deemed a pawnbroker.
' Fourth. Ck>mmercial brokers shall pay $20. Every person, firm, or company
whose business it is as a broker to negotiate sales or purchases of goods, wares,
produce, or merchandise, or to negotiate freights and other business for the
owners of vessels, or for the shippers or consignors or consignees of freight
carried by vessels, shall be regarded as a commercial broker under this Act
Fifth. Custom-house brokers shall pay $10. Every person, firm, or company
whose occupation It is, as the agent of others, to arrange entries and other
custom-house papers, or transact business at any port of entry relating to the
importation or exportation of goods, wares, or merchandise, shall be regarded
as a custom-house broker.
Sixth. Proprietors of theaters, museums^ and concert halls, where a charge
for admission is made, having a seating capacity of not more than two hundred
and fifty, shall pay $25; having a seating capacity of more than two hundred
and fifty and not exceeding five hundred, shall pay $60 ; having a seating capacity
exceeding five hundred and not exceeding eight hundred, shall pay $75 ; having
a seating capacity of more than eight hundred, shall pay $100. Every edifice
used for the purpose of dramatic or operatic or other representations, plays;
or performances, for admission to which entrance money is received, not in-
cluding halls or armories rented or used occasionally for concerts or theatrical
representations, shall be regarded as a theater : Provided, That whenever any
such edifice is under lease at the passage of this Act, the tax shall be paid by
the lessee, unless otherwise stipulated between the parties to said lease.
Seventh. The proprietor or proprietors of circuses shall pay $100. Every
building, space, tent, or area where feats of horsemanship or acrobatic sports
or theatrical performances not otherwise provided for in tlfls Act are exhibited
shall be regarded as a circus : Provided, That no qpecial tax paid in one State,
Territory, or the District of Columbia shall exempt exhibitions from the tax
in another State, Territory, or the District of Columbia, and but one special
tax shall be imposed for exhibitions within any one State, Territory, or District
Eighth. Proprietors or agents of all other public exhibitions or shows for
money not enumerated in this section shall pay $10: Provided, That a special
tax paid in one State, Territory, or the District of Columbia shall not exempt
exhibitions from the tax in another State, Territory, or the District of Colum-
bia, and but one special tax shall be required for exhibitions within any one
State, Territory, or the District of Columbia : Provided further. That this para-
graph shall not apply to Chautauquas, lecture lyceums, agricultural or indus-
trial fairs, or exhibitions held under the auspices of religious or charitable
associations.
Ninth. Proprietors of bowling alleys and billiard rooms shall pay $5 for each
alley or table. Every building or place where bowls are thrown or where
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games of billiards or pool are played, and that are open to the public with or
without price, shall be regarded as a bowling alley or a billiard room, respec-
tively.
Tenth. Commission merchants shall pay $20. Evary person, firm, or com-
pany whose business or occupation it Is to receive into his or its possession any
goods, wares, or merchandise to sell the same on commission shall be regarded
as a commission merchant: Provided, That any person having paid the special
tax as a commercial broker shall not be required to pay the special tax as a
commission merchant: Provided further, That this provision shall not apply to
commission houses run upon a cooperative plan.
TOBACCO DEALEBS AND MANTTFAOTtTBlEBS.
Sec. 4. That on and after November first, nineteen hundred and fourteen,
special taxes on tobacco dealers and manufacturers shall be and hereby are
imposed annually as follows, the amount of such annual taxes to be computed
in all cases on the basis of the annual sales for the preceding fiscal year :
Dealers in leaf tobacco whose annual sales or transfers do not exceed fifty
thousand pounds shall each pay $6. Dealers in leaf tobacco whose annual sales
or transfers exceed fifty thousand and do not exceed one hundred thousand
pounds shall pay $12, and if their annual sales or transfers exceed one hun-
dred thousand pounds shall pay $24: Provided, That dealers in leaf tobacco
whose annual sales or transfers do not exceed one thousand pounds shall be
exempt from the tax herein imposed on dealers in leaf tobacco.
Dealers in tobacco, not specially provided for in this section, whose annual
receipts from the sale of tobacco exceed $200, shall each pay $4.80 for each
store, shop, or other place in which tobacco in any form is sold.
Every person whose business it is to sell, or offer for sale, manufactured
tobacco, snuff, cigars, or cigarettes shall be regarded as a dealer in tobacco:
Provided, That no manufacturer of tobacco, snuff, cigars, or cigarettes shall be
required to pay a special tax as a dealer in manufactured tobacco, snuff, cigars,
or cigarettes for selling his own products at the place of manufacture.
Manufacturers of tobacco whose annual sales do not exceed one hundred
thousand pounds shall each pay $6.
Manufacturers of tobacco whose annual sales exceed one hundred thousand
and do not exceed two hundred thousand pounds shall each pay $12.
Manufacturers of tobacco whose annual sales exceed two hundred thousand
and do not exceed four hundred thousand pounds shall each pay $24.
Manufacturers of tobacco whose annual sales exceed four hundred thousand
and do not exceed one million pounds shall each pay $60.
Manufacturers of tobacco whose annual sales exceed one million and do not
exceed five million pounds shall each pay $800.
Manufacturers of tobacco whose annual sales exceed five million and do not
exceed ten million pounds shall each pay $600.
Manufacturers of tobacco whose annual sales exceed ten million and do not
exceed twenty million pounds shall each pay $1,200.
Manufacturers of tobacco whose annual sales exceed twenty million pounds
shall each pay $2,496.
Manufacturers of cigars whose annual sales do not exceed one hundred
thousand cigars shall each pay $3.
Manufacturers of cigars whose annual sales exceed one hundred thousand and
do not exceed two hundred thousand cigars shall each pay $6.
Manufacturers of cigars whose annual sales exceed two hundred thousand
and do not exceed four hundred thousand cigars shall each pay $12.
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148
Manufacturers of dgara wbose annoal sales exceed four hundred thousand
and do not exceed one million cigars shall each pay (90.
Manufacturers of cigars whose annual sales exceed one million and do not
exceed five million cigars shall each pay $150.
Manufacturers of cigars whose annual sales «cceed five million and do not
exceed twenty million cigars shall each pay fOOO.
Manufacturers of cigars whose annual sales exceed twenty million and do not
exceed forty million cigars shall each pay |1,200.
Manufacturars of cigars whose annual sales exceed forty miUion cigars shall
each pay |2,496.
Manufacturers of cigarettes whose annual sales do not exceed one million
cigarettes shall each pay $12.
Manufacturers of cigarettes whose annual sales exceed one million and do
not exceed two million cigarettes shall each pay $24.
Manufacturers of cigarettes whose annnal sales exceed two million and do
not exceed five million cigarettes shall each pay $60.
Manufacturers of cigarettes whose annual sales exceed five million and do
not exceed ten million cigarettes shall each pay $120.
Manufacturers of cigarettes whose annual sales exceed ten million and do not
exceed fifty million cigarettes shall each pay $600.
Manufacturers of cigarettes whose annual sales exceed fifty million and do
not exceed one hundred million cigarettes shall each pay $1,200.
Manufacturers of cigarettes whose annual sales exceed one hundred million
cigarettes shall each pay $2,496.
In arriving at the amount of license tax to be paid hereunder, and in the levy
and collection of such tax, each person, firm, or corporation engaged in the
manufacture of cigars, cigarettes (Including little cigars), or totMcco shall be
considered and deemed a single manufacturer.
And every person who carries on any business or occupation for which special
taxes are imposed by this Act, without having paid the special tax herein pro-
vided, shall, besides being liable to the payment of such special tax, be deemed
guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not
more than $500, or be imprisoned not more than six months, or both, at the
discretion of the court : Provided, That the special taxes imposed by this Act
and payable during the special tax year ending June thirtieth, nineteen hundred
and sixteen, shall be collected and paid proportionately for the period during
which such taxes shall remain In force during said year.
ADHESIVE STAMPS.
Sec. 5. That on and after the first day of December, nineteen hundred and
fourteen, there shall be levied, collected, and paid, for and in respect of the
several bonds, debentures, or certificates of stock and of indebtedness, and other
documents, instruments, matters, and things mentioned and described in Sched-
ule A of this Act, or for or in respect of the vellum, parchment, or paper upon
which such instrumaits, matters, or things, or any of them, shall be written
or printed by any person or persons, or party who shall make, sign, or issue
the same, or for whose use or benefit the same shall be made, signed, or issued,
the several taxes or sums of money set down in figures against the same, respec-
tively, or otherwise specified or set forth in the said schedule.
And there shall also be levied, collected, and paid, for and in respect to the
preparations, matters, and things mentioned and described in Schedule B of
this Act, manufactured, sold, or removed for sale, the several taxes or sums of
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money set down in words or figures against the same, respectively, or otherwise
specified or set forth in Schedule B of this Act.
Sec. 6. That if any person or persons shall make, sign, or issue, or cause to
be made, signed, or issued, any instrument, document, or paper of any kind or
description whatsoever, without the same being duly stamped for denoting the
tax hereby imposed thereon, or without having thereupon an adhesive stamp to
denote said tax, such person or persons shall be deemed guilty of a misde-
meanor, and upon conviction thereof shall pay a fine of not more than $100, at
the discretion of the court
Sec. 7. That if any person shall forge or counterfeit, or cause or procure to
be forged or counterfeited, any stamp, die, plate, or other instrument, or any
part of any stamp, die, plate, or other instrumait, which shall have been pro-
vided, or may hereafter be provided, made, or used in pursuance of this Act,
or EAiall forge, counterfeit, or resemble, or cause or procure to be forged, coun-
terfeited, or resembled, the impression, or any part of the impression, of any
such stamp, die, plate, or other instrument, as aforesaid, upon any vellum,
parchment, or paper, or shall stamp or mark, or cause or procure to be stamped
or marked, any v^um, parchment, or paper with any such forged or counter-
feited stamp, die, plate, or other instrument, or part of any stamp, die, plate,
or other instrument, as aforesaid^ with intent to defraud the United States of
any of the taxes hereby imposed, or any part thereof; or if any p^son shall
utter, or sell, or expose for sale, any vtilum, parchment, paper, article, or thing
having thereupon the impression of any such counterfeited stamp, die, plate^ or
other instrument, or any part of any stamp, die, plate, or other instrument, or
any such forged* counterfeited, or resembled impression, or part of impression,
as aforesaid, knowing the same to be forged, counterfeited, or resembled; or
If any person shall knov^lngly use or permit the use of any stamp, die, plate,
or other instrument, which shall have been so provided, made, or used as afore-
said, with Intent to defraud the United States; or if any person shall fraudu-
lently cut, tear, or remove, or cause or procure to be cut, torn, or removed* the
Impression of any stamp, die, plate, or other instrument which shall have been
provided, made, or used in pursuance of this Act from any v^lum, parchm^t,
or paper, or any instrument or writing charged or chargeable with any of the
taxes Imposed by law; or if any person shall fraudulently use, join,. fix, or
place, or cause to be used, joined, fixed, or placed, to, with, or upon any velCom,
parchment, paper, or any instrument or writing charged or chargeable with
any of the taxes h^eby imposed, any adhesive stamp, or the impression of any
stamp, die, plate, or other instrument, which shall have be«i provided, made,
or used in pursuance of law, and which shall have been cut, torn, or r^uoved
from any other vellum, parchment, or paper, or any instrument or writing
charged or chargeable with any of the taxes imposed by law ; or if any person
shall willfully r^nove or cause to be removed, alter or cause to be altered, the
canceling or defacing marks of any adhesive stamp with intent to use the same,
or to cause the use of the same, after it shall have been once used, or shall
knowingly or willfully sell or buy such washed or restored stamp, or offer the
same for sale, or give or expose the same to any person for use, or knowingly
use the same, or prepare the same with intent for tlie further use thereof;
or if any person shall knowingly and without lawful excuse (the. proof whereof
shall lie on the person accused) have In his possession any washed, restored, or
altered stamp which has beeaoL removed from any vellum, parchment, paper,
instrument, or writing, then, and in every such case^ every person so offending,
and every person knovrlngly and willfully aiding, abetting, or assisting In com-
mitting any such offenses as aforesaid shall be seemed guilty of a misdoneanor,
and, upon conviction thereof, shall forfeit the said counterfeit stamps and the
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150
artidee apon which they are placed, and shall be punished by fine not exceeding
$1,000, or by imprisonment and eonfln^nent at hard labor not exceeding five
years, or both, at the discretion of the court
Seo. 8. That in any and all cases where an adhesive stamp shall be used for
denoting any tax imposed by this Act, except as hereinafter provided, the person
using or affixing the same shall write or stamp thereupon the initials of his
name and the date upon which the same shall be attached or used, so that the
same may not again be used. And if any person shall fraudnleitly make use of
an adhesive stamp to denote any tax imposed by this Act without so effectually
canceling and obliterating such stamp, except as before mentioned, he, she, or
they shall be denned guilty of a misdemeanor, and upon conviction thereof shall
pay a fine of not exceeding $500, or be imprisoned not more than six months, or
both, at the discretion of the court: Provided, That instead of cancellation by
initials and date, the stamps on the articles enumerated in Schedule B shall be
so affixed on the box, bottle, or package that In opening the same, or using the
contents thereof, the said stamp shall be effectually destroyed; and in default
thereof the party making default shall be liable to Ihe same penalty imposed for
neglect to affix said stamp as hereinbefore prescribed in this Act.
Ssc. 9. That if any person or persons shall make, sign, or issue, or cause to
be made, signed, or Issued, or shall accept or pay, or cause to be accepted or
paid, with design to evade the payment of any stamp tax, any promissory note
liable to any of the taxes imposed by this Act, without the same being duly
stamped, or having thereupon an adhesive stamp for denoting the tax hereby
charged thereon, he, she, or they shall be deemed guilty of a misdemeanor, and
upon conviction thereof shall be punished by a fine not exceeding $200, at the
discretion of the court
Sec. 10. That the collectors of the several districts are hereby authorized and
required to furnish to any assistant treasurer of the United States or designated
d^K>sitary thereof, or any postmaster located in their collection districts, re-
spectively, a suitable quantity of adhesive stamps, without prepayment therefor,
and may in advance require of any designated depositary, assistant treasurer of
the United States, or postmaster a bond, with sufficient sureties, to an amount
equal to the value of the adhesive stamps which may be placed in his hands and
remain unaccounted for, conditioned for the faithful return, whenever so re-
quired, of all quantities or amounts undisposed of, and for the payment monthly
of all quantities or amounts sold or not remaining on hand. And it shall be the
duty of such collectors to supply their deputies with, or sell to other parties
within thrfr respective districts who may make application therefor, jadhesive
stamps, upon the same terms allowed by law or under the regulations of the
Ck>mmissioner of Internal Revalue, who is hereby authorized to make such other
r^ulations, not inconsistent herewith, for the security of the United States and
the better accommodation of the public, in relation to the matters hereinbefore
mentioned, as he may judge necessary and expedient And the Secretary of the
Treasury may from time to time make such regulations as he may find neces-
sary to insure the safekeeping or prevent the illegal use of all such adhesive
stamps.
Sec. 11. That any person or persons who shall register, issue, sell, or transfer,
or who shall cause to be issued, registered, sold, or transferred, any instrument,
document, or paper of any kind or description whatsoever mentioned In Schedule
A of this Act, without the same being duly stamped, or having thereupcm an
adhesive stamp for denoting the tas chargeable thereon, and canceled in the
manner required by law, with intent to evade the provisions of this Act, shall
be deemed guilty of a misdemeanor, and upon conviction thereof shall be
pimished by a fine not exceeding $50, or by imprisonment not exceeding six
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151
months, or both, in the discretion of the court : Provided, That hereafter, in all
cases where the party has not aMxed to any instrument the stamp required by
law thereon at the time of issuing, selling, or transferring the said- bonds,
debentures, or certificates of stock or of indebtedness, and he or they, or any
party having an interest therein, shall be subsequently desirous of affixing such
stamp to said instrument, or, if said instrument be lost, to a copy thereof, he or
they shall appear before the collector of internal revenue of the proper district,
who shall, upon the paymoit of the price of the proper stamp required by law,
and of a penalty of flO, and, where the whole amount of the tax denoted by
the stamp required shall exceed the sum of $50, on payment also of interest, at
the rate of six per centum, on said tax from the day on which such stamp ought
to have been affixed, affix the proper stamp to such bond, debenture, certificate
of stock or of indebtedness or copy, and note upon the margin thereof the date
of his so doing, and the fact that such penalty has been paid ; and the same
shall thereupon be deemed and held to be as valid, to all intents and purposes,
as if stamped when made or issued: And provided further. That where it shall
appear to said collector, upon oath or otherwise, to his satisfaction, that any
such instrument has not be^i duly stamped, at the time of making or issuing
the same, by reason of accident, mistake, inadvertence, or urgent necessity, and
without any willful design to defraud the United States of the stamp, or to
evade or delay the payment thereof, then and in such case, if such instrument,
or, if the original be lost, a copy thereof, duly certified by the officer having
charge of any records in which such original is required to be recorded, or
otherwise duly proven to the satisfaction of the collector, shall, within twelve
calendar months after the making or issuing thereof, be brought to the said
collector of internal revenue to be stamped, and the stamp tax chargeable
thereon shall be paid, it shall be lawful for the said collector to remit the
penalty aforesaid and to cause such instrument to be duly stamped. And when
the original instrumait, or a certified or duly proven copy thereof, as aforesaid,
duly stamped so as to entitle the same to be recorded, shall be presented to the
clerk, register, recorder, or other officer having charge of the original record,
it shall be lawful for such officer, upon the payment of the fee legally chargeable
for the recording thereof, to make a new record thereof, or to note upon the
original record the fact that the error or omission in the stamping of sa!d
original Instrument has been corrected pursuant to law ; and the original instrur
ment or such certified copy, or the record thereof, may be used in all courts
and places in the same manner and with like effect as if the instrument had
been originaUy stamped: And provided further. That in all cases where the
party has not affixed the stamp required by law upon any such Instrument
issued, registered, sold, or transferred at a time when and at a place where no
collection district was established, it shall be lawful for him or them, or any
party having an interest therein, to affix the proper stamp thereto, or, if
the original be lost, to a copy thereof. But no right acquired in good faith
before the stamping of such instrument, or copy thereof, as herein provided.
If such record be required by law, shaU in any manner be affected by such
stamping as aforesaid.
Sec. 12. That hereafter no instrument, paper, or document required by law to
be stamped, which has been signed or issued without being duly stamped, or with
a deficient stamp, nor any copy thereof, shall be recorded until a legal stamp
or stamps, denoting the amount of tax, shall have been affixed thereto, as pre-
scribed by law: Provided, That any bond, debenture, certificate of stock, or
certificate of Indebtedness issued in any foreign country shall pay the same tax
as is required by law on similar instruments when Issued, sold, or transferred
in the United States ; and the party to whom the same Is issued, or by whom it
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is sold or transferred, sliall, before selling or transferring the same, aflix tiiereon
the stamp or stamps indicating the tax required.
Sec. 13. That is shall not be lawful to record or register any instrument, paper,
or document required by law to be stamped unless a stamp or stamps of the
proper amount shall have be^i affixed and canceled in the manner prescribed
by law.
Sec. 14. That no instrumait, paper, or document required by law to be stamped
shall be deemed or held inyalid and of no effect for tiie want of a particular
kind or description of stamp designated for and denoting the tax charged on
any such instrument, paper, or document, provided a legal documentary stamp
or stamps denoting a tax of equal amount shall have been duly affixed and used
thereon.
Sec. 15. That all bonds, debentures, or certificates of indebtedness issued by
the officers of the United States Government, or by the officers of any State,
county, town, municipal corporation, or other corporation exercising the taxing
power, shall be, and hereby are, exempt from the stamp taxes required by this
Act : Provided, That it is the intent hereby to exempt from the stamp taxes im-
posed by this Act such State, county, town, or other municipal corporations in
the exercise only of functions strictly belonging to them in their ordinary gov-
ernmental, taxing, or municipal capacity : Provided further, That stock and
bonds issued by cooperative building and loan associations, mutual ditch or
irrigating companies, and building and loan associations or companies that
make loans only to their shareholders, shall be exempt fnnn the tax herein
provided.
Sec. 16. That all the provisions of this Act relating to dies, stamps^ adiiesive
stamps, and stamp taxes shall extend to and include (except where manifestly
inapplicable) all the articles or objects enumerated in Schedule B, subject to
stamp taxes, and apply to the provisions in relation thereto.
Sec. 17. That on and after December first, nineteen hundred and fourteen,
any person, firm, company, or corporation that shall make, prepare, and s^,
or remove for consumption or sale, perfumery, cosmetics, preparations, com-
positions, articles, or things upon which a tax is imposed by this Act, as pro-
vided for in Schedule B, without affixing thereto an adhesive stamp or label
denoting the tax before meitioned shall be deemed guilty of a misdemeanor,
and upon conviction thereof shall pay a fine of not more than $500, or be im-
prisoned not more than six months, or both, at the discretion of the court
Sec. 18. That any manufacturer or maker of any of the articles' for sale
mentioned in Schedule B, after the same shall have been so made, and the
particulars hereinbefore required as to stamps have been complied with, or
any other person who shall take oif, remove, or detach, or cause, or permit,
or suffer to be taken off, or removed or detached, any stamp, or who shall use
any stamp, or any wrapper or cover to which any stamp is affixed, to cover
any other article or commodity than that originally contained in such wrapper
or cover, with such stamp when first used, with the intent to evade the stamp
duties, shall for every such article, respectively, in respect of which any such
offense shall be committed, be deemed guilty of a misdemeanor, and upon
conviction thereof shall pay a fine of not more than $500, or be imprisoned not
m;ore than six months, or both, at the discretion of the court, and every such
article or commodity as aforesaid shall also be forfeited.
Sec. 19. That any maker or manufacturer of any of the articles or com-
modities mentioned in Schedule B, as aforesaid, or any other person who shall
sell, send out, remove, or deliver any article or commodity, manufactured as
aforesaid, before the tax thereon shall have been fully paid by affixing thereon
the proper stamp, as in this Act provided, or who shall hide or conceal, or
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cause to be tildden or concealed, or who sball remove or convey away, or deposit,
or cause to be removed or conveyed away from or deposited in any place, any
such article or commodity, to evade the tax chargeable thereon, or any part
thereof, shall be deemed guilty of a misdemeanor, and upon conviction thereof
shall pay a fine of not more than $000, or be imprisoned not more than six
months, or both, at the discretion of the court, together with the forfeiture of
any such article or commodity: Provided, That articles upon ^hich stamp
taxes are required by this Act may, wh^i intended for exportation, be manu-
factured and sold or removed without having stamps affixed thereto, and with-
out being charged with tax as aforesaid; and every manufacturer or maker
of any article as aforesaid, intended for exportation, shall give such bonds
and be subject to such rules and regulations to protect the revenue against
fraud as may be from time to time prescribed by the Commissioner of Internal
Bevenue, with the approval of the Secretary of the Treasury.
Sec. 20. That every manufacturer or maker of any of the articles or com-
modities provided for in Schedule B, or his foreman, agent, or superintendent
shall at the end of each and every month make, sign, and file with the col-
lector of internal revenue for the district in which he resides a declaration ia
writing that no such article or commodity has, during such preceding month
or time when the last declaration was made, been removed, or carried, or sent,
or caused or suffered or known to have been r^noved, carried, or sent from
the premises of such manufacturer or maker other than such as have been
duly taken account of and charged with the stamp tax, on pain of such manu-
facturer or maker- forfeiting for every refusal or neglect to make such declara-
tion 1100; and if any such manufacturer or maker, or his foreman, agent, or
superintendent, shall make any false or untrue declaration, such manufacturer
or maker, or foreman, agent, or superintendent making the same shall be
deemed guilty of a misdemeanor, and upon conviction shall pay a fine of not
more than $500, or be imprisoned not more than six months, or both, at the
discretion of the court.
Sec. 21. That the stamp taxes prescribed in this Act on the articles pro-
vided for in Sdiedule B shall attach to all sudi articles and things sold or
removed for sale thirty days after the approval of this Act Bvery person, ex-
cept as otherwise provided in this Act, who offers or exposes for sale any
article or thing provided for in said Schedule B, whether the article so offered
or exposed is of foreign manufacture and imp<Mrted or of domestic manufacture,
shall be deemed the manufacturer thereof, and shall be subject to all the taxes,
liabilities, and penalties imposed by law for the sale of artiicles without the
use of the proper stamp denoting the tax paid therecHi; and all such artides
of foreign manufacture shall, in addition to the import duty imposed on the
»une, be subject to the stamp tax prescribed in this Act : Provided further, That
internal revenue stamps required by existing law on imported merchandise
shall be affixed thereto and canceled at the expense of the owner or importer
before the withdrawal of such merchandise for consumption, and the Secretary
of the Treasury is authorized to make such rules and regulations as may be
necessary for the* affixing and canceling of such stamps, not inoonsistmt here-
with.
Sec. 22. That the Commissioner of Int^nal Revenue shall cause to be pre-
pared and distributed for the payment of the taxes iHrescribed in this Act suit-
able stamps denoting the tax on the document, article, or thing to which the
same may be affixed, and he is authorised to prescribe such method for the can-
cellation of said stamps, as substitute for or in addition to the method pro-
vided in this Act, as he may deem expedient. The Commissioner of Internal
BevMiue, with the afiproval of the Secretary of the Treasury, is authorised to
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procure any of the stamps proyided for in this Act by contract whatever such
stamps can not be speedily prepared by the Bureau of Engraying and Printing;
but this authority sliall expire on the first day of November, nineteen hundred
and fifteen, except as to imprinted stamps furnished under contract, authorized
by the Commissioner of Internal Revenue. That the adhesive stamps. used in
the payment of the tax levied in Schedules A and B of this Act shall be fur-
nished for sale by the several collectors of internal revenue, who shall sell and
deliver them at their face value to all persons applying for the same, except
officers or employees of the .Internal-Revenue Service : Provided, That such col-
lectors may sell and deliver such stamps in quantities of not less than flOO of
face value, with a discount of one per centum, except as otherwise provided in
this Act.
Schedule A.
STAUF TAXES.
Bonds, debentures, or certificates of indebtedness issued on and after the
first day of December, nineteen hundred and fourteen, by any association, com-
pany, or corporation, on each $100 of face value or fraction thereof, 5 cents,
and on each original issue, whether on organization or reorganization, of cer-
tificates of stock by any such association, company, or corporation, on each $100
of face value or fraction thereof, 5 cents, and on all sales, or agreements to sell,
or memoranda of sales or deliveries or transfers of shares or certificates of
stock in any association, company, or corporation, whether made upon or i^own
by the books of the association, company, or corporation, or by any assigmnent
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 man-
ner to the benefit of such stock, or to secure the future payment of money or lor
the future transfer of any stock, on each |100 of face value or fraction thereof,
2 cents: Provided, That it is not intended by this Act to impose a tax upon
an agreement evidencing a deposit of stock certificates as collateral security for
money loaned thereon, which stock certificates are not actually sold, nor upon
such stock certificates so deposited: Provided further. That in case of sale
where the evidence of transfer is shown only by the books of the company the
stamp shall be placed upon such books ; and where the change of ownership is
by transfer certificate the stamp shall be placed upon the certificate; and in
cases of an agreement to sell or where the transfer is by delivery of the cer-
tificate assigned in blank there shall be made and delivered by the sellelr to the
buyer a bill or memorandum of such 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. And any person or persons liable to pay
the tax as herein provided, or anyone who acts in the matter as agent or broker
for such person or persons, who shall make any such sale, or who shall in pur-
puance of any such sale deliver any such stock, or evidence of the sale of any
such stock or bill or memorandum thereof, as herein require(f, without having
the proper stamps affixed thereto, with intent to evade the foregoing provi-
sions shall be deemed guilty of a misdemeanor, and upon conviction thereof shall
pay a fine of not exceeding f 1,000, or be imprisoned not more than six months,
or both, at the discretion of the court
Upon each sale, agreemoit of sale, or agre^nent to sell* any products or
merchandise at any exchange, or board, of trade, or other similar place, either
for present or future delivery, for each |100 in value of said sale or agreement
of sale or agreement to seU, 1 cent, and for each additional $100 or fractional
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155
part thereof In excess of flOO, 1 cent: Provided, That on every sale or agree-
ment of sale or agreement to .sell as aforesaid there shall be made and de-
livered by the seller to the buyer a bill, memorandum, agreement, or other
evidence of such sale, agreement of sale, or agreement to sell, to which there
shall be affixed a lawful stamp or stamps in value equal to the amount of the
tax on such sale. And every such bill, memorandum, or other evidence of sale
or agreement to sell shall show the date thereof, the name of the seller, the
amount of the sale, and the matter or thing to which it refers ; and any person
or persons liable to pay the tax as herein provided, or anyone who acts in the
matter as agent or broker for such person or persons, who shall make any such
sale or agreement of sale, or agreement to sell, or who shall, in pursuance of
any such sale, agreement of sale, or agreement to sell, deliver any such products
or merchandise without a bill, memorandum, or other evidence thereof as herein
required, or who shall deliver such bill, memorandum, or other evidence of sale,
or agreement to seU, without having the proper stamps affixed thereto, with
intent to evade the foregoing provisions, shall be deemed guilty of a misde-
meanor, and upon conviction thereof shall pay a fine of not exceeding |1,000,
or be imprisoned not more than six nK>nths, or both, at the discretion of the
court.
That no bill, memorandum, agreement, or other evidence of such sale, or
agreement of sale, or agreement to sell, in case of products or merchandise
actually delivered at the time of sale or while in vessel, boat, or car, and
actually in course of transportation, shall be subject to this tax, provided such
bill, memorandum, agreement, or other evidence of such sale, or agreement of
sale, or agreement to sell shall be accompanied by bills of lading or vouchers
showing that the said products are actually in course of transportation as
aforesaid.
Promissory notes, except bank notes issued for circulation, and for each
renewal of the same, for a sum not exceeding f 100, 2 cents ; and for each addi-
tional flOO or fractional part thereof in excess of $100, 2 cents.
Express and freight: It shall be the duty of every railroad or steamboat
company, carrier, express company, or corporation or person whose occupation
is to act as such, to issue to the shipper or consignor, or his agent, or person
from whom any goods are accepted for transportation where a charge exceeding
5 cents is made a bill of lading, manifest, or other evidence of receipt and for-
warding for each shipment received for carriage and transportation, whether
in bulk or in boxes, bales, packages, bundles, or not so inclosed or included;
and such shipper, consignor, agent, or person shall duly attach and cancel, as
is in this Act provided, to each of said bills of lading, manifests, or other memo-
randum, a stamp of the value of 1 cent : Provided, That a consignment of news-
papers to any one point or to different points by the same train or conv^ance
when inclosed in one general bundle at the point of shipment shall be con-
sidered as one shipment, and, in lieu of a bill of lading therefor, the publisher
of such newspaper shall file on or before the fifteenth day of each month with
the collector of internal revenue for the district in which such newspaper is
published a report under oath showing the number of such shipments during
the preceding month to which report such publisher shall affix and cancel
stamps equal in value to 1 cent for each shipment so reported : Provided fwrtheTf
That the report herein required shall not include shipments of newspapers de-
livered to points within the county in which the same are published. Any
failure to issue such bill of lading, manifest, or other memorandum as herein
provided, shell subject such railroad or steamboat company, carrier, express
company, or corporation or person to a penalty of $50 for each offense.
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Tdegraph and telephone messages : It shall be the duty of every penKm* firm,
or corporation owning or operating any telegraph or telephone line or lines to
make within thirty days after the expiration of each month a sworn statement
to the collector of internal revoine in each of their reflective districts, stating
the nnmber of dispatches, messages, or conversations originated at each of their
respective exchanges, toll stations, or offices, and transmitted thence over their
lines during the preceding month for which a charge of 15 cents or more was
imposed, and for each of such messages or conversaticms the said person, firm,
or corporation shall collect from the person paying for the message or conver-
sation a tax of 1 cent in addition to the regular charges for the message or
conversation, which tax the said person, firm, or corporation shall in turn pay
to the said collector of internal revenue of their respective districts: Provided,
That only one payment of said tax shall be required, notwithstanding the lines
of one or more persons, firms, or corporations shall be used for the transmis-
sion of each of said messages or conversations: Provided further, That the
messages or dispatches of the officers and employees of any telegraph or tele-
phone company concerning the afbiirs and service of the company, and like
messages or dispatches of the officials and employees of railroad companies sent
over the wires on their respective railroads shall be exonpt from this require-
ment: And provided further. That messages of officers and employees of the
Government on official business shall be exempt from the taxes herein imposed
upon telegraphic and telephonic messages.
Bond: For indemnifying any person or parsons, firm, or corporation who
shall have become bound or engaged as surety for the payment of any sum of
money, or for the due execution or performance of the duties of any oOce or
position, and to account for money received by virtue thereof, and all other
bonds of any description, except such as may be required in legal proceedings,
not otherwise provided for in this schedule, GO cents.
Oertificate of profits, or any certificate or memorandum showing an interest
in the property or accumulations of any association, company, or corporation,
and on all transfers thereof, on each $100 of face value or fraction thereof, 2
cents.
Oertificate : Any certificate of damage, or otherwise, and all other certificates
or documents issued by any port warden, marine surveyor, or other person
acting as such, 25 cents.
Certificate of any description required by law not otherwise specified in this
Act, 10 cents.
Contract : Broker's note, or memorandum of sale of any goods or merchandise,
stocks, bonds, exchange, notes of hand, real estate, or property of any kind or
description issued by brokers or persons acting as such, for each note or memo-
randum of sale, not otherwise provided for in this Act, 10 cents.
Conveyance : Deed, instrument, or writing, whereby any lands, tenem^its, or
other realty sold shall be granted, assigned, transferred, or othervrise conveyed
to, or vested in, the purchaser or purchasers, or any other person or persons,
by his, her, or their direction, when the consideration or value of the interest
or property conveyed, exclusive of the value of any lien or encumbrance thereon,
exceeds $100 and does not exceed $500, 50 cents ; and for each additional $500
or fractional part thereof in excess of $500, 50 cents : Provided, That nothing
contained in this paragraph shall be so construed as to impose a tax upon any
instrument or writing given to secure a debt
Entry of any goods, wares, or merchandise at any customhouse, either for
consumption or warehousing, not exceeding $100 in value, 25 cents; exceeding
$100 and not exceeding $500 in value, 50 cents; exceeding $500 in value, $1.
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Entry for the withdrawal of any goods or merchandise from customs bonded
warehouse, 50 cents.
Insurance : Each policy of Insurance or other instrument, by whatever name
the same shall be called, by which insurance shall be made or renewed upon
property of any description (Including rents or profits), whether against peril
by sea or on Inland waters, or by fire or lightning, or other peril, made by
any person, association, or corporation, upon the amount of premium charged,
one-half of 1 cent on each dollar or fractional part thereof: Provided, That
purely cooperative or mutual fire insurance companies or associations carried on
by the members thereof solely for the protection of their own property and not
for profit shall be exempted from the tax herein provided : And provided further,
That policies of reinsurance shall be exempt from the tax herein Imposed by
this paragraph.
Each policy of insurance, or bond or obligation of the nature of indenmity
for loss, damage, or liability issued, or executed, or renewed by any person,
association, company, or corporation, transacting the business of fidelity, em-
ployer's liability, plate glass, steam boiler, burglary, elevator, automatic sprink-
ler, or other branch of insurance (except life, personal accident, and liealth
insurance, and insurance described and taxed or exempted in the preceding
paragraph and excepting also workmen's compensation insurance carried on by
the members thereof solely for their own protection and not for profit), and
each bond undertaking or recognizance, conditioned for the performance of the
duties of any oflSce or position, or for the doing or not doing of anything therein
specified, or other obligation of the nature of indemnity, and each contract or
obligation guaranteeing the validity or legality of bonds or other obligations
issued by any State, county, municipal, or other public body or organization,
or guaranteeing titles to real estate or mercantile credits executed or guar-
anteed by any liability, fidelity, guarantee, or surety company upon the amount
of premium charged, one-half of 1 cent on each dollar or fractional part
thereof: Provided, That policies of reinsurance shall be exempt from the tax
herein imposed by this paragraph.
Passage ticket, for each pass^iger, sold in the United States for passage by
any vessel to a foreign port or place, if costing not exceeding $80, $1; costing
more than 130 and not exceeding $60, $3; costing more than $dO, $5: Provided,
That such passage tickets, costing $10 or less, shall be exempt from taxation.
Power of attorney or proxy for voting at any election for officers of any
incorporated company or association, except religious, charitable, or literary
societies, or public cemeteries, 10 cents.
Power of attorney to sell and convey real estate, or to rent or lease the
same, to receive or collect rent, to sell or transfer any stock, bonds, scrip,
or for the collection of any dividends or interest thereon, or to perform any
and all other acts not hereinbefore specified, 25 cents : Provided, That no stamps
shall be required upon any papers necessary to be used for the collection of
claims from the United States for pensions, back pay, bounty, or for property
lost in the military or naval service.
Protest: Upon the protest of every note, bill of exchange, acceptance, check
or draft, or any marine protest, whether protested by a notary public or by
any other officer who may be authorized by the law of any State or States
to make such protest, 25 cents.
Every seat sold in a palace or parlor car and every berth sold in a sleeping
car, 1 Cent, to be paid by the company selling the same.
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Schedule B.
Perfumery and cosmetics and other similar articles: For and upon every
packet, box, bottle, pot, phial, or other inclosure containing any essence, ex-
tract, toilet water, cosmetic, vaseline, petrolatum, hair oU, pomade, hair dress-
ing, hair restorative, hair dye, tooth wash, dentifrice, tooth paste, aromatic
cachous, or any similar substance or article, by whatsoever name the same
heretofore have been, now are, or may hereafter be called, known, or dis-
tinguished, used, or applied as perfumes or as cosmetics, and sold or removed
for consumption and sale in the United States, where such packet, box, bottle,
pot, phial, or other inclosure, with its contents, shall not exceed at the retail
price or value the sum of 5 cents, one-eighth of 1 cent
Where such packet, box, bottle, pot, phial, or other inclosure, with its con-
tents, shall exceed the retail price or value of 5 cents, and shall not exceed
the retail price or value of 10 cents, two-eighths of 1 cent
Where such packet, box, bottle, pot, phial, or other inclosure, with its con-
tents, shall exceed the retail price or value of 10 cents and shall not exceed the
retail price or value of 15 cents, three-eighths of 1 cent
Where such packet, box, bottle, pot, phial, or other inclosure, with its con-
tents, shall exceed the retail price or value of 15 cents and shall not exceed the
retail price or value of 25 cents, five-eighths of 1 cent And for each additional
25 cents of retail price or value or fractional part thereof in excess of 25 cents,
five-eighths of 1 cent.
Chewing gum or substitutes therefor : For and upon each box, carton, jar, or
other package containing chewing gum of not more than $1 of actual retail
value, 4 cents; if exceeding $1 of retail value, for each additional dollar or
fractional part thereof, 4 cents; under such regulations as the Commissioner
of Internal Revenue, with the approval of the Secretary of the Treasury, may
prescribe.
That all articles and preparations provided for in this schedule which are in
the hands of manufacturers or of wholesale or retail dealers on and after De-
cember first, nineteen hundred and fourteen, shall be subject to the payment
of the stamp taxes herein provided for, but it shall be deemed a compliance
with this Act as to such articles on hand in the hands of wholesale or retail
dealers as aforesaid who are not the manufacturers thereof to affix the proper
adhesive tax stamp at the time the packet, box, bottle^ pot, or phial, or other
inclosure with its contents is sold at retail.
There shall be an allowance of drawback on articles mentioned in Schedule B
of this Act on which any internal-revenue tax shall have been paid, equal in amount
to the stamp tax paid thereon, and no more, when exported, to be paid by the
warrant of the Secretary of the Treasury on the Treasurer of the United States^
out of any money arising from internal taxes not otherwise appropriated : Pro-
vided, That no allowance of drawback shall be made for any such articles ex-
ported prior to the date this Act becomes effective. The evidence that any such
tax has been paid as aforesaid shall be furnished to the satisfaction of the
Commissioner of Internal Revenue by the person claiming the allowance of
drawback, and the amount shall be ascertained under such regulations as shall
be prescribed from time to time by said commissioner, with the approval of the
Secretary of the Treasury.
Sec. 23. That all administrative, special, or stamp provisions of law, includ-
ing the law relating to the assessment of taxes, so far as applicable, ar^hereby
extended to and made a part of this Act, and every person, firm, company, cor-
poration, or association liable to any tax imposed by this Act, or for the coUec-
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159
tion thereof, shall keep such records and render, under oath, snch statements
and returns, and shall comply with such regulations as the Commissioner of
Internal Bevenue, with the approval of the Secretary of the Treasury, may from
time to time prescribe, and every such person, firm, company, corporation, or
association who evades or attempts to evade any of the taxes imposed by this
Act, or shall fail to truly account for and pay all taxes collected by them under
this Act, or any regulations issued thereunder, shaU be subject to a penalty of
double the amount of the taxes evaded or attempted to be evaded or unlawfully
withheld, to be assessed and collected as other penalties incurred under internal-
revenue laws are assessed and collected; and for the expense connected with
the assessment and collection of the taxes provided by this Act there is hereby
appropriated $200,000, or so much thereof as may be required, out of any money
in the Treasury not otherwise appropriated ; $170,000 to be added to and made
a part of the appropriations for ** salaries and expenses of collection of internal
revenue, nineteen hundred and fifteen; and $30,000 to the appropriation for
paper for internal-revenue stamps, nineteen hundred and fifteen."
Seo. 24. That the provisions of this Act shall take effect on the day next suc-
ceeding the date of its passage, except where otherwise expressly provided:
Provided, That on the day after the thirty-first day of December, nineteen hun-
dred and fifteen, the taxes levied under this Act shall no longer be levied and
collected, but all taxes arising or accruing before said date shall continue to
be collectible under the terms of this Act : Provided, however. That on and after
the first day of January, nineteen hundred and sixteen, the provisions of section
thirty-three hundred and thirty-nine of the Revised Statutes, as amended by an
Act approved April twelfth, nineteen hundred and two, imposing a tax on fer-
mented liquors shall not be affected by any limitation as to the levying or
collecting of the additional tax imposed by this Act on such fermented liquors^
but shall then be in full force and effect on and after the said first day of
January, nineteen hundred and si^^eai. All stamps provided for in this Act
unused after the aforesaid date shall be redeemed from the holder thereof, under
such rules as the Secretary of the Treasury may prescribe.
Approved, October 22, 1014.
(T. D. 2034.)
Case and strip stamps.
Case and strip stamps for spirits bottled in bond to be in the immediate custody
of the storekeeper-ganger.
Tkbasubt Depaktment,
Office of C!ommissioner of Internal REVENUEy
Washington, D. O.^ October «7, 19H.
To collectors of internal revenue:
It has been recently brought to the attention of this office that it
has been the practice in some of the collection districts to furnish
direct to distillers case stamps for spirits bottled in bond, the dis-
tiller in turn furnishing the stamps to the storekeeper-gauger as-
signed to the bottling house in quantities sufficient only to cover one
day's bottling.
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These bottling stamps are in the nature of Government guaranty
as to the quantity, age, and proof of the spirits. Dangerous oppor-
tunities for the misuse of these stamps are afforded by allowing them
to remain in the custody of persons other than the officer in charge of
the bottling warehouse, and article 25 of the regulaticms was spe-
cially designed to prevent such misuse* The distillers should, tibare-
f ore, provide a suitable place in the bottling warehouse for the safe-
keeping, under lock and key, of these stamps by the storekeeper in
charge.
Collectors in whose districts it has been the practice to furnish
these stamps to the distillers direct will take the necessary steps to see
that article 25 of Begulations No. 28 is strictly complied with, advis-
ing this office accordingly.
W. H. OSBORN,
C(mmi»sum&r of Internal Revenue.
(T. D. 2085.)
Schedule of articles and occupations subject to taa.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, October 2(J, 1914.
The following revised schedule of articles and occupations subject
to tax is published for the information of internal-revenue officers
and others concerned.
W. H. OSBORN,
CoTmnissioner of Internal Revenue.
REVISED SCHEDULE OF ABTICIiES AND OCCUPATIONS SUBJECT TO TAX.
SPECIAL TAXES.
Rate of tax.
Rectifiers of less than 500 barrels a year , $100. 00
Rectifiers of 500 barrels or more a year 200.00
Wholesale liquor dealers 100. OO
Retail liquor dealers 25. OO
Wholesale dealers in malt liquors 50. OO
RetaU dealers in malt liquors 20. OO
Manufacturers of stills 50. OO
And for stills or worms manufactured, each 20. 00
Brewers :
Annual manufacture less than 500 barrels 50. 00
Annual manufacture 500 barrels or more 100. 00
Manufacturers of filled cheese 400.00
Wholesale dealers in filled cheese 250. 00
Retail dealers in tfled cheese 12. OO
Manufacturers of oleomargarine 600.00
Wholesale dealers in oleomargarine artificially colored in Imitation of
butter 480. OO
Wholesale dealers in oleomargarine free from artificial coloration...^ 200. 00
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Rate of tax.
Retail dealers in oleomargarliie artificially colored in imitation of
butter $48. 00
Retail dealers in oleomargarine free from artificial coloration 6. 00
Manufacturers of adulterated butter 600.00
Wholesale dealers in adulterated butter 480. 00
Retail dealers in adulterated butter 48. 00
Manufacturers of process or renoyated butter 60. 00
Manufacturers, packers, or repackers of mixed fiour 12. 00
Additional special taxes imposed hp the act of Octoher 22, 1914, taking effect
November 1, 1914, to continue to January i, 1916.
Bank^s, for each |1,000 of capital employed 1. oo
Brokers who have not paid as bankers 30. 00
Pawnbrokers 50.00
Commercial brokers 20. 00
Customhouse brokers 10. 00
Commission merchants who have not paid as commercial brokers 20. 00
Proprietors of theaters, museums, and concert halls :
Beating capacity not over 250 25. 00
Seating capacity over 250 and not exceeding 500 50. 00
Seating capacity over 500 and not exceeding 800 75. 00
Seating capacity over 800 _ 100. 00
Proprietors of circuses 100. 00
Proprietors or agents of other exhibitions or shows for money 10. 00
Proprietors of bowling alleys and billiard rooms, for each alley or
table 5. 00
Dealers in leaf tobacco (annual sales of 1,000 pounds or less exempt) :
Sales not over 50,000 pounds 6. 00
Sales over 50,000 and not over 100,000 pounds 12. 00
Sales over 100,000 pounds ^- 24. 00
Dealers in tobacco (manufactured tobacco, snuff, cigars, and ciga-
rettes) exempt when annual receipts are not over $200 4. 80
Manufacturers of tobacco :
Sales not over 1(X),000 pounds 6. 00
Sales over 100,000 and not over 200,000 pounds 12. 00'
Sales over 200,000 and not over 400,000 pounds 24. 00
Sales over 400,000 and not over 1,000,000 pounds 60. 00
Sales over 1,000,000 and not over 5,000,000 pounds 300. 00
Sales over 5,000,000 and not over 10,000,000 pounds 600, 00
Sales over 10,000,000 and not over 20,000,000. pounds 1, 200. 00
Sales over 20,000,000 pounds 2, 496. 00
Manufacturers of cigars :
Annual sales not over 100,000 cigars 3. 00
Annual sales exceed 100,000 and do not exceed 200,000 cigars 6. 00
Annual sales exceed 200,000 and do not exceed 400,000 cigars 12. 00
Annual sales exceed 400,000 and do not exceed 1,000,000 cigars— 30. 00
Annual sales exceed 1,000,000 and do not exceed 5,000,000 cigars. 150. 00
Annual sales exceed 5,000,000 and do not exceed 20,000,000 cigars. 60o. 00
Annual sales exceed 20,000,000 and do not exceed 40,000,000 cigars. 1, 200. 00
Annual sales exceed 40,000,000 cigars 2, 406. 00
Manufacturers of cigarettes :
Manufacturers whose annual sales do not exceed 1,000,0(XX ciga-
rettes 12.00
Annual sales exceed 1,000,000 and do not exceed 2,000,000 ciga-
rettes 24.00
Annual sales exceed 2,000,000 and do not exceed 5,000,000 ciga-
rettes 60.00
Annual sales exceed 5,000,000 and do not exceed 10,000,000 ciga-
rettes ^- 120.00
Annual sales exceed 10,000,000 and do not exceed 50,000,000 ciga-
rettes 600.00
Annual sales exceed 50,000,000 and do not exceed 100,000,000
cigarettes 1, 200. 00
Annual sales exceed 100,000,000 cigarettes 2,496.00
27776'— VOL 16—14 11
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TAXES IN EFFECT.
TOBACCO Ain> 8NT7FF.
Rate of tax
after July 1,
1910.
Tobacco, however prepared, manufactured and sold, or removed for
consumption or sale, per pound $0.08
Snuff, however prepared, manufactured and sold, or removed for con-
sumption or sale, per pound .08
fllGABS AND CIGABETTES.
Rate of tax
per thousand
after July 1,
1910.
Cigars of all descriptions made of tobacco, or any substitute therefor,
and weighing more than 3 pounds per thousand . $3. 00
Cigars of all descriptions made of tobacco, or any substitute therefor,
and weighing not more than 3 pounds per thousand . 75
Cigarettes weighing not more than 3 pounds per thousand 1. 25
Cigarettes weighing more than 3 pounds per thousand 3. 60
DISTILLED SPIRITS, ETC.
Rate of tax.
Distilled spirits, per gallon $1.10
Stamps for distilled spirits intended for export, each . 10
Except when affixed to packages containing two or more 5-gallon
cans for export i .06
Case stamps for spirits bottled in bond . 10
Wines, liquors, or compounds known or denominated as wine, and
made in imitation of sparkling wine or champagne, but not made
from grapes grown In the United States, and liquors not made from
grapes, currants, rhubard, or berries grown in the United States,
but produced by being rectified or mixed with distilled spirits or
by the infusion of any matter in spirits, to be sold as wine, or as a
substitute for wine, in bottles containing not more than 1 pint per
. bottle or package .10
Same, in bottles containing more than 1 pint, and not more than 1
quart, per bottle or package . 20
(And at the same rate for any larger quantity of such merchan-
dise, however put up or whatever may be the package. )
DISTILLED SPIRITS (Act Of Oct. 22, 1914).
Grape brandy or wine spirits used in the fortification of sweet wines
(to be assessed), per gallon , $0.65
FERMENTED LIQUORS (Act Of Oct. 22, 1914).
Fermented liquors, per barrel, containing not more than 31 gallons $1. 50
(And at a proportionate rate for any other quantity or for fractional
parts of a barrel authorized by law.)
WINES, LIQUEURS, CORDIALS, ETC., D0UE8TI0 AND IMPORTED. (Act Of Oct 22, 1914.)
Still wines per pint— $0. 01
(In bottles containing less than pint in proportion.) quart .. . 02
^loxu. . 08
Champagne and other sparkling wines and artificially carbonated
wines per } pint or less.. .05
More than i pint and not more than 1 pint . 10
More than 1 pint and not more than 1 quart . 20
(Larger quantities same rata)
Liqueurs, cordials, and similar compounds per i pint.. .01)
More than ) pint and not more than 1 pint . 08
More than 1 pint and not more than 1 quart . 06
Larger containers per gallon^. . 2A
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OLBQICABOASINE.
Bate of tax.
Oleomargarine, domestic, artificially colored to look like butter, of any
shade of yellow, per pound |0. 10
Oleomargarine, free from coloration that causes it to look like butter,
of any shade of yellow, per pound . OOJ
Oleomargarine, imported from foreign countries, per pound . 15
ADTJLTEBATED BUTTEB, AND PBOCESS OB BENOVATED BI7TTKB.
Adulterated butter, per pound |0. 10
Process or renovated butter, per pound . OOi
FILLED CHEESE.
Filled cheese, per pound |0. 01
Same, imported, per pound . 08
MIZED FLOTJB.
Mixed flour, per barrel of 196 pounds, or more than 98 pounds . $0. 04
Half barrel of 98 pounds, or more than 49 pounds . 02
Quarter barrel of 49 pounds, or more than 24i pounds . . 01
Eighth barrel of 24^ pounds or less . OOi
(Mixed flour imported from foreign countries, in addition to import
duties, must pay intemal-reTenue tax as above.)
OPIUM.
Opium manufactured for smoking purposes, per pound . $300.00
PLAYING CABDS.
Playing cards, per pack, containing not more than 54 cards |0. 02
WHITE PH0SPH0BU8 MATCHES.
White phosphorus matches, per hundred |0.02
(Bate of tax after Jan. 1, 1915.)
TAX ON INCOMES.
(Act of October S, 191S.)
Normal tax (assessed annually), 1 per cent on net income.
Exemption allowed individuals —
If single - $3, 000
If married- ^ 4, 000
Additional tax on individual incomes: Percent
On incomes over $20,000 and not over $50,000 -^ 1
On incomes over $50,000 and not over $75,000 2
On incomes over $75,000 and not over $100,000 3
On incomes over $100,000 and not over $250,000 4
On incomes over $250,000 and not over $500,000 6
On incomes over $500,000 6
STAMP TAXES OK AND AFTER DECEMBER 1, 1914, TO OONHNUB TO
JANUARY 1, 1916,
SOHEDTTLE A.— DOCUMEIITABY.
Rate of tax.
Bonds, debentures, or certificates of indebtedness of any association, com-
pany, or corporation, on each $100 of face value or fraction thereof — $0. 06
On each original issue of certificates of stock, whether on organization
or reorganization, on each $100 of face value or fraction thereof . 06
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Rate of tax.
On all sales, agreements to sell, memoranda of sales, deliveries or trans-
fers of shares, or certificates of stock of any association or corpora-
tion, on each $100 of face value or fraction thereof $0.02
Upon each sale, agreem^it to sell, or agreement of sale of any products
or merchandise at any exchange or board of trade, or other similar
place, either for preset or future delivery, for each $100 in value of
said sale . 01
And for each $100 or fractional part thereof in excess of $100 .01
Promissory notes, and for each renewal, for a sum not exceeding $100- .02
For each additional $100 or fraction thereof .02
Bills of lading, manifests, etc., issued by* express companies or public
carriers, etc . 03
Bonds, except those required in l^^al proceedings . CO
Certificates of profits or certificates or memoranda showing interest in
the property or accumulations of any association, company, or cor-
poration, and all transfers thereof, on each $100 of face value or frac-
tion thereof . 02
Certificate of damage or otherwise and all other certificates or docu-
ments issued by port warden or marine surveyor . 25
Certificates of any description required by law, not otherwise specified- . 10
Contract : Broker's note, or memorandum of sale of goods, or merchan-
dise, stocks, bonds, exchange, notes of hand, real estate, or property of
any kind, issued by brokers, etc., for each note or memorandum of
sale not otherwise provided for in act .10
Conveyance: Deed, instrument, or writing conveying lands, tenements,
or other realty, etc., value over $100 and not exceeding $500 . 50
For each additional $500 or fraction thereof . 60
Entry of goods, wares, or merchandise in customhouse, not exceeding
$100 in value .26
Exceeding $100 and not exceeding $500 .60
Exceeding $500 in value 1.00
Entry for withdrawal of goods or merchandise from customs bonded
warehouse . 50
Insurance, marine, inland, and fire (except purely cooperative or mu-
tual), lightning or other peril, on each policy, or renewal on amount
of premium charged on each $1 or fractional part .OOJ
Insurance, fidelity, and guarantee on each policy, <m each $1 or frac-
tional part thereof of premium received .00}
Passage tickets by any vessel from the United States to a foreign port,
costing not exceeding $30 (tickets costing $10 or less exempt) 1. 00
More than $30 and not exceeding $60 3. 00
More than $60 ., 6. 00
Power of attorney or proxy for voting at an election of officers of any in-
corporated company or association, except religious, charitable, literary
societies, or public cemeteries . 10
Power of attorney to sell or convey real estate or to rent or lease the
same, to collect or receive rent, to sell or transfer stock, bonds, etc . 25
(Papers used in the collection of pension, back pay, or bounty claims, or
claims for property lost in military or naval service are exempt.)
Protest: Upon the» protest of every note, bill of exchange, acceptance^
check, or draft, or any marine protest . 25
Telegraph and telephone messages : Every person, firm, or corporation op-
erating any telegraph or telephone line or lines is required to make a
■worn statement to the collector of the number of messages or conver-
sations transmitted over their lines during preceding month for which
a charge of 15 cents or more was imposed, and for each of such messages
•r conversations to pay a tax of 01
On seats in palace or parlor cars and berths in sleeping cars (to be
paid by the company selling the same) .01
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SOHEDTTLE B.— IN EFFECT DlSGEMBEB 1, 1914.
Perfumery and cosmetics and other similar articles : Rate of tax.
For and upon every packet, box, bottle, pot, or pbial, etc., where each
packet, box, bottle, pot, phial, and contents shall not exceed retail
price 5 cents $0. ooj
When retail price exceeds 5 cents and does not exceed 10 cents . 00|
When retail price exceeds 10 cents and does not exceed 15 cents . 00|
When retail price exceeds 15 cents and does not exceed 25 cents . OOf
And for each additional 25 cents of retail price or value or fractional
part thereof in excess of 25 cents . oOf
Chewing gum or substitutes therefor :
For and npcm each box, carton, jar, or package containing chewing
gum, when the retail value does not exceed $1 '. ^ . 04
If exceeding $1, for each additional dollar or fractional part thereof. . 04
Note.— The act of August 18, 1914, known as the " United States
cotton futures act," in effect February 18, 1915, imposes a tax on
contracts of sale of cotton for future delivery made on any ex-
change, board of trade, or similar Institution or place of busi-
ness, of 2 c^its for each pound of cotton involved, to be paid by
means of stamps to be affixed to the contract or to the meqio-
randa evidencing the same.
The collection of the tax devolves on the Commissioner of In-
ternal Revenue under regulation of the Secretary of the Treasury.
MISGlSLLANEOnS TAXES NOT PAYABLE BT STAMP.
Circulation issued by any bank, etc., or person (except a national
bank taxed under sec. 5214, Rev. Stat, and sec 13, act of Mar.
14, 1900), per month A of Ip.c.
Circulation (except national banks) exceeding 90 per cent of capi-
tal, in addition, per month }ofp. c.
Banks, etc., on amount of notes of any person. State bank, or State-
banking association, used for circulation and paid out 10 per cent.
Banks, etc., bankers, or associations, on amount of notes of any
town, city, or municipal corporation paid out by them lOper cent.
Bvery person, firm, association, other than national-banking asso-
ciations, and every corporation, fStnte bank, or State-banking asso-
ciation, on the amount of their own notes used for circulation
and paid out by them 10 per cent.
Bvery such person, firm, association, co]i)oration. State bank, or
State-banking association, and also every national-banking asso-
ciation, on the amount of notes of any person, firm, association,
other than a national-banking association, or of any corporation,
State bank, or State-banking association, or of any tO¥m, city, or
municipal corporation, used for circulation and paid out by them. 10 per cent.
On deficiencies in production of spirits:
On spirits which excess of materials used should produce under
survey.
On fruit brandy required to be produced from materials used and
not reported.
On spirits produced and not accounted for.
Taxes ordinarily payable by stamps not paid at the time and in the
manner required by law.
FBBB AHD FEKALTOGS.
Fees of $1 fbr 100 words or fraction thereof to be charged by col-
lectors for furnishing certified copies of lists of special tax-
payers upon application of prosecuting officers of any State,
county, or municipality.
Penalties of 60 per cent and 100 per cent for failure to make certain
returns, or for making false returns, respectively.
Penalty of 5 per cent for failure to pay assessed taxes witiiin the
time united by law.
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(T. D. 2036.)
Consignment of nefiDSfaferB under Schedule A, act of October iX, 1914.
RepOTts of shipmentB of newspapers to be made monthly to collecton in lieu of bills
of lading.
Tbeasubt Dbpabtment,
Office of Commissioner of Internal Beyenue,
WashingUm, D. G., October «S, 1914.
Sir: This office is in receipt of your letter of the 23d instant,
relatiye to that portion of the internal-revenue act of October 22,
1914, relating to the consignment of newspapers.
In reply, you are informed that in lieu of a bill of lading, the pub-
lisher of the newspaper must file on or before the 16th day of each
month \fith the collector of the district a report, under oath, show-
ing the number of shipments during the preceding month, to which
report a stamp shall be affixed equal in value to one cent for each
shipment so reported. The portion of the act relating to this subject
goes into effect December 1. The first report to be made, therefore,
will be on or before January 15, 1915, for the number of bundles
shipped during the month of December. ♦ ♦ ♦
Respectfully,
W. H. OSBOBN,
Commissioner of Internal Revenue.
Mr.
(T. D. 2037.)
Supplemental instnictiona relative to paying taxes imposed upon wines
lyyiheaetof October ££, 1914.
Treasury Department,
Office of CoifMissioNER of Internal R£venx7e,
Washington, D. C, October SO, 1914>
To coUeetors <rf internal rmmvae:
In office telegram of October 23, 1914, collectors were instracted to
require dealers who sell wine to consumers to keep account of sales
on and after that date and to delay collection of tax until further
advised.
T. D. 2027 of October 24 prescribes method of procedure and form
of report.
Collectors should collect no tax on wines sold by dealers on and
after October 23 until they receive from this office the special wine
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167
stamps which they will require all dealers in wines who Bell to
consumers to purchase in qfiantities sufficient for their needs. So
many of these stamps as will be necessary to represent the tax on
wines sold up to the date of making the report required in T. D.
2027 wfll be canceled by each dealer and disposed of in the manner
provided in said Treasury decision.
The special wine stamps that will be forwarded to collectors about
the 15th proximo must be used exclusively to indicate the payment
of the wine tax, and under no circumstances shall documentary or
proprietary stamps be used to indicate the payment of tax on sale
of wines or cordials, and it must be borne in mind by every collector
that no discount can be allowed on the sale of wine stamps.
Collectors may allow a discoimt of 1 per cent on the sale of adhesive
stamps used in the payment of the tax levied in Schedules A and B
of the act in quantities of not less than $100 face value covered in
one sale, except to 'officers and employees of the Internal Revenue
Service.
RoBT. Williams, Jr.,
Acting Commissioner of Internal Beven/ue.
(T. D. 2038.)
Emergency revenue law.
TftXM impoeed under Schedule B effective on and after December 1, 1914.
Treasury Department,
Offiob of Gommissioker of Internal Revenue,
Washington, D. 0., November S, 1914*
To collectors cf internal revenue:
Referring to the discrepancy in the act of October 22, 1914, as to
the date when Schedule B goes into effect, the act providing in sec-
tion 21 that the said schedule shall go into effect 30 days after the
passage of the act and in the schedule itself that it shall go into effect
December 1, you are advised that as originally drafted the act pro-
vided in both places that Schedule B was to go into effect 30 days
after passage. This was later amended by paragraph 6 of Sched-
ule B to December 1, 1914, and it is therefore held by this office that
the schedule in question is effective on and after December 1, 1914.
Geo. E. Fletcher,
AcHng Commissioner of Internal Revenue.
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(T. D. 2039.)
Emergency revenue law — Special-tax returns.
Special-tax returns to be rendered under act of October 22, 1914.
Tbeasubt DePABTBCBNT;
Office of Commissioneb of Internal Retenue,
Washington, D. C, November 5, 1914-
To coUeetors of internal revenue:
Every person, fibrin, or company liable to special tax under the act
of October 22, 1914, should render a return and pay such special tax,
as provided in the case of other special-tax payers. As these special
taxes take efifect from November 1, 1914, all such returns and pay-
ments, for the remainmg portion of the special-tax year ending
June 30, 1915, should be made during the present month or within
the month in which the business is subsequently commenced.
The returns rendered by such persons, Sjms, and companies wiU be
on Special Form 11 A, except in the case of bankers, whose returns
will be made on Form 457, revised. Blanks of these several forms
and the required special-tax stamps will be furnished to collectors at
an early date. The preparation and issue of stamps of the various
denominations which would be required in the case of bankers are
found to be impracticable and the taxes due from this class of special-
tax payers will be assessed on a special bankers^ list, as was done in
the case of like taxes imposed by the war-revenue act of Jime 13,
•1898.
Instructions as to the preparation of such lists will also be furnished
at an early date*
W. H. OSBOEN,
Oommissioner of Internal Revenue.
NoTB. — ^It is suggested that the widest publicity through the press, wiHiout cost to
the Govemment, should be given to the list of new special taxes in effect on Novem-
ber 1, as shown by T. D. 2035, Schedule of Taxes, and to the fact that return for
these special taxes must be made during the current month. In the event that
blank forms for returns are not received in time for persons to make return within
the calendar month thereon, parties requesting same should be instructed to make a
statement or return of liability on a plain paper, which can be received as a tenta-
tive return, relieving the party making the same from any liability to 50 per cent
penalty for delinquency.
(T. D. 2040.)
Emergency revenue law — Motion-picture theaters.
If otkm-pieture theaters classed as taxable under the sixth paragraph of section 3, act
ol October 22, 1914.
Tbeasubt Depabtment,
Offiob OF Commissioneb of Intebnal Revenue,
Washington, D. C, November 5, 1914'
Sm: Replying to your communication of the 26th ultimo, you are
informed that after careful consideration this office has reached the
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169
conclusion that motion-picture theaters come under the sixth para-
graph of section 3 of the act of October 22, 1914^ and therefore are
taxable as theaters.
Respectfully, G. E. Fletcher,
Acting Commissioner of Internal Bevewae.
C!oLLE0TOB, Elbvekth DISTRICT, ColumJms, Ohio.
(T. D. 2041.)
Emergency revenue law — Sales of seats or herihs in cars.
Tax on sales of seats or berths in palace, parlor, or sleeping cars. — Form prescribed
for rendering monthly statement
Tbeastxbt Department,
Ofbicb of CoioassioKEB OF Intsbkai. Beybkite^
Washington, D. 0., November 7, 1914-
To collectors of internal revenue and others concerned:
Until otherwise provided, every railroad company or oth^ com-
pany owning or operating any palace or parlor car or sleeping car will,
after January 1, 1915, and not later than the 20th day of each month,
render to the collector of internal revenue of the district in which its
principal office is located a sworn return of the number of seats or
berths in any such car sold by it during the preceding month, and will
pay to said collector the tax imposed by the revenue iEict of October
22, 1914, of 1 cent on each seat or berth so sold.
The return to be rendered in such cases will be in the following
form:
(Fonn 674.)
UNTTID STATES INTEBNAL BBVBNXJB.
Return of sales of seats and berths in palace, parlor, or sleeping cars taxable under act of
October tt, 1914*
Distrlctof »
,191...
The imd ersigned , , of the ,
(President or chief ofHeer.) (Hero give name of company.)
having its principal office at , State of , hereby certifiw
that the said company owns or controls certain palace, parlor, and sleeping cars in use
on its or other railroad lines, and that during the month of , 191-, the total
ntunber of seats or berths in said cars sold by or on account of this said company
was as follows:
Total number of seats sold
Total number of berths sold
Total of seats and berths sold
Amount of tax due |w
(Title.)
Subscribed and sworn to before me this day of , 191..
[SBAL.] *
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170
Blank forms of the return here prescribed will be furnished at an
early date, and on receipt of such returns collectors will enter on
their next regular Hsts, Form 23, the amount of tax found to be due
in each case.
W. H. OSBOBN,
Oommimaner of Internal Revenue.
Approved:
W. G. McjAdoo,
Secretary of ike Treasury.
(T. D. 2042.)
Emergency revennu law — Stamp tax on deeds.
Deeds deliyered on and after December 1, 1914, must be stamped. B^gistera and
recorders are required to take notice that instruments are stam]>ed before accept-
ing for record.
Tbeasubt DepabtbosnT;
Offiob of Commissioner of Intebkal Reyenue,
Washington, D. G., October SI, 1914.
Sib: This office is in receipt of your letter of the 27th instant^ in
which you request to be informed if it would be necessary, under
the internal-revenue act of October 22, 1914, to attach stamps to a
deed of real property dated, executed, and acknowledged prior to
December 1, 1914, and also deUvered prior to that date to a third
party for account of the grantee named in the deed, the delivery,
however, from such third party to the grantee named in the deed
taking place subsequent to December 1, 1914.
In reply, you are informed that the deed should be stamped before
delivery, which takes place after the law goes into effect.
You also request to be informed if a deed delivered to. the grantee
named therein subsequent to December 1, 1914, could be recorded
without the recording officer being required to see that stamps were
attached.
In reply to this inquiry you are informed that section 13 of the
act reads as follows:
That it shall not be lawful to record or register any instrument, paper, or document
equired by law to be stamped unless a stamp or stamps of the proper amount shall
have been affixed and canceled in the manner prescribed by law.
As this section of the law will become effective December 1, 1914,
registers and recorders wiU be required on and after that date to
take notice that all instruments required to be stamped are stamped
before accepting same for record.
BespectfuUy, Robt. Williams, Jr.,
Acting Commissioner of Internal Revenue.
Mr. .
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171
(T. D. 2043.)
Emergency revenue law — Policies of fire insurance.
Stamp tax on policies of fire insurance under act of October 22, 1914.
Trbasuey Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, November 6, 1914'
Sm: This oflBlce is in receipt of your letter of the 6th instant in
r^ard to stamp tax on policies of fire insurance under th^ act of
October 22, 1914.
You desire a ruling on policies made, signed, and issued by brokers
and agents prior to December 1 , 1914, on renewals of business expiring
after December 1, 1914. A policy does not require a stamp until it is
issued. If the policy is issued in due course of business, delivered
and accepted in such a way as to be legally binding upon the parties
before December 1, 1914, it would not be subject to the tax imposed
by the recent act.
Respectfully, W. H, Osborn,
l^£j.^ ^ Commissioner of Internet Beverme.
(T. D. 2044.)
Emergency revenue law — Building and loan associations.
The exemption of cooperative building and loan associations extends only to stocks
and bonds issued by such associations or companies.
Treasury Department,
Office of Coboiissioner of Internal Revenue,
WasJdngtonj D. C, November 9, 1914*
Sir : This office is in receipt of your letter of the 26th ultimo in
reference to liability of building and loan associations or companies
under the internal-revenue act of October 22, 1914.
In reply, you are informed that the exemption extended by the
revenue act of October 22, 1914, to cooperative building and loan
associations, etc., extends only to stocks and bonds issued by such
associations or companies.
The law appears clear on this subject in that it specifies ''stocks and
bonds issued by," etc., and thereby excludes from such exemption all
other taxable instruments which may be executed or delivered by the
associations or companies contained in the provision.
Respectfully, W. H. Osborn,
Mr. . Commissioner of InUmal Beven/ae.
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(T. D. 2045.)
Emergency revenue law — Preparation of hankers^ lists.
InstructionB as to the preparation of special bankers' lists.
Tbeasuby Dbpabtmbnt,
Office of Commissioneb of Internal Reyenub,
WashingUmy D. (Z, November 6, 1914*
To coUedoTs of internal revenue:
In view of the provisions of section 3 of the act approved October
22, 1914, imposing a special tax on bankers (for which special-tax
stamps are not provided), each collector will, on or before the 10th of
December, 1914, and on or before August 10, 1915,- prepare and for-
ward to this office a special havkera^ list for the preceding month.
This list will be prepared on blanks prescribed for the regular
assessment hst. Form 23, and will be arranged alphabeticllay, (first)
bynames of cities or other places, and (second) bynames of bankers
in each city or other place in which two or more banks are located.
If the district comprises two or more States or Territories, the names
of the bankers should be arranged as above under the names at the
States and Territories, also alphabetically arranged.
The heading of column 3 should be changed to read, "Amount of
capital," and in this column will be entered the amount of capital,
inclvding the surplus and undivided profits, employed in business
during the last fiscal year.
In colunm 4 will be entered the period, as "8 months ending June
30, 1916,'' "6 months ending December 31, 1915."
In colmnn 5 of the November list will be entered the amount of
tax computed on the basis of eight-twelfths of the tax at $1 for each
$1,000 of capital reported in column 3 in each case, as provided above*
In column 6 will be entered the basis of the assessment as now
required by the regulations of this office, and in column 7 will be
entered the date of the receipt of Form 457.
Bankers whose returns are received after the special bankers' list
has been forwarded and those commencing business subsequent to
the month of November will be reported on the regular assessment
lists. Form 23.
Collectors will receipt for the amounts assessed on the special
bankers' list on a special receipt, Form 23 J.
W. H. OSBOBN,
Commissioner of Internal Revewue,
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(T. D, 2046.)
Emergency revemie law — Special taxes.
Digest of rulings under war-revenne act of June 13, 1S98, identical with, or essentially
similar to, the special-tax provision t)f the emergency revenue act of October 22,
1914, published for convenience in construing the latter act.
Tbeasttbt Depabtmbnt,
Office of Ck)MMissioNEB of Internal Revenue,
Washington, D. C, Novemher 9, 191^.
To internal-revenue officers and others concerned:
The following rulings, made under the special-tax provisions of the
war-revenue act of June 13, 1898, and its amendments, which were
identical with, or essentially similar to, the special-tax provisions of
the act of October 22, 1914, are published for the information and
guidance of all concerned.
While they are not necessarily controlling, they will be given great
weight in construing the requirements of the later act, as Congress,
in practically reenacting the provisions of the earlier act, must be
considered to liave done so in the light of the administrative con-
struction given to that act.
W. H. OSBOEN,
Commissioner of Internal Revenue.
BANKERS.
Sbo. 3. That on and after November first, nineteen hundred and fourteen, special
taxes shall be, and hereby are, imposed annually as follows, that is to say:
first. Bankers shall pay $1 for each $1,000 of capital used or employed, and in
estimating capital surplus and undivided profits shall be included. The amount of
such annual tax shall in all cases be computed on tlie basis of the capital, surplus,
and undivided profits for the preceding fiscal year. Every person, firm, or company,
and every incorporated or other bank, having a place of businees where credits are
opened by tlie deposit or collection of money or currency, subject to be paid or remit-
ted upon draft, check, or order, or where money is advanced or loaned on stodks,
bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, buUion,
bills of exchanee^ or promissorv notes are received for discount or sale, shall be a
banker under mis Act: Provided, That any postal savings bank, cft savii^ bamk
having no capital stock, and whose business is confined to receiving deposits and
loaning or investing the same for the benefit of its depositors, and which does no oiheg
business of banking, shall not be subject to this tax.
(1) The decision of the Supreme Court in the case of Selden v. Equitable Trust
Go. (94 U. S., 419) construes section 3407, Bevised Statutes, the language of which in
defining bankers is identical with section 2.
The test question as to the liability of a company or firm as bankers, as laid down
in that case is whether or not, having a place of business, a firm or person is embraced
in any one of the three following classes:
First. Do they have a place of business ''where credits are opened (to the general
public) by the deposit or collection of money or currency, subject to be paid or remit-
ted upon draft, check, or order"?
Second. Do they have a place of business where money is advanced or loaned on
collaterals (stocks, bonds, etc.)?
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Third. Do they have a place of bosiness where stocks, bonds, bullion, bills of ex-
change, or promissory notes are received from another person, toe sale, or bills of
exchange or promissory notes are received for discount, belonging to that other person?
(Vol. 2, Treas. Dec. (1898), No. 20349.)
(2) Bankers, as well as all other special-tax payers, nmst be included in Record
No. 10, kept by collectors for public inspecticHi under secHon 3240, Revised Statutes;
but nothing is required to be stated in the record but the name of the Special-tax
payer, his busLaess, the place of business, and the time of payment of the special tax.
(Vol. 2, Treas. Dec. (1898), No. 19969.)
(3) Loaning money on the personal notes of the borrowers, without collateral secu-
rity, is not the business of banking contemplated by the statute. (Vol. 2, Treas.
Dec. (1898), No. 20264.)
(4) When the charter of a savings bank (or other corporate bank) is surrendered,
and the same persons who are officers and stockholders thereof carry on a private bank-
ing business, a new special tax is required. (Vol. 2, Treas. Dec. (1898), No. 20336.)
(5) Certain merchants receiving deposits from grain buyers and not from the
general public do not thereby become bankers within the meaning of the statute.
(Vol. 2, Treas. Dec. (1898), No. 20341.)
(6) City merchants who receive on deposit money from country merchants who are
their customers, for the convenience of the latter, but not opening such accounts with
the public generally, are not regarded as subject to special tax as bankers. (Vol. 2,
Treas. Dec. (1898), No. 20342.)
(7) The receiving of employees' deposits on interest does not involve a company
or firm in special-tax liability as bankers. (Vol. 2, Treas. Dec. (1898), No. 20343.)
(8) Merchants do not bring themselves within the definition of bankers by reason
of selling their own drafts to their customers; they are not, on this account, required
to pay special tax as bankers. (Vol. 2, Treas. Dec. (1898), No. 20365.)
(9) In the case of a bank with branches, a special tax is required of each branch,
the special tax being due as to each place where the business of banking is carried on.
(Sec. 3235, Rev. Stat., 1st clause; Vol. 2, Treas. Dec. (1898), No. 20397.)
(10) If two or more bankers, each of whom has paid a special tax, consolidate their
business, the consolidated banking firm must pay a new special tax from the date oi
the consolidation. But in neither case are the capital and surplus of the old (defunct)
firm to be considered in reckoning the special tax of the new firm. (Vol. 2, Treas.
Dec. (1898), No. 20419.)
(11) Bank^s special tax — Change of name, — Where a banking firm (not a corporation)
changes its name, without any change in its membership, special tax is not required
to be paid again on account of such change. (Vol. 2, Treas. Dec. (1899), No. 20786.)
(12) Private banks having no capital stock are subject to tax as bankers.
(13) In estimating the amount of special tax based upon capital and surplus,
the amount invested in United States bonds is not to be deducted.
(14) The amount invested in a bank building is not to be deducted.
(15) A bank in liquidation, doing no business except collecting and dividing assets
in closing, is not required to pay special tax.
(16) A bank engaged in business in the month of July must pay special tax for the
entire year, beginning July 1.
(17) A trust company is liable as a banker if it comes within any one of the three
clauses of definition in Subdivision 1, section 3, act October 22, 1914.
(18) Borrowed capital must be taken into account when estimating amount of spe-
cial tax.
(19) It is not the subscribed capital, but the capital actually employed during the
preceding fiscal year, that is to be taken as the basis for estimating tiiie special tax.
(Vol. 2, Treas. Dec. No. 19843.)
(20) The advancing or loaning of money by brokers on the collateral security of stocks,
if these loans or advances are confined by them strictly to customers who have given
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them, as brokers, orders for the purchase of stocks, and the coUateral is held solely to
secure themselves in filling such ordos, is not regarded as involving them in specials-
tax liability as bankers within the meaning of the statute. (Vol. 1, Treas. Dec. (1889),
No. 21152.)
BROKBRS.
Second. Brokers shall pay $30. Everv person, firm, or company whose business
it is to negotiate purchases or sales of stocks, bonds, exchange, bullion, coined money,
bank notes, promissory notes, or other securities, for themselves or others, shall be
regarded as a broker: Provided^ That any person having paid the spedal tax as a
bimker shall not be required to pay the special tax as a broker.
(21) The loaning of money for oneself or ten others on commission does not subject
the lender to special tax as a broker; but if a person makes it a business to negotiate
purchases or sales of stocks, bonds, exchange, bullion, coined money, bank notes,
promissory notes, or other securities, for himself or others, he is required to pay the
tax. ''It is only when making sales and purchases is his business, his trade, his
profession, his means of getting his living, or making his fortune that he becomes a
broker within the meaning of the statute." (Warron et al. v. Shook, 91 U. S., 704.)
(22) Persons or firms acting as agents for parties loaning money upon promissory
notes secured by mortgages are not brokers.
(23) A lawyer can make investments for clients without being liable, unless he
does it to such an extent that it can be called a ''business."
(24) Loan and mortgage companies not liable for loaning money on notes or bonds
secured by mortgage or trust deed on real estate. If they purchase notes, bonds, or
other securities they become liable as brokers.
(25) A person engaged in the business of placing loans secured by notes and mort*
gages upon real estate, acting simply as agent, roceiving a commission for his services
in obtakdng the application for the loan and attending to the execution of the papers,
is not a broker.
(26) A person engaged in the business of selling real estate, acting as the agent of
the owner in finding purchasers and receiving a commission for his services, is not
a broker.
(27) When persons negotiate purchases or sales of promissory notes, if these are
only occasional acts and do not constitute their regular business, they are not broken
within the meaning of the act.
(28) Bucket-shop proprietors giving memorandum of transactions are required to
pay special tax as brok^.
(29) The principal's special-tax stamp for his place of business in another dty
covers the transactions only at that place of business and can not cover the business
done elsewhere at a branch office.
(30) Broker's tax is not required to be paid at branch offices where a clerk is
employed whose sole duty is to receive orders and transmit them by wire to the head
of tiie office. The mere receipt and transmission by clerks of orders is not regarded
as carrying on the business of a broker. (Vol. 2, Treas. Dec, No. 19843.)
(31) Special tax must be paid for every branch office where the employee in charge
not only receives and transmits orders with the money to the main office, but also
receives from the main office moneys for disbursement to customers, or keeps accounts
with the customers at the branch office, or does other business with relation to the
transactions of brokers at such branch office. Separate special tax must be paid and
a separate stamp taken out for every "bucket shop," whether such office is called a
branch office or a main office. (Vol. 2, Treas. Dec. (1898), No. 20374.)
(32) It is the language of the statute, and not the ordinary and usual meaning of
the word "broker," which must govern in determining who is a broker required to
pay a special tax. (Vol. 1, Treas. Dec. (1899), No. 20649.)
(33) While a miniTig syndicate or other association issuing certificates of stock in
a company organized by it is not required to pay a special tax as a broker therefoTt
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a manager or other penon employed by it to sell such certificates on commiaBum ia
a broker and required to pay special tax. (Vol. 1, Tieas. Dec. (1899), No. 20637.)
(34) An express or railway agent doing business for his principals otoly, not a broker.
(Vol. 1, Treas. Dec. (1898), No. 20106.)
(35) Bills of exchange, bonds for the payment of money, and promissory notes are
in the popular acceptation of the term '^ securities" for money. (Jennings v. Davia»
31 CJonn., 139.)
(36) Securities: '^Evidence of indebtedness." '^Written assurance forthe return
or payment of money. * ' (Anderson's Dictionary of Law . )
(37) Proprietors of bucket shops who issue memoranda of their transactions in
stocks and in cotton, grain, etc., even though they sell (mly ''futures," are required
to pay special tax both as brokers and as commercial brokers. (Vol. 2, Treas. Dec
(1899), No. 21607.)
(38) Loan and mortgage companies are not liable for special tax as brokers unlefls
they engage in the sale of the securities on which they make loans. When they
engage in such sales they become brokers and are required to pay special tax accoid-
ingly. (Vol. 2, Treas. Dec. (1899), No. 21620.)
(39) An express company engaged in the business of buying or selling ftn^eign
money or bills of exchange is required to pay special tax as a broker. (Vol. 2, Treas.
Dec. (1899), No. 21709.)
(40) No person or firm liable to special tax for simply buying or selling real estate
on commission. (T. D. 19755).
(41) Business of selling land on commission, taking applications for farm loans,
and writing insurance, b not the business of a broker, and special tax is not required.
(T. D. 19872.)
(42) Purchase of State, county, school, or district orders, or warrants, by any peison
does not subject him to special tax as a broker, if not done to an extent constituting
it his business. (T. D. 19885.)
(43) Broker's special tax not required for negotiating loans of money. (T. D . 19894.)
(44) Occasional transactions in sale of sight draft do not necessitate the payment <^
special tax as broker. (T. D. 19937.)
(45) Only those whose business it is to negotiate purchases or sales of the securities
contemplated by paragraph two of section 2, act of June 30, 1898 (subdivision 2, of
section 3, act of October 22, 1914), are brokers and liable to tax. (T. D. 19940.)
(46) Special tax not required to be paid by a person because of the f&ct of his holding
a seat on the stock exchange, if he transacts no business,' directly or indirectly.
(T. D, 19943).
(47) Special tax as broker not required for the mere cashii^ of checks lor customers
by merchants. (T. D. 20026.)
(48) Persons whose practice it is to buy fee bills of witnesses are not brokers. Such
paper is not properly described by any of the terms used in the law, to wit, "stocks,
bonds, exchange, bullion, coined money, bank notes, promissory notes, or other
securities." (T. D. 21647.)
PAWNBROXERS.
Third, pawnbrokers shall pay $50. Every person, firm, or coBkpuay whoee bnsi-
ness or occupation it is to take or receive, by way of pledge, pawn, or exchange, any
goods, wares, or merchandise, or any kind of personal moperty whatever, as security
for the repayment of money loaned thereon, shall be deemed a pawnbroker.
(49) A person is not required to pay a special tax as a pawnbroker for rare or occa-
eional acts, which can not be r^arded as his business or occupation. (Circular Ko.
608, Aug. 8, 1898; Vol. 2, Treas. Dec. (1898), No. 19843.)
(50) Special tax of pawnbroker not required to be paid for making loaDS when the
chattels are not taken or received by way of pledge, pawn, or exchange. (T. D. 20552.)
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(51) A pezBon usiiig no tickets in his bufilness, but making a pretenee of baying
articles which are brought to him, which he holds with a verbal agreement that the
artidea can be bought back again by the person selling them, upon the payment ol a
specified bonus, is liable to special tax as pawnbroker. (T. D^ 20439.)
COMMERCIAL BROKERS.
Fourth. Commercial brokers shall pay |20. Every person, firm, or company whose
business it is as a broker to negotiate sales or purchases of goods, wares, produce, or
merchandise^ or to negotiate freights and other business for the owners of vessels,
or for the shippers or consignors or consi^ees of freight carried by vessels, shall be
regarded as a commercial broker under this act.
(52) Commercial brokers are those persons only who, without having in their pos-
session goods, wares, or merchandise, negotiate sales or purchases thereof on commis-
sion. (Vol. 2, Treas. Dec. (1898), No. 20416.)
(53) Commission merchants who receive goods in possession to sell for othera are
not commercial brokers. The difference between a factor or commission merchant
and a broker b that a factor may buy and sell in his own name and has the goods in
his possession, while a broker, as such, can not ordinarily buy or sell in his own name
and has no possession of the goods sold. (Slack v. Tucker, 23 Wall., 321.)
(54) Cattle brokers, who receive and sell cattle on commission, are not required to
pay special tax as commercial brokers.
(55) A person wlio is employed by certain firms to soHcit and receive orders on com-
mission for their goods and is bound by his agreement with them to give his entire
services to them, to the exclusion of other firms or persons, not a commercial broker.
(56) Warehousemen who receive tobacco, cotton, or any other produce or goods on
consignment for sale on commission are not liable as commercial brokers, but are lia-
ble as commission merchants under act of October 22, 1914.
(57) Auctioneers who receive and sell goods at their auction rooms or on the prem-
ises of the owners on commission are not subject to special tax as commercial brokers.
(58) Drug brokers are subject to the special tax.
(59) If cotton buyers have possession of cotton which they sell, they are not liable
as commercial brokers; if they have not, and sell on commission, they are liable.
(Circular No. 508, vol. 2, Treas. Dec. (1898), No. 19843.)
(60) Persons representing cigar manu&cturers who are furnished with samples and
send orders to factories, receiving a commission for furnishing orders, are liable as
commercial brokers. (T. D. 19575.)
(61) Warehouse receipts for grain transferred through elevators liable— Brokers
must pay special tax at branch offices. (T. D. 19615.)
(62) Definition of commercial broker. Settled ruling modifying prior rulings.
(Vol. 2, Treas. Dec. (1898), No. 20417.)
Decision of Comptroller Tracewell. (VI Comp. Dec., 545.)
(63) Persons whose business it is to obtain orders from those who desire to buy
goods, and who purchase, receive, and forward the goods to their customers, are not
on this account conunercial brokers, nor are they required to pay special tax under
the act of June 13, 1898, for such business, though they make a profit therein
through discounts allowed them by merchants and commissions paid them by their
customers — "Installment purchasers," who have running accounts at stores and give
orders to their customers, on which orders these customers themselves buy and receive
goods, are required to pay special tax as commercial brokers. (T. D. 19884.)
(64) A firm negotiating sales of goods not shipx>ed to them nor held in their posses-
sion before being sold, but shipped^from other points direct to purchasers from the
mills, they being liable for all sales and doing their own ''bUling,'^ making settlements
with the mills at the end of each month, retaining a stipulated conmiission, held to
be liable to tax as commercial brokers. (T. D. 19938.)
27776°— VOL 16—14 12
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(65) Persons representing several houses in the negotiation of sales of goods on com-
mission (the goods not being in their possession), if they are not bound by agreement
to act solely for these houses, but are at liberty to engage in the same transactions for
other houses, are commercial brokers, and must pay special tax as such. (T. D.
19966.)
(66) Special tax is not required to be paid for representing one, two, or three firms
to solicit and receive orders, if person is bound by agreement to give his entire service
to them. (T. D. 20117.)
(67) Leaf tobacco dealers, who are also engaged in the business of negotiating the
purchase of tobacco as agents for others, on commission, are commercial brokers under
the fourth paragraph of section 2 of the war-revenue act. (T. D. 20592.)
CUSTOMHOUSB BROKBRS.
Fifth. Customhouse brokers shall pay $10. Every person, firm, or company whoee
occupation it is, as the agent of others, to arrange entries and other customhouse
{Mipers, or transact business at any port of entry relating to the importation or exjMrta-
tion of goods, wares, or merchandise, shall be regarded as a customhouse broker.
(68) If the complete business of customhouse brokers is transacted by parties at
offices at different ports of one district, a separate and distinct special tax must be
paid for each of their offices, under the provisions of section 3235, Revised Statutes,
page 114. (Circular No. 508, Aug. 8, 1898; vol. 2, T. D., No. 19843.)
(69) Transactions for which customhouse brokers* special tax m not required to be
paid. (Vol. 2, T. D. (1898), No. 20106.)
(70) A special-tax stamp taken out by a person in his own name as a customhouse
broker is sufficient to cover the business done by him in his own name, at the place of
business stated therein, whether such business is done by him on his own account or
as an agent for other persons. (T. D. 20206.)
(71) Bills of sale of vessel property are "customhouse papers" in contemplatioii of
the statute, and a person "whose occupation it is, as the agent of othera," to prepare
such bills of sale is required to pay special tax as a customhouse broker. (T. D. 20321.)
(72) Persons whose occupation it is, as agents for others, to enter and clear vessels at
the customhouse, can not be relieved from payment of special tax as customhouse
brokers on the ground that they have paid special tax as commercial brokers, which
entitles them "to negotiate freights or other business for the owners of vessels."
(T. D. 20725.)
THEATERS, ETO.
Sixth. Proprietors of theaters, museums, and concert halls, where a chazge for admis-
sion is made, having a seating capacity of not more than two hundred and fifty, shall
pay $25; having a seating capacity of more than two hundred and fifty and not exceed-
ing five hundred, shall pay $50; having a seating capacity exceeding five hundred
and not exceeding eight hundred, shau pay $75; having a seating capacity of more
than eight hundred, snail pay $100. Every edifice used for the purpose of dramatic
or operatic or other representations, plays, or performances, for admission to which
entrance money is received, not induoing halls or armories rent^ or used occasionally
for concerts or theatrical representations, shall be regarded as a theater: Provided, That
whenever any such edifice is under lease at the passage of this act, the tax shall be
paid by the essee, unless otherwise stipulated between the parties to said lease.
(73) Persons are not required to pay special taxes for the mere occasional rentdng
of their hall for public performances to dramatic companies or other persons charging
entrance money therefor, but the special tax of $10 is required to be paid by such
persons or companies if they give dramatic performances or the other exhibitions spe-
cifically mentioned in paragraph 8, section 2. •(Subdivision 6, Sec. 3, Act Oct. 22,
1914.)
(74) Where theaters are entirely closed to performances during the months of July
and August, and only open in the month of September, the special tax is to be reek-
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oned from the 1st day of September to the 1st day of July following, at the rate of $100
for the year b^iimliig July 1. (Nov. 1, 1914, to June 30, 1915, current year.) (Circu-
lar No. 508, Aug. 8, 1898; Vol. 2, Treas. Dec, No. 19843.)
(75) Moving-picture shows taxable as theaters under Section 6. (T. D. 2040.)
(76) A special-tax stamp taken out by the lessees of a theater can not, upon their
transferring their lease to other persons, be transferred and made to answer for the
latter -petsonB in conducting the theater. (T. D. 20396.)
CIRGUSBB.
Seventh. The proprietor or proprietors of circuses shall pay $100. Every building,
space, tent, or area where feats of horsemanship or acrobatic sports or theatrical per-
formances not otherwise provided for in this act are exhibited shall be regarded as a
circus: Providedy That no special tax paid in one State, Territory, or the District of
Columbia shall exempt exhibitions from the tax in another State, Territory, or the
District of Columbia, and but one special tax shall be imposed for exhibitions within
any one State, Territory, or District.
(77) Exhibitions of feats of horsemanship (such as are seen in circuses), which
occur on race tracks, are subject to a special tax of $100; but mere tests of speed
of horses in racing are not r^arded as ''feats of horsemanship'' within the meaning
of paragraph 7 of section 2, act of Jime 13, 1898. (Subdivision 7, sec. 3, act of Oct.
22, 1914.)
(78) Variety shows, whether given at summer resorts or elsewhere, which include
"acrobatic sports," come within the definition of a circus in the statute which
requires special tax therefor.
(79) When a circus is exhibiting in any State in the month of July, the special tax
of $100 is required to be paid for the year beginning July 1. If in the following
month the circus goes into another State, the special tax at the rate of $100 for the
year is to be reckoned from the 1st day of August to the 1st day of July following,
and a separate special-tax stamp must be taken out accordingly for that State, and
soon.
(80) The "theatrical performances" contemplated by paragraph 7, section 2, of
the act of June 13, 1898 (subdivision 7, sec. 3, act of Oct. 22, 1914), are only those
which are given in connection with a circus.
(81) A show under canvas exhibiting, among other things, acrobatic and athletic
exercises, but no feats of horsemanship, and having no menagerie, is not subject to
special tax as a circus ($100) under paragraph 7 of section 2, act of June 13, 1898, if
the acrobatic exercises are so few and simple as to make it unreasonable to hold that
they constitute the show a circus. (T. D. 19944.)
(82) A small wagon show having no ''circus feats," but only "such acts as trapeze,
wire walking, trained ponies, singing, and dancing," is not to be regarded as a circus
within the meaning and intent of paragraph 7 of section 2, act of June 13, 1898. It
is a show coming under the eighth paragraph, for which the special tax of $10 la
required to be paid. (T. D. 19975.)
PUBLIC* EXHIBITIONS, ETC.
Eighth. Proprietors or agents of all other public exhibitions or shows for money
not enumerated in this section shall pay $10: Provided^ That a special tax paid in
one State, Territory, or the District of Columbia shall not exempt exhibitionB from
the tax in another State, Territory, or the District of Columbia, and but one special
tax shall be required for exhibitions within any one State, Territory, or the District
of Columbia: Provided further, That this paragraph shall not apply to chautauquas,
lecture lyceums, a^cultural or industrial »irs, or exhibitions held under the auspices
of religious or chantable associations.
(83) The show of a medicine vender (consisting of various "athletic, humoroiis,
and comic periormances," there being given also an exhibition of ropewalking and
trapeze 2>erformance, the object being merely to attract a crowd), liable to a tax of
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180
$10 under paragiaph 8, act of June 13, 18d8, instead of $100 under paragmph 7. (T. D.
19830.)
(84) Tbe *' theatrical performancea" contemplated by this paragraph are only tho0e
which are given in connection with a circus.
(85) Agricultural aasociatlona are required to pay a special tax at the rate of $10
for exhibitions, including horse racing.
(86) Exhibitions and shows given on fair grounds, but not under management of
the foir association, are required to pay special tax.
(87) A lecturer using a stereopticon to illustrate his lectures, and chaiging an
adnussion fee, is liable to the special tax as giving a public exhibition or show for
money.
(88) If an exhibition is given in more than one State the law requires payment of
special tax for every such State.
(89) Amateur theatrical exhibitions, either in private houses or licensed public
halls, for payment of expenses incurred in giving the exhibition and not for pecuniary
profit of the performers or the manager, are not such performances as are subject to
tax.
Amateur dubs or local oiganizations giving exhibitions, even though they chaige
an admiasion price, are not required to pay special tax therefor if the proceeds are not
for the pecuniary profit of the clubs or associations, but are devoted to some charitable
or public object and payment of expenses. (Vol. 1, Treas. Dec. (1899) No. 20840.)
(90) Concert gardens where no admission fee is charged, but where beer and other
drinks are sold and shows or stage entertainments are given, are within the meaning
of this paragraph, and the special tax of 110 must be paid therefor. (Vol. 2, Treas. Dec.
No. 19843).
(91) Exhibitions and shows for which special tax w required to be paid. (Vol. 2,
Treas. Dec. (1898), Decisions Nos. 19749, traveling shows; 19826-19830, medicine
vender's show; 19873, horse races; 19968, exhibition at park or gardens; 19976, exhi-
bition or show in a saloon; 20121, nickel-in-slot machine, liable under certain condi-
tions; 20190, exhibitions by an athletic association; 20261, phonograph parlor;
20270, concert hall.)
(92) Entertainments for which special tax w not required to be paid. (Vol. 2, Treas.
Dec. (1898), Decisions Nos. 19752, amatetir theatricals; 19941, halls; 19977, lecturers
or elocutionists; 20029, circus p^ormances at county fairs; 20115, merry-go-round;
20123, illustrated lectures (educational association exclusively); 20124, harvest show;
20165, fortune telling;^ 20228, football, baseball, etc.; 20242, theatrical entertainment
for benefit of fire department; 20273, bands in city parks; 20314, pianoforte lecture
recital; 20319, store show (monkeys); 20337, university exhibitions.)
(93) Special* tax is not required to be paid by proprietors of restaurants or cafes for
employing bands of music or orchestras during meal hours for the benefit of their
patrons, no admission price being charged and no performance or exhibition being
given in connection therewith. Former rulings tending to a different conclusion
modified. (Vol. 2, Treas. Dec. (1899), No. 21522.)
(94) An entertainment given by a railway company, to which no admission price
18 charged, is not regarded as an exhibition or show for money. (Vol. 2, Treas. Dec.
(1899), No. 21559.)
(95) Special tax not required for bands of music playing in saloons to which no price
of admission is charged, and where persons visiting such places are not under any
obligation to buy. (Vol. 2, Tieas. Dec. (1899), No. 21636.)
BOWUNO ALLSTS AND BIUJABD BOOMS.
Ninth. Proprietors of bowling alleys and billiard rooms shall pay |5 for each allev
or table. Every building or place where bowls are thrown or where games of bil-
liards (X pool are played, and tiiat are open to the public with or without price, shall
be r^darded as a bowling alley or a biluard room, respectively.
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(96) Social dnba open only to members are not required to pay special tax on
billiard tables. (Circular No. 508, Aug. 8, 1898; vol. 2, Treas. Dec., No. 19843.)
(97) Club not required to pay special tax on its billiard tables. (Vol. 2, Treas.
Dec. (1898), No. 19743.)
(98) A person for the time being in the possession and control of a billiard table
in a place or building open to the public is prima fade the proprietor of a billiard
loom and liable to pay the special tax therefor, even if the general property and
ultimate control of the table or place, or either of them, be in some one else. (United
States V, Howard, 13 Int. Rev. Rec., 118.)
(99) Special-tax stamp to be issued for each bowling alley, pool or billiard table.
(Vol. 2, Treas. Dec. (1898), No. 19610.)
(100) Bagatelle table not liable to special tax. (Vol. 2, Treas. Dec. (1898), f^o.
20102.)
(101) Tivoli table not liable to special tax. (Vol. 2, Treas. Dec. (1898), No. 20126.)
(102) Bowling alley at Sunday-school picnics or at colleges, special tax not required.
(Vol. 2, Treas. Dec. (1898), Nos. 19890*20021.)
(103) When a person who has taken out a i^)ecial-tax stamp for a bowling alley
closes this alley and thereafter opens another to the public, the stamp may be trans-
ferred to the latter bowling alley under the provisions of section 3241, Revised Stat-
utes, if it renudns in his ownership and control. (Vol. 2, Treas. Dec. (1899), No. 21495.)
(104) In every building or place where bowls are thrown, each ^vision or track is
a separate alley, for which the special tax of $5 must be paid. (Vol. 2, Treas. Dec.
(1899), No. 21606.)
COMMISSION MBRCHANTS.
Tenth. Commission merchants shall pay $20. Every person, firm, or company
whose business or occupation it is to receive into his or its possession any goods, wares,
or merchandise to sell the same on commission shall be reg^arded as a commission
merchant: Provided, That any person having paid the special tax as a commercial
broker shall not be required to pay the special tax as a commission merchant: Pro*
tided fwrther. That this provision uiall not apply to commission houses run upon a
cooperative plan.
Not taxed under act June 30, 1909; hence no Treasury Decisions thereon.
(T. D. 2047.)
EtMTgency reveryue law — Fermented liquors.
Further InstructionB in connection with additional tax on fermented liquors.
Tbbasttrt Dobpabtbcent,
Offiob of Comhissidkeb of Intxkkal Rbvbnue,
Washinffton, Z>. C.^ NovenAer lOj 1914.
To ccOeetora of internal revenwe and others concerned:
For the purpose of correcting some misapprehension which may
have arisen in connection with the collection of the additional tax
on fermented liquors under the act of October 22, 1914, the following
further instructions are hereby promulgated:
1. The additional tax of 50 cents per barrel accrues on all fermented
liquors in possession of brewers or agents of brewers on the morning
of October 23, 1914, before the commencement of business, whether
contained in bottles or otherwise, which had been tax paid at the
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old rate of $1 per barrel. This includes beer ia tlie measuring oistems
of a bottler, who is also a brewer or agent of a brewer^ which had been
tax paid at the old rate, as well as bottled beer in his bottling house
which had been filled into bottles before October 23.
2. Inventories of stocks of fermented liquors on storage on October
23 are not required of wholesale dealers in malt liquors, except in
cases where they are also brewers or agents of brewers. A whoksale
malt liquor dealer who had beer in his possession or consigned to
him on the morning of October 23, which was his own property, is
not required to return the same. Beer which he may have had pos-
session of merely as agent for a brewer should be returned.
W. H. OSBOBN,
Commissioner of Intemci Revenfue.
(T. D. 2048.)
Income tax.
Taxable status of dividends paid on the capital stock from the current net earnings
or established surplus created from the net earnings of corporations, joint-stock
comx)anies or associations, and insurance comx)anie8 taxable upon their net
income.
Tbeasubt Department,
Office of Commissioner of Internal Revbntje,
Washington J Z?. (7., November 18, 191 4*
To collectors of internal revenue:
Diyidends from the net earnings or established surplus created
from the net earnings of any corporation, joint-stock company or
association, and insurance company are rested in the stockholder
on the date on which such dividends are declared, whether distributed
or not, and regardless of the time when the surplus or undivided
profits from which such dividends are declared were earned and
entered on the books of the corporation as such. Dividends so de-
clared should be accounted for in full in the returns of income of
individuals for the year in which they became due and payable,
whenever the amount of income is sufficient to require the indusion
of dividends, as provided in paragraph D of the income-tax law and
T. D. 1945, and should be included in the gross income of corporations,
etc., regardless of the amount of income.
All decisions and regulations which are in conffict herewith are
hereby revoked.
W. H. OSBORN,
Commissioner of Internal Revenue,
Approved:
W. G, MoAdoo,
Secretary of the Treasury.
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183
(T. D. 2049.)
Emergency revenue law — Income^ax certificates.
Income-tax certificates which are not required by specific statute, but by r^^ulationa
only, are not subject to tax as ''certificates required by law " under act of October
22, 1914.
Treasury Department,
Office of Commissioner of Internal Revenue,
WasMngtonf D. C, November 12, 1914>
Sm: In reply to your verbal inquiry as to whether certificates of
ownership, certificates of exemption, and other certificates required
by the income-tax regulations, but not by specific statute, are subject
to tax as certificaites required under the internal-revenue act of
October 22, 1914, 1 beg to advise you that they are not.
While regulations made pursuant to and under authority of law
as a rule have the force and eflfect of law, it is held by this office that
it was not the intent of Congress to tax certificates which are required
by regulations of the department for its own purposes and not by
any express provision of law.
Respectfully, W. H, Osborn,
Commissioner of Internal Revenue.
Mr. .
(T. D. 2050.)
Emergency revenue law.
Eelfttive to dassification of Hqueurs, cordials, and similar compounds.
Treasury Department,
Ofhoe of Commissioner of Internal Bevenue,
Wadiingtony D. (7., November IS, 1914.
Sib : Replying to your letter of the 7th instant, you are informed that
the words ''liqueurs, cordials, and similar compounds," as used in the
act of Congress approved October 22, 1914, are not held to include
alcohol, whiskies, rums, brandies, and gins, except when so com-
pounded as to be known to the trade as cordials and liqueurs.
Compotmds classed by this oflBlce as medicines are also excepted.
The word ** liqueur," as defined by Webster, is an alcoholic aromatic
cordial, and obviously a cordial is practically the same. It would
appear, therefore, that the words ''liqueurs, cordials, or similar
compounds,'' under whatever name sold or offered for sale, would
include those beverages commonly known to the trade as liqueurs
and cordials. Further, the term "similar compounds" would
appear to include vermuths and like wine compounds, bitters used
as beverages, cocktails, maraschino, cordialized liquors, fortified
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fruit juices, and all other compounds the formulas of which, methods
of preparation, or use, make them sufficiently like liqueurs and
cordials to place them in the class with hqueurs and cordials.
Respectfully,
G. E, Fletohek,
Acting Commissioner of Internal Revenue.
Mr. .
(T. D. 2061.)
Emergency revenue law — Schedule A.
Digest of rulings under war-revenue act of June 13, 1898, identical with or essentially
similar to Schedule A of the emergency revenue act of October 22, 1914, pub-
lished for oonTenience in construing the latter act.
Tebasubt Depabtment,
Office of Commissioner of Intebnal Reyenue,
Waahington, D. 0,\ NovernberO, 1914.
To internal-revenue officers and others concerned:
The following rulings, made under Schedule A of the war-revenue
act of June 13, 1898, and its amendements, which were identical
with or essentially similar to Schedule A of the act of October 22 ^
1914, are published for the information and guidance of all con-
cerned.
While they are not necessarily controlling, they will be given great
weight in construing the requirements of the later act, as Congress,
in practically reenacting the provisions of the earlier act, must be con-
sidered to have done so in the light of the administrative construc-
tion given to that act.
RoBT. Williams., Jb.
AetM^ Oommissianer of Internal Revenue.
SCHEDULE A.
STAMP TAXES.
BONDS, DBBBNTUBBS, OB CERTDIOATBS OF INDBBTBDNBS8.
BondB, debentureti, or certificates of indebtedness issued on and after the first day
of December, nineteen hundred and fourteen, by any association, companv, or cor-
pcRBtion. on each $100 of face value or fraction thereof, 5 cents; and on each original
iflsue^ wnether on oiganizatlon or reoiganization, of certificates of stock by any such
association, company, or corporation, on each $100 of face value or fraction thereof^
5 cents; and on all sales, or agreements to sell, or memoranda of sales or deUyeries or
ttansfeipB of shares or certificates of stock in any association, company, or OQrporationy
whether made upon or shown by the books of the association, company, or corpora-
tion, or by any assknment in blank, or by any delivery, or by any paper or agree*
mept or memorandum or other evidence of transfer or sale, whether entitUug Hie
holder in any manner to the benefit of such stock, or to secure the future payment
off m<mey or for the future transfer of any stock, on each $100 of face value or fnustion
thereof, 2 cents: Promded, That it is not intended by this act to impose a tax upon an
agreement evidencing a deposit of stock certificates as collateral security for money
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loaned thereon, vbich stock certificates are not actually sold, nor upon such stock cer-
tificatesfio deposited: Promdedfwrtiier, That in case of sale where the evidence of trans-
fer is shown only by the books of the company the stamp shall be placed upon such
books: and where the change of ownership is by transfer certificate tne stamp shall be
placed upon the certificate; and in cases of an agreement to sell or where the transfer
IS by delivery of the certificate assigned in blank there shall be made and delivered
by tiie 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 or agreement to sell before mentioned
shall show the date thereof, the name of the seller, the amount of Uie sale, and the
matter or thing to which it refers. And any person or persons liable to pay the tax as
herein provided, or anyone who acts in tiie matter as agent or broker for such person
or penxHis, who shall make any such sale, or who shall in pursuance of any such sale
deuver any such stock, or evidence of the sale of any such stock or bill or memoranr
dum thereof, as herein required, without having the proper stamps affixed thereto,^
with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor,
and upon conviction thereof shall pay a fine of not exceedii^ $1,000, or be imprisonea
not more than six months, or both, at the discretion of the court.
(1) When a bond is said to be issued. Whenever a corporation issues a bond, and
there accrues to the corporation a benefit or consideration for issuing the same, the
bond is subject to taxation. (Vol. 2, Treas. Dec. (1898), No. 20156.)
(2) Stamp tax; certificates of stock; sales and transfers of certificates of stock.
(Vol. 2, Treas. Dec. (1898), No. 19607).
(3) In reckoning the stamp tax on transfers of certificates of shares, the tax is reck-
oned on the face value. (Vol. 2, Treas. Dec. (1898), No. 19710.)
(4) Transfers of shares or certificates of stock; how stamps are to be attached;
stamp tax to be reckoned on face value of certificate. (Vol. 2, Treas. Dec. (1898),
No. 19888.)
(5) Transfers of stock from guardian to ward subject to taxation. (Vol. 2, Treas.
Dec. (1898), No. 20070.)
(6) Preferred stock issued in lieu of common stock not taxable when there is no
change of ownership. (Vol. 1, Treas. Dec. (1899), No. 20694.)
(7) Where brokers acting in behalf of their principals buy stock and receive stamped
bills of sale in their own names, they may transfer such stock on the books of the cor-
poration to the names of their principals without additional stamp tax. (Vol. 1,
Treas. Dee. (1899), No. 20727.)
(8) Certificates of stock of a foreign corporation when sold or delivered within the
United States are liable to the same tax as certificates of stock of any domestic corpora-
tion. (Vol. 1, Treas. Dec. (1899), No. 20793.)
(9) ''Puts'' and ''calls." The Attorney General decided that the fonner are not
subject to tax, but that the latter, being agreements to sell, are taxable. (Vol. 1,
Treas. Dec. (1899), No. 21151.)
(10) When a certificate of stock is presented for transfer and the power of att<«iey
on the back thereof is dated prior to July 1, 1898, although the name of the transferee
is not filled in until after that date, both the power of attorney and the certificate are
required to be stamped. (Vol. 1, Treas. Dec. (1899), No. 21277.)
(11) No tax on the closing of a stock transaction caused by margin being exhausted
because of market going against speculator. (Vol. 2, Treas. Dec. (1899), No. 21707.)
(12) The circumstances under which the memoranda issued by brokers evidencing
the sale or purchase of stock need or need not be stamped. (Vol. 2, Treas. Dec. (1899),
No. 21711.)
SALES OF TRAN8FBES OF STOCK.
Following rulings are taken from Circular No. 503, Revised November 14, 1898:
^13) In reckoning the stamp tax on transfer of certificates of stock, the tax is reckoned
on the face value. In reckoning this tax, the fact that only part of the face value of
ehares subscribed for and issued has been paid by the shareholders is not to be taken
into consideration.
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186
(14) Where stock is sold at the par value of $100» and upon which it appears that only
$25 have been paid, the tax is to be reckoned upon the iaoe value of |100, and not
upon the $25.
(15) Where one certificate represents several shares, the tax of 2 cents on each
$100 or fraction thereof is to be reckoned on the face value of the certificate, and not
on the face value of each separate share.
(16) On transfer of one certificate representing 500 shares, $5 par value, the stamp
tax required is 60 cents.
(17) When stock Is transferred for which no certificate has been issued, and the
evidence of transfer is shown only by books of the company, the stamps should be
placed upon such books. Where the change of ownership is by the transfer of a cer-
tificate, and the certificate contains a blank form of assignment on the back, which
is filled in by the insertion of the name of the person to whom the stock is transferred,
the stamp should be placed upon the certificate.
(18) In case of an agreement to sell, or where the transfer is, by the delivery of the
certificate, signed in blank, the name of the transferee or vendee to be filled in after-
wards, there should be made and delivered by the seller to the buyer a bill or memo-
randum of sale, to which the stamp should be affixed.
(19) Where certificates of shares were sold and delivered before July 1, 1898, entry
of transfer on corporate books after June 30 does not require stamp.
(20) New certificates of stock issued to holder in lieu of original certificate, and re-
maining in his ownership, do not require stamps.
(21) When certificate of stock is sold and stamp tax is paid on memorandum thereof,
upon transfer of this certificate to purchaser's name no additional tax tar such transfer
is required. Where one certificate represents several shares of stock (however laige the
number of shares), on transfer of this certificate the stamp tax is to be reckoned on its
face value and not on the face value of each separate share of stock which it represents.
(22) Transfers of stock from parties occupying fiduciary relationships to those for
whom they held the stock are transfers subject to taxation.
(23) A owns a certificate of 100 shares of stock; he transfers 50 shares to B; there are
two certificates of 50 shares each issued in lieu of the 100-share certificate, 50 shares
going to A and 50 shares to B. The tax imposed is on the transfer to B; there is no
tax on A's transfer to himself.
SALE OF FRODUOTS OB MBBCHANDISB ON EZCHANOB, BTO.
Upon each sale, aigreement of sale, or agreement to sell, any products or merchandise
at any exchange, or board of trade, or other similar place, either for present or future
delivery, for eacn $100 in value of said sale or agreement of sale or agreement to sell,
1 cent, and for each additional $100 or fractional part thereof in excess of $100, 1 cent:
Provided, That on every sale or agreement of sale or agreement to sell as aforesaid tiiere
shall be made and delivered by the seller to Ihe buyer a bill, memorandum, agree-
ment, or other evidence of such sale, agreement of sale, or agreement to sell, to which
there shall be afOxed a lawful stamp or stamps in value equal to the amount of the
tax on such sale. And everv such bill, memorandum, or other evidence of sale or
agreement to sell shall show tne date thereof, the name of the seller, the amoimt of the
sSe, and the matter or thing to which it refers; and any person or persons liable to pav
the tax as herein provided, or anyone who acts in the matter as agent or broker for such
person or persons, who shall make any such sale or agreement of sale, or agreement to
sell, or who shall, in pursuance of any such sale^ agreement of sale, or agreement to
sell, deliver any such products or merchandise without a bill, memorandum, or other
evidence thereof as herein required, of who shall deliver sucn bill, memorandum, or
other evidence of sale, or agreement to sell, without having the proper stamps affixed
thereto, with intent to evade the foregoiiu; provisions, shall be deemed ^ulty 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, at the discretion of the court.
That no bill, memorandum^ agreement, or other evidence of such sale, or agreement
of sale, or agreement to sell, m case of products or merchandise actually delivered at
the time of sale or while in vessel, boat, or car, and actually in course of tranaportation,
shall be subject to this tax, provided such bill, memorandum, agreement, or other
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evidence of such sale, or agreement of sale, or agreement to sell shall be accompanied
by bills of lading or vouchers showing that the said products are actually in course of
transportation as aforesaid.
(24) The provision relative to sales, or agreements to sell, of products or merchandise
at any exchange or board of trade, or other similar place, and requiring the seller to
give a bill or memorandum which shall be stamped, declared constitutional.
(25) Sales of live stock at stock yards come within the law, the same being a similar
place to an exchange or board of trade.
(26) The tax is not a direct tax, nor a tax upon the business itself which is so trans-
acted, but is a duty upon the facilities made use of and actually employed in the trans-
action of the business, separate and apart from the business itself. (Nicol v, Ames,
173 V. S., 509; vol. 1, Treas. Dec. (1899), No. 20984.)
(27) Transactions of live-stock exchanges — ^Duty of exchanges, when sale is made,
or an agreement of sale, or an agreement to sell entered into, to give to buyer a bill,
memorandum, or other evidence of such sale, and to place thereon the required stamp.
(Vol. 2, Troas. Dec. (1898), No. 19739.)
(28) Tax on sales ''at any exchange, or board of trade, or other similar place;" live
stock comes within the classification of ''any products or merchandise;'' "similar
place " defined in reference to the selling of live stock; sales of live stock at such places
as those defined subject to taxation. (Vol. 2, Treas. Dec. (1898), No. 20031.)
(29) To constitute an exchange, board of trade, or other similar place, so as to subject
the evidence of sale to tax, there must be more than one person, company, or partner-
ship authorized to negotiate sales thereat. (Vol. 1, Treas. Dec. (1899), No. 21148.)
(30) Bucket shops defined; tax on agreements to sell shares of stock or merchandise
at such places. (Vol. 1, Treas. Dec. (1899), No. 21279.)
(31) Sales of grain made at an exchange and sales of grain made by broken in their
own offices, held taxable. (Vol. 2, Treas. Dec. (1899), No. 21396.)
(32) Transactions of live-stock exchanges — ^Duty of exchanges, when sale is made,
or an agreement of sale, or an agreement to sell entered into, to give to buyer a bill,
memorandum, or other evidence of such sale, and to place thereon the required stamp.
(T. D. 19739.)
FBOMI8SOBY NOTBS.
FromisBory notes, except bank notes Issued for circulation, and for each renewal of
the same, for a sum not exceeding $100, 2 cents; and for each additional |100 or frac-
tional part thereof in excess of $100, 2 cents.
(33) A judgment note is a promissory note and is required to be stamped as such.
(T. D. 19662.)
(34) Receipts accepted in lieu of promissory note, as evidence of money loaned,
must be stamped as promissory notes. (T. D. 20985.)
(35) Promissory notes under seal taxable same as other promissory notes, and not as
bonds. T. D. 21691 revoked. (T. D. 21815.)
(36) Checks used in lieu of promissory notes must be stamped at the rate of 2 cents
per $100. (Vol. 2, Treas. Dec. (1898), No. 20463.)
Following rulings are taken from Supplement to Internal Revenue Circular No.
503, dated August 16, 1898:
(37) Where a note or notes with detached interest-coupon notes are given, each
coupon note requires a stamp in addition to the stamp placed on the principal note.
(38) Interest coupons attached to bonds and surrendered as receipts for interest
paid do not require a stamp.
(39) No stamp is required upon the transfer by indorsement of promissory notes.
(40) Where notes secured by a deed of trust are used as collateral, the deed of trust
and the notes are required to be stamped not on the basis of their face value, but on the
amount for which they are pledged (that is to say, the memorandum of their pledge
must be so stamped). This pledge of notes and deed of trust does not require to be
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188
stamped again because of renewals of the notes held as collateral if the pledge itself
is not renewed. (Pledges not taxable under act of Oct. 22, 1914.)
(41) Promissory notes which have matured and have been allowed to run without
suit are held not to be renewed by the payment of interest. This is looked upon as
a ''forbearance" and not a renewal, the holder not relinquishing his right of action
for any stated period.
EXPBESS AND FSUOHT BILLS OF LADINO, BTO.
ElxpresB and freight: It shall be the duty of every railroad or steamboat company y»
carrier, express company, or corporation or person whose occupation is to act as such
to issue to the shipper or consignor, or his agent, or person from whom any goods are
accepted for transportation where a charge exceeding 5 cents is made a biU of lading,
manifest, or other evidence of receipt and forwaidinjg; for each shipment received &r
carriage and transportation, whether in bulk or in boxes, bales, packages, bundles,
or not so inclosed or included ; and such shipper, consignor, agent, or person shall duly
attach and cancel, as in this act provided, to each of said bills of laduig, manifeste, or
other memorandtun, a stamp of the value of 1 cent: Providedy That a consignmeiit
of newspapers to ahy one pomt or to different points bv the same train or conveyance
whmi inclosed in one genetol bundle at the point of snipment shall be considered as
one shipment, and, in lieu of a bill of lading therefor, the publisher of such newspaper
shall file on or before the fifteenth day of each month with the collector of intenial
revenue for the district in which such newspaper is published a rep<Mrt undw oath
showing the number of such shiiHnents during the preceding month to which report
such publisher shall affix and cancel stamps equal in value to 1 cent for each ship-
ment so reported: Provided^ further y That the report herein required shaU not include
shipments of newspapers delivered to points witmn the county in which the same are
puoliahed. Any milure to issue audi oill of lading, manifest, or other mfimorandum
as herein provided, shall subject such railroad or steamboat company, carrier, ex-
press company, or corporation or person to a p^ialty of $50 for each offense.
United States v. Wells, Faigo & Go. Expteaa (96 fM., 835).
Crawford v. Hubbell (89 Fed., 961).
(42) The common carrier shall lanie bills of lading, manliest, or other evidence of
receipt and forwarding. *' Shipment** defined: On a through bill of lading it is odb
shipment, though several modes of conveyance are employed. Every separate
shipment requires evidence that it has been made, and to the evidence the stamp
is affixed. (Vol. 2, Treas. Dec. (1898), No. 19829.)
(43) Opinion of the Attorney G^ieral, August 17, 1898, on the question whether
the word ''goods'' includes money: Where an express company receives money for
transportation, it is regarded as "goods'' under Schedule A, and a bill of lading must
be issued therefor and a stamp affixed. (Vol. 2, Treas. Dec. (1898), No. 19970.)
(44) Receipts, bills of lading, or manifests issued by express companies in cases of
shipment of money and securities of the United States Government under contract
for transportation of same are subject to stamp tax under act of 1898. (Vol. 2, Treas.
Dec. (1898), No. 19996.)
(45) The Attorney General holds that the law which makes it the duty of the car-
rier to issue a bill of lading or a receipt to a person from whom any goods are accepted
for transportation, and to stamp the same, does not apply to baggage received by
railroad companies and carried upon the same train with the owner, whether such
baggage be the quantity allowed ordinarily by the rules of the railroad company or
is in excess of such amount. (Vol. 2, Treas. Dec. (1898), No. 20169.)
(46) Exemption from tax of express matter carried for railroad company free under
contract with express company. (Vol. 2, Treas. Dec. (1898), No. 20240.)
(47) Memorandum receipts for freight, afterwards exchanged for bills of lading,
must be stamped when issued. (Vol. 2, Treas. Dec. (1899), No. 21688.)
(48) Concerning the business of local expressmen and common carriers. (Vol. 2^
Treas. Dec. (1899), No. 21692.)
(49) No tax on receipts issued for special-delivery baggage. T. D. 21668 re-
voked. (T. D. 13.)
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(50) When, tax is paid on general bundle of newspapers, each package in the gen-
eral bundle which is taken therefrom and delivered at intermediate XK)int8 does not
require a stamp. (T. D. 19846.)
(51) Dray tickets or shipping receipts not surrendered for a stamped bill of lading
must be themselves stamped. (T. D. 19887.)
(52) Tax on bills of lading or receipts for goods accepted for transportation by
express and freight companies — ^Definition of ''express business'' within the meaning
of the law. (T. D. 19965.)
(53) Bills of lading or receipts from transportation companies may include more
than one shipment therein, provided that a stamp or stamps amounting in value to
1 cent for each shipment shall be affixed thereto and canceled. (T. D. 20194.)
TELEOBAFH AND TELEPHONE MESSAGES.
Tel^;raph and telephone messages: It shall be the duty of every person, firm, or
corporation owning or operating any telegraph or telephone line or lines to make
wilhin thirty days after the expiration of each month a sworn statement to the collector
of internal revenue in each of their respective districts, stating the number of dis-
patches, messages, or conversations originated at each of their respective exchanges,
toll stations, or offices, and transmitted thence over their lines during the preceding
month for which a charge of 15 cents or more was imposed, and for each of such mes-
sages or conversations the said person, firm, or corporation shall collect from ^e person
paying for the message or conversation a tax of 1 cent in addition to the regular cnarges
for the message or conversation, which tax the said person, firm, or corporation shall in
turn pay to Ihe said collector of internal revenue of meir respective districts: Provided,
That only one payment of said tax shall be required, notwithstanding the lines of one
or more persons, &ms, or corporations shall be used lor the transnussLon of each of said
messages or conversations: Frovided further, Thaji the messages or dispatches of tlie
officers and employees of any telegp*aph or telephone company concermng the affairs
and service of uie company, and like messages or dispatdies of the officials and em-
ployees of railroad compames sent over the wires on their respective railroads shall be
exempt from this requirement: And provided /vrthcTj That messages of officers and
employees of the Government on official business shall be exempt from the taxes
herein imposed upon telegraphic and telephonic messages.
(54) Exemption in favor of dispatches sent by* State officers in discharge of their
official duties. (T. D. 19704.)
(55) Telegraphic messages of railroad companies concerning the affairs and service
of the companies, when exempt. (T. D. 19794.)
(56) Exemption from stamp tax of telegrams of foreign diplomatic officers residing in
this country. (T. D. 20060.)
(57) Telegraph messages of associated steamship lines, or fast freight lines operating
over railroads, not entitled to exemption from stamp tax under section 18, act of June
13, 1898. (T. D. 20066.)
(68) The fact that an individual holds a telegraph frank has no bearing upon the
question of liability or nonliability to stamp tax of the message sent by such frank
holder. (T. D. 20066.)
INDEMNITir OR OTHER BONDS.
Bond: For indemnifying any person or persons, firm, or corporation who shall have
become bound or engaged as surety for the payment of any sum of money, or for the
due execution or performance of the duties oi any office or position, and to account for
money received by virtue thereof, and all other bonds of any description, except such
as may be required in legal proceedings, not otherwise provided for in this schedule,
50 cents.
^(59) Bonds of municipal officers required to be stamped. (Vol. 2, Treas. Dec.
(1898), No. 19686.)
(60) Tax on renewal of bonds of fidelity companies taking effect on or after July 1,
1898. (Vol. 2, Treas. Dec. (1898), No. 19845.)
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(61) Tax on bonds required before a person can enter on the duties of a State office
not a tax on the functionis of a State government. (Vol. 1, Treas. Dec. (1899), No.
20510.)
(62) Bonds of notaries public are subject to a tax. (Vol. 1, Treas. Dec. (1899), No.
20547.)
(63) Dramshop bonds. (United States v, Ambrosini, vol. 3, Treas. Dec. (1900),
Int. Rev. No. 40.)
(64) Bonds required in l^gal proceedings. B(»ids of administrators, executofs,
guardians, and receivers appointed by the courts not taxable. (Vol. 1, Treas. Dec.
(1899),' No. 20756.)
(66) Opinion of the Attorney General that bonds given by private individuals
secured by mortgages are taxable as bonds of any description not otherwise provided
fott and not as promissory notes. (Vol. 1, Treas. Dec. (1899), No. 20788.)
(66) Bonds given under section 3297, Revised Statutes, by officers of State institu*
Uons for alcohol to be used for scientific purposes not subject to stamp tax. (Vol. 1,
Treas. Dec. (1899), No. 20876.)
(67) Stamps required on bonds of distillers, brewers, and other manu&tcturers, when
given in duplicate or triplicate, only the original to be stamped. Modification of
Treasury ruling No. 19707, of July 18, 1898. (Vol. 1, Treas. Dec. (1899), No. 21312.)
(68) Guaranties accompanying proposals taxable the same as bonds. (Vol. 2, Treas.
Dec. (1899), No. 21609.)
(69) Bonds of indemnity, and fidelity and guaranty insurance. (Vol. 3, Treas. Dec.
(1900), Int. Rev. No. 15.)
(70) Warehpusmg bonds taxable under Schedule A, act of June 13, 1898. (T. D.
19609.)
(71) Instructions in regard to stamping bonds of brewers, manufacturers of tobacco,
manu&cturers of cigars, distiUeris, etc. (T. D. 19707.)
(72) Bonds issued by guaranty companies in Canada guaranteeing the fidelity of
employees, individuals, or corporations in the United States. (T. D. 19738.)
(73) When a bond is said to be issued— Whenever a corporation issues a bond and
there accrues to the corporation a benefit or consideration for issuing the same the
bond is subject to taxation. (T. D. 20156.)
(74) Bond of private person secured by mortgage considered in relation to opinion
of the Attorney General and amendment to Schedule A, approved February 28, 1899.
(T. D. 20796.)
(75) Where fidelity or guaranty companies become sureties on bonds, tax is due and
payable whenever the premiums are paid. — ^Method of paying tax. — ^Tax on renewal
of bonds. (T.D. 21666.)
(76) The conveyance used under the statutes of the State of Georgia in cases where
the payment of a debt is secured by pledging of real estate is taxable under the para-
graph in Schedule A relating to mortgage or pledge. — The ''bond to reoonvey" is
subject to a tax of 50 cents. (T. D. 21667.)
(77) A bond filed by order of court to obtain a decree or order for the sale of real
estate is a bond given in a legal proceeding and is exempt from tax.
(78) Bonds given by public officers, such as sheriffs, clerks, registers or recorders of
deeds, treasurers of counties, cities, or towns, or other public officers of like character,
are required to be stamped.
(79) Mere agreements to build houses are not taxable, but if bonds are included tat
the faithful performance of work or contracts, they are held to be subject to tax as
bonds.
(80) Bonds issued by guaranty companies in (Canada guaranteeing the fidelity of
employees, of individuals, or corporations in the United States, executed and de-
livered in (Canada, are not taxable, but if they are not valid imtil countersigned or
delivered by the agent in the United States, they should be stamped.
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^1) Marriage bond requires a stamp of 50 cents.
(82) Bonds ''required in legal proceedings" are exempt from stamp tax.
0BBTIFICATB8.
Certificate of profits, or any certificate or memorandum showing an interest in the
property or accumulations of any association, company, or corporation, and on all
trauders thereof, on each |100 of face value or fraction thereof, 2 cents.
Certificate: Anv certificate of damage, or otherwise, and all other certificates or
documents issued by any port warden, marine surveyor, or other person acting as
such, 25 cents. ,
Certificate of any description required by law not otherwise specified in this act,
10 cents.
(88) Liability for recording or registering documents required by law to be stamped
uniesB sumps are aifixed and canceled. (T. D. 19681.)
(84) Certain certificates made by national banking associations not liable. (T. D.
19698.)
(85) Stamping certificates of damage to vessels, 25-cent stamp required on originals
but none on copies. (T. D. 19706.)
(86) Letters of administration and other probate papers, certificates of sale for un-
paid taxes, and certificates of redemption, no stamp required. (T. D. 19837.)
(87) Teachers' certificates issued by State or county officers do not require a stamp —
Certificates required by law, issued by State officers at request of private persons,
solely for private use, require a stamp. (T. D. 19883.)
(88) Certificates of inspection of steam vessels and all copies thereof are exempt
&om taxation. (T. D. 20387.)
(89) Certificates of authority issued to insurance agents by State officers are subject
to taxation, and the rate imposed is 10 cents on each certificate. (T. D. 20551.)
(90) Certificates as to use of alcohol withdrawn from bond for scientific purposes
under section 3297, Revised Statutes, held to be not subject to stamp tax under act
of June 13, 1898. (T. D. 20980.)
(91) Certificates attached to depositions to be used in l^^al proceedings not taxable.
(T. D. 9.)
Following rulings are taken from supplement to Internal Revenue Circidar No.
503, dated August 16, 1898:
(92) Certificates required by law issued by any department or officer of the Gov-
ernment at the request of private persons, solely for private use, should be stamped.
The stamp should be furnished by the person applying for the instrument and for
whose use and benefit the same is issued, and should be affixed before the document
is delivered.
(93) Certificates of officers of the United States given in the discharge of official
functions necessary in carrying on the machinery of the Government are exempt.
(94) Certificates Issued by an officer of the State, in the interest of the State, are not
liable to tax.
(95) Any documents, the stamping of which would make it necessary that the
State shoidd furnish and affix the stamp, are held to be exempt from the stamp tax.
(96) Return of birth, certificate of death, and certificates of the r^istrar as to the
facts declared concerning birth, marriage, and death are none of them held to be sub-
ject to the stamp tax imposed upon certificates, in view of the fact that these certifi-
cates are given in pursuance of State laws for public purposes.
(97) Certificates issued by the health officer of New York, under State statute,
relative to the employment of children, are exempt, being issued in the discharge of
a duty connected with the operations of the Government.
(98) A marriage certificate, to be returned to any officer of a State, county, city,
or town, to constitute part of a public record, requires no stamp. A marriage certifi-
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cate issued by the offidating cleigyxoan at magiitete and given to the paiCiai, if
required by law, must be stamped at the rate oi 10 owts.
(99) A teacher's certificate issued by a county superintendent of public instruc-
tion or other officer of State, county, or municipality comes within the exemption
provided by section 17 of the act, and does not require a stamp. These certificates,
given under regulations adopted in connection with public schools, are held to be lor
governmental purposes rather than lor private use.
(100) A mercantile ticense or liquor dealer's license, being a certificate required by
the laws of a State or ordinance of a city in the exercise of the functions governmental,
taxing, or municipal of the State or ovporation, comes within the exemption.
(101) Inspectors and weighers of grain who give certificates under State laws are not
required to stamp such certificates. They are exempt under section 17.
(102) No stamp is required upon certificates of the sufficiency of sureties upon bonds.
(103) A stamp is required on a certificate of incorporation.
(104) The certificate of a clerk of court to the qualifications of a notary public, or
justice of the peace, is held to be a certificate requiring a stamp.
(105) An architect's certificate requires no stamp, unless, by an indorsement, it
becomes an order for the payment of money.
(106) A certificate of acknowledgement to a deed where the consideration of the deed
is 1100 or less, or to a mortgage where the consideration is |1,000 or less, does not require
a stamp. (See also No. 119.)
(107) Certificates issued at tax sale or certificate of redemption from tax sale do not
require stamps.
(108) Certificate of ' ' proqf of loss " for use of an insurance company, beinga statement
made as to the ^ta and circumstances attending a fire, is not a certificate requiring a
stamp.
(109) Certificates required by law, which are made by court officers under the direc-
tion and authority of the court, and which are necessary to give proper effect to the
court proceediDgB, are exempt.
(110) Court processes, such as summonses, writs of attachment, subpoenas, warrants,
orders of court, etc., are not required to be stamped.
(111) Certificates of protest of every note, bill of exchange, etc., whether protested
by a notary public or by any other officer duly authorized by law, must be stamped.
Rulings from Circular No. 603, revised November 14, 1898:
(112) *' Certificates of any description required by law not otherwise specified in
this act, 10 cents. " The first requirement necessary to subject any given certificate
thus generally described to tax is that it shall be one which is required to be given by
law, national, State, or municipal. All such are taxable, except those coming within
the exemption of section 17— that is to say, those which are given strictly in the exer-
cise of the functions — governmental, taxing, or municipal — of the State or corporation.
(113) Certificates given by an officer, not for a public or governmental purpose, but
for private interests and use, are liable to the tax if they are given in obedience to any
law which requires them to be given when called for.
(114) A certificate of search showing that the dockets or records of a court have been
searched, and show either that Hens exist or do not exist as to property, or that judg-
ments are recorded or are not recorded, and also certificates of search to ascertain
whether or not titles are good, whether taxes have been paid, and other certificates
of this character are not such as are requured in the general discharge of governmental
functions on the part of the officers giving them, but are such as are needed for private
use and private interests, and are, therefore, subject to the tax, as being required by
law to be given when called for.
(115) If the act performed, or the certificate issued by the officer is in the discharge
of an official function necessary in operating the general machinery of the Government,
it is exempt.
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(116) Certificates of acknowledgment of deeds and mortgages are not required to be
stamped. The memorandum on the back of a deed or mortgage, made by the register
or recorder, that the instrument has been placed upon record, is not subject to taxa-
tion. It is not a certificate such as is contemplated by the law. It is a brief note on
the back of the deed or mortgage citing date of filing and date and place of record.
(117) Certificates of birth, marriage, and death, given in ptirsuance of the laws of
the State requiring the collection and registration of vital statistics as a basis for the
administration of public health laws, come within the exemption of section 17. Such
certificates, however, when issued to private persons for private use, are subject to the
10-cent stamp tax.
CONTRACTS.
Contract: Broker's note, or memorandum of sale of any goods or merchandise,
stocks, bonds, exchange, notes of hand, real estate, or property of any kind or de-
scription issued b3r brokers or persons acting as such, for each note or memorandum
of sale, not otherwise provideafor in this act, 10 cents.
Following rulings from Circular No. 503, dated November 14, 1898:
(118) The original note or memorandum of sale is alone subject to the tax of 10
cents when made by a broker or one acting as such, and the tax in payable by said
broker or one acting as such; the duplicate or the copy of the original memorandum
of sale is not taxed.
(119) A mere memorandum accompanying an offer to purchase is subject to the
tax only provided the offer is accepted, and should be stamped by the broker on the
acceptance of the offer.
(120) A statement of account showing the receipts and disbursements in connection
with a sale, and not being the contract of sale, does not require a stamp.
(121) A broker's memorandum of sale of promissory notes (''notes of hand") re-
quires the 10-cent stamp.
CONVETANCBS.
Conveyance: Deed, instrument, or writing, whereby any lands, tenements, or
other realty sold shall be granted, assigned, transferred, or otherwise conve]^ed to,
or vested in, the purchaser or purchasers, or any other person or persons, by ms, her,
or their direction, when the consideration or value of the interest or property con-
veyed, exclusive of the value of any lien or encumbrance thereon, exceeds $100 and
does not exceed $500, 50 cents; and for each additional $500 or fractional part thereof
in excess of $500, 50 cents: Provided^ That nothing contained in this paragraph shall
be so construed as to impose a tax upon any instrument or writing given to secure
a debt.
Note. — ^The act of June 13, 1898, taxed conveyances upon the whole value of the
consideration, while the act of October 22, 1914, taxes such instruments on the value
exclusive of the value of any lien or incumbrance thereon.
(122) Beferee's deed. Decision of New York Supreme Court. (Loring v. Chase,
Vol. 1, Treas. Dec. (1899), No. 20794.)
(123) A conveyance of realty by a master commissioner must have necessary stamps
to be receivable for record. (Farmers' Loan and Trust Co. v. Council Bluffs Gas and
Electric Light Co. (1898), 90 Fed., 806. Vol. 1, Treas. Dec. (1899), No. 20952.)
(124) Taxation of conveyances of realty sold subject to mortgage. Decision of
Judge Taft in United States Circuit Court for Southern District of Ohio considered.
(Vol. 1, Treas. Dec. (1899), No. 21314.)
(125) Escrow deeds are not subject to taxation until final delivery. (Vol. 2, Treas.
Dec. (1898), No. 20096.)
(126) A contract for deed used in selling real estate is not subject to stamp tax,
(Vol. 2, Treas. Dec. (1898), No. 20065.)
27776**— VOL 16—14 13
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(127) Beleaaes of mortgiigeB and deeds of trust opeiatiiig as mortgages are not sub-
ject to taxation, no matter in what form they are executed. (Vol. 2, Treas. Dec.
(1898), No. 20440.)
(128) Deeds of masters in chancery are required to be stamped. (Vol. 2, Treas.
Dec. (1898), No. 20311.)
(129) Warranty deed with vendor's lien taxed as a conveyance of land. No mort-
gage lax imposed thereon. (Vol. 2, Trees. Dec. (1898), No. 20320.
(130) When a partition deed is operative in defining boundary lines or in showing
by location each tenant in common's interest, no tax accrues. (Vol. 1, Treas. Dec.
(1899), No. 20792.)
(131) A deed or mortgage executed and delivered prior to July 1, 1898, is subject
to stamp tax when offered for registration after that date in States where, by State
law, registration is necessary to pass title or establish valid lien. (Vol. 1, Treaa.
Dec. (1899), No. 20838.)
(132) Conveyance of a mine located on unpatented land is subject to taxation.
(Vol. 1, Treas. Dec. (1899), No. 20986.)
(133) Decision construing the clause in Schedule A relative to stamps on con-
veyances. United States Circuit Court, Western District of Missouri. (Vol. 3, Treas.
Dec. (1900), Int. Rev. No. 51.)
(134) Deeds of conveyance executed by and between tenants in common not
taxable. Deeds of conveyance executed by and between joint tenants taxable.
(Vol. 1, Treas. Dec. (1899), No. 21283.)
(135) Conveyance of realty to trustees or other persons without a valuable consideri-
tion not taxable. (Vol. 3, Treas. Dec. (1900), Int Rev. No. 52; Circular 555, Mar.
9, 1900.)
(136) A deed of conveyance conveying real estate that lies in countries that are not
United States territory is not subject to taxation, though the grantor and grantee may
both be citizens and residents of the United States. (Vol. 2, Treas. Dec. (1899),
No. 21562.)
(137) Deeds that are simply confirmatory and do not vest title not already vested
are exempt from tax; same as to deeds of partition. (Circular No. 503, 2d revision.
Compilation of decisions for year 1899, p. 293.)
(138) If a deed does not grant, assign, transfer, or convey to the purchaser any lands^
tenements, or other realty, but only the rig^t to burial, to erect monuments, etc.,
it does not require a stamp. (T. D. 19838.)
(139) The words of purchase in the paragraph of the law relating to stamps on con-
veyances include all changes of title except those occurring by descent or operation
of law. (T.D. 20195.)
Modified by circular 555 of March 9, 1900. Only those where a valuable considera-
tion, capable of estimation in money value, passes.
(140) Quitclaim deed taxable according to value of the proi>erty interest conveyed.
(T. D. 20232.)
(141) Contracts for sale of land taxable if they vest title; if provision is made for
future delivery of deed, they are not taxable. (T. D. 20310.)
(142) Ground-rent deed incorporated in the following ruling taxable as a con-
veyance and not as a lease. (T. D. 21537.)
OUBTOMHOUSB BNTBIB8.
Entry of any eoods, wares, or merchandise at any customhouse, either for con-
sumption or warehousing, not exceeding $100 in value^ 25 cents; exceeding $100 and
not exceeding |500 in value, 50 cents; exceeding $500 in value, $1.
Entry for the withdrawal of any goods or merchandise from customs bonded ware-
house, 50 cents.
(143.) Stamps on customhouse entries, bonds, etc. (T. D. 19605.)
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INSURANCE — MARINE, FIRE, LIGHTNING, ETC.
Insurance: Each policy of insurance or other infltrument, by whatever name the
eame shall be called, by which insurance shall be made or renewed upon property of
any description (incmding rents or profits), whether against peril by sea or on inland
waters, or by fire or lightning, or other peril, made by any person, association, or cor-
poration, upon the amount of premium charged, one-halt of 1 cent on each dollar or
rractional part thereof: Proviaed, That purely cooperative or mutual fire insurance
companies or associations carried on by the members thereof solely for the protection
of their own property and not for profit shall be exempted from the tax herein pro-
vided: And provided further, That policies of reinsurance shall be exempt from the
tax herein imposed by this paragraph.
(144) Tax on insurance policies issued by foreign insurance companies having
agencies in the United States. (Vol. 2, Treas. Dec. (1898), No. 20034.)
(145) Fire insurance policy, when assigned or transferred, taxed in proportion to
the unearned premium. (Vol. 2, Treas. Dec. (1898), No. 20068.)
(146) Policies of insurance (marine) issued by foreign companies having no estab-
lished agendes in the United States are nevertheless subject to the stamp tax when
obtained by or through insurance brokers residing in this country. (Vol. 2, Treas.
Dec. (1898), No. 20259.)
(147) Stamps must be affixed to premium notes as well as to policies. (T. D. 19620.)
(148) Ruling as to mutual fire insurance companies — In what cases exemption
applies. (T. D. 19651.)
(149) Policies of mutual insurance companies, when taxable and when exempt —
When the receipts of the company are invested and profit accrues the policies are
subject to taxation. (T. D. 20020.)
INSURANCE — CASUALTY, FIDBLrTY, AND GUARANTEE.
Each policy of insurance, or bond or obligation of the nature of indemnity for loss,
damage, or Liability issued, or executed, or renewed by any person, association, com-
pany, or corporation, transacting the business of fidenty, employer's liabilitv, plate
glass, steam Doiler, bui^lary, elevator, automatic sprinkler, or other brancn of in-
surance (except life, personal accident, and health insurance, and insurance described
and taxed or exempted in the preceding paragraph and exceptinp^ also workmen's
compensation insurance carried on bv the meinoers thereof solely tor their own pro-
tection and not for profit), and each bond undertaking or recognizance, conditioned
for the performance of the duties of any office or position, or for the doing or not doing
of anything therein specified, or other obligation of the nature of indemnity, and each
contract or obligation guaranteeing the validity or legality of bonds or other obliga-
tions issued by any State, county, municipal, or other public body or organization,
or guaranteeing titles to real estate or mercantile credits executed or guaranteed by
any liability, fidelity, guarantee, or surety company upon the amount of premium
char^, one-half of 1 cent on each dollar or fractional part thereof: Provided^ That
policies of reinsurance shall be exempt from the tax herein imposed by this paragraph.
(150) When the policies should be stamped as policies of insurance and not as
bonds. (T. D. 20781.)
(151) Bonds of indemnity, and fidelity and guaranty insurance. (Vol. 3, Treas.
Dec. (1900), Int. Rev. No. 15.)
PASSAGE TICKETS.
Passage ticket, for each passenger, sold in the United States for passage by any
vessel to a foreign port or place, ii costing not exceeding $30, $1 : costing more than
$30 and not exceeding $60, $3; costing more than $60, $6: Provideaf That such passage
tickets, costing $10 or less, shall be exempt frOm taxation.
(152) Bevocation of ruling that tickets issued in Canada for passage on a vessel
sailing from a United States port are not subject to stamp tax. (Vol. 2, Treas. Dec.
(1898), No. 20004.) »
1 This dedaion not applicable to new law in view of changes from act of Jane 13, 1888.
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(163) Membera of foreign diplomatic corps are not required to pay tax on paasage
tickets by veseel from a port in the United States to a foreign port. (Vol. 2, Treas.
Dec. (1B98), No. 20196.)
(154) If one ticket only is issued, though it contains several names, only one stamp
tax required. Circular 503, revised November 14, 1898.^
FOWEB OF ATTOBNBT OB FBOZT.
Power of attorney or proxy for voting at any election for officers of an^ incoqxmted
company or association, except religious, charitable, or literary societies, or pubHc
cemeteries, 10 cents.
Power of attorney to sell and convey real estate, or to rent or lease the same, to
receive or collect rent, to sell or transfer any stock, bonds, scrip, or for the collection of
any dividends or interest thereon, or to perform any and ail other acts not herein-
before specified, 25 cents: Providedy That no stamps shall be required upon any papen
necessary to be used for the collection of claims nrom the United States for pensions,
back pay, bounty, or for property lost in the military or naval service.
(156) An instrument authorizing the secretary to transfer stock on the books of
the company held not to be taxable as a power of attorney. (Vol. 2, Treas. Dec.
(1899). No. 21467.)
(156) An instrument appointing an attorney in fact to transfer stock on the books of
the company requires to be stamped as a power of attorney, but an instrument auth(»r-
izing the secretary to make the transfer is held not to be a power of attorney. (Vol,
2, Treas. Dec. (1899), No. 21563.)
(167) Proxies — Contracts — Receipts — Sales of certificates of stock — ^Powen of
attoniey, etc. (T. D. 19700.)
(168) Where judgment notes, so called, contain a clause authorizing any attorney
at law to confess judgment in favor of the holder of the note, such authorization is held
to be a power of attorney, and taxable as such, in addition to the tax required on the
judgment note as a promissory note. (dr. No. 503, revised November 14, 1898.)
(150) Powers of attorney to sell or transfer (government bonds are taxable. (Cii.
No. 503, revised November 14, 1898.)
PBOTESTS.
Protests: Upon the protest of every note, bill of exchange, acceptance, check, or
draft or any marine protest, whether protested by a notary public or by any otner
officer who may be authorized by the law of any State or States to nu^e such protest,
25 cents.
No rulings found.
BEBTHS AND SBATS IN 8LBEFINO OB PABLOB CABS.
Every seat sold in a palace or parlor car and every berth sold in a sleeping car, 1 cent
to be paid by the company seUing the same.
(T. D. 2052.)
Emergency revenue law — Stamp tax — Chewing gum.
The tax on chewing gum is based on the retail value, whether sold in small packages
or in bulk, on and after December 1, 1914. The article must be retailed from
8tamx)ed packages, whether sold over the counter or by means of a slot machine.
Treasubt Depabtment,
Ofeiob of Commissiokeb of Intbbnal Revenue,
Washington, D. C, November 5, 1914-
GENTLEiiEN: YouT letter dated the 2d instant, in which you make
aeveral inquiries relative to the stamp tax imposed on chewing gum
as provided in the act of October 22, 1914, has been received.
1 This decision not applicable to new law in view of changes from act of June 13, 1808.
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You state that you manufacture your products in several forms,
and generally sell in bulk, in all manner of quantities, and at prices
wiiich vary considerably, such prices being based lai^ely on the
quantity sold, and that your goods are retailed over the counter and
by means of slot machines. Also, that one form of gum produced
and put out by you can be sold by the dealer from two to four pieces
for a penny. TWiis particular form of gum you state is sold generally
in barrel lots.
In reply, you are informed that the act of October 22, 1914, imposes
on you as manufacturer the duty of stamping your product, on and
after December 1, 1914, in whatever manner it may be put up, at
the rate of 4 cents for each $1 of its actual retail value. If the con-
tents of a package should exceed $1 and be less than $2 in value, it
should be stamped 8 cents, and similarly larger quantities in multi-
ples of the initial tax. The law does not provide for stamping chew-
ing gum valued at retail at less than $1 at any other rate than 4 cents.
Chewing gum may be sold at retail in small packages either over
the counter or by means of a slot machine without the same being
stamped, provided it is sold from the original stamped packages.
The law requires the manufacturer to stamp his product on a basis
of its actual retail value. You state you can not control this prioe.
Nevertheless, it is believed that no one is so competent as the manu-
facturer to determine the retail price or value of his products, and
he will be held strictly responsible for due compliance with the
statute. This retail price or value is a price such as a single package
or other small quantity would be sold at to consumers at the place of
manufacture.
In reply to your inquiry as to the meaning of section 21 of the act,
you are hiformed that the provision that ''every person, except as
otherwise provided in this act, who offers or exposes for sale any
article or thing provided for in said Schedule B * ''^ ''^ shall be
deemed the manufacturer thereof, and shall be subject to all the
taxes, liabilities, and penalties, etc.," refers to wholesalers and re-
tailers who may have taxable goods on hand December 1, when the
several articles enumerated in Schedule B must be stamped as pro-
vided therein. On and after December 1, the manufacturer is re-
quired to stamp his products before delivery on a sale; and such
goods, if in possession of any other person, firm, or corporation on
said date, must be stamped by such person, firm, or corporation, or,
failing so to do, they will incur the liabilities and penalties denoimced
by the act.
RespeottuUy, W. H. Osboen,
CommissioTher of Internal Revenue.
Messrs. .
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(T. D. 2053.)
Emergency revenue law — Wines, etc.
Relative to affixing and canceling stamps on containers of wines, cordials, liqueun^
and similar compounds.
Tebasuey Depabthekt,
Office of Cokmissioneb of Intebkal Revenue,
Washington, D. C, November IS, 1914.
Sib: Replying to your letter of the 9th instant, you are informed
that the act of Congress approved October 22, 1914, imposing taxes
upon wines, liqueurs, and cordials, is silent as to where such stamps
must be affixed to the bottles or other containers.' It is held, there-
fore, that these stamps must be affixed conspicuously to the bottles
or other actual containers of the wines and cordials and must be
canceled by the person affixing same, and that the initials of the
person, as well as the date when affixed, must be written or stamped
indelibly upon the adhesive stamp. When the bottle or other con-
tainer to which the stamp is affixed is empty, the person emptying
same must completely efface and obliterate the adhesive stamp or
or stamps, as the case may be.
In reply to your second inquiry, this office is unable to state how
bottles or other containers from which sales are made may be kept
constantly filled and at the same time be stamped and the stamps be
duly canceled in conformity with the law. Bottles from which wines
and cordials are sold to consumers for immediate consumption must
be stamped with properly canceled stamps, and when* empty the
stamps should be, as above stated, completely effaced and obliterated
and new ones substituted therefor upon each refilling. It would
seem, therefore, to be necessary to completely empty the bottles in
order to comply with the law.
RespectfuUy, ^^ Welliamb, Jr.,
Ading Commissioner of Internal Revenue,
Mr. .
(T. D. 2054.)
Emergency revenue law — Certificates of deposit.
Certificates of deposit issued by banks not taxable under the act of Octob^ 22, 1914.
Treasury Department,
Office of Commissioner op Internal Revenue,
Washin^gton, Z>. C, November I4, 1914-
Sir: In reply to your letter of the 11th instant, you are informed
• that imder the internal-revenue act of October 22, 1914, stamps are
not required to be affixed to certificates of deposit issued by banks.
Respectfully,
RoBT. WnxiAMs, Jr.,
Acting Commissioner of Internal Beoenue.
Mr. .
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(T. D. 2056.)
EmergeTicy revenue law — Discount on purchases of documentary stamps.
Postmasters and others authorized to be furnished stamps without prepayment not
allowed discount unless stamps are paid for by them at the time.
Tbeasuet Department,
Office of Commissiokeb of Internal Revenue.
Washington, D. C, November 16, 1914*
To collectors of internal revenue:
You are inf onned that postmasters who buy from you and pay for
the stamps issued under the internal-revenue act of October 22, 1914,
are allowed a discoxmt of 1 per cent on purchases amounting to $100
or more. If they are furnished with the stamps under bond without
prepayment therefor they are not allowed the 1 per cent discount,
RoBT. Williams, Jr.,
Actin{i Commissioner of Internal Revenue.
(T. D. 2056.)
Em£rgency revenue lam — Power of attorney to transfer stock.
An instrument appointing an attorney in fact to transfer stock on the books of the
company requires it to be stamped as a power of attorney, but an instrument author-
izing the secretary to make the transfer is held not to be a power of attorney.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. 0,, November 14, 1914-
Sib: This office is in receipt of your letter of the 9th instant, asking
for a ruling under Schedule A of the act of October 22, 1914. You
make the following inquiry:
1. Does the tax of 25 cents imposed in Schedule A on powers of attorney to sell or
transfer stock apply to the ordinary formal power of attorney to transfer on the books?
In other words, is the sale and the transfer of the stock itself taxed separately?
If this so-called power of attorney on the back of the certificate
simply authorizes the secretary of the company to transfer the same
on the books of the company, it is held not to be a power of attorney
within the meaning of the internal-revenue law. In that case the
secretary of the corporation can not be said to be the agent or attorney
for the transfer of stock, as the effect of the instrument is only to give
the secretary authority to do an act which he is required to do by the
by-laws of the oi^anization when properly authorized, just as a
cashier of a bank is required to pay a check when the check is properly
signed and presented for payment. In that case, therefore, this
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instrument would only be taxable as a transfer of stock. An instru-
ment appointing an attorney in fact to transfer stock on the books
of the company will require stamp as a power of attorney.
Respectfully;
ROBT. WHXIAMS; Jr.,
Acting Commissioner of Internal Revenue.
Mr. : .
(T. D. 2057.)
Annual inventories.
Annual inventorieB to be made by cigar and tobacco manufacturan and verified by
collectors and their deputies.
Tebasubt Depabtment,
Office of Commissioner of Internal Revenue,
Washington, D. C, November 17, 1914.
To collectors of internal revenue:
Every manufacturer of tobacco or snuff and every manufacturer of
cigars or cigarettes shall make a true inventory of the stock of tobacco
materials, stamped and unstamped manufactured tobacco and snuff,
or cigars and cigarettes, and attached and unattached internal-revenue
stamps on hand in the factory on the 1st day of January of each year,
and shall verify the same by his own oath, as provided in sections
3358 and 3390 of the Revised Statutes, respectively. These statutes
also require that the collector (or his deputy) shall make personal
examination of the stock sufficient to satisfy himself as to the cor-
rectness of the inventory, and shall verify the fact of such examina-
tion by oath to be indorsed on the inventory.
These inventories are important elements in settlement of manu-
facturers' accounts for the year or period. It is absolutely essential
that the accuracy of an inventory shall not be questioned by a manu-
facturer when his accounts show deficiencies and he is, in consequence,
called upon to show cause f^gainst assessment for omitted tax. Each
manufacturer shall see to it that a proper inventory ofhisfadory is made^
for the reason that such inventory having been sworn to hy the ma,nufacr
iurer and verified under oath hy a deputy collector , no claim of failure to
indude certain tobacco, mjode in response to a deficiency notice, wiU be
entertained. Therefore the following instructions in regard to making
the required inventory must be observed:
(a) All tobacco material within the metes and bounds of the
bonded factory premises, as described on Form 41 ^ posted in cigar
factory and on Form 36 of tobacco factory shall be segregated into
classes corresponding strictly with the headings provided therefor in
Fonn 70a and Form 70b.
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(h) Each class of tobacco shall be weighed separately.
(e) Tobacco dust, sif tings, sweepings, and waate which has accu-
mulated in manufactuxing shall not be included under any class of
tobacco except under the head of ''Waste/' which is provided for in
inventory Form 70b. The quantity of each of these by-products
may there be shown separately.
{d) Inventory must include all unstemmed leaf tobacco debited on
manufacturers' books and returns which is stored off the bonded fac-
tory premises for which outside storage permission has been granted.
(e) To enable the deputy collectdr to verify the inventory, a list
should be made of each unopened hogshead, case, or bale, or other
package of tobacco, with sufficient description for identification by
the deputy, of all broken packages or loose tobacco within the factory,
and of all unstemmed tobacco stored off the bonded premises, shall be
made on the back of the inventory form or preserved on separate
sheets of the same size and attached thereto.
(f) An accurate record should also be kept of the quantity of each
class of tobacco (as inventoried) used in production between the time
inventory is taken and the time the deputy calls to verify the same.
Collectors will instruct their deputies so to arrange their routes as
to make these verifications at the earliest practicable date after Jan-*
uary 1 next. In verifying an inventory each deputy collector —
1 . Will see that each class of tobacco has been properly inventoried
and instructions above observed.
2. Will determine from the quantities of each different kind of
tobacco purchased, sold, and used between the date inventory was
taken and the time of his verification as to the correctness of the
inventory, and will require any necessary amendments before the
manufacturer makes oath to same before him.
"Deficiencies found by examining officers" should be immediately
reported to the collector, and shall be treated in accordance with the
instructions under that head on page 60 of Regulations No. 8, revised
July 1, 1910.
Upon receipt of these inventories, properly verified, collectors will
prepare their abstracts on loose leaves Record 11 and Form 146 of the
accounts of cigar and tobacco manufacturers in their districts for the
year or period ending December 31, 1914, observing in such prepara-
tion instructions in T. D. 1726 and T-Mim-980, as modified by
T-Mim-1006, and Treasury Decision No. 1479 and T-Mim-993,
respectively, and will forward said accounts to this office as fast as
they are completed, not later than 90 days from the 1st day of Jan-
uary, 1 91 5. An account showing a deficiency should not be held until
the tax on same is collected, but forwarded at once, after having
made sure it is correctly stated. Formal notice to show cause will
then be forwarded for service on the manufacturer.
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. Collectors are hereby instructed to cause a copy of this circular,
together with the necessary inventory blank, to be delivered to each
manufacturer of tobacco, snuff, cigars, or cigarettes registered within
their respective districts, not later than the 15th day of Decembw
next, for the taking of the required inventories on January 1, 1915.
RoBT. Williams, Jr.,
Acting CommiaHoner cf Internal Beven/ue.
(T. D. 2058.)
Emergency revenue law — Telegraph and tdephone messages.
Law and instructions relative to the tax imposed on telegraph and telephone messages
by the act of October 22, 1914, effective December 1, 1914.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, November IS, 1914.
The following provisions, efiFectdve December 1, 1914, relating to
telegraph and telephone messages, are contained in Schedule A of the
act *'To increase the internal revenue, and for other purposes,"
approved October 22, 1914:
Telegraph and telephone mesK^^es: It shall be the duty of every peiwn, firm, or
corporation owning or operating any telegraph or telephone line or lines to make,
within thirty days after the expiration of each month, a sworn statement to the collector
of internal revenue in each of their respective districts, stating the number of dis-
patches, messages, or conversations originated at each of their respective exchanges,
toll stations, or offices, and transmitted thence over their lines during the preceding
month for which a charge of 15cent8 or more was imposed, and for each of such messages
or conversations the said person, firm, or corporation shall collect from the person
paying for the message or conversation a tax of 1 cent in addition to the regular chaiges
for the message or conversation, which tax the said person, firm, or corporation shall
in turn pay to the said collector of internal revenue of their respective districts:
Provided, That only one payment of said tax shall be required, notwithstanding the
lines of one or more persons, firms, or corporations shall be used for the transmission
of each of said messages or conversations: Provided furiher, That the messages or dis-
patches of the officers and employees of any telegraph or telephone company concern-
ing the affairs and service of the company, and like messages or dispatches of the
officials and employees of railroad companies sent over the wires on their respective
railroads, shall be exempt from this requirement: Atid provided Jurther, That messages
of of^cetB and employees of the Government on official business shall be exempt trom
the taxes herein imposed upon telegraphic and telephonic messages.
INSTRUCTIONS.
1. A company shall make one report and one return for the com-
pany as a whole and not for each of its exchanges and toll stations
separately. Such report and return shall be made to the collector
of internal revenue of the district in which the company's principal
office is located.
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2. Every company shall include in its report all taxable messages
originated by it without regard to the ownership of toll lines used
in transmitting those messages. Telephone companies receiving mes-
sages to be retransmitted over the lines of a telegraph company or
telegraph companies receiving messages to be retransmitted over the
line of a telephone company will be regarded as the point where such
messages originate. In such cases the company retransmitting such
messages will not be required to include the same in its monthly
return. Where, however, a message sent over a telephone line is
received directly from the sender, the company receiving and trans-
mitting the same will, in such case, be regarded as the point of origin,
and wiU include all such taxable messages in its monthly return. A
reversed message shall be considered as originating at the point of
collection.
3. Reports and returns may be made by a company for its fiscal
month or billing period to be filed within 30 days after expiration of
fiscal month, provided full return is made for the period dining which
the tax is to be collected.
4. Additions may be made any month for errors on the previous
month's reports and returns. Reductions covering items reported
in excess in previous months not allowable. In such cases amended
returns may be filed before assessment is made, otherwise claim for
abatement or refund, as the case may be, should be filed.
5. Messages originating at automatic telephone stations, for each
of which a charge of 15 cents or more was made, are subject to tax,
and companies owning or operating such stations must include all
such messages in their monthly returns. The method of collecting
the tax from the senders of such messages is a matter wholly within
the province of the companies receiving and transmitting the mes-
sages.
6. All overtime telephone messages, where the initial rate is less
than 15 cents, but the total charge, on account of the overtime,
brings the charge to 15 cents or more, are subject to tax.
7. Messages transmitted over private leased circuits and relating
exclusively to the business for which the circuit was leased are held
to be exempt from tax. Where, however, any such leased circuit is
used for the transmission of messages other than above stated, return
for all such messages for which a charge of 15 cents or more would
ordinarily be made must be rendered monthly by the lessee.
8. Messages or dispatches of oflicers and employees of the company
concerning the affairs and service of the company, and like messages
or dispatches of officials and employees of railroad companies sent
over the wires on their respective railroads, are exempt from tax.
Franked messages, if of a private character, for which a charge of
15 cents or more would otherwise be charged, do not come within
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the exemption above referred to, and should be mcluded in the return
made.
9. Messages of officers and employees of the United States Groveom-
ment on official business and like messages of State officials are ex-
empt from tax.
ROBT. WiLLIAKS, Jr.,
Acting ChmmisMner of Internal Bevennu.
Approved:
W. G. MoAdoo,
Secretary of the Treasury,
(T. D. 2059.)
Emergency revenue law — Bills of lading.
It is the duty of the earner to see that the stamp is duly affixed imd canceled when the
bill of lading is issued and delivered to the shipper.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, November 18, lffI4-
Sir: This office is in receipt of your letter of the 14th instant, call-
ing attention to the provision of the internal-revenue act of October
22, 1914, relative to bills of lading.
You inquire whether the whole duty of the railroad company is
performed when it issues such bill of lading or whether it is the duty
of the railroad company not only to issue the bill of lading but to
refuse to accept the shipment imtil the shipper affixes the necessary
internal-revenue sta(mp and cancels it as required by law.
In reply, you are informed that this matter has received consid-
eration, and it is the opinion of this office that it is the duty of the
raUroad company to see that the stamp is duly affixed and canceled
when the biU of lading is issued and delivered to the shipper.
In reply to your other inquiries in regard to messages sent over the
lines on the railroad, you are informed that messages or dispatches
of the officers or employees concerning the affairs and service of the
company sent over the wires on their respective railroads are exempt.
If they do not relate to the business of the company, the exemption
does not apply.
Respectfully,
Robt. Williams, Jr.,
Acting Commissioner of Internal Revenue,
Mr. .
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(T. D. 2060.)
Emergency revenue law — Stamp tax on deeds and mortgages.
Stamp required on bond accompanying a mortgage; stamp not required on certificate
of officer taking acknowledgment of deeds and mortgages.
Tebasuby Department,
Office of C!ommissioneb of Internal Revenue,
Washington, D. G,, November 20, 1914.
Sir: This office has received letters from parties in your district
making inquiries in regard to stamp tax on deeds and mortgages
imder the internal-revenue act of October 22, 1914.
You are informed that a stamp is required upon the bond accom-
panying a mortgage. It comes imder the provision for stamp tax
of 50 cents on all bonds of any description, except such as may be
required in legal proceedings. A stamp is not required upon the
certificate of the officer taking acknowledgment of deeds and
mortgages.
Respectfully,
RoBT. Williams, Jr.,
Acting Commissioner of Internal Revenue.
Mr. .
(T. D. 2061.)
Emergency revenue law — Special taxes — Tobacco dealers and numufae-
turers.
R^^lations and information as to certain requirements of act of October 22, 1914,
together vnHh synopsis of decisions made under the act of June 13, 18d8, which
wiU be given weight in determining similar questions arising under the emezgency
revenue act of October 22, 1914.
Treasury Department,
Office of Commissiokbr of Internal Revenue,
Washington, D. C, November 10, 191^.
The act of October 22, 1914, imposes special taxes as follows:
TOBAOCO DEALERS AND liANUFACTUREHS.
Sec. 4. That on and after November first, nineteen hundred and fourteen, special
taxes on tobacco dealers and manufacturers shaU be and hereby are imposed annually
as follows, the amount of such annual taxes to be computed in all cases on the basis
of the annual sales for the preceding fiscal year:
Dealers in leaf tobacco whose annual sales or transfers do not exceed fifty thousand
pounds shall each pay |6. Dealers in leaf tobacco whose annual sales or transfers
exceed fifty thousand and do not exceed one hundred thousand pounds shall pay $12,
and if their annual sales or transfers exceed one hundred thousand pounds shall pay
$24: Provided, That dealers in leaf tobacco whose annual sales or transfers do not
exceed one thousand pounds shall be exempt from the tax herein imposed on dealers
in leal tobacco.
Dealers in tobacco, not specially provided for in this section, whose annual receipts
from the sale of tobacco exceed $200, shall eac*h pay $4.80 for each store, shop, or other
place in which tobacco in any -form is sold.
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Every person whose biismess it is to sell, .or offer for sale, mamifactared tobacco,
snuff, cigars, or cigarettes shall be regarded as a dealer in tobacco: Provided^ That no
manufacturer of tobacco, snuff, cigars, or cigarettes shall be required to pay a special
tax as a dealer in manufactured tobacco, snuff, cigars, or cigarettes for seUing his own
products at the place of manufacture.
Manufacturers of tobacco whose annual sales do not exceed one hundred thousand
pounds shall each pay $6.
Manufacturers of tobacco whose annual sales exceed one hundred thousand and do
not exceed two hundred thousand pounds shall each pay $12.
Manufacturers of tobacco whose annual sales exceed two hundred thousand and do
not exceed four hundred thousand pounds shall each pay $24.
Manufacturers of tobacco whose annual sales exceed four hundred thousand and do
not exceed one miUion pounds shall each pay $60.
Manufacturers of tobacco whose annual sales exceed one million and do not exceed
five million pounds shall each pay $300.
Manufacturers of tobacco whose annual sales exceed five million and do not exceed
ten million pounds shall each pay $600.
Manufacturers of tobacco whose annual sales exceed ten million and do not exceed
twenty million pounds shall each pay $1,200.
Manufacturers of tobacco whose annual sales exceed twenty miUion pounds shall
each pay $2,496.
Manufacturers of cigars whose annual sales do not exceed one hundred thousand
cigars shall each pay $3.
Manufacturers of cigars whose annual sales exceed one hundred thousand and do not
exceed two hundred thousand cigars shall each pay $6.
Manufacturers of cigars whose annual sales exceed two hundred thousand and do noi
exceed four hundred thousand cigars shall each pay $12.
Manufacturers of cigars whose annual sales exceed f oiur hundred thousand and do
not exceed one million cigars shall each pay $30.
Manufacturers of cigars whose annual sales exceed one million and do not exceed
five million cigars shall each pay $150.
Manufacturers of cigars whose annual sales exceed five million and do not exceed
twenty million cigars shall each pay $600.
Manufacturers of cigars whose annual sales exceed twenty million and do not exceed
forty million cigars shall each pay $1,200.
Manufacturers of cigars whose annual sales exceed forty miUion cigars shall each
pay $2,496.
ikianufacturers of cigarettes whose annual sales do not exceed one million cigarettes
shall each pay $12.
Manufacturers of cigarettes whose annual sales exceed one million and do not exceed
two million cigarettes shall each pay $24.
Manufacturers of cigarettes whose annual sales exceed two million and do not exceed
five million cigarettes shall each pay $60.
Manufacturers of cigarettes whose annual sales exceed five million and do not exceed
ten million cigarettes shall each pay $120.
Manufacturers of cigarettes whose annual sales exceed ten million and do not exceed
fifty million cigarettes shall each pay $600.
Manufacturers of cigarettes whose annual sales exceed fifty million and^do not exceed
one hundred million cigarettes shall each pay $1,200.
Manufacturers of cigarettes whose annual sales exceed one hundred million cigarettes
shall each pay $2,496.
In arriving at the amount of license tax to be paid hereunder, and in the levy and
collection of such tax, each person, firm, or corporation engaged in the manufacture
of cigars, cigarettes (including little cigars), or tobacco shall be considered and deemed
a single manufacturer.
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And every person who carries on any business or occupation for which special taxes
are imposed by this act, without having paid the special tax herein provided, shall,
besides being liable to the payment of such efpecial tax, be deemed guilty of a misde-
meanor, and upon conviction thereof shall pay a fine of not more than |500, or be
imprisoned not more than six months, or both, at the discretion of the court: Pfo-
vided, That the special taxes imposed by this act and payable during the special tax
year ending June 30, 1916, shall be collected and paid proportionately for the period
during which such taxes shall remain in force during said year.
Sbc. 23. That all administrative, special, or stamp provisions of law, including the
law relating to the assessment of taxes, so far as applicable, arejbiereby extended to
and made a part of this act, and every peraon^ firm, company, corporation, or associa-
tion liable to any tax imposed by this ^t, or for the collection thereof, shall keep
such records and render, under oath, such statements and returns, and shall comply
with such regulations as the Commiasioner of Internal Revenue, with the approval
of the Secretary of the Treasury, may from time to time prescribe, and every such
person, firm, company, corporation, or association who evades or attempts to evade
any of the taxes imposed by this act, or shall Ml to truly account for and pay all
taxes collected by them under this act, or any regulations issued thereunder, shall
be subject to a penalty of double the amount of the taxes evaded or attempted to
be evaded or unlawfully withheld, to be assessed and collected as other penalties
incurred imder internal-revenue laws are assessed and collected.
In answer to numerous inquiries, the following information as to
certain requirements of the act of October 22, 1914, is given:
The law provides that each person, firm, or corporation engaged
in the manufacture of cigars, cigarettes (including little cigars), or
tobacco shall be considered and deemed a single manufacturer.
Each manufacturer of cigars therefore is required to pay but one
special tax at the appropriate rate, no matter how man^ factories
are operated under his exclusive ownership and control. Ownership
by one corporation manufacturing cigars, cigarettes, or tobacco of a
part or all of the stock of another corporation, also bonded as a manu-
facturer, is not exclusive ownership or control of the latter, which is
a separate legal entity and must pay a separate special tax.
A corporation which is engaged in the manufacture of cigars and
also of cigarettes or tobacco must pay a separate special tax as
manufacturer of cigars and as manufacturer of cigarettes or as manu-
facturer of tobacco, or both, as the case may be.
For the purposes of calculating the rate of tax under this act, all
tobacco cigarettes, commonly known as '' little cigars, "are rated as
cigarettes.
Where more than one factory or branch is operated by the same
manufacturer, the special tax shall be paid to the collector of the
district where the principal factory or place of business is located,
and the special tax stamp will be posted at such factory or place
of business. The collector issuing the special-tax stamp will also
issue as many certificates that the tax has been duly paid to him
as may be necessary to cover each factory operated by the tax-
payer, and one of such certificates must be posted in a conspicuous
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place at each of such factories. In maldiig return for special tax
the manufacturer will file a sworn statement of production, includ-
ing all factories or branches, for the preceding fiscal year. The
return should state separately the factory number, district, and State
as to each factory operated, the output of each factory, and the
aggregate output. of all factories upon which the special tax is
calculated.
The law provides that the amount of the annual taxes is to be
computed in all cases on the basis of the annual sales of the pre-
ceding fiscal year, and the basis of computation is the total sales
during the year, whether business is conducted during the whole or
only a part of the year.
Dealers or manufacturers who were not engaged in such business
during the preceding fiscal year must procure special-tax stamps
before commencing business. The special-tax stamp purchased at
the commencement of business may be of such grade as, in the
opinion of the dealer or manufacturer, may be required to cover
his business for the fiscal year, but when the limit of sales. allowed
under such stamp is reached, the dealer or manufacturer must pro-
cure a stamp of a higher grade, so that his liability to special tax
on the basis of sales as provided by law wiU at all times be covered.
Peddlers of tobacco, whose aimual receipts exceed $200, are
liable to special tax at the rate of $4.80 per annum. The special-
tax stamp in such cases, like special-tax stamps for dining cars, will
cover sales made in the United States and should be carried by the
peddler on his person, or posted in his wi^on or other conveyance,
if he has one.
Return for register. Form 277, should be made acnd certificate of
registry should be issued only in the case of dealers in leaf tobacco,
including retail dealers in leaf tobacco, whose sales do not exceed
1,000 poimds and who are exempt from special tax.
Dealers in tobacco and dealers in leaf tobacco, including retail
dealers in leaf tobacco claiming exemption from special tax imder
the provisions of this act, will be required to establish same imder
oath.
Attached hereto is published for the guidance and information of
aU concerned a synopsis of decisions made under the act of June
13, 1898, which will be given considerable weight in determining
similar questions arising under the present act.
W. H. OSBOBN,
Gomtmsaioner of Internal Bewnue.
Approved:
W. G. MoApoo,
Secretary of the Treasury.
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(1) A maau&cturer of tobacco or cigazs can not sell at retail at place of manulactuie.
(16 Op. Atty. Gen., 89; 24 Int. Rev. Rec., 227; Crisp v. Proud, 24 iWrf., 340; Ludloff v.
United States, 108 U. S., 176; 29 Int. Rev. Rec., 125.)
(2) Special tax liability of a person buying leaf tobacco exclusively for export by
himself. (T. D. 28.)
(3) Liability to special tax of tobacco dealers and manu&cturers imder the act of
June 13, 1898. (T. D. 138.)
(4) As to the penalty for failure to make return on Form 11 of special taxes incurred
(T. D. 19748.)
(5) Manufacturers can not pack goods of another factory on goods made at their own
factory. Manufacturers selling their own products at place of manu&icture not re-
quired to pay special tax as dealers in tobacco. Manufacturers are not permitted
to pack stamped packages of smoking tobacco or stamped caddies of plug tobacco
between the chime and the head or bottom of such packages. (T. D. 19765.)
(6) Dealers in leaf tobacco who improperly qualify as manufacturers of cigars for the
purpose of dealing in cigar cuttings, and who made no cigars last year, are not liable
to special tax as manufacturers of cigars, but such persons will be required to close
their business as cigar manufacturers and may qualify as manufacturers of tobacco.
(T. D. 19801.)
(7) Dealers in leaf tobacco, and manufacturers of tobacco or cigars, who were not
engaged in business last fiscal year, required on commencing business to pay minimum
rate of special tax, and when sales during the year reach an amount requiring payment
of higher rate, will make return and pay tax at the higher rate. (T. D. 19822.)
(8) Persons who have qualified as manufacturers of tobacco for the sole purpose of
handling and dealing in stems, refuse scraps, cuttings, clippings, and sweeping of
tobacco are required to register and pay the minimum rate of special tax imposed on
manufacturers of tobacco. (T. D. 19844.)
(9) Manufacturers of tobacco, snuff, or cigars may, under special permit, * * *
sell stemmed or unstemmed leaf tobacco to other qualified manufacturers of tobacco,
snuff, or cigars without being required to register and pay special tax as dealers in
(leaf) tobacco. Special permits are only granted when it is ascertained that the manu-
facturer has material on hand which he finds not suitable for his business. (T. D.
19876.)
(10) A farmer who sells and delivers leaf tobacco of his own raising is not required
to make return or pay special tax as dealer in leaf tobacco. (T, D. 19962.)
(11) Auction sales of tobacco in warehouses, or at ''tobacco breaks,'' subject to tax
same as upon sales of *^ any products or merchandise at any exchange or board of trade,
or other similar place.' ■ (T. D. 19972.)
(12) No pro\'ision of law by which a special-tax stamp issued to one person can be
transferred to and made use of by any other person, except in the single instance of
the death of the special-tax payer, expressly provided for by section 3241, Revised
Statutes. (T. D. 20153.)
(13) Where farmer or producer brings product to market and sells it in his own
name through an auctioneer, the sales will come within the scope of a sale made at an
auction house, and stamp tax and memorandum of sale is not required. (T. D. 20236.)
(14) Under existing law the farmer or grower of tobacco has the right to sell tobacco
of his own growth and raising to any person and in any quantity which may be desired,
provided its condition has not been changed in any manner. This is a personal
privilege and can not be delegated by him to another person. The farmer can not
employ another person to travel from place to place to sell and deliver tobacco to con-
sumers, nor has he the right to place the tobacco in the hands of another person to be
sold for him to consumers, but he may place it in the hands of a qualified dealer in
leaf tobacco to be sold on conmiission to other (qualified dealers^ or to manufacturers of
27776"— VOL 16—14 14
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tobacco or dgan, or to persons who buy leaf tobacco in packages for export. (T. D.
20482.)
(15) Warehousemen who sell leaf tobacco on commission are required to pay special
tai^ as leaf tobacco dealers; and if they neither acquire possessbn of, nor right or
title to, leaf tobacco, which they sell on commission as agents for others, they must
also pay special tax as commercial brokers. (T. D. 20603.)
(16) A manufacturer purchasing large quantities of leaf tobacco, exceeding the
demands of his factory, for the purpose of reselling his suiplus to other manufacturers,
must be regarded as engaged in and carrying on the business of a dealer in leaf tobacco,
and will be required to make return and pay erpecial tax as dealer in leaf tobacco at
some place not coimected with the factory. (T. D. 20605.)
(17) Dealers in leaf tobacco who have several warehouses at which they receive
tobacco, and from which the same is delivered to the purchaser, required to pay special
tax at each place. (T. D. 20638.)
(T. D. 2062.)
Emergency reverme law — Stamp taxes.
Stamp tax on bonds and policies of insurance.
Tbeasxjey Department,
Ofpiob of Commissioner of Internal Revenue,
WasUngtanj D. C, November 50, 1914.
Sir: This office is in receipt of your letter of the 19th inst., in
regard to the stamp tax on bonds and poUcies of insurance under
Schedule A, act of October 22, 1914, eflFective December 1. The
ruling of this office is as follows:
The act aforesaid, imder the designation of "bond," specifies that
a bond —
For indemnifying any person or persons, firm, or corporation who shall have become
bound or engaged as surety for the payment of any sum of money, or for the due exe-
cution or performance of the duties of any office or position, and to account for money
received by virtue thereof, and all other bonds of any description, except such as may
be required in legal proceedings, not otherwise provided for in this schedule, 50
cents.
Had Congress made no other provision for the taxation of bonds
except in the language here quoted, every bond, in its broadest term,
would have been subject to but one tax fixed specifically at 50 cents.
Following this, however, and imder the head of *' Insurance," the
law says:
Each policy of insurance, or bond, or obligation of the nature of indemnity for
loss, damage, or liability issued, or executed, or renewed by any person, association,
company, or corporation, transacting the business of fidelity, employer's liability,
* * * or other branch of insurance, * * * and each bond undertaking or
recognizance, conditioned for the performance of the duties of any office or position,
or for the doing or not doing of anything therein specified, or other obligation of the
nature of indemnity, * * * upon the amount of premium chaiged, one-half of 1
cent on each dollar or fractional part thereof.
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There appears to be no ambiguity or difficulty of interpretation or
reconciliation of the two provisions of this act.
First. Every bond of every description and kind, in its broadest
sense and meaning, without regard to its form, where sureties are
added, for indemnifying any person or corporation, government or
otherwise, is subject to the 60 cent tax if the sureties consist of any
person, corporation, or other entity, except ''persons, companies, or
corporations transacting the business of fidelity, etc., insurance."
Second. If the sole surety or sureties upon ''any bond undertaking,
recognizance" of any character, kind or description, "conditioned for
the performance of the duties of any office or position, or for the doing
or not doing of anything therein specified, or other obligation of the
nature of indemnity" is executed or guaranteed by any liability,
fidelity, or guaranty or surety company, the tax upon the amount of
premium charged is one-half of 1 cent on each dollar or fractional
part thereof, and no other tax of any character or kind is required
to be paid upon such bond, undertaking, agreement, or clause made for
the purpose of indemnifying any person. Government, or any other
thing.
This office will not be governed by any interpretation, regulation, or
ruling of construction on this subject made under the similar pro-
visions of the war revenue act of 1898 inconsistent with the above.
Kespectfully,
EoBT. Williams, Jr.,
Acting Commissioner of Internal Revenue.
Mr. .
(T. D. 2063.)
Emergency revenue law — Perfumery ^ cosmetics , etc.
Regulations relative to perfumery, cosmetics, chewing gum, etc., taxable under
Schedule B, act October 22, 1914. .
Tebasuey Depabtment,
Office of Commissioneb of Intebnal Revenue,
Wasltington, D. G., November 9, 1914.
To internal revenue officers and others concerned:
The following are the provisions of law specially applicable to the
articles taxed under schedule B of the act of October 22, 1914,
together with the regulations promulgated under the authority
granted in the act.
Provisions of the Law.
ADHESIVE STAMPS.
Sbo. 5. That on and after the first day of December, nineteen hundred and four-
teen, * * * there shall be levied, collected, and paid, for and in respect to the
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prepai&tions, matten, and Hungs mentioned and described in Schedule B of this
act, manufactured, sold, or removed for sale, the several taxes or sums of money set
do\m in words or figures against the same, req>ectively, or otherwise specified ot set
forth in Schedule B of this act.
Sec. 8. That in any and all cases where an adhesive stamp shall be used for denoting
any tax imposed by this act, except as hereinafter provided, the x>erson using or
affixing the same shall write or stamp thereupon the initials of his name and the date
upon which the same shall be attached or used, so that the same may not again be
used. And if any person shall fraudently make use of an adhesive stamp to denote
any tax imposed by this act without so effectually canceling and obliterating such
stamp, except as before mentioned, he, she, or they shall be deemed guilty of a mis-
demeanor, and upon conviction thereof shall pay a fine of not excee(ting $500, or be
imprisoned not more than six months, or both, at the discretion of the court: Provided f
That instead of cancellation by initials and date, the stamps on the arHdes enumerated
in Schedule B shall be so affixed on the box, bottle^ or package that in opening the same or
using the contents thereof y the said stamp shall be effectually destroyed; and in drfauU
thereof the party making default shall be liable to the same penalty imposed for neglect to
affix said stamp as Jiereinliefore prescribed in this act,
Sbc. 16. That all the provisions of this act relating to dies, stamps, adhesive stamps,
and stamp taxes ehall extend to and include (except where manifestly inapplicable)
all the articles or objects enumerated in Schedule B, subject to stamp tax, and apply
to the provisions in relation thereto.
Sec. 17. That on and after December first, nineteen hundred and fourteen, any
person, firm, company, or corporation that shall make, prei)are, and sell, or remove
for consumption or sale, perfum^y, cosmetics, preparations, compositions, articies^
or things upon which a tax is imposed by this act, as provided lor in Schedule B»
without aflixing thereto an adhesive stamp or label denoting the tax before mentioned
shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine
of not more than $500, or be imprisoned not more than six months, or both, at the
discretion of the court.
Sec 18. That any manufacturer or maker of any of the articles for sale mentioned
in Schedule B, after the same shall have been so made, and the particulars herein-
before required as to stamps have been complied with, or any other person who shall
take off, remove, or detach, or cause, or permit, or suffer to be taken off, or removed
or detached, any stamp, or who shall use any stamp, or any wrapper or cover to which
any stamp is affixed, to cover any other article or commodity than that originally
attained in such wrapper or cover, with such stamp when first used, with the intent
to evade the stamp duties, shall for every such article, respectively, in respect of
which any such offense shall be conmiitted, be deemed guilty of a misdemeanor, and
upon conviction thereof shall pay a fine of not more than $500, or be imprisoned not
more than six months, or both, at the discretion of the court, and every such article
or commodity as aforesaid shall also be forfeited.
Sec. 19. That any maker or manufacturer of any of the articles or commodities
mentioned in Schedule B, as aforesaid, or any other person who shall sell, send out,
remove, or deliver any article or commodity, manu&ictured as aforesaid, before the
tax thereon shall have been fully paid by affixing thereon the proper stamp, as in
this act provided, or who shall hide or conceal, or cause to be hidden or concealed,
or who shall remove or convey away, or deposit, or cause to be removed or conveyed
away from or deposited in any place, any such article or commodity, to evade the
tax chargeable thereon, or any part thereof, shall be deemed guilty of a misdemeanor,
and upon conviction thereof shall pay a fine of not more than $500, or be imprisoned
not more than six months, or both, at the discretion of the court, together with the
f6rfeiture of any such article or commodity: Provided y That articles upon which stamp
taxes are required by this act may, when intended for exportation^ be mi^nulactur^
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and sold or remoinad without having stmnps affixed thereto, and without being charged
with tax as aforeeaid; and every manufacturer or maker of any article as aforesaid,
intended for exportation, shall give such bonds and be subject to such rules and
regulations to protect the revenue against fraud as may be from time to time pre-
scribed by the Commissioner of Internal Revenue, wit^ the approval of the Sec-
retary of the Treasury.
Ssc. 20. That every manufacturer or maker of any of the articles or commodities
provided for in Schedule B, or his foreman, agent, or superintendent shall at the
end of each and every month make, sign, and file with the collector of internal reve-
nue for the district in which he resides a declaration in writing that no such article
or commodity has, during such preceding month or time when the last declaration
was made, been removed, or carried, or sent, or caused or suffered or known to have
been removed, carried, or sent from the premises of such manufacturer or maker
other than such as have been duly taken account of and charged with th^ stamp
tax, on pain of such manufacturer or maker forfeiting for every refusal or neglect
to make such declaration flOO; and if any such manufacturer or maker, or his fore-
man, agent, or 8Ui>erintendent, shall make any false or untrue declaration, such
manufacturer or maker, or foreman, agent, or superintendent making the same shall
be deemed guilty of a misdemeanor, and ujmn conviction shall pay a fine of not
more than $500, or be imprisoned not more than six months, or both, at the discretion
of the court.
Sbc. 21. That the stamp taxes prescribed in this act on the articles provided for in
Schedule B shall attach to all such articles and things sold or removed for sale thirty
days after the approval of this act.* Every x>erson, except as otherwise provided
in this act, who offers or exposes for sale any article or thing provided for in said
Schedule B, whether the article so offered or exposed is of foreign manufacture and
imported or of domestic manufacture, shall be deemed the manufacturer thereof,
and shall be subject to all the taxes, liabilities, and penalties imposed by law for
the sale of articles without the use of the proper stamp denoting the tax paid thereon;
and all such articles of f(»eign manufacture shall, in addition to the import duty
im2>08ed on the same, be subject to the stamp tax prescribed in this act: Provided
further^ That internal revenue stamps required by existing law on imported mer-
chandise shall be affixed thereto and canceled at the expense of the owner or importer
bef(»e the withdrawal of such merchandise for consumption, and the Secretary of
the Treasury is authorized to make such rules and regulations as may be necessary
tor the affixing and canceling of such stamps, not inconsistent herewith.
Sec. 22. That the Commissioner of Internal Revenue shall cause to be prepared
and distributed for the payment of the taxes prescribed in this act suitable stamps
denoting the tax on the- document, article, or thing to which the same may be affixed,
and he is authorized to prescribe such method for the cancellation of said stamps,
as substitute for or in addition to the method provided in this act, as he may deem
expedient. * * * That the adhesive stamps used in the payment of the tax
levied in Schedule * * * B of this act shall be furnished for sale by-the several
collectors of internal revenue, who shall sell and deliver them at their face value to
all persons applying for the same, except officers or employees of the Internal-Revenue
Service: Provided j That such collectors may sell and deliver such stamps in quantities
of not lees than f 100 of face value, with a discount of one per centum, except as other-
wise provided in this act.
Perfumery and cosmetics and other similar articles: For and upon every packet,
box, bottle, pot, phial, or other inclosure containing any essence, extract, toilet water,
cosmetic, vaseline, petrolatum, hair oil, pomade, hair dressing, hair restorative, hair
1 The act is elsewbere amended to read " on and after December first, 1914.'' It is therefore held that
the law is in efiect on and alter Dec. 1, 1914. *
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dye, tooth wash, dentifrice, tooth paste, aromatic cachous, or any similar substance or
article, by whatsoever name the same heretofore have been, now are,^or may hereafter
be called, known, or distinguished, used, or applied as perfumes or as cosmetics, and
sold or removed for consumption and sale in the United States, where such packet,
box, bottle, pot, phial, or other incloeure, with its contents, shall not exceed at the
retail price or value the sum of 5 cents, one-eighth of 1 cent.
Where such packet, box, bottle, pot, phial, or other inclosure, with its contents,
shall exceed the retail price or value of 5 cents, and shall not exceed the retail price
or value of 10 cents, two-eighths of 1 cent.
Where such packet, box, bottle, pot, phial, or other inclosure, with its contenta,
shall exceed the retail price or value of 10 cents and shall not exceed the retail price
or value of 15 cents, three-eighths of 1 cent.
Where such packet, box, bottle, pot, phial, or other inclosure, with its contents^
shall exceed the retail price or value of 15 cents and shall not exceed the retail price or
value of 25 cents, five-eighths of 1 cent. And for each additional 25 cents of retail
price or value or fractional part thereof in excess of 25 cents, five-eighths of 1 cent.
Chewing gum or substitutes therefor: For and upon each box, carton, jar, or other
package containing chewing gum of not more than $1 of actual retail value, 4 cents;
if exceeding $1 of retail value, for each additional dollar or fractional part thereof, 4
cents; under such regulations as the Cbmmisaioner of Internal Revenue, with the
approval of the Secretary of the Treasury, may prescribe.
That all articles and preparations provided for in this schedule which are in the hands
of manufacturers or of wholesale or retail dealers on and after December first, nineteen
hundred and fourteen, shall be subject to the payment of the stamp taxes herein
provided for, but it shall be deemed a compliance with this act as to such articles on
hand in the hands of wholesale or retail dealers as aforesaid who are not the manufac-
turers thereof to affix the proper adhesive tax stamp at the time the packet, box, bottle,
pot, or phial, or other inclosure with its contents is sold at retail.
There shall be an allowance of drawback on articles mentioned in Schedule B of
this act on which any internal-revenue tax shall have been paid, equal in amount to
the stamp tax paid thereon, and no more, when exported, to be paid by the warrant of
the Secretary of the Treasury on the Treasurer of the United States, out of any money
arising from internal taxes not otherwise appropriated: Provided, That no allowance or
drawback shall be made for any such articles exported prior to the date this act
becomes effective. The evidence that any such tax has been paid as aforesaid shall
be furnished to the satisfaction of the Commissioner of Internal Revenue by the person
claiming the allowance of drawback, and the amount shall be ascertained under such
regulations as shall be prescribed from time to time by said commissioner, with the
approval of the Secretary of the Treasury.
Regulations.
perfumery, cosmetics, and other similar articles.
These include all perfumeries, eau de cologne, and all other scented
waters; pastilles and all scented powders, papers, medallions, aro-
matic cachous, or other materials used to impart their odor to the
breath, the air, or other substances; all cosmetics, lotions, and pow-
ders for beautifying, restoring, improving, or preserving the skin,
hair, mouth, teeth, nails, or other parts of the body.
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Articles under the head of perfumes and cosmetics are taxable
under the statute, regardless of the style or manner in which they are
put up and sold. It is immaterial how they are labeled, recommended,
or advertised, or whether they are labeled at all, so long as they are
known to come within the provisions of the law.
BULK PACKAGES.
Articles -subject to stamp tax under Schedule B are equally liable
to stamp tax when sold in what are termed bulk packages as when
sold in retail packages, and the value of the stamp or stamps to be
affixed must correspond with and be proportionate to the price of a
single retail package.
Dealers may retail directly to the constmier from such bidk pack-
ages as have been properly stamped by the manufacturer or importer,
drawing from the same in quantities to suit their customers without
any additional stamping, but the stamps attached to such bulk
packages will only protect the original contents.
If bulk packages are broken up by the dealer drawing oflF the con-
tents into smaller vessels to be put upon his shelves, or otherwise kept
for future sales, the contents so drawn oflF thereby ceases to be identi-
fied with the stamped package in which they were originally put up
by the manufacturer or sold by the importer, and such contents so
put up become liable to seizure if stamps are not affixed to them.
The contents of bulk packages, liable to tax under Schedule B,
which were in the hands of retailers on the 1st day of December, 1914,
and therefore unstamped, must be stamped when sold at retail from
said packages proportionately to the retail price of the whole package.
TTNOLARIFIED PETSOLATUM AND OTHER INCOMPLETE MANUFAOTUBES
SHIPPED IN BULK.
While the act specifically provides that the stamp taxes shall apply
to petrolatmn, it is held to be the intent of the statute to impose the
tax mainly upon the clarified product. The unclarified is an unfin-
ished product requiring to be treated with heat and otherwise manipu-
lated before it wiU be accepted by manuf acturhig druggists as a basis
for various ointments, or drawn off into small packages and sold as
vaseline, and may be shipped in bulk without stamps.
If, however, the unclarified, unfinished petrolatmn is sold for use
by consumers, either at wholesale or retail, it is liable to the stamp
tax at the same rate as the finished product.
Many articles which ultimately become taxable are not so when
they are first removed from the manuf actxiring chemist's laboratory,
but. are incomplete manufactures, the process of manufacture not
being completed imtil they are bottled, labeled, or otherwise placed
in a salable condition.
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216
This regulation particularly applies to articles manufactured for
dealers^ to be bottled, packed, and labeled by them, and sold under
their own names, when it becomes the duty of the dealers who pack
and sell the goods under their own names and not the manufacturers,
to affix the tax stamps due.
SOAPS.
Soaps are ordinarily either laundry or toilet articles. They may,
however, and do become cosmetic articles, whenever the manu-
facturer or vendor holds them out and recommends them to the
public for the softening and beautifying effects produced by their
use upon the hair, mouth, skin, or complexion. In other words,
whenever the manufacturer or vendor takes them out of the cate-
gory of laundry or toilet articles and places them in the category of
cosmetic articles, he must stamp them according to the provisions
of Schedule B.
SAMPLES.
Samples of perfumery and cosmetics, taxable under Schedule B,
may be removed from the place of manufacture for free distribution,
wiliiout stamps or payment of tax.
Every sample so removed, however, must have legibly printed
thereon the following notice:
This is a free sample removed from the factory for gratuitous dbtributioii. Any
pezBon seUlng or expoeiiig for sale this sample, unstamped, at any time wiU be liable
to all the paiDs and penalties of the law denounced against persons selling, or exxMxdng
for sale, unstamped articles taxable under Schedule B.
But where, owing to the minute size of the sample, the above
prescribed cautionary notice can not be legibly and neatly printed
and affixed thereto, the following may be substituted:
Free sample. Penalty for sale, $500.
Where several small free samples are packed together in a box, the
whole being given as an entirety, it will be sufficient if the free sample
label is placed upon the box.
CHEWING GUM.
On and after December 1, 1914, stamps must be affixed by the
maker or manufacturer to packages of chewing gum or substitutes
therefor before the same are removed from the factory for con-
sumption or sale.
Stamps of the denomination of 4 cents have been provided for
the payment of this tax. When packages exceed $1 of retail value
the manufacturer shall affix additional stamp or stamps to cover
the amount of tax due on such packages.
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217
There shall be affixed to each and every box, carton, jar, or other
package, containing chewing gum, before its removal from the
factory, a label, on which shall be printed in plain, legible letters,
the number of small tablets, 1-cent packages, or other small pack-
ages of chewing gum contained therein, and the retail price of each
such tablet or small package of gum, in form as follows:
100 l-cent packages, retail value fl. 00
20 packages, 2 for 5 cents, retail price 60
60 packages, 3 for 5 cents, retail price 1. 00
12 packages, 5 cents each 60
There shall also be affixed to each package a label, upon which
shall be printed in plain and legible letters the manufacturer's name,
with town or city address, and the number of district and the State
in which the factory is located, for example: ''John Doe, Manu-
facturer, Philadelphia, First District of Pennsylvania." These
labels may be printed on the boxes or cartons if preferred.
Samples for salesmen, or for mailing, or for free distribution, shall
be taken only from packages which have been duly stamped and
shall be marked as provided elsewhere in these regulations.
The stamps on emptied packages will be destroyed.
When chewing gum and cachous are to be sold through auto-
matic vending or selling machines, the same are to be kept in the
regularly stamped boxes, packages, or containers until placed in
the machines, when the stamps shall be destroyed. The chewing
gum and cachous shall be securely locked in the machine and shall
not be removed therefrom except through the regular aperture
controlled by the mechanism.
ARTICLES ON HAND, DECEMBER 1, 1914.
The statute governing this matter is as follows:
That aU articles and preparations provided for in this schedtde which are in the
hands of manufacturers or of wholesale or retail dealers on and after December 1,
1914, shall be subject to the payment of the stamp taxes herein provided for, but it
shall be deemed a compliance with this act as to such articles on hand in the hands
of wholesale or retaQ dealers, as aforesaid, who are not the manufacturers thereof to
affix the proper adhesive tax stamp at the time the packet, box, bottle, pot, or phial,
or other inclosure with its contents is sold at retail.
Under this provision it is held that articles liable to tax in the
hands of a retail dealer who is not the manufacturer thereof, Decem-
ber 1, 1914, must be stamped by such retail dealer when he sells
them at retail.
Articles liable to tax in the hands of wholesale dealers who are
not the manufacturers thereof on and after December 1, 1914, may
be sold by such wholesale dealer to other wholesale dealers or to
retail dealers without stamping the same, the obligation to stamp
being limited to sales at retail.
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218
All articles in the hands of manufacturers on said date liable to tax
must be stamped before removal from the place of manufacture.
BETAIL PBIOE.
Dealers, in stamping articles on hand December 1, 1914, when sold
at retail, must adhere to the normal retail price and stamp the article
accordingly, and not according to some ''cut price/' Where a price
is printed or stamped on the article or container, that will be consid-
ered as- the normal retail price.
The manufactiu^r or importer shall pay the tax upon the normal
retail price or value of the taxable articles under Schedule B manu-
factured or imported by him, and a£ELx the corresponding adhesive
stamps to the same before removal from the place of manufacture or
importation. This duty is imposed on the manufacturer or importer
by law, and he will be held strictly responsible for a due compliance
with the statute.
This retail price or value is a pric^ such as a single package or other
small quantity would be normally sold at to consumers at the place
of manufacture or importation. If the manufacturer pays the tax
upon the retail price in good faith according to this rule, he need
apprehend no complaint if at different times and in different places
the article is retailed for a greater or less sum than denoted by the
stamps affixed thereto.
Five cents being the lowest retail price mentioned in Schedule B,
taxable articles retailing for a less simi may be packed together under
one wrapper, band, or other inclosure, when the retail price of said
package shall not in the aggregate exceed 5 cents, and a stamp of
the value of one-eighth of one cent shall be affixed to the outside band
or wrapper, or other inclosure, in such a manner that the stamp shall
be wholly destroyed in opening it. In such cases each subpackage
shall have printed thereon the words: ''Sold from a duly stamped
package.''
AFFIXING STAMPS.
Section 8 provides that instead of cancellation by initials and date,
the stamps on the articles enumerated in Schedule B shall be so affixed
on the box, bottle, or package that in opening the same or using the
contents thereof the said stamp shall be effectually destroyed, but
section 22 authorizes the Commissioner of Internal Bevenue to
prescribe such method of cancelling stamps as he may deem expedient
in Ueu of the method provided in the act. In pursuance of this re-
quirement, where articles are sold to the public in boxes, bottles,
tins, or other similar packages without any other covering, the
stamp shall be so affixed to the box, bottle, tin, or other package of
such character that in opening the same the stamp will be destroyed.
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219
Where the boxes, bottles, tms, or other containers are usually offered
to the public in wrappers or cartons, the stamp shall be affixed in
such manner as to seal the wrapper or carton. In case of double-end
cartons, the stamps shall be affixed to the top end lapping over on the
side.
There are some articles not usually oflFered to the public in cartons,
containing patent stoppers, etc., which make it impossible to affix a
stamp in the manner provided by law. Where it is clearly imprac-
ticable to affix the stamp so that it will be destroyed in using the
contents, the stamp may be affixed upon one side or the bottom of the
bottle.
Where articles subject to tax are usually displayed for sale in
fancy or expensive outer cases or containers to which it is impossible
without marring the container to affix the stamp in such manner as
to break it on opening, the stamp may be affixed in such place as will
not mar the appearance of the container.
Where articles are usually oflFered for sale in small containers
mounted on cards, the stamp covering all articles affixed may be at-
tached to the card.
Where several articles, all taxable or some taxable and some un-
taxable, are packed together for sale as entireties, the stamp cover-
ing the tax on the taxable contents may be placed on the container.
In all cases where the stamps are not so affixed as to be broken
when the container is opened, the stamp shall be canceled with the
initials of the manufacturer and the month and year.
manupactuber's statements.
At the end of each and every month, the manuf actiurer or maker
or packer for distribution of any of the articles or commodity pro-
vided for ia Schedule B must make a declaration as provided in sec-
tion 20 of the act as follows:
That every manufacturer or maker of any of the articles or commodities provided for
in Schedule B, or his foreman, agent, or superintendent shall at the end of each and
every month make, sign, and file with the collector of internal revenue for the .district
in which he resides a declaration in writing that no such article or commodity has,
during such preceding month or time when the last declaration was made, been removed
or carried, or sent, or caused or suffered or known to have been removed, carried, or sent
from the premises of such manufacturer or maker other than such as have been duly
taken account of and charged with the stamp tax, on pain of such manu&icturer or
maker forfeiting for every refusal or neglect to make such declaration $100; and if
any such manufacturer or maker, or his foreman, agent, or superintendent, shall make
any false or imtrue declaration, such manufacturer, or maker, or foreman, agent, or
superintendent making the same shall be deemed guilty of a misdemeanor, and upon
conviction shall pay a fine of not more than $500, or be imprisoned not more than six
months, or both, at the discretion of the court.
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220
ABTICLBS fiXFOBTED WITHOX7T STAMPING, AND IHtAWBAOK OK
STAMPED ABTIOLES EXPC»tTED. .
Articles liable to tax under Schedule B, when intended for exporta-
tion, may be manufactured and sold or removed without having the
stamps affixed thereto and without being charged with tax as afore-
said, by giving bond and complying with regulations to be provided
by the Commissioner of Internal Revenue and approved by the
Secretary of the Treasury. See section 19, act of October 22, 1914.
An allowance of drawback on articles mentioned in Schedule B,
which have already been stamped and afterwards exported, is allowed
by the last paragraph of Schedule B, reading as follows:
There shall be an allowance of drawback on acticles mentioned in Schedule B
of this act on which any internal-revenue tax shall have been paid, equal in amount
to the stamp tax paid thereon and no more, when exported, to be paid by the warrant
of the Secretary of the Treasury on the Treasurer of the United States, out of any
money arising from internal taxes not otherwise appropriated: Provided, That no
allowance of drawback shall be made for any such articles exported prior to the date
this act becomes effective. The evidence that any such tax has been paid as afore-
said shall be furnished to the satisfaction of the Commissbner of Internal Revenue
by the person claiming the allowance of drawback, and the amount shall be ascer-
tained under such regulations as shall be prescribed from time to time by said com-
missioner, with the approval of the Secretary of the Treasury.
Regulations made in pursuance of the foregoing provisions will be
furnished to parties interested, on application to collectors of internal
revenue.
niPOBTED ABTIGI4ES.
All perfumeries, cosmetics, chewing gum, etc., imported from
foreign countnes are Uable to the stamp tax as similar articles of
domestic manufacture, in addition to the import duty on the same,
and the stamps must be afBxed by the owner or importer before the
same are sold or offered for sale, and aflSxed in the same manner,
upon every packet, box, bottle, phial, or other inclosure containing
the same.
No exception is made in this respect for articles sold in original and
unbroken packages in which the bottles or other inclosures were
packed by the manufacturer before the importation. All such must
be unpacked for the purpose of stamping the primary package.
Importers may, however, supply manufacturers abroad with internal-
revenue stamps to be there affixed to the respective articles before
shipment.
COLLECTORS TO MAKE EXAMINATIONS. •
Collectors and revenue agents will make examinations of the
retail drug stores, pharmacies, and other places in their districts to
ascertain if the medicinal articles and other articles mentioned in
Schedule B, contained in stock and offered for sale, are stamped
according to law wherever liable under the foregoing instructions.
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221
In oases where the officer is not able to determme liability to tax,
or where there is reasonable doubt, samples should be sent to this
office marked ''Law Division" for decision. Samples sent for this
purpose should include all wrappings, circulars, advertisements, etc.,
pertaining to the sample in question, and should be accompanied
by a letter of transmission giving fuU information concerning the
same.
W. H. OSBOBN,
Commissioner oflrUenuil Beven/ue.
Approved.
Byron R. Newton,
Acting Secretary of the Treasury.
(T. D. 2064.)
Emergency revenue law — Tax on undivided profits.
Method of arriviiig at undivided profits to be entered into the basiB upon which tax
on bankers, under the act of October 22, 1914, is to be computed.
Treasury Departbosnt,
Office of Commissioner of Internal Revenue,
Washington, D. 0., November SS, 1914.
To collectors of internal revenue, revenue argents, and others'.
Subdivision 1, section 3, act of October 22, 1914, imposes an annual
tax upon bankers of $1 upon each $1,000 of capital, surplus, and
undivided profits used or employed during the preceding fiscal year.
Many inquiries have been received from bankers as to the proper
method of arriving at the amount of undivided profits to be used in
the basis upon which the tax is computed when such undivided profits
have varied or fluctuated.
In T. D. 19797, dated July 29, 1898, it was held that the undivided
profits should be figured for each business day, and the average
thereof taken as the amount of undivided profits to be used in com-
puting the tax due. In many instances it is clear that such a method
would be more or less impracticable and involve too lengthy a calcu-
lation in arriving at the basis desired. Therefore, while, perhaps, the
daily average of undivided profits, as set forth above, is the one
absolutely accurate method by which to arrive at the amount to be
entered into the total of capital, surplus, and undivided profits, this
office will accept a return, under oath, from any banker where the
undivided profits are computed in any manner whereby a fair and
just amount is arrived at representing the average amount of the
undivided profits employed by the bank during the fiscal year pre-
cediog the year for which the tax is due.
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222
It should be understood^ in the event the amount of undivided
profits arrived at by the banker is questioned^ that the average
undivided profits should be computed for each business day, as set
forth in T. D. 19797.
W. H. OSBOBN,
Commissioner of Internal Revenue.
(T. D. 2065.)
Emergency revenue law — Bills of lading.
The law requiring bills of lading to be stamped does not apply to local operatois for
the delivery of packages, baggage, and such like, within the limits of the same
town or city.
Treasuby Department,
Office of Commissioneb of Internal Revenue,
Washington, D. 0., November 2S, 1914-
Sir: In reply to your letter of the 13th instant, you are infonned
that mere local operators for the dehvery of packages, baggage, and
such Uke, within the limits of the same town or city, are not required
to give biUs of lading. Although such operators may give a receipt
for articles to be delivered, such receipt is not required to be stamped.
A mere carrier, as, for instance, a person with a horse and wagon, who
does a local deUvery business in a city or town, is not included within
the above requirement. The carriers which were intended to be in-
cluded within the terms of Schedule A, under the head of *' Express
and freight," are such as are engaged in the transportation of express
matter and freight from one place to another in the ordinary course
of commerce and trade.
Respectfully,
RoBT. Williams, Jr.,
Acting Commissioner of Internal Revenue.
Mr. .
(T. D. 2066.)
Emergen^ revenue law — Talcum powders, etc.
Relative to tax on talciun powders, bay mm, witch-hazel, and vaseline, under the
act of Congress approved October 22, 1914.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, November 83, 1914.
Sir: Replying to your letter of the IQth instant, you are informed
that it is held that talcum powders of all kinds, although not specifi-
cally named in Schedule B of the act of Congress approved October
22, 1914, are clearly such similar substances or articles to those
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223
enumerated therein as to be subject to the tax. Talcum powder
must; therefore, as a class, be stamped.
Witch-hazel, bay rum, white vaseline, perfumed vaseline, and so-
called blue-label vaseline are subject to the tax.
Respectfully,
W. H. OSBOBN,
Commissioner oj Irderml Revenue.
Mr. .
(T. D. 2067.)
Emergency revenue law — Schedule A.
Law and r^^lations concerning internal-revenue documentary stamps and taxes
under sdhedule A, act of October 22, 1914.
Treasuey Depabtment,
Office of Commissioneb of Intebnal Revenue,
Washington^ D. 0., November SS, 1914*
The act of October 22, 1914, is in part as follows:
Law.
ADHESIYB STAMPS.
Sec. 5. That on and after the first day of December, nineteen hundred and four-
teen, there shall be levied, collected, and paid, for and in respect of the several bonds,
debentures, or certificates of stock and of indebtedness, and other documents, instru-
ments, matters, and things mentioned and described in Schedule A of this act, or for
or in respect of the vellum, parchment, or paper upon which such instruments,
matters, or things, or any of them, shall be written or printed by any person or per-
sons, or party who shall make, sign, or issue the same, or for whose use or benefit the
same shall be made, signed, or issued, the several taxes or sums of money set down in
figures against the same, respectively, or otherwise specified or set fortii in the said
schedule. * * *
Sec. 6. That if any person or persons shall make, sign, or issue, or cause to be made,
signed, or issued, any instrument, document, or paper of any kind or description
whatsoever, without the same being duly stamped for denoting the tax hereby im-
posed thereon, or without having thereupon an adhesive stamp to denote said tax,
such person or persons shall be deemed guilty of a misdemeanor, and upon conviction
thereof shall pay a fine of not more than $100, at the discretion of the court.
Sec. 7. That if any person shall forge or counterfeit, or cause, or procure to be forged
or counterfeited any stamp, die, plate, or other instrument, or any part of any stamp,
die, plate, or other instrument, which shall have been provided, or may hereafter be
provided, made, or used in pursuance of this act, or shall forge, counteifeit, or resem-
ble, or cause or procure to be forged, counterfeited, or resembled, the impression, or
any part of the impression, of any such stamp, die, plate, or other instrument, as
aforesaid, upon any vellum, parchment, or paper, or shall stamp or mark, or cause or
procure to be stamped or marked, any vellum, parchment, or paper with any such
forged or counterfeited stamp, die, plate, or other instrument, or part of any stamp,
die, plate, or other instrument, as aforesaid, with intent to de^ud the United States
of any of the taxes hereby imposed, or any part thereof; or if any person shall utter,
or Bell, or expose for sale, any velltun, parchment, paper, article, or thing having
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224
fbereupon the impresBion of any such counterfeited stamp, die, plate, or other instru-
ment, or any part of any stamp, die, plate, or other instrument, or any such foiged,
counterfeited, or resembled impression, or part of impression, as aforesaid, knowing
the same to be forged, counterfeited, or resembled; or if any person shall knowingly
use or permit the use of any stamp, die, plate, or other instrument, which shall have
been so provided, made, or used as aforesaid, with intent to defraud the United States,
or if any person shall fraudulently cut, tear, or remove, or cause or procure to be cut,
torn, or removed, the impression of any stamp, die, plate, or other instrument which
■hall have been provided, made, or used in pursuance of this act from any vellum, parch-
ment, or paper, or any instrument or writing charged or chargeable with any of the taxes
imposed by law; or if any person shall fraudulently use, join, fix, or place, or cause to
be used, joined, fixed, or placed, to, with, or upon any vellum, parchment, paper, or
any instrument or writing charged or chargeable with any of the taxes hereby imposed,
any adhesive stamp, or the impression of any stamp, die, plate, or other instrument,
which shall have been provided, made, or used in pursuance of law, and which shall
have been cut, torn, or removed from any other vellum, parchment, or paper, or any
instrument or writing charged or chargeable with any of the taxes imposed by law;
or if any person shall willfully remove or cause to be removed, alter or cause to be
altered, the canceling or defacing marksiof any adhesive stamp with intfent to use the
same, or to cause the use of the same, after it shall have been once used, or shall know-
ingly or willfully sell or buy such washed or restored stamp, or offer the same for sale,
or give or expose the same to any person for use, or knowingly use the same, or prepare
the same with intent for the further use thereof; or if any person shall knowingly and
without lawful excuse (the proof whereof shall lie on the person accused) have in his
possession any washed, restored, or altered stamp which has been removed from any
vellum, parchment, paper, instrument, or writing, then, and in every such case,
every person so offending, and every person knowingly and willfully aiding, abetting,
or assisting in committing any such offenses as aforesaid shall be deemed guilty of a
misdemeanor, and, upon conviction thereof, shall forfeit the said counterfeit stamps
and the articles upon which they are placed, and shall be punished by fine not ex-
ceeding |1,000, or by imprisonment and confinement at hard labor not exceeding
five years, or both, at the discretion of the court.
Sec. 8. That in any and all cases where an adhesive stamp shall be used for denoting
any tax imposed by this act, except as hereinafter provided, the person using or a&ir
ing the same shall write or stamp thereupon the initials of his name and the date upon
which the same shall be attached or used, so that the same may not again be used.
And if any person shall fraudulently make use of an adhesive stamp to denote any tax
imposed by this act without so effectually canceling and obliterating such stamp, ex-
cept as before mentioned, he, she, or they shall be deemed guilty of a misdemeanor,
and upon conviction thereof shall pay a fine of not exceeding |500, or be imprisoned
not more than six months, or both, at the discretion of the court: * * ♦
Sec. 9. That if any person or persons shall make, sign, or issue, or cause to be made,
signed, or issued, or shall accept or pay, or cause to be accepted or paid, with design
to evade the payment of any stamp tax, any promissory note liable to any of the taxes
imposed by this act, without the same being duly stamped, or having thereupon
an adhesive stamp for denoting the tax hereby charged thereon, he, she, or they shall
be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished
by a fjae not exceeding $200, at the discretion of the court.
Sec. 10. That the collectors of the several districts are hereby authorized and
required to furnish to any assistant treasurer of the United States or designated depos-
itary thereof, or any postmaster located in their collection districts, respectively, a
suitable quantity of adhesive .stamps, without prepayment therefor, and may in
advance require of any designated depositary, assistant treasurer of the United States,
or postmaster a bond, with sufficient siureties, to an amoimt equal to the value of the
adhesive stamps which may be placed in his hands and remain un^counted for,
Digitized by VjOOQIC
225
conditioned for the faithful return^ whenever so required, of all quantities or amounts
undisposed of , and for the payment monthly of all quantities or amounts sold or noi
remaining on hand. And it shall be the duty of such collectors to supply their depth
ties with, or sell to other parties within their respective districts who may tn^h f
application therefor, adhvive stamps, upon the same terms allowed by l%w or undci
the regulations of the Gommiflsioner of Internal Revenue, who is hereby authorized te
make such other regulations, not inconsistent herewith, for the seciuity of the United
States and the better accommodation of the public, in relation to the matters henln-
before mentioned, as he may judge necessary and expedient. And the Secretary of
the Treasury may from time to time make such regulations as he may find necessary
to insure the safe*keeping or prevent the illegal use of all such adhesive stamps.
Sbc. 11. That any person or peisons who shall register, issue, sell* or tansfer, or
who shall cause to be issued, registered, sold, or transferred, any instrument, doca«
ment, or paper of any kind or description whatwever mentioned in Schedule A of
this act, without the same being duly stamped, or having thereupon an adhesive
stamp for denoting the tax chargeable thereon, and canceled in the manner required
by law, with intent to evade the provisions of this act, shall be deemed guil^ of a
misdemeanor, and upon conviction thereof shall be pimished by a fine not ^ceeding
150, or by imprisonment not exceeding six months, or both, in the discretion of tise
court: Provided, That hereafter, in all cases where the party has not affixed to any
instrument the stamp required by law thereon at the time of issuing, selling, or traae*
lening the said bonds, debentures, or certificates of stock or of indebtedness;. and he
or they, or any party having an interest therein, shall be subsequently desirous of
affixing such stamp to said instrument, or, if aaid instrument be lost, to a copy thereof^
he or they shall appear before the collector of internal revenue of the proper district,
who shall, upon the payment of the price of the proper stamp required by law, and of
a penalty of |10, and, where the whole amount of the tax denoted by the stamp
required shall exceed the sum of |50, on payment also of interest, at the rate of six
per centum, on said tax from the day on whidi such stamp ought to have beeii affixed,
affix the proper stamp to such bond, debenture, certificate of stock or of indebtedne«
or copy, and note upon the margin thereof the date of his so doing, and the fact that
such penalty has been paid; and the same shall thereupon be deemed and held to
be as valid, to all intents and purposes, as if stamped when made or issued: And
provided further f That where it riiall appear to said collector, upon oath or otherwise,
to his satisfaction, that any such instrument has not been duly stamped, at the time
of making or issuing the same, by reason of accident, mistake, inadvertence, or urgent
necessity, and without any willful design to defraud the United States of the stamp*
or to evade or delay the payment thereof, then and in such case, if such instrument,
or, if the original be lost, a copy thereof, duly certified by the officer having charge
of any records in which such original is required to be recorded, or otherwise duly
proven to the satisfaction of the collector, shall, within twelve calendar months after
the making or issuing thereof, be brought to the said collector of internal revenue to
be stamped, and the stamp tax chargeable thereon shall be paid, it shall be lawful
for the said collector to remit the penalty aforesaid and to cause such instnmient Ut^
be duly stamped. And when the original instrument, or a certified or duly proven
copy thereof, as aforesaid, duly stamped so as to entitle the same to be recorded, shall
be presented to the clerk, r^;ister, recorder, or other officer having charge of the
original record, it shall be lawful for such officer, upon the payment of the fee legally
chargeable for the recording thereof, to make a new record thereof, or to note upon
the original record the fact that the error or omission in the stamping of said original
instrument has been corrected pursuant to law; and the original instrument or such
certified copy, or the record thereof, may be used in aU courts and places in the same
manner and with like effect as if the instrument had been originally stamped: And
prcvided further^ That in ail cases where the party has not affixed the stamp require4
27776°— VOL 16—14 15
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226
by law upon any each instrument isBued, roistered, sold, or transferred at a time
wtoi and at a place where no collection district was established, it shall he lawful
lor him or them, or any party having an interest therein, to affix the proper stamp
thereto, or, if the original be lost, to a copy thereof. But no right acquired in good
iaith before the stamping of such instrument, or copy thereof, as herein provided, if
such record be required by law, shall in any manner be affected by such stamping
as aforesaid.
Sec. 12. That hereafter no instrument, paper, or document required by law to be
stamped, which has been signed or issued without bemg duly stamped, or with a
defikdent stamp, nor any copy thereof, shall be recorded until a legal stamp or stamps,
denoting the amount of tax, shall have been affixed thereto, as prescribed by law:
Provided, That any bond, debenture, certificate of stock, or certificate of indebtedness
issued in any foreign country shall pay the same tax as is required by law on similar
instruments when issued, sold, or transferred in the United States; and the party to
whom the same is issued, or by whom it is sold or transferred, shall, before selling or
transferring the same, affix thereon the stamp or stamps indicating the tax required.
Sec. 13. That it shall not be lawful to record or register any instrument, paper, or
document required by law to be stamped unless a stamp or stamps of the proper amount
shall have been affixed and canceled in the manner prescribed by law.
Sec. 14. That no instrument, paper, or document required by law to be stamped
shall be deemed or held invalid and of no effect for the want of a particular kind or
description of stamp designated for and denoting the tax charged on any such instru-
ment, paper, or document, provided a legal documentary stamp or stamps denoting
a tax of equal amount shall have been duly affixed and used thereon.
Sbo. 15. That all bonds, debentures, or certificates of indebtedness issued by
the officers of the United States Government, or by the officers of any State, county,
town, municipal corporation, or other corporation exercising the taxiqg power, shall
be, and hereby are, exempt from the stamp taxes required by this act: Provided, That
it is the intent hereby to exempt from the stamp taxes imposed by this act such State,
county, town, or other municipal corporatkms in the exercise only of functions strictly
belonging to them in their ordinary governmental, taxing, or municipal capacity:
Provided further^ That stock and bonds issued by cooperative building and loan asso-
ciations, mutual ditch or irrigating companies, and building and loan associations
or companies that make loans only to their shareholders, shall be exempt from the tax
herein provided.
Sec. 22. That the GonmiisBioner of Internal Bevenue shall cause to be prepared
and distributed for the payment of the taxes prescribed in this act suitable stamps
denoting the tax on the documoit, article, or thing to which the same may be afiixed,
and he is authorized to prescribe such method for the cancellation of said stamps, as
substitute for or in addition to the method provided in this act, as he may deem expe-
dient. The Commissioner of Internal Revenue, with the approval of tiie Secretary
of the Treasury, is authorized to procure any of the stamps provided for in this act
by contract whenever such stamps can not be speedily prepared by the Bureau of
Engraving and Printing; but this authority shall expire on the first day of November,
nineteen hundred and fifteen, except as to imprinted stamps furnished under con-
tract, authorized by the Commissioner of Internal Kevenue. That the adhesive
stamps used in the payment of the tax levied in Schedules A and B of this act shall
be furnished for sale by the several collectors of internal revenue, who shall sell and
deliver them at their ^ce value to all persons applying for the same, except officers
or employees of the Internal-Revenue Service: Provided, That such collectors may sell
and deliver such stamps in quantities of not less than $100 of face vaIuo, with a dis-
count of one per centum, except as otherwise provided in this act.
Sec. 23. That all administmtive, 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 pert of this act; and every person, firm, company, corporation, or assoda-
Digitized by VjOOQIC
227
tion liable to any tax impoeed by thiB act, or for the collection thereof, shall keep such
records and render, under oath, such statements and returns, and shall comply with
such regulations as the Commissioner of Internal Revenue, with the approval of the
Secretary of the Treasury, may from time to time prescribe; and every such person,
firm, company, corporation, or association who evades or attempts to evade any of
the taxes imposed by this act, or shall fail to truly account for and pay all taxes col-
lected by them under this act, or any regulations issued thereunder, shall be subject
to a penalty of double the amount of the taxes evaded or attempted to be evaded or
unlawfully withheld, to be assessed and collected as other penalties incurred under
internal-revenue laws are assessed and collected; * * *,
Sec. 24. That the provisions of this act shall take effect on the day next succeed-
ing the date of its passage, except where otherwise expressly provided: Provided,
That on the day after the thirty-first day of December, nineteen hundred and fifteen,
the taxes levied under this act shall no longer be levied and collected, but all taxes
arising or accruing before said date shall continue to be collectible under the terms
of this act: * * * All stamps provided for in this act unused after the aforesaid
date shall be redeemed from the holder thereof, under such rules as the Secretary of
the Treasury may prescribe.
Approved, October 22, 1914.
SCHEDXTUS A.
STAMP TAXES.
Bonds, debentures, or certificates of indebtedness issued on and after the first day
of December, nineteen hundred and fourteen, by any association, company, or cor-
poration, on each $100 of face value or fraction thereof, 5 cents, and on each original
issue, whether on organization or reorganization, of certificates of stock by any such
association, company, or corporation, on each $100 of face value or fraction thereof,
5 cents, and on all sales, or agreements to sell, or memoranda of sales or deliveries or
transfers of shares or certificates of stock in any association, company, or corporation,
whether made upon or shown by the books of the association, company, or corpora-
tion, or by any assignment in blank, or by any delivery, or by any paper or agreement
or memorandum or other evidence of transfer or sale, whether entitiing the holder in
any manner to the benefit of such stock, or to secure the future payment of money or
for the future transfer of any stock, on each $100 of face value or fraction thereof, 2
cents: Provided, That it is not intended by this act to impose a tax upon an agreement
evidencing a deposit of stock certificates as collateral security for money loaned
thereon, which stock certificates are not actually sold, nor upon such stock certificates
so deposited: Provided further, That in case of sale where the evidence of transfer is
shown only by the books of the company the stamp shall be placed upon such books;
and where the change of ownership is by transfer certificate the stamp shall be placed
upon the certificate; and in cases of an agreement to sell or where the transfer is by
delivery of the certificate assigned in blank there shall be made and 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 or agreement to sell before mentioned
shall show the date thereof, the name of the seller, the amount of the sale, and the
matter or thing to which it refers. And any person or persons liable to pay the tax as
herein provided, or anyone who acts in the matter as agent or broker for such person
or persons, who shall make any such sale, or who shall in pursuance of any such sale
deliver any such stock, or evidence of the sale of any such stock or bill or memoran-
dum thereof, as herein required, without having the proper stamps affixed thereto,
with intent to evade the foregoing provisions shall be deemed guilty of a misde-
meanor, and upon conviction thereof shall pay a fine of not exceeding $1,000, or be
imprisoned not more than six months, or both, at the discretion of the court.
Upon each sale, agreement of sale, or agreement to sell, any products or merchandise
at any exdiangd, or board of trade, or other similar place, either for present or future
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deli'very, for each $100 in value of eaid sale, or agreement of sale, or agreement to sell,
1 cent, and for each additional $100 or fractional part thereof in excess of $100, 1 cent:
Provided, That on every sale, or agreement of sale, or agreement to sell as aforesaid, there
shall be made and delivered by the seller to the buyer a bill, memorandum, agreement,
or other evidence of such sale, agreement of sale, or agreement to sell, to which there
shall be affixed a lawful stamp or stamps in value equal to the amount of the tax on
such sale. And every such bill, memorandum, or other evidence of sale or agreement
to sell shall show the date thereof, the name of the seller, the amount of the sale, and
the matter or tiling to which it refers; and any person or persons liable to pay the tax
as herein provided, or anyone who acts in the matter as agent or broker for such person
or persons, who shall make any such sale or agreement of sale, or agreement to sdl, or
who shall, in pursuance of any such sale, agreement of sale, or agreement to s^,
deliver any such products or merchandise wiUiout a bill, memorandum, or other evi-
dence thereof as herein required, or who shall deliver such bill, memorandum, or other
evidence of sale, or agreement to sell, without having the proper stamps affixed thereto,
with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor,
and uxxm conviction thereof shall pay a fine of not exceeding $1,000, or be imprisoned
not more than six months, or both, at the discretbn of the court.
That no bill, memorandum, agreement, or other evidence of such sale, or agreement
of sale, or agreement to sell, in case of products or merchandise actually delivered at
the time of sale, or while in vessel, boat, or car, and actually in course of transportation,
shall be subject to this tax, provided such bill, memorandum, agreement, or other
evidence of such sale, or agreement of sale, or agreement to sell shall be accompanied
by bills of lading or vouchers showing that the said products are actually in course of
transportation as aforesaid.
Promissory notes, except bank notes issued for circulation, and for each renewal of
the same, for a sum not exceeding $100, 2 cents; and for each additional $100 or frac-
tional part thereof in excess of $100, 2 cents. .
Express and freight: It shall be the duty of every railroad or steamboat company,
carrier, express company, or corporation or person whose occupation is to act as such,
to issue to the shipper or consignor, or his agent, or person from whom any goods are
accepted for transportation where a charge exceeding 5 cents is made a biU of lading,
manifest, or other evidence of receipt and forwarding for each shipment received for
carnage and transportation, whether in bulk or in boxes, bales, i)ackages, bundles,
or not so inclosed or included; and such shipper, consignor, agent, or person shall
duly attach and cancel, as is in this act provided, to each of said bills of lading, mani-
feets, or other memorandum, a stamp of the value of 1 cent; Provided^ That a consign-
ment of newspapers to any one point or to diiSerent points by the same train or con-
veyance when inclosed in one general bundle at the point of shipment shall be con-
sidered as one shipment, and, in lieu of a bill of lading therefor, the publisher of such
newspaper shall file on or before the fifteenth day of each month with the collector of
internal revenue for the district in which such newspaper is published a report under
oath showing the number of such shipments during the preceding month to which
report such publisher shall affix and cancel stamps equal in value to 1 cent for each ship-
ment BO reported: Provided further, That the report herein required shall not include
shipments of newspapers delivered to points within the county in which the same are
published. Any failure to issue such bill of lading, manifest, or other memorandum,
as herein provided, shall subject such railroad or steamboat company, carrier, express
company, or corporation or person to a penalty of $50 for each offense.
Telegraph and telephone messages: It shall be the duty of every person, firm, or
corporation owning or operating any telegraph or telephone line or lines to make
within thirty days after the expiration of each month a sworn statement to the col-
lector of internal revenue in each of their respective districts, stating the number
of dispatches, messages, or conversations originated at each of their respective
exchanges, toll stations, or offices, and transmitted thence over their lines during the
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229
IMrecedlng month for which a change of 15 cents or more waa imposed, and for each
of such messages or conversations the said person, firm, or corporation shall collect
from the peraon payii^ for the message or conversation a tax of 1 cent in additian
tc the regular charges for the message or conversation, which tax the said person,
firm, or corporation shall in turn pay to the said collector of internal revenue of
their respective districts: Provided^ That only one payment of said tax shall he
required, notwithstanding the lines of one or more persons, firms, or corpotatioBB
shall be used ior the transmission of each of said messages or converaations: Provided
further^ That the messages or dispatches of the officers and employees of any tele-
graph or telephone company concerning the affairs and service of the company,
and like messages or dispatches of the officials and employees of railroad companies
sent over the wires on their respective railroads shall be exempt from this require-
ment: And provided furiherf That messages of officers and employees of the Govern*
ment on official business shall be exempt from the taxes herein imposed upon tele-
graphic and telephonic messages.
Bond: For indenmifying any person or persons, firm, or corporation who shall have
become bound or engaged as surety for the payment of any sum of money, or for the
due execution or performance of the duties of any oflke or position, and to account
for money received by virtue thereof, and all other bonds of any description, except
■ucfa as may be required in legal proceedings, not otherwise provided for in this ached*
ule, 5Q cents.
Certificate of profits, or any certificate or memorandum showing an interest in the
property or accumulations of any association, company, or corporatian, and* on all
transfers thereof, on each $100 of face value or fraction thereof, 2 cents.
Oertificate: Any certificate of damage, or otherwise, and all other certificates or
documents issued by any port warden, marine surveyor, or other person acting as
such, 25 cents.
Certificate of any description required by law not otherwise specified in this act^
10 cents.
Contract: Broker's note, or memorandum of sale of any goods or merchandise,
stocks, bonds, exchange, notes of hand, real estate, or property of any kind or descrip-
tion issued by brokers or persons acting as such, for each note or memorandum of
sale, not otherwise provided for in this act, 10 cents.
Ccmveyance: Deed, instrument, or writing, whereby any lands, tenements, or other
realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested
in, the purchaser or purchasers, or any other person or persons, by his, her, or their
direction, when the consideration or ^^ue of the interest or property conveyed, exclu-
sive of the value of any lien or encumbrance thereon, exceeds $100 and does not
exceed 1500, 50 cents; and for each additional $500 or fractional part thereof in excess
of 1500, 50 cents: Provided, That nothing contained in this paragraph shall be so oon-
ftrued aa to impose a tax upon any instrument or writing given to secure a debt.
Entry of any goods, wares, or merchandise at any customhouse, either for consump-
tion or warehousing, not exceeding $100 in value, 25 cents; exceeding $100 and not
exceeding $500 in value, 50 cents; exceeding $500 in value, $1.
Entry for the withdrawal of any goods or merchandise from customs bonded ware-
house, 50 cents.
Insurance: Each policy of insurance or other instrument, by whatever name the
same shall be called, by which insurance shall be made or renewed upon property of
any description (including rents or profits), whether against peril by sea or on inland
waters, or by fire or lightning, or other peril, made by any person, association, or corw
poratbn, upon the amount of premium charged, one-half of 1 cent on each dollar or
fractional part thereof: Provided ^ That purely cooperative or mutual fire insurance
companies or associations carried on by the members thereof solely for the protection
of their own property and not for profit shall be exempted from the tax herein provided :
And provided /uriher. That policies of reinsurance shall be exempt from the tax herein
impoised by Uiis paragraph.
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230
Each policy of inaurance or bond or obligatioii of the nature of indemnity tat Iobb,
damage, or liability iaeued or executed or renewed by any person, aasodation, com-
pany, or corporation transacting the buoneas of fidelity, employer's liability, plate
glasB, steam boiler, buiglary , elevator, automatic sprinkler, or o^er branch of insurance
(except life, personal accident, and health insurance, and insurance described and
taxed or exempted in the preceding paragraph and excepting also iwrkmen's com-
pensation insurance carried on by the members thereof solely for their own protection
and not for profit), and each bond, undertaking, or recognizance, conditioned for the
performance of the duties of any office or position, or for the doing or not doing of
anything therein specified, or other obligation of the nature of indenmity, and each
contract or obligation guaranteeing the validity or legality of bonds or other obliga-
tions issued by any State, county, municipal, or other public body or organization,
or guaranteeing titles to real estate or mercantile credits executed or guaranteed
by any liability, fidelity, guarantee, or surety company upon the amount of pre-
mium charged, one-half of 1 cent on each dollar or fractional part thereof: Promded^
That policies of reinsurance shall be exempt from the tax herein imposed by this
paragraph.
Passage ticket, for each passenger, sold in the United States for passage by any
vessel to a foreign port or place, if costing not exceeding $30, $1; costing m(»e than $30
and not exceeding |60, |3; costing more than $60, |5: Proinded^ That such passage
tickets costing $10 or less shall be exempt from taxation.
Power of attorney or proxy for voting at any election for officers of any incorporated
company or association, except religious, charitable, or Hterary societies, or public
cemeteries, 10 cents.
Power of attorney to sell and convey real estate, or to rent or lease the same, to receive
or collect rent, to sell or transfer any stock, bonds, scrip, or for the collection of any
dividends or interest thereon, or to perform any and all other acts not hereinbefore
specified, 25 cents: Provided^ That no stamps shall be required upon any papers neces-
sary to be used for the collection of claims from the United States for penedons, back
pay, bounty, or for property lost in the military or naval service.
Protest: Upon the protest of every note, bill of exchange, acceptance, check or draft,
or any marine protest, whether protested by a notary public or by any other officer who
may be authorized by the law of any State or States to make such protest, 25 cents.
Every seat sold in a palace or parlor car and every berth sold in a sleeping car, 1 cent,
to be paid by the company selling the same.
Regulations.
Section 5 of the act of October 22, 1914, provides under the title of
adhesive stamps, for the collection, on and after December 1, 1914, of
certain taxes on dociunents, instruments, and things mentioned and
described in Schedule A of said act, as follows:
STAMP DUTIES ON AND AFTER DECEMBER 1, 1914,
ScHBDULB A. — Documentary,
1. Bonds, debentures, or certificates of indebtedness of any association, com-
pany, or corporation, on each $100 of face value or fraction thereof |0. 05
2. On each original issue of certificates of stock, whether on organization or
reorganization, on each $100 of face value or fraction thereof 05
On all sales, agreements to sell, memoranda of sales, deliveries or transfers
of shares, or certificates of stock of any association or corporation, on
each $100 of face value or fraction thereof 02
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281
3. Upon each sale, agreement to sell, or agreement of sale of any products or
merchandise at any exchange or board of trade, for future delivery, for
each $100 in value of said sale $0. 01
And for each 1100 or fractional part thereof in excess of $100 01
i. Promissory notes (except bank notes issued iot drculation), and for each
renewal of same, for a sum not exceeding $100 02
And for each additional $100, or fractional part thereof, in excess of $100. . . 02
5. Bills of lading, manifests, etc., issued by expreas companies, or public
carriers, etc., where a charge exceeding 5 cents is made, a stamp to
each of the value of 01
6. Bond, indemnifying, etc. (except those required in legal proceedings),
not otherwise provided for 50
7. Certificates of profits, or certificates or memoranda showing interest in
the property or accumulations of any association, company, or corpo-
ration, and all transfers thereof, on each $100 of face value or fraction
thereof : 02
8. Certificates of damage, or otherwise, and all other certificates or docu-
ments issued by port warden or marine surveyor 25
9. Certificates of any description required by law, not otherwise specified. . . 10
10. Contract, broker's note, or memorandum of sale of goods, or merchandise,
stock, bonds, exchange, notes of hand, real estate, or property of any
kind, issued by brokers, etc., for each note or memorandum of sale not
otherwise provided for 10
11. Conveyance— deed, instrument, or writing conveying lands, tenements, or
other realty, etc., value over $100 and not exceeding $500 50
For each additional $500 or fraction thereof 50
12. Entry of goods, wares, and merchandise in customhouse, not exceeding
$100 in value: 25
Exceeding $100 and not exceeding $500 50
Exceeding $500 in value 1.00
13. Entry for withdrawal of goods or merchandise from customs bonded
warehouse 60
14. Insurance, marine, inland and fire or lightning (except purely cooperative
or mutual), on each policy, or renewal, on amount of premium charged
on each $1 or fractional part 00)
15. Insurance, casualty, fidelity, and guarantee, on each policy, on each $1
or fractional part thereof of premium charged ; .00)
16. Passage ticket, for each passenger sold in the United States for passage by
any vessel to a foreign port or place, cost not exceeding $30 1. 00
More than $30 and not exceeding $60.... 8.00
More than $60 5.00
Cost not exceeding $10 exempt.
17. Power of attorney or proxy for voting at an election for officers of any
incorporated company or association, except religious, charitable,
literary societies, or public cemeteries 10
18. Power of attorney to sell or convey real estate or to rent or lease the same,
to collect or receive rent, to sell or transfer stock, bonds, etc 25
(Papers used in the collection of pension, back pay, or bounty claims, or
claims for property lost in military or naval service ar^ exempt.)
19. Protest: Upon the protest of every note, bill of exchange, acceptance,
check, or draft, or any marine protest 25
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232
20. Tel^raph and telephone messages: Every person, finn, or corporation
operating any telephone line or lines is required to make, within 30
days after the expiration of each month, a sworn statement to the col-
lector of the number of messages or conversations transmitted over
their lines during precedii^ months for which a charge of 15 cents
or more was imposed, and for each of such messages or conversations
a tax shall be paid of $0. 01
21. Every seat sold in a palace or parlor car and every berth sold in a sleeping
car, to be paid by the company celling the same 01
Under authority conferred upon the Commissioner of Internal
Bevenue in section 22 of said act; the following adhesive stamps have
been prepared:
Documentary stamps j Schedule A. — J cent, 1 cent, 2 cents, 3 cents,
4 cents, 5 cents, 10 cents, 25 cents, 40 cents, 50 cents, 80 cents, $1,
$2, $3, $5, $10, $30, $50, $100, $500, $1,000. •
PEOCUEEMENT OF ADHESIVE STAMPS.
All of the above stamps may be purchased from collectors and
deputy collectors of internal revenue.
In addition, provision has been made in the act for the delivery of
stamps by collectors without prepayment to any Assistant Treasurer
of the United States, depository of the United States, or postmaster,
who may be required to give bond for the value of stamps deposited
with him. It is not mandatory upon the persons named to make
the required bond and secure the stamps. When stamps are so
furnished without prepayment, the postmaster or other officer is not
entitled to any discount, but discount of 1 per cent will be allowed to
those who purchase to the amount of $100 of face value at one time,
paying cash therefor at the time of purchase or receipt, either from
the collector or the persons with whom stamps have been deposited
without prepayment as noted in the foregoing.
Stamps to be affixed to articles manufactured in a foreign country
and imported into the United States may be purchased and forwarded
to the place of manufacture and there affixed to the articles before the
same are packed for importation.
TELE<}EAPH AND TELBFHOKE MESSAGES.
1. A company shall make one report and one return for the
company as a whole* and not for each of its exchanges and toll
stations separately; such report and return shall be made to the
collector of internal revenue of the district in which the company's
principal office is located.
2. Every company shall include in its report all taxable messages
originated by it without regard to the ownership of toll lines used
in transmitting those messages. Telephone companies receiving
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233
messages to be retransmitted over the lines of a telegraph company,
or telegraph companies receiving messages to be retransmitted over
the line of a telephone company, will be regarded as the point where
such messages origuiate. In such cases the company retransmittrr^
such messages will not be required to include the same in its monthly
return. Where, however, a message sent over a telephone line is
received directly from the sender, the company receiving and
transmitting the same wUl, in such case, be r^arded as the point of
origin, and will include fldl sueh taxable messages in its monthly
return. A reversed message shall be considered as originating at
the point of collection.
3. Reports and returns may be made by a company for its fiscal
month or billiag period to be filed within 30 days after expiration of
fiscal month, provided full return is made for the period during which
the tax is to be collected.
4. Additions may be made any month for errors on the pr^oufl
month's reports and returns. Beduotkms cM)vering items reported
in excess in previous months not allowable. In such cases ameiMted
returns may be filed before assessment is made, otherwise claim for
abatement or refund, as the case may be, should be filed.
5. Messages originating at automatic telephoine &tatic»ifi for^Mxdl
of which a charge of 15 cents or more was made are subject to tax,
and companies owning. or operating such stations must include all
such messages in their monthly returns. The method of collecting the
tax from the senders of such messages is a matter wholly within the
province of the companies receiving and transmitting the messages.
6. All overtime telephone messages where the initial rate is less
than 15 cents, but the total charge, on account of the overtime, brings
the charge to 15 cents or more, are subject to tax.
7. Messages transmitted x>ver private leased circuits and felating
exclusively to the business for which the circuit was leased are held
to be exempt from tax. Where, however, any such leased circuit is
used for the transmission of messages other than above stated,
return for all such messages for which a charge of 15 cents or more
would ordinarily be made must be rendered monthly by the lessee.
8. Messages or dispatches of officers and employees of the com-
pany concerning the affairs and service of the company, and like
messages' or dispatches of officials and employees of railroad com-
panies sent over the wires on their respective raUroads, are exempt
rom tax. Franked messages, if of a private character, for which a
charge of 15 cents or more would otherwise be chained, do not come
within the exemption above referred to, and should be included in
the return made.
9. Messages of officers and employees of the United States (jov-
emment on official business, and like messages of State officials, are
exempt from tax.
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284
Messagea or dispatcheB of officials and employees of railroad com-
panies sent over wires not on their respective roads, for which a
charge of 15 cents or more is made (including pro rata chaises on
messages sent in excess of free messages allowed under contracts with
such railroads), are subject to tax.
TAX ON SALES OF SEATS OB BEKTHS IN PALACE, PABLOB, OB
SLEEPING OABS.
Until otherwise provided, every railroad company or other com-
pany owning or operating any palace or parlor car or sleeping car
will, after January 1, 1915, and not later than the 20th day of each
month, render to the collector of internal revenue of the district in
which its principal office is located a sworn return of the number
of seats or berths in any such car sold by it during the preceding
month, and will pay to said collector the tax imposed by the reve-
nue act of October 22, 1914, of 1 cent on each seat or berth so sold.
The return to be rendered in such cases will be in the following
form:
(Form 674.)
UKITBD STATES INTERNAL RBYBNUB.
Return o/aakB (tf$eai» and berths in palace, parlor, or sleeping cart taxable under act of
October tt, 1914.
District of ,
,191...
The undersigned, , of the ,
(Fnildfliit or chtof oflloer.) (Here sive name of oompany.)
having its principal Qffice at , State of , hereby certifies
that the said company owns or controls certain palace, parlor, and sleeping cars in
use on its or other railroad lines, and that during the month of , 191 ., the total
number of seats or berths in said can sold by or on account of this said company was
as follows:
Total number of seats sold
Total number of berths sold
Total of seats and berths sold
Amount of tax due %.
(Title.)
Subscribed and sworn to before me this day of , 191..
[seal.]
FBEIGHT AND EXPBESS RECEIPTS.
Paragraph 5 of Schedule A required every raib'oad or steamboat
company, (^arrier, express company, or corporation or person whose
occupation is to act as such, to issue to the shipper or consignor, or
his agent, or person from whom any goods are accepted for trans-
portation when a chaj^e exceeding 5 cents is made a bill of lading,
manifest, or other evidence of receipt and forwarding for each ship-
ment recseived.
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235
A literal compliance with this requirement is in some cases im-
practicable or impossible.
It is, therefore, hereby provided that where freight is accepted at
nonagency stations,, it must be receipted for by conductors accept^
ing it. He must see to it that an internal-revenue stamp of 1 cent
denomination is attached to each of such receipts and canceled as
required by these regulations before such shipments are accepted for
transportation: Provided, Jiawever, That in the event shipment so
oflFered are of a perishable nature, or are likely to deteriorate by de-
lay, or to obstruct sidings or other facilities by being refused for lack
of a compliance with the provisions of the act, or if shippers or their
representatives are not at such nonagency stations to receive or to
stamp such receipts, conductors may accept and transport such
nonagency shipments to destination in advance of the affixing of the
stamp. In such cases, receipts issued by the conductors must not be
surrendered to the shipper, but must be delivered with the freight
to the destinaticm agent, who, in such cases, must present the con-
signor's receipt to the consignee and demand that it be stamped and
the stamp canceled by him as agent for the shipper before delivery
of the shipment. If a nonagency shipment be destined to another
nonagency station, and the tax is not paid by the shipper, the con-
ductor's receipt therefor must be indorsed ''Stamp tax not paid,'^
and it must be delivered with the freight to the agent at the nearest
agency station to the destination of the shipment for execution and
delivery of the receipt by and to the consignee. If a nonagency ship*
ment, upon which the tax is not paid by the shipper, be destined to a
point on another railway, the agent at the junction point at which the
shipment is delivered to the connecting line must indorse on the
delivery slip or manifest for such shipment ''Stamp tax not paid,"
which delivery slip shall follow to the delivery station, the agent at
which shall collect the tax before delivery of the freight.
Shipments of milk or cream, consisting of one or more cans, shipped
by one shipper to one consignee on the same date and train to which
milk or cream tickets are attached, wiQ be regarded as one ship-
ment, and to one of the milk tickets a stamp must be affixed, unless
other evidence of receipt is issued, in which case the other evidence
shall be properly stamped.
Switching tickets covering local switching orders for which a chaise
is made, covered by no bill of lading, will be regarded and stamped as
evidences of receipt.
Dray tickets, or shippers tickets, will be regarded and stamped as
evidences of receipt, unless surrendered for a bill of lading.
Baggage checks for the transportation of bicycles, dogs, baby car-
riages, etc., will be regarded as evidences of receipt and should be
properly stamped.
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286
No stamp is required upon Federal and State Government ship-
ments of Government or State property, for which, if a stamp were
issued, the Federal Govemm^ott or State government would be re-
quired to pay.
PASSAGE TICKETS.
A tax is imposed on tickets sold in the United States for passage by
any vessel to a foreign port where the amount charged is in excess
of $10; and whether the vessel for which the ticket is sold sails from a
port of the United States or not. It is the duty of the person selling
the ticket to affix and cancel tiie stamp to the ticket or paper which
evidences the sale, namely, the coupon or order, at the time same is
sold.
Where a single ticket is issued for transportation of more than one
passenger, the ticket, coupon, or prepaid order must be stamped at
the proper rate for each passenger based upon the number of passen-
gers and the total amount paid for the transportation.
Where proxies are sent out by corporations to be executed and
returned to the corporation or to the person named in the proxy, such
proxies may be stamped after execution and delivery by the person
receiving same as the agent of the person executing the proxy.
CANCELLATION OF DOCUMENTARY STAMPS.
In any and all cases where an adhesive stamp shall be used for
denoting any tax imposed by Scbjedule A of the act of October 22,
1914, the person using or affixing the same shall write or stamp
thereon, with ink, the initials of his name and the date (year, month,
and day) in which the same shall be attached or used; or shall, by
cutting and canceling said stamp with a machine or punch, which
wiU affiix the initials and date as aforesaid, so de&ce the stamp as
to render it unfit for reuse. The cancellation by either method
diould not so deface the stamp as to prevent its denomination and
genuineness from being readily determined.
In addition to the foregoing, stamps of the value of 10 cents or
more shall have three parallel incisions made by some sharp instru*
mmott lengthwise through the stamp after the stamp has been at-
tached to the docmnent: Provided^ This will not be required where
stamps are canceled by perforation.
DOCUMENTARY STAMPS.
1. Documentary revenue stamps issued prior to October 22, 1914,
under former revenue laws can not be used for the payment of taxes
required by existing law, and the redemption or exchange of such old
stamps is prohibited by statute.
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287
2. Ordinary postage stamps can not be used for the payment of
any intemal-reyenue taxes.
As adhesive stamps may be sold by any person and readily pass at
their face value in the market, provision has not been made for their
exchange or redemption by the Government. Where, however, such
stamps are rendered useless by gumming or sticking together in
transit or otherwise without the fault of the purchaser, they may be
exchanged by a collector for oth^ stamps of exactly the same quan-
tity and denomination.
i. Documentary Mid 'proprietary stamps can not be used inter-
cbaa^ably. Documentary stamps only must be used upon papera,
doGTUHiNits, and instruments subject to tax as provided in Schedide A.
5. YHiere a stamp of the proper denomination to pay the tax due
on an article or document can not be procured, two or more stamps
Bftay be used. In such case as few stamps as possible should be
attached, and each stamp used shotdd be canceled in the manner
provided by regulation.
W. H. OSBOBNy
Commissioner of IrUerruil Revenue.
Approved:
Bybon R. Newton,
Acting Secretary of the Treasury^
(T. D. 2068.)
Emergency revenue law — Tax on insurance policies.
Relative to whether the insurance company or the policyholder shall pay the tax
imposed on insurance policies by the act of October 22, 1914.
Teeasury Department,
Office of Commissioner op Internal Revenue,
WasUngton, D. (7., November 26, 1914.
Gbntlemen : Your letter of the 20th instant in regard to stamp tax
en policies of insurance under the internal-revenue act of October 22,
1914, has been received. You inquire whether the tax should be
borne by the insurance company or the policyholder.
In reply, you are informed that if the company insists that the
insured party pay the value of the stamp, it is not a matter which
the internal-revenue laws can deal with. It is a matter between the
ixi8uria»3e company and the policyholder.
Re^iectfully, W. H. Osborn,
Commissioner of Interruil Revenue,
Messrs. — ^.
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288
(T. D. 2069.)
Emergency revenue lavy— Marking of tax stamps.
Marking with initials of etamps intended to be forwarded by manufacturing company
to cover stocks in the hands of retailers permitted.
Tbeasuby Depabthent,
Office of Goicmissioneb of Intebnal Revenue,
WasUngUm, 2>. (7., November £S, 1911
Sib: This office is in receipt of your letter of the 11th instant
stating that the company of your city desires to forward stamps
covering stocks of preparations manufactured by them in the hands
of retail dealers, and that the said company also desires to perforate
the stamps with its initials to insure the using of the stamps on their
manufactures.
In reply, you are informed that this office perceives no objection
to allowing the company to perforate the stamps as indicated by you.
Respectfully, W. H. Osbobn,
Commissioner of Internal Revenue.
Mr.~ .
(T. D. 2070.)
Emergency revenue law — Discount on purchases of documentary and
proprietary stamps.
Postmasters, designated depositaries, and assistant treasurers of the United States
furnished with stamps without prepayment not to be credited with a discount.
All discounts allowed taxpayers by such postmasters, designated depositaiieB,
and assistant treasurers will be claimed and allowed upon reports made to col-
lectors at the close of a month.
Tbeasuby Depabtment,
Office of Commissioneb of Intebnal Revenue,
Washington, D. (7., November £7, 191^.
To collectors of internal revenue:
Reference is made to T. D. 2065, dated November 16, 1914, under
the caption, "Emergency revenue law — ^Discount on purchases of
documentary stamps," which is hereby modified to provide that post-
masters, designated depositaries, and assistant treasurers of the
United States who buy documentary and proprietary stamps and pay
for same upon or before delivery to them, are allowed a discount of
1 per cent when the value of each purchase is $100 or more.
If they are furnished with stamps under bond without prepayment
therefor, such postmasters, designated depositaries, and assistant
treasurers are not to be credited with the discount at that time, but
when selling such stamps to taxpayers the discount provided by sec-
tion 22 of the act may be allowed, and in reporting sales of stamps and
remitting for same to collectors at the close of a month credit will be
claimed and allowed for the amount of such discounts.
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It must be borne in mind at all times that no discount can be
allowed on sales of stamps offier ihan docwmentary and proprietary.
W. H. OSBOEN,
Cornmissioner of IrUemal Revenue.
(T. D. 2071.)
Emergency revenue law — Schedule A.
Certificates issued by State officers in the interest of the State not liable to stamp tax.
Tbeasubt Depabtment,
Ofpioe of Gommissioneb of Intebnal Reyenub,
Washington, D. <7., November £7, 1914.
Sm: This office is in receipt of your letter of the 23d instant,
stating that under the law of the State of New Jersey, foreign insur-
ance companies and agents of such companies are permitted to
transact business within the State only after they have received
from the Commissioner of Banking and Insurance of the State a
certificate authorizing them to transact such business, and inquiring
whether or not the certificates are subject to stamp tax under the
act of October 22, 1914.
In reply, you are informed that certificates issued by officers of
the State in the interest of the State are not liable to tax. Certificates
required by law issued by any department or office of the Govern-
ment at the request of private persons, solely for private use, are to
be stamped, the stamps to be furnished by the person applying for
the document, and they should be affixed before the document is
delivered.
Respectfully,
W. H. OSBOBK,
Commissioner of Internal Beven/ue.
Mr. .
(T. D. 2072.)
Emergency revenue law — InsuraTice companies.
Bonds and other instruments executed by fidelity and other similar insurance
companies.
Tbeasubt DEPABTifENT,
Office of Coiocissioneb of Intbbnal Revenue,
Washington^ D. a, November 28, 1914.
Gentlebcen: Under date of the 24th instant you presented for
consideration the f ollovdng questions relative to stamp taxes under
the act of October 22, 1914:
1. What bonds are subject to tax under schedule A of said act and
the rate of tax thereon ?
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2. As to what uistruments are exempt under the term ''bonds
required in legal proceedings/'
3. Relative to the stamping of bonds given by States, counties,
and subdivisions thereof,
4. Bonds that are given to States, municipalities, etc.
5. Are certificates issued by a State officer authorizing agents or
other persons to transact business within the State subject to tax ?
6. Is tax required on premiums paid subsequent to December 1,
1914, upon continuous bonds executed prior thereto ?
7. Relative to certificates required by State statutes or municipal
ordinances to be attached to bonds for the purpose of showing the
authority of officers executing them, and certificates required by
State statutes showing the financial condition of the surety on the
bond.
Answers are given to these questions in the order presented:
1. Every bond or obligation of the nature thereof, without regard
to form, sealed or imsealed, with or without sureties, made by any
individual, firm, or corporation to indemnify any person, corporation,
«r other entity for loss, damage, or liability, or for the doixxgor not doing
of anything therein specified, and all undertakings, proposals, or
agreements of every character offering indemnity or guaranteeing
TAlidity to any person or thing, is subject to a 50 cent tax, imless the
sureties thereon, if any are offered, consist of persons, companies,
or corporations transacting the business of fidelity, etc., insurance,
when the rate of tax and the only tax required to be paid thereon
will be one-half of 1 cent on each dollar or fractional part thereof of
the premium charged.
2. Bonds required in legal proceedings or such as are essentially
necessary in matters pending before judicial tribunals are exempted
specifically by the law from taxation. Such bonds would generally
include those required of executors, guardians, receivers, and other
fiduciaries appointed by the court to care for or represent the inter-
ests of property or persons within the custody of the court. If
simply appointed by any tribunal or officer to discharge other func-
tions, the bonds so given are subject to taxation.
3. AU bonds given by State, township, county, and subdivisions
thereof are exempt from taxation.
4. Bonds given to a State for the performance of contracts — such
as the construction of State or municipal buildings or the discharge
of other duties strictly for or in behalf of the State, when necessary
to protect the State's interests — ^are not subject to taxation.
5. C^tifioates issued by State officers authorizing companies or
their agents to do business within the State, or vesting private per-
sons with authority to transact business of a private nature, not
under State or mimicipal control, are subject to tax.
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6. Bonds executed and delivered prior to tjie inception of the Act
aforesaid; whether taking ejBfect immediately or subsequent to the
enforcement of the taxing act, are not subject to tax.
7. Certificates issued by State or municipal officers showing the
authority of the person before whom the instrumttit is attested,
attached to any bond subject to tax, are subject to a tax of 10 cents
as provided by law.
Respectfully, W. H. Osbobn,
• Commissioner of Intemtd Revenue.
Messrs. .
(T. D. 2073.)
Em>ergency revenue Vm — Rulings under Schedule A,
Transfers of stock certificates, bills of lading, and passage tickets.
Treasury Department,
Office of Commissioner op Internal Revenue,
Washingtony D. (7., November 2S, 1914.
Sm: This office is in receipt of your letter of the 16th instant, sub-
mitting for ruling certain questions in connection with the internal-
revenue act of October 22, 1914.
Many of the questions submitted are under consideration by this
office and no ruHng has yet been made.
In regard to transfers of stock you are informed that the intention
of the law is to tax the original issue of certificates of stock and to
impose a tax upon every change of ownership. When stock is
transferred for which no certificate has been issued and the evidence
of transfer is shown only by the books of the company, the stamps
shall be placed on such books. Where the change of ownership is
by the transfer of a certificate and the certificate contains a blank
form of assignment on the back which is filled in by the insertion of
the name of the person to whom the stock is transferred, the stamp
shall be placed upon the certificate.
In case of an agreement to seU or where the transfer is by the
delivery of the certificate signed in blank the name of the transferee
or vendee to be filled in afterwards there shall be made' and delivered
by the seller to the buyer a bill or memorandum of sale, to which the
stamp should be affixed.
Where certificates of stock are sold and the tax has been paid and
stamps affixed in the manner stated when the transfer is made on
the books of the company from the name of the party selling to the
name of the purchaser, no stamps are required on the new certificates
issued in heu of those canceled.
If a transfer of shares of stock be made by an owner thereof to a
broker merely for the purpose of having the broker make a sale
thereof and if the request for such transfer to the broker is accom-
27776**— VOL 16—14 16
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242
panied by the broker's certificate that he has no ownership therein,
the transfer being made to him merely for the purpose of making
sale, such transfer to a broker need not be stamped.
Certificates of stock of a foreign corporation when sold or delivered
within the United States are subject to the same tax as certificates
of stock of any domestic corporation.
Certificates required by law issued by any department or officer of
the Government at the request of private persons solely for private
use should be stamped. The stamp should be furnished by the person
applying for the instrument and for whose use and benefit the same
is issued and should be affixed before the document is delivered.
Certificates of officers of the United States given in the discharge of
official functions necessary in carrying on the machinery of the Gov-
ernment are exempt. Any documents, the stamping of which would
make it necessary that the Government should furnish the stamp,
are held exempt from the stamp tax.
The first requirement necessary to subject any given certificate to
tax under the heading of "Certificates of any description required by
law not otherwise specified in this acf is that it shall be one that is
required to be given by law, national, State, or municipal.
Certificates given by an officer, not for a public or governmental
purpose, but for private interests and use, are liable to the tax if they
are given in obedience to any law which requires them to be given
when called for.
A paper evidencing the carriage of excess baggage by a railroad
company does not require to be stamped.
Bills of lading and manifests are not required by those who make
local dehveries of merchandise or packages in a town or city, the mer-
chandise being transported from one part of the city to another.
The law is iutended to apply to what is known as *' common camera
of freight;''
If a through shipment is made on one bill of lading, it will be suf-
ficient to affix the 1-cent stamp to the original bill of lading only.
Copies or duphcates should have written or stamped thereon "Orig-
inal duly stamped,'' or words to that effect. Where bills of lading
are exchanged for others under reconsignments, the new bills of lad-
ing require stamps.
It is the opinion of this office that it is the duty of the railroad
company or carrier to see that the stamp is duly affixed and canceled
when the bill of lading is issued and deUvered to the shipper.
In regard to passage tickets, you are advised that a tax is imposed
on tickets sold in the United States for passage by any vessel to a
foreign port where the amount charged is in excess of $10, and whether
the vessel for which the ticket is issued sails from a port of the United
States or not. It is the duty of the person selling the ticket to aflBx
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and cancel the stamp to the ticket or paper which evidences the sale,
namely, the coupon or order, at the time same is sold.
Respectfully,
W. H. OSBOBN,
Commissioner of Internal Revenue.
Mr. .
(T. D. 2074.)
Emergency revenue law — Foreign hiUs of lading.
Tax required on bills of lading for export where there is an inland haul.
Treasury Department,
Office of Commissioner of Internal Revenue,
Wa^Jiington, D, C, December 1, 191 4-
Sir: This office is in receipt of your letter of the 27th ultimo, re-
questing a ruling as to whether or not a tax is imposed upon a through
bill of lading from an interior point to a foreign port, a part of which
is necessarily an inland haul. You refer to the decisions of the
Supreme Court in Fairbanks v. United States, (181 U. S., 283) and the
later decision in the case of Cornell v, Coyne (192 U. S., 418), as bearing
upon the case.
This office has heretofore considered these two decisions, and is of
the opinion that the doctrine laid down in the case of Cornell v. Coyne
is more applicable to the present law than is the Fairbanks decision.
The latter was rendered in a case arising under the war revenue act of
June 13, 1898, which imposed a tax of 1 cent on domestic bills of
lading, and 10 cents on export bills of lading, which was clearly dis-
criminatory. In the Cornell case it was held that it is not discrimi-
natory to impose the same tax upon an article intended for export
as is imposed upon the same article when intended for domestic con-
sumption.
This office is of the opinion, therefore, that foreign bills of lading
for direct shipment from the United States without inland haul are
not taxable, but that where there is an inland haul, the bills of lading
are taxable, as the same bill of lading would be for an inland haul
alone.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue.
Mr. .
(T. D. 2075.)
Emergency revenue law — Bundles of newspapers.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washin^nj D. C, December 1, 1914-
Sir: In reply to your letter of the 23d instant to the Secretary
of the Treasury, which has been referred to this office, the following
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244
answers are made to the questions relative to that portion of the act
of October 22, 1914, concerning consignment of newspapers, numer-
ically placed in your conununication:
1. There is no objection to the use of shipping sacks similar to the
United States mail bags.
2. One shipment to a consignee requires one stamp.
3. Where there are two or more wagonloads of newspapers deliv-
ered to a railroad or express company in one shipment, to one con-
signee, such shipment would require but one stamp.
4. If the contents of a wagon deUvered to a railroad or express
company are one shipment, to one consignee, such contents require
one stamp and are considered one bundle.
5. Bundles of papers taken by dealers or news companies from the
office of distribution to points outside of a coimty are not subject
to tax.
6. Shipments from New York or Brooklyn to other points in
Greater New York, not in the same county, are subject to tax.
7. Each shipment or bundle must be counted as one.
You are also advised that the law provides that a consignment of
newspapers to any one point or to different points by the same tram
or conveyance when inclosed in one general bundle at the point of
shipment shall be considered as one shipment.
See T. D. 2036 relative to reports of shipments of newspapers to
be made monthly to collectors in lieu of bills of lading, which will be
shown you by the collector of your district upon application, to whom
you are referred for further irdformation.
Respectfully, W. H. Osbobk,
Commissioner of Internal Revenue.
Mr. .
(T. D. 2076.
Chewing gum in hroTceh packages.
Chewing gum in broken packages to be stamped before sale at retail.
Treasuky Department,
Office of Commissioner of Internal Revenue,
Washington, D, C, Noverriber 23, 1911
Sir: This office is in receipt of your letter of the 16th instant in-
quiring whether broken packages of chewing gum in the hands of
retail dealers on December 1 are subject to tax under the act of
October 22, 1914.
In reply, you are informed that in T. D. 19579, of June 27, 1898,
referring to the act of June 13, 1898, it is stated that:
All chewing gum in the hands of manufacturers or wholesalers or retail dealers on
the Ist day of July, 1898, is subject to the payment of the stamp tax.
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245
Since the provisions of the act of October 22, 1914, in relation to
chewing gum are similar to the corresponding provisions of the act
of 1898, it is held that the above-mentioned provision of T. D. 19679
also governs the enforcement of the present act, and, therefore, all
chewing gum, though in broken packages, should be stamped before
being sold at retail.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue,
CoLLBOTOB Internal Revenue, Toledo, OTiio,
(T. D. 2077.)
Income tdx.
The gain or loes lesultiiig from the Bale of capital assets and apportioned to the yean
subsequent to January 1, 1909, should be increased or decreased accordingly as
there was gain or loss by the amount of depreciation charged off since January 1,
1909, and not used to make good such depreciation.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, November SI, 19H.
To collectors ofiniemal revenue:
Article 110, page 66, of Regulations No. 33 should be, and is
hereby, amended to read as follows:
Art. 110. For the purpose of determining the amount of profit or Iobb arising from
the sale of capital assets acquired prior to January 1, 1909, which shall be taken into
account by corporations in making their returns of annual net income, the gain or
loss represented by the difference between the purchase price and the selling price
shall be prorated according to the number of years the assets were held prior to their
sale, and the amount thus apportioned or apportignable to the years subsequent to
January 1, 1909, shall be included in or deducted from the gross income of the year in
which the assets were sold, accordingly as they were sold for more or less than their
original cost. To any gain thus apportioned and to be included in income there
f^ould be added any amount or amoimts which had been charged against and
deducted from gross income during the years since the inception of the special
excise tax law, on account of depreciation and which had not been paid out in making
good the depreciation — ^that is, any amoimt charged off subsequent to January 1,
1909, on account of the depreciation of the assets sold and not used to make good
such depreciation shall be added to the gain apportioned to these years and will be
included in the income of the year in which the property was sold. Likewise, for
the purpose of a deduction from gross income of the year in which the assets were
sold, loss resulting from any such sale, apportionable to the years subsequent to
January 1, 1909, will be reduced by the amount of the unused portion of the depre-
ciation ciiaiged off with respect to such assets since January 1, 1909.
This nding, in so far as it relates to depreciation, applies only to
such tangible property as is subject to wear and tear, exhaustion
and obsolescence, and is not to be construed as recognizing any gain
or loss due to fluctuations in the market value or arbitrary changes
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in the book value of securities and like assets, the gain or loss with
respect to which wiU be determined only when such assets mature
or are sold or disposed of — that is, when there is a completed, a
closed, transaction. (See T. D. 2005.)
W. H. OSBORN,
Commissioner of InUrrud Bevenue.
Approved:
Bybon R. Newton,
Acting Secretary of the Treasury.
(T. D. 2078.)
Emergency revenue law — Section S.
Instnictions for 0tamping bottles and other containers of wines, liqueurs, cordials,
and similar compounds taxable under the act of Gongrees approved October 22,
1914.
Treasury Department,
Office op Commissioner of Internal Revenue,
Washington, D. C, November 28 j 1914,
To collectors of internal revenue:
It is tliought tliat producers, importers, and dealers in domestic
and imported wines, liqueurs, cordials, and similar compounds are
not stamping and have not tax paid all such goods sold, offered for
sale or consumption on and after October 23, 1914, as required by
the act of Congress approved October 22, 1914. The tax attached
to all such goods October 23, 1914, and must be paid accordingly.
Still wines are all those which do not effervesce from natural or
artificial carbonization.
Sparkling wines are all those which effervesce from natural or
artificial carbonization.
Liqueurs, cordials, and similar compounds, it is believed, have been
sufficiently classified for all practical purposes in T. D. 2050, which
reads as follows:
Liqueurs, cordials, and similar compounds, as used in the act of Congress approved
October 22, 1914, are not held to include alcohol, whiskies, rums, brandies, and gins,
except when so compgnded as to be known to the trade as cordials and liqueurs.
Compounds classed by this office as medicines are also excepted. The word ' ^liqueur/'
as defined by Webster, is an alcoholic aromatic cordial, and obviously a cordial is
practically the same. It would appear, therefore, that the words ' 'liqueurs, cordials,
or similar compounds," under whatever name sold or offered for sale, would include
those beverages commonly known to the trade as liqueurs and cordials. Further,
the term '* similar compounds" would appear to include vermuths and like wine
compounds, bitters used as beverages, cocktails, maraschino, cordialized liquors,
fortified fruit juices, and all other compounds the formulas of which, methods of
preparation, or use, make them sufficiently like liqueurs and cordials to place them
in tiie class with liqueurs and coidialfl.
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The rates on wines, liqueurs, cordials, etc., domestic and imported,
(act of Oct. 22, 1914) are as follows:
[pint . ^.90, 01
Still wines quart .. .02
[gallon.. .08
In bottles containing less than pint, in proportion.
Champagne and other sparkling wines and artificially carbonated wines:
One-half pint or less , / 06
More than } pint and not more than 1 pint 10
More than 1 pintand notmorethan 1 quart 20
Larger quantities same rate.
Liqueurs, cordials, and similar compounds:
One-half pint : , . OIJ
More than J pintand not more than 1 pint 03
More than 1 pintand not more than 1 quart 06
Larger containers per gallon. . . 24
Under thre statute sales may be made in any quantity of these tax-
able goods by producers, importers, and dealers to other dealers,
including rectifiers, manufacturing chemists, and druggists, without
payment of the tax by the vendor, but the purchaser when selling
to a consumer (not a dealer) must pay the tax and aflSx the stamps to
the bottles or other containers. It will thus be seen that it is the
vendors to consumers who must pay the tax and aflBx and cancel the
stamps, regardless of the quantity. The only exception in the
statute is that of stiU wines, which are not subject to the tax when
sold to a rectifier, manufacturing chemist, or druggist to be used in
manufacturing liqueurs, cordials, or other similar compounds taxed
hy this act. Still wines are subject to the tax when used by rectifiers,
manufacturing chemists, or druggists in manufacturing any com-
poimds not taxed by this act. Still wines sold to tobacco or other
manufacturers than those named and used by them in manufacturing
any articles are subject to the tax, and same must be paid by the
vendor to such consumer and the stamps be aflSxed accordingly to
the bottle or other container.
A wholesale liquor dealer who is also a rectifier must record all
purchases and sales of cordials in record Form 62. Those sold to
himself as a rectifier, to be used in rectifying and blending, must be
tax paid by him as vendor to a consumer and have stamps affixed to
the containers. He is held to be the consumer, as he destroys the
nature and identity of the cordials in rectifying and blending. Pur-
chases and sales of wines by a rectifier must be recorded in a separate,
and special book, similar to Form 52, to be provided by him. This
book will be open to inspection by internal-revenue oJEcers. All
wines sold to himself as a rectifier, to be consumed in rectifying aad^
blending, must be tax paid and stamped by him, with the exception
only of stiU wines used in manufacturing liqueurs, cordials, and similar
compounds taxed by this act.
All taxable goods in the hands of consumers, such as rectifiers,
manufacturing chemists, druggists, etc., on October 23, 1914, must
be tax paid and stamped by them.
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248
Taxable goods in the stock room are not required to be stamped
until sold or offered for sale or consumption. When therefore the
taxable goods are removed to a retail room or department and sold
or offered for sale or consumption, same must be tax paid and
stamped. Bar bottles or other containers from which sales by the
drink are made must be stamped and the stamps be completely
effaced and obliterated when emptied. New stamps must be affixed
at each refilling. If sales by the drink are made from large con-
tainerS; such as wine kegs or barrels, they must be stamped. Bottles
or jugs may be filled from large unstamped containers, such as barrels
of wine, but the necessary stamps must be afi^ed to the bottles or
jugs. See T. D. 2053 relative to affixing and canceling stamps on bot-
tles or other containers of wines, liqueurs, etc., which reads as follows:
The act of Congrees approved October 22, 1914, imposing taxes upon wmes, liqueurs,
and cordials is silent as to where such stamps must be affixed to the bottles or other
containers. It is held, therefore, that these stamps must be affixed conspicuously to
the bottles or other actual containers of the wines and cordials and must be canceled
by the peraon affixing same, and that the initials of the person, as well as the date
when affixed, must be written or stamped indelibly upon the adhesive stamp. When
the bottle or other container to which the stamp is affixed is empty, the person empty-
ing the same must completely efface and obliterate the adhesive stamp or stamps, as
the case may be.
Cocktails compounded by bartenders for immediate consumption
by customers fi'om glasses need not be tax paid.
Miniature bottles of taxable goods for display purposes or use of
drummers need not be stamped, but must be filled from stamped
containers, and each must have a certificate attached to that effect.
Such bottles for liqueurs and cordials should not contain more than
2 ounces and those for wines not more than 4 ounces.
The particular attention of producers, importers, and dealers who
sell to consumers is called to the fact that the statute imposes the
duty of tax payment and affixing stamps upon them. The absence
of stamps on any bottle or other container of wines, liqueurs, cordials,
and sinailar compounds taxable imder this act, sold or offered for
sale or consumption, is prima facie evidence that the tax has not
been paid and all such goods shall be forfeited to the United States.
Severe penalties are also imposed for failure to cancel such stamps.
It may be stated that it is a rule of evidence that all are presumed
to know the law and a plea of ignorance thereof is no excuse.
Collectors will give iromediate attention to this matter and see
that the law is fully complied with and that these taxes are duly
and fully collected.
W. H. OSBORN,
Commissioner of iTdemal Revenue*
Approved:
Wm. p. Malbitbn,
Acting Secretary of the Treasury,
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(T. D. 2079.)
Income tax.
Income tax liability and vdtiiholdii^ requirements in connectioii with qnarten, heat
and light, mileage, leimbiusement for actual expenses^ and per diem allowances
in lieu of subsistence while traveling under orders, furnished or paid by the Gov-
ernment to officers and employees.
Tbsasttbt Depabtmbnt,
Ofetoe of Commissioner of Internal REVENUBy
Washington, D. C, November S4f i9H.
To collectors of internal revenue:
All decisions and regulations which are in conflict with the holdings
that follow are hereby revoked.
{A) Income tax liability.
(1) Qiuirters. — Commutation of quarters and the money equiva*
lent of quarters furnished in kind shall be returned as income.
When quarters are furnished in kind, of a less number of rooms
than the number allowed by law, the money equivalent only of the
number of rooms actually assigned shall be returned as iz^come.
When' quarters are furnished in kind, of a greater number of rooms
than the number allowed by law, it is to be assumed that the excess
number is assigned for the convenience of the Government, and the
money equivalent only of the number of rooms allowed by law shall
be returned as income.
(2) Heal and lighl. — ^Amoimts received by, or paid for, an officer
for heat and hght shall be returned as income.
This includes the money equivalent, as fixed by the (jovemment,
of heat and light furnished to an officer occupying public quarters.
(3) Mileage. — The difference between the amoimt received as
mileage and the amoimt of actual necessary expenses incurred on* a
journey shall be returned as income.
Mileage, as such, is not gain, profit, or income to the officer, as he
is required to pay his actual expenses while traveling imder mileage
orders. The gain, profit, or income is the difference between the
amoimt received as mileage and the amount properly expended by
the officer while traveling, and this difference only should be returned
as income.
The actual expenses to be deducted by the individual before
ascertaining his gain, profit, or income on account of mileage are
the expenses for which reimbursement would be made by the Govern^
ment if he had traveled on an actual expense basis instead of a
mileage basis.
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(4) Reimbursement for actual expenses. — ^Amounts paid by the
Goyemment in the nature of reimbursement for subsistence and
otiier items of actual expenses incurred while absent on business for
the Goyemment are not required to be returned as income.
(5) Per diem aUewances in lieu of euheietence whUe traveling uvder
orders. — The difference between the amount received as a per diem
allowance and the amount of actual necessary expenses incurred on
a journey shall be returned as income.
(JB) WiOiholding requirements.
Payments in connection with (1) quarters^ (2) heat and light, (3)
mileage, (4) reimbursement for actual expenses, and (5) per diem
allowances in lieu of subsistence while traveling under orders are
indefinite and irregular as to right of possession, amount, and time of
accrual, and are not, therefore, subject to withholding as ''fixed or
determinable annual or periodical gains, profits, and income" under
the requirements of the income-tax law.
W; H. OSBOBN,
Commissioner of Internal Revenue,
Approved:
Bybon R. Newton,
ActiTig Secretary of the Treasury.
(T. D. 2080.)
Emergency revenue law.
Instructioiis relative to accoiints and reports of any assistant treasurer of the United
States, or designated depositary thereof, or any postmaster furnished with wine,
documentary, or proprietary stamps under the provisions of section 10, act of
• October 22, 1914.
Tbeasubt Depabtment,
Office of Commissioneb of Internal Revenue,
Washington, D. C, December 4, 1914,
To cdUectors of internal revenue:
Whenever, imder the provisions of section 10, act of October 22^
1914, collectors furnish to any assistant treasurer of the United
States, or designated depositary, or any postmaster, wine, documen-
tary, or proprietary stamps without prepayment, they should open
accounts with them in Record No. 43 and require monthly reports
similar to those received from their stamp deputies.
In order to avoid double shipment of forms and records, coDectois
should make requisition on this office in the case of each assistant
treasurer, depositary, or postmaster procuring stamps, to supply
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direct the following forms and records, naming the quantity of each
required:
For wine stamps. — ^Record 147, daily record of wine stamps sold;
Farm 1Q2-K, deputy collector's report of wine stamp transactions^
Form 427-B, purchaser's requisition for wine stamps.
For documentary and proprietary stamps. — ^Record 103, daily record
of documentary stamps sold; Record 104, daily record of proprietary
stamps sold; Form 427, purchaser's requisition for documentary
stamps; Form 427-A, purchaser's requisition for proprietary stamps;
Form 461, deputy collector's report of proprieta^ stamp trans-
actions; Form 452, deputy collector's report of documentary stamp
transactions; Form 459, schedule of sales of documentary and pro-
prietary stamps on which discount was allowed.
W. H. OSBOBN,
Commissioner of Internal Bevemie.
Approved:
Bybon R. Newton,
Acting Secretary of the Treasury.
(T. D. 2081.)
Emergency revenue law — Judgment notes.
Clause in promissory notes authorizing confession of judgment is not taxable as a
power of attorney.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 8, 1914-
Sir: In reply to your letter of the 19th ultuno, you are informed
that where judgment notes, so called, contam a clause authorizing
any attorney at law to confess judgment in favor of the holder of the
note, such authorization is held not taxable as power of attorney in.
addition to the tax required on the judgment note as a promissory
note.
The instrument is held to be a warrant of attorney instead of a
power of attorney. Treat, Collector, v. Tolman (113 Fed., 892).
Any ruling to the contrary is hereby revoked.
Simply crediting interest quarterly on a note is not considered a
renewal of the note.
Respectfully,
W. H. OSBORN,
Commissioner of Internal Revenue.
Mr. .
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252
(T. D. 2082.)
Emergency revenue law — Stamping display containers.
Relative to stamping display containas in which small articles are customarily dis-
played lor sale and retained in the^ontainer until disposed of.
Tbeasuey Depabtment,
omob op commissioneb op internal revenue,
WasMngtan, D, (7., December S, 19H,
To collectors of internal revenue, revenue a^/ents, and others concerned:
The provision of the reflations authorizing the stamping of dis*
play cards to which small articles are affixed in lieu of stamping each
separate article is extended to cover other display containers in
which small articles are customarily displayed for sale and retaiaed
in the container until disposed of.
Several different lines of samples have been exhibited to this office
to which it is impracticable, because of minute size, construction, or
material, to affix even the smaller caution label provided in the re-
lations for free samples. In such cases the full caution notice pro-
vided in the regulations should be prolninently affixed to the box
in which such samples are packed and from which they are dis~
tributed to the public.
The regulations are modified accordingly.
W. H. OSBOBN,
Commissioner of Internal Revenue.
Approved:
Byron R. Newton,
Acting Secretary of the Treasury.
(T. D. 2083.)
Emergency revenue law — Special tax.
Real estate agents engaged in negotiating upon a commission purchases and sales of
real estate, collecting rents, etc., do not incur liability as brokers.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 8, 1914.
Gentlemen: Replying to your communication of the SOIJi ultimo
you are informed that real estate i^ents engaged in negotiating, upon
a commission, purchases and sales of real estate, collecting rents, etc.,
do not incur liability as brokers imder the provisions of section 3, act
of October 22, 1914. However, if in connection with such business
they engage in negotiating purchases or sales of promissory notes,
deeds of trust, mortgages, etc., then special-tax liability as brokers
is incurred. Further, il they also engage in the brokeri^e business
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of negotiating sales of goods, wares, and merchandise additional
special-tax liability as commercial broker is incurred.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue,
Tiie Co., Dayton, Ohio.
(T. D. 2084.)
Emergency revenue law — LiaMUiy jis commission merchants.
Relative to liability as commission merchants of the customers of various firms through
their method of handling goods of these firms.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 7, 1914.
Sir: Referring to your personal visit to this office relative to the
allied liability of the customers of through their method of
handling goods of that firm, you are advised that it is the under-
standing of this office from your statements and papers submitted
that receive orders from druggists, coimtry merchants, and
others for boxes of assorted seeds which are furnished them upon an
agreement or contract that the seeds sold shall be paid for at the end
of the season, less certain specified discounts, and that unsold seeds
may be returned to .
The question of the status of a transaction of this character has
been b^ore the Supreme Court of the State of Alabama, which de-
cided in effect that such transactions did not involve liability as
commission merchants, in which view this office concurs, and it is,
therefore, held that special-tax liability as commission merchants is
not incurred by the customers of under the act of October
22, 1914, and under conditions noted.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue.
Mr. .
(T. D. 2086.)
Emergency revenue law — Powers of attorney.
Powers of attorney for transfer of stocks and bonds under certain conditions not
subject to tax.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 9, 1914.
Sir: This office is in receipt of your letter of the 30th ultimo, asking
foraruling under ScheduleAof theactof October 22, 1914. You make
the following inquiry:
1. Does the tax of 25 cents imposed in Schedule A on powers of attorney "to trans-
fer any stock " apply to the power of attorney to transfer stock on the books of the
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corporation embodied in the form of assignment of stock which is in common use and
printed on the back of the stock certificates?
In T. D. 2056 it was held that, where such a blank form of power
was filled in with the name of the secretary, it was a mere formal
power authorizing the secretary to do what would be his duty in any
event if no power of attorney appeared upon the certificate.
Where the owner of a certificate of stock executes the assignment
printed on the reverse thereof and the stock is delivered, the registry
of the transfer on the books of the corporation is in substance a purely
corporate act, in which neither the former owner nor the new is
required, or ordinarily does, participate, and that the power of attor-
ney included in the ordinary form of assignment of stock does not
authorize or empower any person to do anything which could not be
done or compelled to be done on a pure assignment unaccompanied
by a power of attorney.
This same question has arisen with respect to the combined assign-
ment and power of attorney printed on the reverse of bonds.
It is held, therefore, that the pro forma power of attorney to transfer
bonds or stock on the books of the corporation embodied in the
assignment printed on the back of the bond or stock certificate is not
subject to the tax.
Respectfully,
W. H. OSBORN,
Gommissioner of Internal Revenue.
Mr. •
(T. D. 2086.)
Emergency reoenue law — WUchr-haad.
Instructions as to the handling of witch-hazel for medicinal use, not taxable under
the act of October 22, 1914.
Tbeasubt Depabtment,
Office of Commissioneb of Intebkal Bevekue,
Washinffton, D. C.j December 10, 1914.
Sm: Referring to your visit of recent date, you are informed that
extract of witch-hazel removed from the factory and sold to barbers,
barbers' supply houses, or others, to be used or labeled as a toilet
water, must be duly tax paid and have the stamps affixed to the con-
tainers, regardless of the size of same. Where, however, extract of
witch-hazel is removed from the factory in bulk for shipment or sale
to druggists and portions will be sold for medicinal purposes and
portions sold as toilet water, the same need not be tax paid and
stamped by the manufacturer. In such case the person thus receiv-
ing the goods and drawing same off and labeling them for sale must
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pay tax and affix the stamps to the smaller containers into which
drawn of such portion as is sold as toilet water. In case of such
removal of bulk goods from the factory for shipment to druggists
there should be affixed to the bulk package a label reading as
follows:
These goods are removed from the foctory in an unfinished condition and need to
be drawn off into smaller bottles, labeled in the name of the person thus drawing off,
wrapped and otherwise put in a salable condition. Notice is hereby given to the
person thus drawing same off, labeling, packing, and placing them in a salable con-
dition, that the tax must be paid on such portion as is sold as toilet water or without
medicinal claims, and the necessary stamps be affixed to the bottles or other con-
tainers into which same are drawn. The portion sold for medicinal purposes need
not be tax }>aid and stamped.
The label should be dated and signed by the manufacturer.
It may be stated that witch-hazel commonly used for medicinal
purposes and sold under appropriate labels is not held to be taxable
under Schedule B of the act of Congress approved October 22, 1914.
When removed or sold as a toilet water in its ordinary condition or
colored and perfumed it is, held to be taxable imder said act.
Witch-hazel removed from the factory for purely medicinal pur-
. poses is not taxable.
Respectfully,
W. H. OSBORN,
Oommissioner of Internal Revenue.
Mr. .
(T. D. 2087.)
Emergency revenue law — Schedtde A.
Treasubt Dbpabtmbnt,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 11, 1914*
T6 internal-revenue officers and otJiers concerned:
With reference to that provision of Schedule A of the internal-
revenue act of October 22, 1914, which provides that ''certificates of
any description required by law not otherwise specified in this act"
are subject to a tax of 10 cents, this office holds that the first require
ment necessary to subject any given certificate thus generally
described to tax is that it shall be one which is required to be given
by law — National, State, or municipal. That is, the issuance of the
certificate must be mandatory under conditions or circumstances
prescribed by law or it must be one which the individual is expressly
authorized to demand and receive. All such certificates are taxabfe
except those which are given strictly in the exercise of the functions —
governmental, taxing, or municipal — of the Government, State, or
oth^r poHtical subdivision.
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It is further held that certificates which are not reqtiired by express
atatute, but are required by regulations of this or any other executive
department; although such regulations ordinarily hare the force and
e£Fect of law^ are not certificates required by law within the meaning
of the said act, it being held by this office that Congress did not
intend to authorize Grovemment departments to extend taxation by
multiplying r^ulations. Income-tax certificates, drawback cer-
tificates, and various other certificates required by regulations are,
therefore, not taxable.
A simple acknowledgment or jurat before a notary public or other
officer authorized to administer oaths is not taxable.
Certificates required by law issued by any department or officer of
the Government at the request of private persons, solely for private
use, should be stamped.
Certificates of national banks specifically required by statute to be
rendered to the Comptroller of the Currency are taxable.
Certificates issued by State or municipal officers showing the
authority of the person before whom an instrument is attested are
taxable.
Warehouse certificates, if required by law, are taxable.
A certificate of title or search carrying with it a guaranty of title
and assuming liability for any loss incurred through a flaw in the
title is held to be a bond of insurance and subject to a tax of one-half
of 1 cent on each dollar charged for its guaranty provision.
A certificate of search showing that the dockets or records of a
court have been searched, and showing either that liens exist or do
not exist as to the property, or that judgments are recorded or are not
recorded, and also certificates of search to ascertain whether or not
tities are good, whether taxes have been paid, and other certificates
of this character are not such as are required in the general discharge
of governmental fxmctions on the part of the officers giving them,
but are such as are needed for private use and private interests, and
are, therefore, subject to tax if the law requires they shalll)e issued
upon demand therefor; otherwise exempt.
Documentary stamps should be affixed to certificates or other
instruments issued for private use prior to their delivery, such stamps
to be furnished by the parties applying for such certificates or instru-
ments.
From among many certificates concerning which inquiry has been
made especial reference is made to the following, which, under the
conditions stated, this office holds are exempt:
(1) Certificates for use of the Oovemment (Federal, State, or locd[). —
Such certificates are exempt. For example, certificates of officers of
the United States or any State, county, town, municipal coiporation,
or other corporation exercising the taxing power, given in the dis-
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charge of official functions necessary in carrying on the machinery
of the Government; certificates of election; certificate of court officer
under direction and authority of the court, and which is necessary to
give proper effect to the court proceedings; court processes, such as
summonses, writs of attachments, subpoenas, warrants, orders of the
court, etc.; returns or reports made to the Government for its own
use, such as income and special tax returns, applications for licenses,
reports made to the Interstate Commerce Commission, reports made
to the Comptroller of the Currency, and to other branches of the
Federal or State Governments for governmental purposes or use;
certificates issued at tax sale or certificates of redemption from tax
sales.
(2) Certificates given for a public 'purpose. — Such certificates are
exempt when required in the interest of the public health, safety, or
weKare. For example, certificates such as by inspectors of steam
vessels, locomotives, boilers, power plants, factories, meats, food
products, lading of inflammables or explosives, births, marriages,
deaths, quarantine, health, etc.; but such certificates are required to
be stamped, as are all authenticated copies thereof, when issued to
private parties for personal use if, imder any law, they are required
to be issued upon demand; certificates issued by health officers rela^
tive to State statutes regulating employment of child labor; certifi-
cates given under State laws by inspectors and weighers of grain; and
teachers' certificates; are exempt.
(3) Licenses. — Licenses or certificates of authority to engage in
any occupation or business or to perform any act issued imder autKor-
ity of any State, coimty, or municipal enactment, as well as appli-
cations or returns therefor, are not subject to tax. Such instruments
include marriage licenses, automobile Hcenses, liquor dealers' Hcenses,
certificates of authority to insurance companies and agents, and other
similar documents.
Any previous ruUngs in conflict herewith are hereby revoked.
W. H. OSBORN,
Commissioner of Internal Revenue.
(T. D. 2088.)
Emergency revenue law — BroTcers^ notes or memoranda.
Treasury Department,
Office of Commissioner op Internal Revenue,
Washington, D, Cj December 11, 1914-
Sm: Referring to your personal visit relative to the letter received
by you from Messrs. , commercial brokers, in the matter of the
tax imposed by the act of October 22, 1914, on "broker's notes or
27776°— VOL 16—14 17
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258
memoranda," I have the honor to advise you that the tenth para-
graph of Schedule A reads as follows:
Contract: Broker's note, or memorandum of sale of any goods or merchandise, stocks,
bonds, exchange, notes of hand, real estate, or property of any kind or description
issued by brokers or persons acting as such, for each note or memorandum of sale, not
otherwise provided for in this act, 10 cents.
It will be noted that the law does not define the instrument taxed
as a brpker's note or memorandum, and so far as this office has been
able to learn there is no definite instrument generally or commercially
known as a "broker's note or memorandum."
This office is therefore compelled to arrive at the meaning of Con-
gress from extrinsic sources.
In paragraph 1 of Schedule A it is provided that on the sale and
delivery of stocks assigned in blank, the seller (usually a broker) must
dehver to the buyer a bill or memorandum of such sale, to which the
stamps covering the transfer tax shall be affixed. Again, in para-
graph 2, relating to goods sold on an exchange, it is provided that the
seller (a broker) must make and deliver to the buyer a bill, memo-
randimi, or other evidence of such sale, to which the stamp, repre-
senting the tax on such sale (if made for future delivery), must be
affixed.
The paragraph under consideration taxes brokers' notes or memo-
randa "not otherwise provided for in this act" and the two instances
noted are the only ones in which anything to which the term " broker's
note or memorandum" could be applied, and it is believed that the
term covers instnmients of the same character as those more speci-
fically described in the paragraphs named.
It is, therefore, held that a "broker's note or memorandum" within
the meaning of the act is any instrument or writing given by the
seller, when a broker or person acting as such, to the buyer of any
goods or merchandise, stocks, bonds, exchange, notes of hand, real
estate, or property of any kind or description evidencing or confirming
the sale.
Except in the case of stocks sold and assigned in blank and mer-
chandise sold on an exchange, there is no requirement in the law that
such a note or memorandum be given to the buyer, but if given it
must bear the 10-cent stamp, unless stamped at the appropriate rate
covering sales of stock or merchandise.
It will be noted that it is the note or memorandum given to the
buyer, and not to the person for whom the broker is acting in making
the sale, which requires the stamp.
Respectfully,
W. H. OSBOBN;
Commissioner of Internal Revenue.
Mr. — .
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259
(T. D. 2089.)
Emergency revenue law — Receipt for adhesive stamps.
Collectors of internal revenue should sign vouchers evidencing receipt of money for
adhesive stamps whenever requested to do so by the purchasers of such stamps.
Treasuby Department,
Office of Commissioneb of Internal Revenue,
Washington, D. C, December 12, 1914.
To collectors of-intemai revenue:
Many complaints have been received by this oflGice that collectors
of internal revenue refuse to sign vouchers evidencing the payment
for adhesive stamps delivered by them. Such vouchers, in many
cases, are necessary to agents and representatives of individuals,
corporations, etc., in the settlement of their accounts, and collectors
should, therefore, as a rule, sign vouchers evidencing the delivery of
adhesive stamps upon request.
Section 3183, Revised Statutes, prohibits a collector from issuing a
receipt in lieu of a stamp representing a tax, but the receipts above
mentioned, evidencing delivery of stamps, are in no sense issued in
lieu of the stamps.
In the absence of any good reason for refusal to do so, collectors will
be expected to sign vouchers presented evidencing the delivery of
adhesive stamps when requested to do so.
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. MoAdoo,
Secretary of the Treasury.
(T. D. 2090.)
Income tax.
Synopsis of rulings on questions relating to the income tax imposed by section 2 of
the act of October 3, 1913.
Treasury Department,
Office of Commissioner op Internal Revenue,
* Washivjgton, D. C, December 14j 1914.
The followmg synopsis of rulings on questions relating to the
income tax imposed by section 2 of the act of October 3, 1913, on
individuals, corporations, joint stock companies, associations, and
insurance companies, is published for the information of internal-
revenue officers and others concerned. All rulings or parts of rul-
ings heretofore made which are in conflict herewith are hereby
revoked.
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Part L
bulings in relation to personal inoome tax.
Actors and actresses. — If costumes purchased by actors and ac-
tresses are used exclusively in the production of a play, and are not
adapted for occasional personal use and are not so used, a deduction
may be claimed on account of such depreciation in their value as oc-
curs during the year on account of wear and tear arising from their
use in the productions of the play or to their becoming obsolete at
the close of the production.
Adrmnistrainx)n of estates, expenses of. — ^Expenses of administration
of an estate, such as court costs, attorneys' fees, executors' conunis-
sions, etc., are chargeable against the corpus of the estate and are not
allowable deductions in a return of a fiduciary on Form 1041.
Administrat(yrs. — See Executors and administrators.
Agent — The word ''agents" as used in paragraphs D and E of the
income-tax law in connection with the words ''control, receipt,
custody, disposal or payment of income to another person," doeB
not relate to agents not acting in a fiduciary capacity. Agents not
acting in a fiduciary capacity have no responsibihty with reference
to withholding the tax on, or making a return of, income turned over
to resident ahens or citizens of the United States ; but the responsible
heads, agents, or representatives of nonresident ahens who are in
charge of property owned, business carried on, or capital invested
within the United States, shall make full and complete returns of
the income therefrom on Form 1040, revised, and pay the tax thereon.
See Nonresident ahen, agent of.
Agent, real estate. — See Real estate agent.
Agent for nonresident alien. — See Nonresident ahen, agent of.
Aids^ pay. — See Pay.
Alimony. — ^Alimony is regarded as fixed and determinable income,
and in cases where it is in excess of $3,000 the person paying such
ahmony is required to withhold the normal tax on the same unless
exemption is claimed under paragraph C, in which case the normal
tax wiU be withheld only on the amount paid in excess of the exemp-
tion claimed. It must be accounted for as income if, together with
other income, the recipient is in receipt of a net income of $3,000 or
more. It is regarded as a personal expense to the person paying it
and is, therefore, not an allowable deduction in his return.
Annuity. — The amoimt paid imder a life insurance, endowment, or
annuity contract is not income when returned to the person making
the contract, either upon the maturity or surrender of 4ihe contract;
but the amount by which the sum received exceeds the sum paid
and coming into the hands of the person making the contract and
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payment is income. When the settlement under such a contract is
made in more than one payment each payment will be considered as
being composed of interest and a proportionate part of the principal.
Where the entire annuity is composed of an interest return upon the
principal sum paid therefor, the entire annuity is income.
AssessmerUs on stock. — Assessments made by a corporation on its
capital stock are regarded as an investment of capital and do not
constitute an allowable deduction in the return of the individual.
Bad debt — See Debt.
Beneficiary. — A beneficiary is liable for the normal tax upon the
amount of net income derived by him from a taxable source through
a fiduciary, less the amount of exemption claimed and the amount of /
income on which the normal tax has been withheld at source, and is
also liable for the additional tax assessable on the amount of net in-
come received by him in excess of $20,000; and in order to determine
whether the net income of a beneficiary is or is not in excess of
$20,000 and subject to the additional tax, the amount derived by
him from an estate and all other taxable sources is required to be
shown on his personal annual return.
Board of education, requirements of, with reference to witJiholding. —
See Rent.
Bond, premium on. — Where an employee is required to furnish
bond and pay the premium on such bond, as a necessary incident of
his employment, the premium on the bond will constitute an allow-
able deduction in computing net income.
Bonds containing tax-free covenant clause. — The stipulation in bonds
whereby the tax which may be assessed against them, or the income
therefrom is guaranteed, is a contract wholly between the corpora-
tion and the bondholder, and in so far as the income-tax law applies,
the Government will not differentiate between coupons from bonds of
this character and those from bonds carrying no such guaranty.
The debtor corporation or its duly authorized withholding agent will
be held responsible for the normal tax due in such cases when no
exemption is claimed. When coupons are accompanied by certifi-
cates of ownership in which no exemption is claimed, the income from
such coupons may be included in the return of the individual (under
colunm A, p. 2, of Form 1040, revised) as income upon which the
normal tax of 1 per cent has been paid or is to be paid at the source.
(T. D. 1948.)
Bonds, interest on. — The exchange of interest coupons for funding
bonds .is a payment of interest on the bonds and the income tax
should be imposed and paid upon such interest as income for the year
in which it matures and such payment is made, and in the absence
of proper claim for exemption the tax should be deducted and with-
held on the amoimt represented by the coupons.
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Book value. — Book values which reflect a shrinkage in the value of
assets are not a basis for determining taxable income. (T. D. 2005.)
Certificate of merit, pay for. — See Pay.
Certificate of ovmership. — Where bonds, under contract provisions
in the bonds, are retired within an interest period and prior to the
expiration of the full term of the bond, ownership certificates will be
required and should cover that part of the interest period ajQFected
between the beginning of such period and the date of the retirement
of the bonds.
Certificates. — The department will furnish blank forms of certifi-
cates to be used in connection with the collection of the income tax
by such parties as may make application for the same. Private cor-
porations and others desiring to have these certificates printed for
themselves may do so if they will strictly observe the requirements
of the department as to size, print, form, color, and contents. (T. D.
1939.)
Certificates to he used in daiming exemption from withholding on
income derived from foreign sources. — See Income derived from
coupons, checks, etc.
Citizenship. — ^An American woman who marries a foreigner takes
the nationahty of her husband and can not claim exemption under
paragraph C.
Cluhs. — AU clubs are not exempt from the provisions of the income-
tax law, even though not operated for profit. A club desiring to be
registered as an exempt organization should file with the Commis-
sioner of Internal Revenue a copy of its charter, or an affidavit of
its principal officer, setting forth the nature of its organization, the
purpose for which organized, the source, if any, from which it derives
iQcome, and the disposition made of such income as is received by it
for consideration and determination as to whether or not it comes
within the class of organizations held to be exempt imder the pro-
visions of paragraph G of the income-tax law.
Commission, — A commission paid to a real estate agent for col-
lecting rents and management of property is a legitimate business
expense and constitutes an allowable deduction in computing net
income.
Commission on renewal premium. — See Renewal premium.
Commissions. — See Compensation.
Commissions paid salesmen. — Commissions paid to salesmen as
a part of the expense of conducting business are allowable deduc-
tions to the payer of the conunission. Such commissions, however,
are income and should be accounted for in the return of the person
receiving them. When indefinite as to amount and time of accrual,
they are not subject to withholding.
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Commrtation of heat and light. — Amounts paid on account of
commutation of heat and light are not subject to withholding.
(T. D. 2079.)
Commrtation of quarters. — Payments made on account of commu-
tation of quarters are not subject to withholding. (T. D. 2079.)
Compensation. — (1) A person receiving a salary in excess of
$4,000, and, in addition, a commission of 1 per cent on all sales, the
exact amount due on account of commissions not being determinable
until February following the year in which the commissions were
earned, at which time both his salary for the preceding year and
his commi3sions are paid to him, should return as income, for the
year in which payment was made, the aggregate amount received
on account of salary and commissions. The normal tax should be
deducted and withheld therefrom when the combined payments of
salary and commissions aggregate in excess of $3,000, subject to
authorized exemption claimed. The normal tax deducted from
these payments should be accounted for on the withholding agent's
return. Form 1042, for the year in which the deductions were made.
(2) Where an employee is paid a sum equal to two years' salary
on condition that he surrender his contract of employment, such sum
should be reported by him on his annual return as income, and if the
sum paid exceeds $3,000, the normal tax should be deducted and
withheld therefrom, subject to authorized exemption claimed.
(3) When profits distributed by a corporation to an employee,
together with payments of the employee's salary, aggregate in excess
of $3,000, the normal tax should be deducted and withheld there-
from, subject to authorized exemption claimed.
Compensation for service upon an annual^ monthly, or weeJcly 6am. —
Where a service and pay^ient period is divided by the end of a taxable
year, the compensation for the period so divided at the end of the
year will be accounted for in the return for the year in which payment
is made and received. Where the service is of such nature as to be
compensated by fee, or of such nature that no portion of the amount
becomes due imtil the service is completed, then the total amount
of the compensation should be included in the return for the year in
which the compensation is received.
Compensation, valve of quarters furnished, part of — ^Where an indi-
vidual is furnished hving quarters in addition to salary, the rental
value of such hving quarters is regarded as compensation subject
to the income tax.
Corporation notes for a period of one year or less. — See Promissory
note of corporations.
Corporation^, equipment trust notes of — See Equipment trust notes.
Corporations, obligations of — ObUgations of corporations similar to
bonds, mortgages, deeds of trust, etc., for income-tax purposes are
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held to be those obligations of corporations which, though not bonds,
mortgages, or deeds of trust, are similar in form, purpose, or in being
extended beyond the time of ordinary bankable commercial paper.
Interest payments on ordinary bankable commercial paper of cor-
porations payable to individuals are subject to withholding at the
source only when the payment to any one individual within a taxable
year exceeds $3,000. On all other obligations of corporations, etc.,
payable to individuals, interest payments are subject to withholding
regardless of the amount of interest payment. See Mortgage, prop-
erty purchased subject to.
Corporations^ principal place vf hu^ness of. — ^The principal place
of business of a corporation is the place or office in which are kept
the books of account and other data from which the return is to be
prepared.
Corporations, property purcTiased hy, subject to mortgage, — See Mort^
gage, property purchased subject to.
CorporaMons, residence o/.— Corporations whose business is done
ivhoUy in Porto Rico and the Phihppine Islands, even though incor-
porated in the United States, are held to be resident corporations of
these possessions, and will make returns and pay the income tax to
the collectors of internal revenue having jurisdiction there.
Costumes. — See Actors aixd actresses.
Debt, — ^A bad or worthless debt, as contemplated by the income-
tax law, and which may be deducted in a return of income, is a debt
which has been actually ascertained to be worthless and charged off
within the taxable year.
Decedentf return of a. — See Executors and administrators.
Deductions, paragraph B, — (1) Necessary expenses actually paid
in carrying on any business, not including personal, living, or family
expenses.
(2) All interest paid within the year by a taxable person on
indebtedness.
(3) All National, State, county, school, and mimicipal taxes paid
within the year, not including those assessed against local benefits.
(4) Losses actually sustained during the year incurred in trade or
arising from fires, storms, or shipwreck and not compensated for by
insurance or otherwise.
(5) Debts due to the taxpayer actually ascertained to be \vorth-
less and charged off within the year.
(6) A reasonable allowance for the exhaustion and wear and tear of
property arising out of its use or employment in the business not to
exceed, in the case of mines, 6 per cent of the gross value at the
mine of the output for the year for which the computation is made;
but no deduction shaU be made for any amount of expense of restor-
ing property or making good the exhaustion thereof for which an
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allowance is or has been made ; provided that no deduction shall be
allowed for any amount paid out for new buildings, permanent
improvements, or betterments made to increase the value of any
property or estate. (See Paragraph B, sec. 2, act of October 3, 1913.)
Depreciation, — See Actors and actresses.
Dividends declared hy foreign corporations transacting "business
whoUy within the United States, — See Foreign corporations, property
owned and business transacted wholly within the United States.
Drainage, irrigation, and redamation districts, interest on bonds of. —
See Special assessment districts.
Employees, foreign, of domestic corporations. — See Foreign em-
ployees of domestic corporations.
Equipment trust notes. — Equipment trust notes secured by mort-
gage issued by a corporation are subject to withholding. Temporary
receipts issued pending preparation and issue of the notes themselves
stand in the place of the notes, and where an interest period inter-
venes and receipts are to be presented for indorsement thereon of a
payment of interest, requisite certificates of ownership- claiming or
not claiming exemption should be filed:
Executors and administrators. — If the net income of a decedent
from January 1 of the year in which he died to the date of his death
was $3,000 or over, a return for such decedent must be made by the
executor or administrator on Form 1040, revised, and such executor
or administrator may claim all deductions and exemption to which
the decedent would have been entitled under the law.
Exempt organizations. — Any organization which has been held by
the Commissioner of Internal Revenue to come within the class of
organizations enumerated in paragraph G of the income-tax law is
not required to deduct and withhold the normal tax from the amoxmt
of any salary or interest paid by it, and it is subject to no require-
ments of said law. However, the owner of bonds issued by such an
organization is not relieved from the fihng of certificates of owner-
ship, with coupons detached from such bonds when presenting same
to a bank or other collecting agency for collection or otherwise, or
to the debtor corporation or its duly designated paying agent for
payment; and while such an organization as the source of income
is under no obligation to withhold the tax in cases where no exemp-
tion is claimed, it should, nevertheless, forward with a letter of
transmittal such certificates as are received by it to the collector of
internal revenue for its district on or before the 20th day of the
month next succeeding that in which the said certificates were re-
ceived. No special form of certificate has been issued for presenta-
tion with coupons detached from bonds of exempt organizations,
but certificates in the usual form, claiming or not claiming exemp-
tion, may be used. (T. D. 1967.)
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Where such organizations have an issue of registered bonds, they
should, before sending out checks issued in payment of registered
interest, stamp or write across the face of such check, '^Corporation
exempt imder paragraph G from withholding;" otherwise the first
bank or collecting agent would deduct and withhold the normal tax
therefrom.
Exempt organizations J salaries paid hy. — Salaries paid by corpora-
tions which corporations have been held to be exempt from the
income tax under paragraph G of the income-tax law, are subject to
the income tax and should be returned as income by the individual,
but the corporation is not required to withhold the tax.
Exemption and deductions allowed in the return of a decedent — See
Executors and administrators.
Exemption, husband and wife. — See Husband and wife.
Exemption on income received from partnerships, — See Partnerships,
identity .of income.
Expense. — Taxes paid bj a tenant to a landlord are considered as
additional payment for rent and are deductible as an expense of
carrying on business.
Failure to render a return, peTiaUy for, — ^Every person having a net
income of $3,000 or more for the calendar year is required to render
a return, and the penalty provided by law for refusal or neglect to
file a return will be enforced regardless of the fact that the net income
may be less than the exemption to which the individual is entitled.
Farm buildings, depreciation of, — ^Depreciation of farm buildings,
other than a dwelling occupied by the owner, actually sustained
within the year in excess of repairs made, will be considered an
allowable deduction.
Fiduciary. — ^* Fiduciary "is a term which appUes to all persons or
corporations that occupy positions of peculiar confidence toward
others, such as trustees, executors, or administrators; and a fiduciary,
for income-tax purposes, is any person or corporation that holds in
trust an estate of another person or persons.
There may be a fiduciary relationship between an agent and a
principal; but the word '' agent" does not denote a ''fiduciary" within
the meaning of the income-tax law.
Fiduciary, return of. — Fiduciaries are required to make a return on
Form 1041, revised, whenever the interest of any one .beneficiary in
the income from the estate or trust subject to the normal tax is in
excess of $3,000. This duty can not be delegated to another person.
When the interest of any one Ijeneficiary exceeds $3,000 and a return
is required, the name and full address of each beneficiary and the
share of income to which entitled, even though it be less than $3,000,
must be shown; and in all cases where the beneficiary's interest is in
excess of $3,000 the fiduciary is required to withhold the normal tax
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unless exemption is claimed under paragraph C, and then only on the
amount in excess of the exemption so claimed.
A fiduciary acting for a beneficiary in more than one estate or trust
is required to account for each estate separately, and if the amount
of income from no one estate exceeds $3,000 no return or withholding
will be required. Unless the beneficiary is imder some 'disability
which requires the fiduciary to act, the beneficiary will make his own
return and account for the tax upon his entire net income.
A fiduciary acting for a minor or insane person having a net income
in excess of $3,000 will make the return for his ward on Form 1040,
revised, and will not be required to file a return on Form 1041,
revised, unless he has more than one ward by reason of the same
estate or trust. Then, in that event, a return will be required on
Form 1041, revised, and a separate retiu'n on Form 1040 for each
ward having a net income of $3,000 or more for the calendar year.
Dividends in the hands of a fiduciary and belonging to a beneficiary
are not subject to the normal tax, but will be subject to the addi-
tional tax to the beneficiary whenever the beneficiary's income from
all taxable sources is in excess of $20,000. (T. D. 1943.)
Fire-insurance policy , premiums paid on. — See Insiu'ance premium.
Foreign corporations, interest on bonds of. — See Income derived
from coupons, checks, etc.
Foreign corporations, property ovmed and business transa^cted whoUy
vnihin the United Staies. — ^Dividends declared and paid by a foreign
corporation which derives' its entire income from business done wholly
within the United States and pays, under the provisions of the
Federal income-tax law, a tax upon its net income, should be treated
in the same manner as dividends from domestic corporations.
Foreign employees of domestic corpc^ations. — Salary received by a
foreign employee of a domestic corporation for services rendered
entirely in .a foreign land is not subject to deduction and withholdii^
of the normal tax at source.
Foreign mortgages, income from. — See Income derived from
coupons, checks, etc.
Foreign service pay. — See Pay.
Gift, property acquired by. — ^The value of property acquired by
gift is not subject to income tax, but all gains, profits, or income de-
rived therefrom are subject to tax, and if the/property so acquired
is subsequeiltly sold at a price greater than the appraised value at
the time the property was acquired by gift, the gain in value is held
to be income and subject to tax under the provisions of the Federal
income-tax law.
Qifts. — See Voluntary offering.
Gratuity. — ^Where the monthly salary of an officer or employee is
paid for a limited period after his death to his widow in recognition
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of the services rendered by her husband, no services being rendered
by the widow, it is held that such payment is a gratuity and exempt
from taxation under the income-tax law. Such a payment would
not, however, be an allowable deduction as an expense of carrying on
business in the return of the person, firm, or corporation paying Same.
GuardiaUj return of, — See Fiduciary, return of.
Heat and light. — ^Amounts received by or paid for an officer for
heat and light shall be returned as income.
This includes the money equivalent, as fixed by the GoTemment,
of heat and light furnished to an officer occupying public quarters.
(T. D. 2079.)
Heat and light j commutation of, — See Commutation of heat and light.
Husband and wife. — Where either dies during the year having a
net taxable income of $3,000 or more a return of income should be
made by the executor or administrator of the deceased as of the date
of his death, and the executor or administrator may claim an exemp-
tion of $4,000 under paragraph C. The survivor, when making a
return at the end of the year for the entire year, will be allowed the
applicable exemption for the single or married status existing at the
close of the year.
Husband and wifcy additional tax computed on separate income of,—
The regulations of the department requiring the incomes of husband
and wife to be combined and authorizing the aggregate exemption of
$4,000 from such combined income are applicable for the purpose of
the normal tax only. The additional, or surtax, imposed by the act
will be computed on the basis of the separate income of each indi-
vidual; that is, on the amount of each individual's income iq excess
of the minimum amounts upon which the surtax at the graduated
rates is to be calculated.
Income derived from coupons j checTcs, or biUs of exchange on foreign
bonds J mortgages J dividends , etc. — Amounts received by citizens or
residents of the United States for or in payment of interest upon
bonds issued in foreign countries, and upon foreign mortgages or like
obUgations, and for any dividends upon stock or interest upon obli-
gations of foreign corporations, associations, or insurance companies
engaged in business in foreign countries, are subject to the income
tax. (Art. 54, regulations No. 33.)
The Ucensed person, firm, or corporation first receiving such foreign
item for collection or otherwise shall withhold therefrom the normal
tax of 1 per cent and will be held responsible therefor unless exemp-
tion is claimed.
If the foreign item is in the form of a check or bill of exchange,
the words "Income tax withheld by " (giving name, address,
and date), or the words, "Income-tax exemption claimed through
" (giving name and address of licensee), as the case may be,
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shall be indorsed or stamped thereon by such Ucensee; but if the
item is represented by a coupon or coupons from bonds, the hcensee
shall attach thereto a statement identifying the same, and the indorse-
ment or stamp showing the tax. withheld or exemption claimed shall
be placed on the statement instead of the coupon or coupons.
Such indorsement or stamp shall be sufficient evidence of tax with-
held or exemption claimed to reheve subsequent holders or purchasers
from the obUgations of withholding. (T. D. 2023, arts. 60-61, regu-
lations 33.)
Claims for exemption from withholding on income other than from
interest on bonds may be made by individuals or Form 1007; by
firms, organizations, or fiduciaries on Form 1063 ; claims for exemp-
tion from witholding on interest from bonds may be made by indi-
viduals on Form lOOOB; by firms and organizations on Form 1001;
and by fiduciaries on Form 1015. (T. D. 1998.)
Insurance premium. — Premiums paid for insurance on property
which is not occupied by the owner as a dwelling, but is rented or
leased to secure an income, constitute allowable deductions in com-
puting net income.
Premiums paid on life insurance by the insured do not constitute
allowable deductions under the income-tax law.
Premiums paid on life insurance taken out by a partnership upon
the lives of individual members of such partnership constitute
allowable deductions in ascertaining the net earnings of the part-
nership. However, when such policies mature, or upon the death
of the insured partner, the amount received as life insurance should
be included in the gross income of the partnership.
Investment certificates. — Investment securities issued by a corpora-
tion for a term of years are corporate obligations within the raeaning
of the income-tax law.
JudgeSy salary of. — The salary of judges of the Supreme and infe-
rior courts of the United States appointed subsequent to October 3,
1913, and of judges who have been retired is subject to the income
tax and to the withholding provisions of the income-tax law.
Landlord. — ^A landlord in receipt of annual rental from a tenant in
excess of $3,000 may, at the time the amount of rental payments
aggregates $3,000, file with the tenant a claim for exemption under
paragraph C of the income-tax law (Form 1007, revised). He may,
also, after December 31 of the taxable year, file with the tenant, or
with the collector of internal revenue, a claim for deductions under
paragraph B on Form 1008, revised.
For duties of tenant with reference to withholding, see Tenant.
(T. D. 1965.)
Legacy. — ^The general policy of the law and rule of interpretation
require that legacies in all cases, unless clearly inconsistent with the
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intention of the testator, should be held to be vested rather than
contingent. Where there is a vested interest the income from such
interest, whether distributed or not, is subject to the tax; and when
in the hands of fiduciaries they are required to account for and pay
the tax thereon.
Life insurance policy, premiums paid on. — See Insurance premium.
Living quarters furnished, — See Compensation, value of quarters
furnished part of.
Local benefits, taxes assessed against — Taxes paid pursuant to
assessments levied by special district^, such as irrigation, reclama-
tion, drainage districts, etc., for sidewalks in cities, street extension,
grading, paving, etc., are held to be '^ taxes assessed against local
benefits." Such taxes are not allowable deductions in a return of
annual net income.
Losses in trade, — ''Only those losses are deductible which are sus-
tained during the tax year 'in trade.' Loss to be deductible must
be an absolute loss, not a speculative or fluctuating valuation of con-
tinuing investment, but must be an actual loss, actually sustained
and ascertained, during the tax year for which the deduction is
sought to be made; it must be incurred in trade and be determined
and ascertained upon an actual, a completed, a closed transaction."
The term "in trade,'' as used in the law and in T. D. 2005, is
held to mean the trade or trades in which the person making the
return is engaged; that is, in which he has invested money other-
wise than for the purpose of being employed in isolated transactions
and to which he devotes at least a part of his time and attention.
A person may engage in more than one trade and may deduct losses
incurred in all of them, provided that in each trade the above
requirements are met. As to losses on stocks, grain, cotton, etc., if
these are incurred by a person engaged in trade to which the buying
or selling of stocks, etc., are incident as a part of the business, as by
a member of a stock, grain, or cotton exchange, such losses may be
deducted. A person can*be engaged in more than one business, but
it must be clearly shown in such cases that he is actually a dealer,
or trader, or manufacturer, or whatever the occupation may be, and
is actually engaged in one or more lines of recognized businesses
before losses can be claimed with respect to either or more than one
line of business, and his status as such dealer must be clearly estab-
lished. (T. D. 2005.)
Mileage, — The difference between the amount received as mileage
and the amount of actual necessary expenses incurred on a journey
shall be returned as income. Payments on account of mileage are
not subject to withholding. (T. D. 2079.)
Minor child, return of. — See Guardian, natural.
Mortgage, property purchased subject to, — An individual issues
coupon bonds secured by a mortgage upon real estate. Subsequently
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a corporation purchases the real estate and assumes (as between
the mortgagor and itself) the payment of bonds and coupons. Held,
that the situation is not changed by the purchase by the corpora-
tion. The corporation purchased only the mortgagor's equity of
redemption (and the mortgagor's possession); the property is the
security, and the character of the bond obligation remains unchanged
and as created, even though the corporation is to pay all interest and
will ultimately pay off the mortgage. There will be no withholding
by the corporation (it being placed in the stead of the mortgagor)
until the interest payment to any one person in any year exceeds
$3,000. (See PubUc utiUty.)
MunicipaMtyj obligation of. — See Public utiUty, and Mortgage,
property purchased subject to.
Naval officers. — See Oaths.
NonresideTvt alien, a^eni of. — The responsible heads, agents, or
representatives of nonresident aliens who are in charge of the prop-
erty owned or bi;siness carried on within the United States by non-
resident aUens shall make iuU and complete returns of the income
therefrom on Form 1040, revised, and shall pay any and all tax, nor-
mal and additional, assessed upon the said income of such nonresi-
dent aUens. (T. D. 2013.)
Notary fublic. — See Oaths.
Oaihs. — (1) A return of income rendered by an individual residing
abroad may b^ acknowledged before any duly appointed ofl&cer of
the country in which he resides authorized to administer oaths and
use an official seal.
(2) If a return is executed in a State before a notary who is not
required by the laws of the State to use a seal, and none is used, the
notary should file with the Conamissioner of Internal Revenue the
certificate of an officer possessing a seal, showing that he is duly
commissioned and authorized to administer oaths; otherwise the
certificate will not be recognized.
(3) Returns acknowledged before commanding officers of naval
vessels while at sea or in foreign ports will be accepted.
(4) Returns executed before a summary court officer. United
States Army, will not be accepted.
OvmersJiip certificates. — Ownership certificates should be filed with
coupons of exempt organizations when presented for collection.
(See Exempt organizations.)
PartnersMp — Identity of income. — The character of partnership
profits divisible between persons has no reference to any character
which, as income accruing to the partnership, it may have borne
prior to receipt by the partnership. It is therefore held that income
received from a partnership can not be traced to its source behind
the partnership for the purpose of claiming individual exemption.
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Income, when accrued, — It is held that the income from a partner-
ship accrues to the individual partner at the time his distributive
interest is determined and reducible to possession. In the returns of
income made by individuals for the calendar year, therefore, there
should be included such income accruing from the business of partner-
ships for their business years as may have been definitely ascertained
by means of a book balance, whether distributed or not. In other
words, members of partnerships are required to make returns of
income hke other individuals for the calendar year, and should in-
clude in their returns the net proceeds of their interest in partnership
profits ascertained at the end of the business year falling within the
calendar year for which the individual return is being rendered.
Pay. — Congress has clearly specified the conditions under which
officers and enhsted men are entitled to foreign service pay, aids'
pay, and pay for certificate of merit, and such items of income are
considered as fixed and determinable and subject to the withholding
provisions of the income-tax law.
Penalty for failure to render a return. — See Failure to render a return,
penalty for.
Pension, foreign.-— lAcQf^Q not required for collection of foreign
pensions paid to resident aliens or citizens of the United States.
Pensio7i5.— Pensions paid by the United States Government are
subject to the income tax.
Per diem allowances in lieu of subsistence while traveling under
orders. — The difference between the amount received as a per diem
allowance and the amount of actual necessary expenses incurred on
a journey shall be returned as mcome and is not subject to with-
holding. (T. D. 2079.)
Power of attorney , fiduciary relation can not he created hy.—A person
can not, by a power of attorney, delegate to another a duty which
he himself could not perform, and inasmuch as an individual can
not relieve a withholding agent from the withholding requirements
of the income-tax law by filing Form 1015, a person holding a power
of attorney from another is without authority to file this certificate
as a fiduciary. Hawever, for income-tax purposes he is authorized
to file any certificate which his principal, as such, would be entitled
to file.
Premium on bond. — See Bond, premium on.
Pr^dpal place of business of corporations. — See Corporations,
principal place of business of.
Profit from sale of real estate. — Profit is the difference between the
selling price and the cost where the selling price is more than the cost.
"Cost of property purchased prior to the incidence of the special
excise tax (Jan. 1, 1909), or the incidence of the income tax (Mar. 1,
1913), will be the actual price paid for the property, including the
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273
expense incident .to the procurement of the property in the first
instance and its sale thereafter, together with carrying charges of
interest actually paid, insurance, and taxes actually paid prior to the
incidence (special assessments, if any, 'actually paid' as 'local bene-
fits' in connection with real estate); provided that where, up to the
incidence of the tax, the expense of carrying property has exceeded
the income from it, the difference between the expense of carrying
and the income from the property shall be added to the purchase
price, and the sum thus ascertained shall.be the cost of the property;
and provided further, that in the case of property purchased prior
to the incidence of the tax and sale thereof subsequent to the inci-
dence of the tax, there shall be excluded from consideration in ascer-
taining cost of any items of income, expense, interest, and taxes pre-
viously taken into account in preparing a return of annual net income.
''The cost of property acquired subsequent to the incidence of the
tax will be the actual price paid for it, together with the expense inci-
dent to the procurement of the property in the first instance, and its
sale thereafter, and- the cost of improvement or betterment, if any."
The entire profits realized by individuals or corporations from the
sale of real estate will be taxable except where the property in con-
nection with which the profit is obtained was acquired prior to March
1, 1913, in the case of individuals, or prior to January 1, 1909, in the
case of corporations; and then and in such event the profit will be
prorated over the whole time the property was held, and that part of
the whole profit apportioned to the taxable period will be reported in
annual returns of income. In prorating, fractional parts of years will
not be considered.
For income-tax purposes, where there is an actual sale and transfer,
profit will be considered as realized even though payment is to be made
in installments, as notes for deferred payments are secured by the
title to the property and presumably bear interest and are held to be
worth, in cash, their face value.
In case of default on installment payments there may be charged
off as bad debts the amoimt of such unpaid installments less the
salvage value of the real estate repossessed. (T. D. 2005.)
Profit sharing, — See Compensation.
Promissory note of corporcUions. — ^A simple promissory note not
exceeding one year in time is not "similar to bonds, mortgages, or
deeds of trust of corporations,'' and the interest on such a note is
not subject to withholding except when the amount of interest
thereon payable to an individual in any one year is in excess of $3,000,
or when the interest thereon is payable to a nonresident alien, in
which latter case the tax should be withheld regardless of the amount
of interest payment.
Public utility. — Where a municipality purchases a public utility
subject to a mortgage, the mortgage retains its original character,
27776°— VOL 16—14 ^18
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274
even though the municipality assumes the mortgage indebtedness
and pays the interest thereon. Therefore, the indebtedness secured
by such mortgage is not an obhgation of the municipality withm the
meaning of paragraph B of the income-tax law. (See Mortgage,
property purchased subject to.)
Quarters. — Conmiutation of quarters and the money equivalent of
quarters furnished in kind shall be returned as income.
When quarters are furnished in kind of a less number of rooms
than the number allowed by law, the money equivalent only of the
number of rooms actually assigned shall be returned as income.
When quarters are furnished in kind of a greater number of rooms
than the number allowed by law, it is to be assumed that the excess
number is assigned for the convenience of the Government, and the
money equivalent only of the number of rooms allowed by law shall
be returned as income. (T, D. 2079.)
Quarters^ commutation of, — See Commutation of quarters.
Real estate agent. — ^Real estate agents are not required to deduct
and withhold the normal tax from rents collected, even though the
amount is in excess of $3,000. The agent stands in the place of the
landlord and receives money from tenants in exactly the same
capacity as the landlord would receive such moneys and should be
treated as such. A real estate agent does not act as an agent of the
debtor. Therefore the duty of withholding the tax can not be trans-
ferred from the debtor to such agent, because siich transfer would
simply be transferring the duty of withholding to thB landlord
himself.
Real estate, profit from sale of — See Profit from sale of real estate.
Reimbursement for actual expenses, — ^Amounts paid by the Govern-
ment in the natiu'e of reimbursement for subsistence and other items
of actual expense incurred while absent on business for the Govern-
ment are not required to be returned as income. (T. D. 2079.)
Renewal premium, — Commissions on renewal premiums for insur-
ance are income when received and income for the period in which
received.
Rent — ^Where a tenant rents two pieces of property from the
same owner, the tenant should combine the payments, and when
such payments so combined aggregate in excess of $3,000 the nor-
mal tax should be deducted and withheld, subject to authorized
exemptions claimed.
Where a board of education for a school district rents property at
an annual rental exceeding $3,000, such board of education is re-
garded as a tenant and should withhold the normal tax, subject,
however, to the exemption claimed.
A lessee paying rent in excess of $3,000 a year under a lease from
two or more individuals must make deduction from all payments to
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individuals in excess of $3,000 unless certificates of exemption are
filed. He should ascertain in what proportion the rent is divided
by the use of office Form lOOOB, which may be adapted and exe-
cuted by one of the parties in interest, the others executing Form
1007. The withholding should be made from the income of individ-
uals and not from the aggr^ate amoimt paid. This situation is not
different if the lessors are husband and wife if their individual inter-
ests are separate. The situation is not changed if, by instruction,
the actual payments of rent are made to one lessor, the payments
to be distributed by him. Where notes are given in payment of
rent, the lessee's obligation to withhold is not altered. The lessee's
obligation is the same as in the case ot cash rental, withholding
occurring at the time the notes are given, and not at maturity.
When rental payments in excess of $3,000 a year are payable to a
fiduciary, who fails or refuses to file Form 1063, agreeing to act as
the source, the beneficiaries are not entitled to file exemption cer-
tificates directly, the lease having been taken from the fiduciary. If
the fiduciary's certificate is not filed, the lessee should withhold 1
per cent on the entu-e amount. The lessee is not presumed to have
knowledge of the beneficiaries unless they are parties to the lease. .
Rent. — See Living quarters.
Return offdudary or guardian, — See Fiduciary, return of.
Returns, execution of, — See Oaths.
Salaries, vnffiholding on, based on calendar year, — The salary of an
individual is subject to withholding at the source only on the basis
of the calendar year. Corporations which have a fiscal year other
than the calendar year and pay employees salaries of $3,000 or over
per annum will be required to withhold on the basis of the calendar
year.
Salary of judges, — See Judges, salary of.
Salary paid in advance, — See Compensation.
Salary paid to widow for a limited time after death of employee, — See
Gratuity.
Scrip, — Scrip certificates issued by a corporation to its stockhold-
ers in lieu of dividends, such scrip certificates bearing interest paya-
ble semiannually and redeemable at a specified time not longer than
one year from date of issue, are not corporate obligations similar to
bonds, mortgages, or deeds of trust, and the interest payable thereon
will not be subject to withholding except when the amount thereof
payable to an individual in a calendar year exceeds $3,000. Pay-
ment in scrip is held to be equivalent to payment in cash, and when
the amount of such scrip payment to any one individual in a calendar
year is in excess of $3,000 the tax must be withheld and accounted
for in excess of exemption claimed.
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Special assessment districts. — Special assessment districts created
under the laws of the several States for public purposes, such as the
improvement of streets and public highways, the provision for sewer-
age, gas, and Kght, and the reclamation, drainage, or irrigation of
bodies of land, and levee and school districts, are held to be political
subdivisions of a State, and income derived from interest upon the
obligations of such districts shall not be included in computing net
income. (T. D. 1946.)
Taxes paid pursuant to assessments levied by such special assess-
ment districts are held to be ^' taxes against local benefits," and are,
therefore, not allowable deductions in computing net income.
Stock dividends. — Stock dividends when required to be included
in a return of income should be accounted for at the valuation placed
upon the stock by the corporation when said stock dividends were
issued.
Summary court officers. — See Oaths.
Taxes. — ^Taxes paid by citizens or resident aliens of the United
States to a foreign country are not allowable deductions in comput-
ing net income. The provision of law for the Seduction of taxes
appUes only to taxes paid to the United States, or to some State or
pohtical subdivision thereof in the United States.
TaxeSj special. — See Special assessment districts.
Tax-free covenant clause.— See Bonds containing tax-free covenant
clause.
Tenant.— See Rent.
Theatrical profession. — See Actors and actresses.
Voluntary offering. — Easter offerings, and fees received by clergy-
men for funerals, masses, marriages, baptisms, etc., are considered
income subject to tax under the provisions of the income-tax law of
October 3, 1913. . Christmas gifts, however, are not considered in-
come within the meaning of the law and should not be included in a
return.
WitJiholding from rents. — See Rent.
Worthless debt. — See Debt.
Part II.
RULINGS IN RELATION TO CORPORATION INCOME TAX.
Agricultural and horticultural a^socia;tions.
Agricultural and horticultural associations specifically enumerated
as exempt are held to be such associations as county fairs, or like
organizations, not themselves engaged in agricultural or horticultural
-pursuits, but which, by means of awards, premiums, etc., are intended
to encourage better production and no part of whose income inures
to the benefit of any private stockholder or individual. (T. D. 1737).
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Corporations engaged in agricultural or horticultural pursuits for
profit are liable under the law to make returns and to pay the income
tax thereby shown to be due.
Agricultural organizcUions. — Corporations owning sugar or other
plantations and disposing of the products thereof are held to be oper-
ating for profit and are not entitled to exemption as agricultural
oi^anizations.
BarJc guaranty fund, — The reserve required to be set aside by banks
in various States and kept and maintained in said banks as a guaranty
of depositors in the banks of said States — which said guaranty fund
is subject to draft by said banking conunissions or boards, in amoimts
to be determined by said State banking commissions or boards, only
for the purpose of supplying deficiencies in estates of failed or insol-
vent banks — ^is not an expenditure and can not be considered either
as a tax or an expense. It is a reserve required to be kept and main-
tained for a certain and specifically designated piurpose . The amounts
actuaUy expended from such fund in paying therefrom drafts of the
State banking commissions or boards on said fund are in the nature
of insurance cost, and as such may be deducted as a. business expense.
The reserve, per se, is not deductible in a retimi of income.
CkipUal of a corporatism. — The amount received by a corporation
for the original issue and sale of its capital stock is held to be the
capital of the corporation. In cases where the stock, as originally
issued, is sold at a price greater or less than the par value, neither
the premium nor the discount will be taken into account iii determin-
ing the net income of the corporation for the year in which the stock
is sold. This is purely a capital transaction and theLincome is neither
increased nor decreased by reason of the sale, per se, of the stock at
a price greater or less than its par value.
Collateral the subject of sale in ordinary course of business of a corpo-
ration {expense of business). — As used in the act, the expression
'^collateral the subject of sale,'' etc., refers to physical or tangible
property boimd for the performance of certain covenants or payment
of certain obligations, and which physical or tangible property is the
"subject of sale in the ordinary business of a corporation'' owning the
same. Where such corporation is, as a matter of its ordinary busi-
ness, engaged in buying and selling, or dealing in such property, the
interest actually paid within the year on indebtedness wholly secured
by such collateral may be allowably deducted from gross income as
an expense of doing business, without regard to the limit of deduct-
ible interest as otherwise provided by the statute. The corporation,
etc., must be organized and operated for the purpose of buying, selling,
and dealing in the particular kind of property which becomes the
collateral in question, and the particular property pledged for the
debt upon which the interest is paid must be the '' subject of sale in
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the ordinary business of the corporation." Real estate mortgj^ed,
and the property of corporations organized for and engaged in the
business of buying, selling, and dealing in real estate, warehouse
receipts representing property the subject of sale in the ordinary
business of the corporation owning the same, and which warehouse
receipts are pledged as collateral for such corporation's own debt, are
examples where the interest paid will be deductible as a *' business
expense'' and not be subject to the statutory limitation as to interest
deduction. (See T. D. 1993.)
Corporation — Exempt, — Cooperative dairies are not. (T. D. 1996.)
Corparddons in existeTice hut part of year .-^All corporations having
an existence as such during all or any portion of a year, unless coming
within the classes specifically enumerated as exempt, are required to
make returns. Dissolved corporations whose fiscal year coincides
with the calendar year will make returns covering the period from
January 1 to the dat6 of dissolution, and corporations having a fiscal
year other than the calendar year will make returns covering the
period from the beginning of the fiscal year to the date of dissolution;
and new corporations will make return for the period from the date of
their organization to December 31. The net income in all such cases
will be ascertained in the manner set out in paragraph G of the act.
Donations. — ^Donations by corporations which legitimately repre-
sent a consideration for a benefit flowing directly or indirectly to the
corporation as an incident of its business are allowable deductions
from gross income in ascertaining net income subject to the income
tax, as donations to a hospital upon consideration that employees of
the corporation are to have a ward for their use in case of accident or
illness. The absence of consideration moving in some form to the
corporation will make a contribution a mere gratuity. Gratuities
are not allowable deductions in a return of income by corporations.
Donations made for purposes connected with the operation of the
property, when limited to charitable institutions, hospitals, or educa-
tional institutions conducted for the benefit of the employees of a
corporation or their dependents, shall be proper as a deduction under
the head of expense in the return of the corporation.
Earnings or dividends not deductible. — ^Every corporation, no matter
how closely related it may be to any other corporation, is required to
make return of annual net income and to pay any income tax
thereby shown to be due.
Parent, holding, or other corporations must include in their gross
income, and can not deduct therefrom, any dividends or share of
earnings which they may receive from a subsidiary, related, or any
other corporation. The fact that the parent or holding company
owns all the stock of the subsidiary company is inmaaterial and will
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not wlEtrrant such parent company in omitting or deducting divi-
dends from gross income.
The Federal income-tax law fixes a specific rule by which the, net
income, for the purposes of the tax, is to be computed. That rule
makes no provision for the exclusion or deduction from the taxable
income of dividends received.
Expense (spending or treating money). — So-called spending or
treating money actually advanced by corporations to their traveling
salesmen as a part of selling expense of the product of such corpora-
tions is an allowable deduction in a return of income by such corpora-
tion. There must be some showing that all the allowance claimed as
a deduction was actually expended for the purpose for which the
allowance was made, namely, the selling of the product of the corpo-
ration in question.
Fiscal year {corporation) — Thejmandal year of a corporation, etc,,,
at the end of which the accounts are balanced. — For income-tax pur-
poses, in the absence of designation otherwise, all returns are required
to be made on the basis of the calendar year. The privilege of mak-
ing a return of income on the basis of a fiscal year other than the cal-
endar year is limited to corporations or institutions which make re-
turns and pay tax as corporations. The statute provides that returns,
must be made on the basis of a calendar year unless the corporation,
etc., involved shall designate a fiscal year other than the calendar
year in the manner provided by the statute. When the calendar
year shall have passed, a return of income for the entire period of
such calendar year is then due and must be made out and filed with
the proper collector of internal revenue on or before March 1 then
next following. This is true even of corporations and institutions
making return as corporations, except that such corporations, etc.,
are given the privilege of filing with the collector of internal revenue
(with whom their return must be filed) not less than 30 days (more,
but not less) prior to March 1 (the date when the return on the basis
of a calendar year is to be filed), a notice, in writing, setting forth •
that such corporation, etc., has designated the last day of some
month in the year (other than the last day of December) as the day
of the closing of its fiscal year, and that from the date so designated
as the close of its fiscal year its books have been or will be kept on
the basis of such designated fiscal year. When this said notice is
filed with the collector of internal revenue, a return must then be
made on or before March 1 for such part of the calendar year elapsed
as is not included in the said designated fiscal year, and return for
the full designated fiscal year must be made and filed within 60 days
next succeeding the last day of said designated fiscal year. This rule
will apply whether the designation affects the future or past, pro-
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vided always that the return of income can not cover more than 12
consecutive months. '
Example :
1914
A X B C Y Z
Jan. 1 June 30 Dec. 31 Mar. 1 June 30 Aug. 29
AB is calendar year and C is March 1, the time when return on
the basis of the calendar year must be filed. At any time not less
than 30 days prior to C a corporation may file with the collector
with whom its return of income must be filed a notice in writing set-
ting forth that said corporation, etc., has designated the last day of
some month in the year (other than December 31) as the day of the
close of its fiscal year, as June 30, represented by X; thereafter, on
March 1, a return will be filed for the period AX. XY represents the
first designated fiscal year, and for this said fiscal year a return of
income must be made (covering the period XY) suteequent to June
30 and on or before August 29; in other words, the 60-day period
next following the close of the fiscal year. Thereafter returns of
income will be made and filed annually subsequent to June 30, and
. on or before August 29. (See T. D. 2001 and T. D. 2029.)
Gifts to corporation — Income, — ^The value or amount of a gift to a
corporation is held to be income to such corporation and should be
returned as such for the year in which the gift is received. The pro-
vision of the act of October 3, 1913, which exempts gifts, bequests,
etc., from the tax imposed by the act applies to individuals and not
to corporations.
Horticultural societies, — Fruit-growers' associations whose purpose
is to promote the mutual benefit of their members in marketing
their products and which are not organized for profit and have no
capital stock represented by shares, and whose income is derived
wholly from membership fees, dues, and assessments to meet neces-
sary expenses, are horticultural societies within the meaning of the
law and are not subject to tax or required to make returns.
Interest. — Individuals are permitted a deduction of "all interest
paid within the year * * * on indebtedness''; corporations
are permitted a deduction of interest paid within the year on an
amount measured by ''the amount of capital stock, or capital
employed, plus one-half the interest-bearing debt," both outstand-
ing at the close of the year.
A foreign corporation in determining the maximum principal upon
which ijiterest for the purpose of a deduction may be computed
will add to the amount of its paid-up capital stock, or if no capital
stock, then the amount of capital employed in business, one-half the
interest-bearing indebtedness, both outstanding at the close of the
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year. Such, proportion of this sum as the gross income derived
from business transacted in this country bears to the gross income
received from business done or capital invested, both within and
without the United States, will constitute the maximum principal
upon which interest for the purpose of a deduction from the income
in the United States may be computed.. For instance, if the gross
income in the United States is one-fourth of the entire gross income,
then one-fourth. of the sum of the. paid-up capital stock plus one-
half the interest-bearing indebtedness will be the maximum prin-
cipal upon which interest deductible from the United States income
may be computed.
Life insurance in favor of corporations, — In cases wherein corpora-
tions pay premiums on insurance poUcies insuring, in favor of the
corporations, the lives of ofl&cers or others, such premiums may be
allowably deducted from the gross income of the corporations paying
the same.
In aUsuch cases the proceeds of the policies when paid at maturity
or upon death of the insured shall be returned by the corporation
as income for the year in which such proceeds were received.
Paid-up capital stocTc outstanding at close of year. — 'Taid-up capital
stock outstanding at the close of the year, " when used in connection
with ' 'interest-bearing indebtedness,'' to determine the maximum
principal upon which interest for the purpose of an authorized de-
duction is to be computed, means the par value of shares issued as
reported in Item 1 of the return form, and will not include the sur-
plus carried by the corporation. (See T. D. 1960 for method of com-
putation and T. D. 1993 for regulation as to deduction of interest
paid on indebtedness wholly secured by collateral, the subject of sale,
in the ordinary course of business.)
Pensions paid employees, 6te.— Amounts paid for pensions to retired
employees or to their f amiUes or others dependent upon them, or on
account of injuries received by employees, are proper deductions as
ordinary and necessary expenses. Gifts or gratuities to employees
in the service of a corporation are not properly deductible in ascer-
taining net income of the corporation.
Philippine and Porto Rican corporaMons. — Such corporations organ-
ized imder laws of the United States or any State thereof, resident
in the United States but doing business in these possessions, are
taxable in the United States. If they are organized imder the laws
of the United States or local laws of these possessions and resident in
said possessions, they are required to pay their tax in the Philippines
or in Porto Rico, as the case may be. The law provides that cor-
porations shall make their returns '^ to the collector of internal revenue
for the district in which they have their principal place of business."
Held, '' principal place of business" of a corporation is the place or
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office in which are kept the books of account and other data from
which the return is to be prepared.
Public utility Qmsiness expense), — In case of a public utility con-
structed, operated, or maintained under contract with any city, Ter-
ritory, or the District of Columbia, or a city where a portion of the
net earnings of such public utility is payable under such contract to
the State, Territory, etc., the amount so paid may be deducted by
the public utility operating under such contract as an "expense of
business.'' (See Art. 93, Reg. 33.)
Rent. — Payments measured by a fixed percentage on the stock of
a railroad corporation whose lines are leased by another railroad cor-
poration and which rent is payable by the lessee directly to the stock-
holders of the lessor corporation, have, under the income-tax law with
respect to the corporation paying such sums, the status of a rental
payment.
In such ca^es there are two corporations involved, the lessor and
the lessee — one the rent payer and the other the rent receiver. To
the lessee rental payments are an expense of operation; to the lessor
the rentals are an income.
A contract which provides that the rentals shall be paid to a third
party, not a party to the contract, does not change the character of
the payment, nor reUeve the lessor from UabUity to tax on the rental
income which the lessee pays to it or to such third party. The income
of the third party, the stockholder, is dividends on the stock which
he holds in the lessor company. Dividends can not be paid unless
the lessor has an income out of which to pay them. Hence the les-
sor company is required under the law to return as income the rentals
which the lessee is required to pay. In paying direct to the stock-
holders tjie lessee is acting as the agent of the lessor, and the amounts
received by stockholders are, in effect and in fact, dividends received
out of the earnings of the lessor.
Return {corporation), — A corporation oi^anized and transacting
no business within the calendar year of its oi^anization must, never-
theless, make and file a return on the basis of the calendar year
unless such corporation shall designate a fiscal year other than the
calendar year in the manner and form as provided for that purpose.
The duty to make a return depends upon corporate or associational
existence and not upon the receipt of income.
Return period. — The return for a completed period must be made
independently of any other period. A corporation changing from
the basis of a calendar year to a fiscal year, and because of said change
having a part of the calendar year for which return is to be made, will
be required to make a separate return for the fraction of the calendar
year, and another separate return for the entire fiscal year; as June
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30 being designated as the end of the &cal year, the part of the
calendar year from January 1 to June 30 must be covered in a return
to be made on or before March 1 then following, and on or before 60
days next following June 30 (next after the filing of return for the
fractional part of a calendar year) a return must be made and filed
for the entire fiscal year of the corporation. (T. D. 2029).
W. H. OSBORN,
Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury,
(T. D. 2091.)
Emergency revenue law — Bonds and certificates.
Liability to stamp tax on bonds and certificates in legal proceedings.
Treasury Department,
Office of Commissioner of Internal Revenue,
Waslhingtony D. C, December I4, 1914-
Sir: This office is in receipt of your letter of the 27th ultimo
inclosing a letter from the counsel for the register of wills of Lehigh
County in regard to liability to stamp tax on bonds and certificates
in legal proceedings.
You request to be advised as to the line of demarcation between
bonds which are required in legal proceedings and bonds which are
taxable.
In reply you are informed that bonds given by court officers under
direction or authority of the court to give proper effect to court
proceedings and practically a part of the record of a suit or proceed-
ings in court are nbt taxable.
Bonds given in cases of appeal are not taxable. Bonds given by
executors, administrators, guardians, and receivers appointed by the
court are bonds required in legal proceedings and are not taxable.
Letters of administration are not taxable.
Certificates issued by the register to administrators showing that
they have been appointed administrators are not taxable.
Certificates by the register to accounts filed in his office, which
certified copies are presented to the court, are not taxable.
See T. D. 2087.
Respectfully, W. H. Osborn,
Oommissumer of Internal Revenue,
Mr. .,
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284
(T. D. 2092.)
Emergency revenue law— Bills of lading.
It is the duty of the carrier to see that the stamp diould be affixed and canceled to
bills of lading when delivered to the shipper.
Treasuby Department,
Office of Commissioner of Internal Revenue,
Washington, D, C, December 11, 1914,
Sm: In reply to inquiries made at this office, you are informed
that it has been held that it is the duty of raiboad companies to see
that the stamp required on bills of lading should be affixed and can-
celed when the biU of lading is issued and delivered to the shipper.
This applies to express companies and other "carriers, as well as to
railroad companies.
Respectfully, _ W. H. Osborn,
Commissioner of Internal Revenue,
Mr.
(T. D. 2093.)
Emergen^ revenue law — Modifying T. D. 2080.
Forms and records for wine, documentary, and proprietary stamps furnished to any
assistant treasurer of the United States or designated depositary thereof or any
postmaster to be supplied by collectors instead of by this office.
Treasury Department,
Office of Commissioner op Internal Revenue,
Washington, D, C, December IB, 1914'
To collectors of internal revenue:
Instructions contained in the second paragraph of T. D. 2080,
dated December 4, 1914, requiring collectors to ihake requisition on
this office to supply direct each assistant treasurer, depositary, or post-
master with the necessary forms and records, are hereby modified.
On requisition, collectors will be furnished with a supply of the
forms and records mentioned in T. D. 2080, and should furnish each
assistant treasurer, depositary, or postmaster, as soon as he quati-
fies, with the forms and records required.
W. H. OsBORN,
Commissioner of Internal Revenue.
Approved:
W. G. McAdoo,
Secretary of the Treasury.
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.285
(T. D. 2094.)
Emergency revenue law — Soaps.
Where claims are made by manufacturers of soaps as to the cosmetic and beautifying
effects of their soaps on the skin, hair, etc., the tax must be paid.
Teeasuey Dbpabtmbnt,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 16, 1914.
Gentlemen: Mr. has personally visited this oflSce
and submitted samples of soaps manufactured by you to determine
which are subject to the tax under Schedule B of the act of Congress
approved October 22, 1914.
It is held that your Woodbury's Facial Soap and Benzoin and
Almond Lotion Soap are justly taxable under said act.
It may be stated for your information that such soaps as Packer's
Tar, Resinol, Palmer's Skin Success, Cuticura, Palmolive, Pears'
Glycerine, Nyal's Face Cream Soap, and other high-grade soaps in
the same class for which claims are made as cosmetics, skin and hair
improvers, and beautifiers, may be regarded as good examples of
soaps taxable imder the statute. Where claims are made by manu-
facturers of ordinary toilet and laundry soaps as to the cosmetic and
beautifying eflPects of their soaps on the skin, hair, etc., the tax must
be paid or the labels and advertising be so modified as to justify
placing them in the category with ordinary toilet or laundry soaps.
Such medicated soaps as ichthyol, carbolic, iodoform, sulphiu*,
etc., are exempt, provided the medication is actual and bona fide
and no claims are made for same as cosmetics and beautifiers of the
skin or hair or both.
Ordinary laimdry soaps, simple soap shampoos, liquid and solid,
and tincture of green soap are exempt, provided, as above stated,
no claims are made for same as cosmetics or beautifiers of the skin
and hair.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue.
Messrs. .
(T. D. 2095.)
Emergency revenue law — Tooth and mouth washes.
Instructions in regard to tax payment and stamping tooth and mouth washes under
Schedule B of the act approved October 22, 1914, and regulations made in pur-
suance thereof.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 16, 1914-
To coUedora of internal revenue-
Tooth washes are specifically taxed by the act in question, and
mouth washes are held by the regulations to be included as taxable.
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286
This includes such antiseptic and antacid preparations as are com-
monly sold by the retailer under labels as tooth and mouth washes,
dentifrices, prophylaxis, etc. The following are regarded as good
examples: listerine, Vemas, Prophytol, Glycothymoline, Wam-
pole's Formohd, Wampole's Formohd Magnesia, Borolyptal, Pyro-
denta, Thycalol, Odol, A. D. S. Antiseptic, Borine, Zongiva, Cam-
phenal, Pasturine, Euthymol, Phenol Sodique, etc.
It is recognized that some of these preparations have double uses
and are conunonly used by physicians, dentists, and others for other
purposes than washing the teeth and mouth. In such cases only
those portions put up under appropriate labels and sold as tooth and
mouth washes are held to be taxable. Those portions which are
sold under appropriate labels for strictly medicinal uses, other than
tooth or mouth washes, are not held to be taxable under said act.
W. H. OSBOEN,
Commissioner of Internal Revenue,
(T. D. 2096.)
Emergency revenue law — Hair oilSj pomades j etc.
Instructions relative to tax payment and stamping hair oils, jwmades, hair dressings,
hair restoratives, hair dyes, etc., under Schedule B of the act of Congress ap-
proved October 22, 1914.
Treasuby Department,
Office of Commissioner of Internal Revenue,
WasJiingtonj D, C, December 21 , 1914,
To collectors of internal revenue:
Under Schedule B of the act of Congress approved October 22,
1914, hair oils, pomades, hair dressings, hair restoratives, hair dyes,
or any similar substances are taxable. This is held to include tonics,
stains, bleaches, improvers, beautifiers, depilatories, briUiantines
for hair and beard under whatever name sold or known, whether
liquids or solids and regardless of shape. Under this head are in-
cluded soaps which are advertised and sold as hair restorers, im-
provers, or beautifiers.
The following list includes good examples of such taxable manu-
factures:
Danderine — ^a grower.
Seven Sutherland Sisters Corporation — ^a hair beautifier.
Herpicide — a dressing.
Kutico — ^a tonic and dressing.
Hair Vigor — Ayer's make.
Hairs Hair Renewer.
Corollas Hair Tonic — a grower.
Hirsutus — a grower (Baker's).
Haye's Hair Health — dressing and invigorant.
Wyeth's Sage and Sulphur — a color or dye.
Lyons Kathairon — a renewer and grower.
Parisian Sage— a dressing.
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Walnutta— hair stain.
C. Damchinsky^s Hair Dye.
Mrs. Potter's Walnut Hair Stain.
Tricopherous, Barry's— a restorer.
Eau de Quinine — a dressing and tonic.
Vaseline Hair Tonic — ^an oil or dressing.
Palmolive Shampoo — arrests falling hair.
Westphal's Auxiliator— a dressing.
Coke Dandruff Cure and Hair Tonic and Dressing.
Colgate's Quinol — ^a tonic and grower.
Bandoline — a hair dressing.
Arabian Egg Shampoo — a beautifier and grower.
Canthrox — beautifier.
Biirnett's Cocoaine — a dressing.
Mansfield's Capillaris — ^a dressing.
Parker's Hair Balsam — a dressing.
Quinzoin — ^hair tonic and grower.
Sanitol — a grower and beautifier.
Colgate's Bnlliantine — adds softness and gloes to hair and beard.
POMADES.
Ford's Hair Pomade.
Nelson's Hair Dressing.
Lanoline.
Ruby Dressine.
Pomade Litholine.
It may be that some such preparations have been held exempt by
this office on incomplete information suppUed, and if such be a fact,
the attention of this office should be called thereto.
Simple soap shampoos, for which no claims are made as beautifiers,
restorers, improvers, dressings, etc., are held to be exempt. Chang-
ing of labels and literature will not be permitted to exempt such
justly taxable manufactures.
Ordinary shaving soaps, powders, pastes, and creams are exempt
unless cosmetic virtues are claimed for them.
Collectors, revenue agents, and others will give this matter prompt
^"«'^*^^^- W. H. OSBOEN,
Commissioner of Internal Revenue.
(T. D. 2097.)
Emergency revenue law-^Policy loan agreemervts.
Policy loan agreements giving merely a right of set-oS not subject to tax as promis-
sory notes — Premium extension notes not promissory notes.
Treasuby Department,
Office of Commissioner of Internal Revenue,
WasMn0on, D. C, December 19, 1914'
To collectors of internal revenue and otJiers concerned:
A number of inquiries have lately been presented to this office con-
cerning the taxability of so-called ''poUcy loan agreements" under
the act of October 2f2, 1914, as promissory notes.
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288
It appears that it is the practice, in some cases required by law, for
hf e insurance companies to make loans to persons insured therem on
the security of their policies, and that while the agreements evidencing
such loans are usually in the form of conventional promissory notes
they contain other provisions entirely inconsistent with the general
character and functions of promissory notes and negotiable paper
generally. Such agreements commonly provide that the remedy of
the company, in case the loan or interest thereon be not paid when
due, is to be that the ameimt thereof shall be deducted from the
dividends due the insured on his policy, or, in some cases, that the
poUcy shall be canceled and a paid-up policy then issued in lieu of
the canceled policy in an amoimt to be expressed in proportion to
the sum due the company on the impaid loan and interest.
Such agreements, in the opinion of this office, are not promissory
notes within the usual conception of the term or within the intent
and purpose of the act of October 22, 1914, they giving to the lenders
not a right to collect a sum certain and at all events but merely a
right to set-oflp against an asset of, or a debt owing to, the insured
(impaid dividends or paid-up value of the policy), a debt owed by the
assured to the company. Such agreements, this office holds, there-
fore, are not subject to tax as promissory notes under the act in
question.
Inquiry has also been made to this office concerning so-called pre-
mium extension notes extending the time within which the assured
may pay his premium. Such notes also usually contain a promise
to pay a simi of money upon a certain date fixed therein. Where,
however, such notes provide that the remedy of the lending company
in case of nonpayment of the premium note when due is- in the can-
cellation of the policy or by such set-off as is indicated above in the
case of policy loan notes, it is the opinion of this office that such
premium extension notes are also exempt from taxation under the
act in question as promissory notes.
Any rulings inconsistent herewith are revoked.
W. H. OSBOBN,
Commissioner of IntemcU Revenue,
(T. D. 2098.)
Emergency revenue law — Oan^Uation of stamps.
Perforation not neceBsary by canceling machine, but hand punch may be need.
Tbeasuby Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 18, 19H»
Sir: This office is in receipt of your letter of the 15th instant,
relative to the cancellation of internal-revenue stamps by incision
when the value of the stamp is $0.10 or more.
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289
In reply, you are advised that the regulations provide that "this
will not be required where stamps are canceled by perforation/'
This does not mean that a perforating machine outlining initial
and date by perforation must be used, but it will be a sufficient com-
pUance with the regulations if, after initials and date have been
written on the stamp, several perforations, sufficient to prevent wash-
ing and resale of stamp, are made with an ordinary hand punch before
affixing the stamp to the document.
Respectfully,
W. H. OSBOEN,
Commissioner of Internal Revenue.
Mr. .
(T D 2099.)
Emergency revenue law — Instructions relative to PacTcer's Tar Soap.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 17, 1914.
To collectors of internal revenue:
You are informed that a ruling of this office, dated November 19,
1914, holding Packer's Tar Soap to be exempt from tax under
Schedule B of the act of Congress approved October 22, 1914, has
been revoked in a ruling issued December 12, 1914, as th^ result of
further investigation of the general question of the taxability of
medicinal or cosmetic soaps.
In view of the peculiar facts in this case, however, such soap as
was removed from factory before December 16, 1914, whether in
manufacturer's warehouse or in the hands of jobbers or retailers,
need not be tax paid or stamped.
W. H. OsborN;
Commissioner of Internal Revenue,
(T. D. 2100.)
Emergency revenue law — Export hands.
Bonds given for the direct exportation of goods not subject to stamp tax.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 22, 1914.
To collectors of internal revenue:
After careful consideration, it is held that export bonds or trans-
portation for export bonds, covering articles for export from th^
27776°— VOL 16— 14 19
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290
United States, are not subject to stamp tax tinder the provisions
of the revenue act of October 22, 1914.
W. H. OSBOBN,
Chmmissioner of Internal Revenui,
(T. D. 2101.)
Emergency revenue law — Coupons or interest notes.
Coupons or interest notes attached to and forming part of the bond or principal note
are not subject to tax as promissory notes, even though they are in the form of
promissory notes.
Treasury Department,
Office of Commissioner of Internal Kevenue,
Washington, D. C, Decernber 24, 191^
Sir: Replying to your letter of the 19th instant, submitting brief
relative to the taxability of interest coupons attached to bonds,
which coupons are in the form of promissory notes, you are advised
that the Supreme Court decisions quoted in your letter, namely,
Kenosha v, Lamson (9 Wall., U. S., 477) and Lexington v, Butler
(14 Wall., 282-297), have been examined and appear to sustain your
contention that coupons attached to bonds are a part of the bond
and are not separately subject to tax, even though in the form of
promissory notes.
It is therefore held that coupons or interest notes attached to
and forming part of the bond or principal note are not subject to
tax as promissory notes, even though they are in the form of prom-
issory notes.
Any rulings heretofore made inconsistent with this are hereby
revoked.
Respectfully, W. H. Osborn,
Commissioner of Internal Revenue,
Mr. .
(T. D. 2102.)
Opium, coca leaves, etc.
Act of December 17, 1914, to provide for the registration of and imposing special tax
upon persons dealing in opium, coca leaves, etc.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 26, 1914.
To collectors and other officers of internal revenue:
The appended act of Congress, approved December 17, 1914, is
published for the information of all concerned.
W. H. OSBOBN,
Commissioner of Internal Revenue.
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291
[PuBUC No. 223— 63d Congress— H. R. 6282.]
AN ACT To provide for the registration of, with collectors of internal revenue, and to Impose a special tax
upon all persons who produce, import, m a nuf acture, compound, deal in, dispense, sell, distribute, or give
away opium or coca leaves, their salts, derivatives, or preparations, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States o/Anieriea
in Congress assembled^ That on and after the first day of March, nineteen hundred and
fifteen, every person who produces, imports, manu&ctures, compounds, deals in, dis-
penses, sells, distributes, or gives away opium or coca leaves or any compound, manu-
facture, salt, derivative, or preparation thereof, shall register with the collector of
internal revenue of the district his name or style, place of business, and place or places
where such business is to be carried on: Provided, That the office, or if none, then the
residence of any person shall be considered for the purposes of this act to be his place
of business. At the time of such registry and on or before the first day of July, annually
thereafter, every person who produces, imports, manufactures, compounds, deals in,
dispenses, sells, distributes, or gives away any of the aforesaid drugs shall pay to the
said collector a special tax at the rate of II per annum: Provided, That no employee of
any person who produces, imports, manufactures, compounds, deals in, dispenses,
sells, distributes, or gives away any of the aforesaid drugs, acting within the scope of
his employment, shall be required to register or to pay the special tax provided by this
section: Provided further, That the person Who employs him shall have registered and
paid the special tax as required by this section: Provided further, That officers of the
United States Government who are lawfully engaged in making purchases of the
above-named drugs for the various departments of the Army and Navy, the Public
Health Service, and for Government hospitals and prisons, and officers of any State
government, or of any county or municipality therein, who are lawfully engaged. in
making purchases of the above-named drugs for State, county, or municipal hospitals
or i)rison8, and officials of any Territory or insular possession or the District of Columbia
or of the United States who are lawfully engaged in making purchases of the above-
named drugs for hospitals or prisons therein shall not be required to register and pay
the special tax as herein required.
It shall be unlawful for any person required to register under the terms of this act
to produce, import, manufacture, compound, deal in, dispense, sell, distribute, or
give away any of the aforesaid drugs without having registered and paid the special
tax provided for in this section.
That the word "person'' as Used in this act shall be construed to mean and include
a partnership, association, company, or corporation, as well as a natural person; and
all provisions of existing law relating to special taxes, so far as applicable, including
the provisions of section thirty-two hundred and forty of the Revised Statutes of
the United States are hereby extended to the special tax herein imposed.
That the Commissioner of Internal Revenue, with the approval of the Secretary of
the Treasury, shall make all needful rules and regulations for canning the provisions
of this act into effect.
Sec. 2. That it shall be unlawful for any person to sell, barter, exchange, or give
away any of the aforesaid drugs except in pursuance of a written order of the person
to whom such article is sold, bartered, exchanged, or given, on a form to be issued
in blank for that purpose by the Commissioner of Internal Revenue. Every person
who shall accept any such order, and in piumLance thereof shall sell, barter, exchange,
or give away any of the aforesaid drugs, shall preserve such order for a period of two
years in such a way as to be readily accessible to inspection by any officer, agent, or
employee of the Treasury Department duly authorized for that purpose, and the State,
Territorial, District, mtmicipal, and insular officials named in section five of this
act. Every person who shall give an order as herein provided to any other person
for any of the aforesaid drugs shall, at or before the time of giving such order, make
or cause to be made a duplicate thereof on a fonn to be issued in blank for that pui^
Digitized by VjOOQIC
292
poee by the CommisBioner of Internal Bevenue, 'and in case of the acceptance of such
order shall preserve such duplicate for said period of two years in such a way as
to be readily accessible to inspection by the officers, agents, employees, and officials
hereinbefore mentioned. Nothing contained in this section shall apply —
(a) To the dispensing or distribution of any of the aforesaid drugs to a patient by
a physician, dentist, or veterinary surgeon registered under this act in the course
of his professional practice onLyi-Providedy That such physician, dentist, or veterinary
surgeon shall keep a record of all such drugs dispensed or distributed, showing the
amount dispensed or distributed, the date, and the name and address of the patient
to whom such drugs are dispensed or distributed, except such as may be dispensed
or distributed to a patient upon whom such physician, dentist, or veterinary surgeon
shall personally attend; and such record shall be kept for a period of two years from
the date of dispensing or distributing such drugs, subject to inspection, as provided
in this act.
(b) To the sale, dispensing, or distribution of any of the aforesaid drugs by a dealer
to a consumer under and in pursuance of a written prescription issued by a physician,
dentist, or veterinary surgeon roistered under this act: Provided^ however, That
such prescription shall be dated as of the day on which signed and shall be signed
by the physician, dentist, or veterinary surgeon who shall have issued the same:
And provided further y That such dealer shall preserve such prescription for a period
of two years from the day on which such prescription is filled in such a way as to
be readily accessible to inspection by the officers, agents, employees and officials here-
inbefore mentioned.
(c) To the sale, exportation, shipment, or delivery of any of the aforesaid drugs
by any person within the United States or any Territory or the District of Columbia
or any of the insular possessions of the United States to any person in any foreign
country, regulating their entry in accordance with such regulations for importation
thereof into such foreign country as are prescribed by said country, such regulations
to be promulgated from time to time by the Secretary of State of the United States.
(d) To the sale, barter, exchange, or giving away of any of the aforesaid drugs to
any officer of the United States Government or of any State, Territorial, District, county,
to municipal or insular government lawfully engaged in making purchases thereof for
the various departments of the Army and Navy, the Public Health Service, and for
Government, State, Territorial, District, county, or municipal or insular hospitals or
prisons.
The Commissioner of Internal Revenue, with the approval of the Secretary of the
Treamiry, shall cause suitable forms to be prepared for the purposes above mentioned,
and shall cause the same to be distributed to collectors of internal revenue for sale by
them to those persons who shall have registered and paid the special tax as required
by section one of this act in their districts, respectively; and no collector shall sell any
of such forms to any persons other than a person who has registered and paid the special
tax as required by section one of this act in his district. The price at which such forms
shall be sold by eeld collectors shall be fixed by the Commissioner of Internal Revenue
with the approval of the Secretary of the Treasury, but shall not exceed the sum of |1
per hundred. Every collector eAiall keep an account of the number of such forms sold
by him, the names of the purchasers, and the number of such forms sold to each of such
purchasers. Whenever any collector shall sell any of such forms, he shall cause the
name of the purchaser thereof to be plainly written or stamped thereon before deliver-
ing the same; and no person other than such purchaser shall use any of said forms bear-
ing the name of such purchaser for the purpose of procuring any of the aforesaid drugs,
or furnish any of the forms bearing the name of such purchaser to any person with
intent thereby to procure the shipment or delivery of any of the aforesaid drugs. It
shall be unlawful for any person to obtain by means of said order forms any of the afore-
said drugs for any purpose otiier than the use, sale, or distribution thereof by him in
Digitized by VjOOQIC
293
the conduct of a lawful busineas in said drugs or in the legitimate practice of his
profession.
The provisions of this act shall apply to the United States, the District of Columbia,
the Territory of Alaska, the Territory of Hawaii, the insular possessions of the United
States, and the Canal Zone. In Porto Rico and the Philippine Islands the adminis-
tration of this act, the collection of the said special tax, and the issuance of the older
forms specified in section two shall be performed by the appropriate internal-revenue
officers-of those governments, and all revenues collected hereunder in Porto Rico and
the Philippine Islands shall accrue intact to the |[eneral governments thereof, respec-
tively. The courts of Gist instance in the Philippine Islands shall possess and exercise
jurisdiction in all cases arising under this act in said islands. Hie President is author-
ized and directed to issue such Executive orders as will carry into effect in the Canal
Zone the intent and purpose of this act by providing for the registration and the impo-
sition of a special tax upon all persons in the Canal Zone who produce, import, com-
pound, deal in, dispense, sell, distribute, or give away opium or coca leaves,their salts,
derivatives, or preparations.
Sec. 3. That any person who shall be registered in any internal-revenue district
under the provisions of section one of this act shall, whenever required so to do by the
coUectcMT of the district, render to the said collector a true and correct statement or
return, verified by aflidavit, setting forth the quantity of the aforesaid drugs received
by him in said internal-revenue district during such period immediately preceding
the demand of the collector, not exceeding three months, as-the said collector may fix
and determine; the names of the persons from whom the said drugs were received; the
quantity in each instance received from each of such persons, and the date when
received.
Sec. 4. That it shall be unlawful for any person who shall not have registered and
paid the special tax as required by section one of this act to send, ship, carry, or deliver
any of the aforesaid drugs from any State or Territory or the District of Columbia or
any insular possession of the United States, to any person in any other State or Territory
or the District of Columbia or any insular possession of the United States: Provided ^
That nothing contained in this section shall apply to common carriers engaged in trans-
porting the aforesaid drugs, or to any employee acting within the scope of his emplby-
ment, or any person who shall have registered and paid the special tax required by
section one of this act, or to any person who shall deliver any such drug which has been
prescribed or dispensed by a physician, dentist, or veterinarian required to register
under the terms of this act, who has been employed to prescribe for the particular
patient receiving such drug, or to any United States, State, county, municipal. District,
Territorial, or insular officer or official acting within- the scope of his official duties.
Sec. 5. That the duplicate-order forms and the prescriptions required to be pre-
served under the provisions of section two of this act, and the statements or returns
filed in the office of the collector of the district, under the provisions of section three
of this act, shall be open to inspection by officers, agents, and employees of the
Treasury Department duly authorized for that purpose; and such officials of any
State or Territory, or of any organized municipality therein, or of the District of
Columbia, or any insular possession of the United States, as shall be charged with
the enforcement of any law or i^unicipal ordinance regulating the sale, prescribing,
dispensing, dealing in, or distribution of the aforesaid drugs. Each collector of
internal revenue is hereby authorized to furnish, upon written request, certified
copies of any of the said statements or returns filed in his office to any of such officials
of any State or Territory or organized mimicipality therein, or the District of Colum-
bia, or any insular possession of the United States, as shall be entitled to inspect the
said statements or returns filed in the office of the said collector, upon the payment of a
fee of $1 for each one hundred words or fraction thereof in the copy or copies so
requested. Any person who shall disclose the information contained in the said
Digitized by VjOOQIC
294
Statements or leturns or in the said duplicate-order forms, except as herein expressly
provided, and except for the purpose of enforcing the provisions of this act, or for
the purpose of enforcing any law of any State or Territory or the District of Columbia,
or any insular possession of the United States, or ordinance of any organized munici-
pality therein, regulating the sale, prescribing, dispensing, dealing in, or distribution
of the aforesaid drugs, shall, on conviction, be fined or imprisoned as provided by
section nine of this act. And collectors of internal revenue are hereby authorized
to furnish upon written request, to any person, a certified copy of the names of any
or all persons who may be listed ih their respective collection districts as special-tax
payers imder the provisions of this act, upon payment o£ a fee of $1 for each one
hundred names or fraction thereof in the copy so requested.
Seo. 6. That the provisions of this act shall not be construed to apply to the sale,
distribution, giving away, dispensing, or possession of preparations and remedies
which do not contain more than two grains of opium, or more than one-fourth of a
grain of morphine, or more than one-eightiti of a grain of heroin, or more than one grain
of codeine, or any salt or derivative of any of them in one fluid ounce, or, if a solid or
semisolid preparation, in one avoirdupois ounce; or to liniments, ointments, or other
preparations which are prepared for external use only, except liniments, ointments,
and other preparations which contain cocaine or any of its salts or alpha or beta eucaine
or any of their salts or any synthetic substitute for them: Promded^ That such remedies
and preparations are sold, distributed, given away, dispensed, or possessed as medi-
cines and not for the purpose of evading the intentions and provisions of this act;
The provisions of this act shall not apply to decocainized coca leaves or preparations
made therefrom, or to other preparations of coca leaves which do not contain cocaine.
Sec. 7. That all laws relating to the assessment, collection, remission, and refund
of internal-revenue taxes, including section thirty-two hundred and twenty-nine of
the Revised Statutes of the United States, so far as applicable to and not inconsistent
with the provisions of this act, are hereby extended and made applicable to the
special taxes imposed by this act.
Sec. 8. That is shall be unlawful for any person not roistered under the provisions
of this act, and who has not paid the special tax provided for by this act, to have in
Ms possession or under his control any of the aforesaid drugs; and such possession or
control shall be presumptive evidence of a violation of this section, and also of a viola-
tion of the provisions of section one of this act: Provided, That this section shall not
apply to any employee of a registered person, or to a nurse under the supervision of
a physician, dentist, or veterinary surgeon registered under this act, having such
possession or control by virtue of his employment or occupation and not on his own
account; or to the possession of any of the aforesaid drugs which has or have been
prescribed in good faith by a physician, dentist, or veterinary surgeon registered
under this act; or to any United States, State, county, municipal. District, Terri-
torial, or insular officer or official who has possession of any said drugs, by reason of
his official duties, or to a warehouseman holding possession for a person roistered
and who has paid the taxes under this act; or to common carriers engaged in trans-
porting such drugs: Provided further, That it shall not be necessary to negative any
of the aforesaid exemptions in any complaint, information, indictment, or other
writ or proceeding laid or brought under this act; and the burden of proof of any such
exemptions shall be upon the defendant.
Sec. 9. That any person who violates or fails to comply with any of the require-
ments of this act shall, on conviction, be fined not more than $2,000 or be imprisoned
not more than fiwe years, or both, in the discretion of the court.
Sec. 10. That the Commissioner of Internal Revenue, with the approval of the
Secretary of the Treasury, is authorized to appoint such agents, deputy collectors,
inspectors, chemists, assistant chemists, clerks, and messengers in the field and in
Digitized by VjOOQIC
295
tlie Bureau of Internal Revenue in the District of Columbia as may be necessary to
enforce the provisions of this act.
Sec. 11. That the sum of $150,000, or so much thereof as may be necessary, be,
and hereby is, appropriated, out of any moneys in the Treasury not otherwise appro-
priated, for the purpose of carrying into effect the provisions of this act.
Sec. 12. That nothing contained in this act shall be construed to impair, alter,
amend, or repeal any of the provisions of the act of Congress approved June thirtieth,
nineteen hundred and six, entitled "An act for preventing the manufacture, sale, or
transportation of adulterated or misbranded, or poisonous, or deleterious foods, drugs,
medicines, and liquora, and for r^^ulating traffic therein, and for other purposes,'*
and any amendment thereof, or of the act approved February ninth, nineteen hundred
and nine, entitled "An act to prohibit the importation and use of opium for other
than m^cinal purposes, " and any amendment thereof.
Approved, December 17, 1914.
(T. D. 2103.)
Distilled spirits — Suit on a warehousing bond,
Treasuby Department,
Office of Commissioner of Internal Revenue,
Washington, D. (7., December 2S, 1914.
The appended decision of the United States Circuit Court of Appeals,
Fourth Circuit is published for the information of all concerned.
W. H. OSBORN,
Commissioner of Internal Revenue.
1. Tax on Sfibtts.
The tax on spirits becomes due as soon as the same is produced, and the Gov-
ernment has a first lien thereon until tax is paid.
2. Spirits Stolen After Seizure. ^
Where spirits in warehouse are stolen after seizure it does not affect the status
of the obligois on the warehousing bond.
3. Warehousing Bond.
The obligation on the warehousing bond is unconditional and continuing.
4. Remedies Cumulative.
The right of the Government to proceed to collect the tax by forfeiture does not
affect its right to resort to other remedies for its collection.
United States Circuit Court op Appeals, Fourth Circuit. No. 1308.
United States Fidelity dc Guaranty Co. of Baltimore, Md., a corporation, plaintiff in
error, v. United States and Columbus F. Cheshire, defendants in error.
Ebbob to the District Court of the United States for the Eastern District of Virginia, at Norfolk.
[Decided November 28, lOU.]
Before Prttchard, Knapp, and Woods, Circuit Judges.
Prttchard, Circuit Judge: This is an action instituted in the United States District
Court for the Eastern District of Virginia, at Norfolk, in February, 1914, against
Columbus F, Cheshire and the United States Fidelity & Guaranty Co. upon a ware-
housing bond in the penalty of $5,000, in which the former is principal and the latter
is surety.
The plaintiff in error will be referred to as defendant and the defendant in error as
glsdntiff, such being the relative positions the parties occupied in the court below.
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296
This case was heard upon a stipulation as to the facts. The court instructed the jury
to return a verdict in favor of the Government for 13,221.79, with interest from the SOtli
day of May, 1913, at the rate of 6 per cent per annum until paid, said amount bebg
the full claim of the Government as presented in such action. Judgment was accord-
ingly entered by the court upon this verdict.
The circumstances are as follows:
Columbus F. Cheshire was a distiller owning distillery warehouse No. 3 near Ports-
mouth, Va. The warehousing bond given by him upon which this suit was brought
was conditioned —
To pay the full amount of tax, at the rate imposed by an act of Congress of Augfuet
28, 1894, on all spirits so deposited in said distillery warehouse before removal there-
fcpom and within eight years from the date of entry of such spirits for dei)osit in said
warehouse.
Because of alleged offenses against the Government proceedings were b^un by it,
before the institution of this suit against Cheshire, in which was obtained a judgment
forfeiting to the Government the distillery, the land whereon it was located, and 64
barrels of spirits upon which taxes amounting to $3,221.79 were then unpaid. ,
The agreed statement of facts contains the following:
Fourth. On May 30, 1913, subsequent to the seizure and forfeiture of the distillery
in these proceedings described, and while said distillery and whisky was in the
possession of the united States Government to be sold by the marshal under the
order of this court in said libel proceedings, the whiskv in the warehouse was stolen
therefrom before said sale and has never been recovered or sold.
Upon the trial the court refused certain instructions asked for by the defendant
and, at the request of the Government, charged the jury as follows:
The jury are charged that the United States tax on spirits distilled attaches to the
same as soon as it comes into existence, and contliiues as a first lien thereon until the
tax is paid or the whiskey is sold by the United States, and defendants are not relieved
from the payment of the tax thereon because the same waa stolen before the sale
thereof, wnile in the possession of the Grovemment, notwithstanding it may have been
declared forfeited to the Government in the proceeding instituted for such forfeiture.
The jury are accordingly directed to find a verdict for the Government for the sum
of $3,221.79 with interest thereon from the 30th day of May, 1913, at the rate of 6
per cent per annum until paid. •
In accordance with such charge, the jury rendered the following verdict:
We, the jury, upon issue joined, find for the Government for the sum of ($3,221.79)
thirty-two hundred and twenty-one 79/100 dollars, with interest thereon from the
30th day of May, 1913, at the rate of 6 per centum per annum until paid. John W.
Starke, foreman. June 12th, 1914.
The surety excepted to the ruling of the court below, and the case comes here on
writ of error.
The only question involved in this controversy is as to whether the court below
erred in holding that under the facts of this case the surety was not relieved of its
obligation to i>ay the taxes on the amount of spirits placed in the warehouse in pur-
suance of the execution of the bond in question. That portion of the obligation
material to the issue is as follows:
The principal shall * * * well and truly pay or cause to be paid * * * the
full amount of tax on all spirits so deposited at said distillery warehouse before the
removal therefrom and witnin eight years from the date of entry of such spirits for
deposit in said warehouse.
It should be borne in mind that in the enforcement of the revenue laws it is the prime
object of the Government to safeguard its rights to collect all the tax on spirits pro-
duced. Therefore when spirits are entered for deposit in a warehouse, the Govern-
ment, in addition to requiring a bond for the payment of the taxes thereon, also
retains possession of the warehouse, and the key to the same is kept at all times in the
custody of a storekeeper and ganger.
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It has been uniformly held that the tax on spirits becomes due as soon as the same
is produced, and that the Government has a first lien on the same until the tax is paid.
United States v. National Surety Co. (122 Fed., 109), IHrici v. United States (111 U. S.,
38), Harkins t;. Williard (146 Fed., 707).
However, it is contended by counsel for defendant that inasmuch as the spirits in
question were stolen after there had been a forfeiture of the same to the Crovemment
by a decree of the District Court, that the defendant as surety on the warehouse bond
was thereby relieved from liability. When the defendant became surety on the ware-
house bond it entered into a contract with the Government to the effect that the full
amount of all taxes on spirits deposited at the distillery warehouse should be paid for
before removal and within eight years from the day when such spirits were entered
for deposit.
By taking advantage of the statute, the distiller was afforded an opportimity to
postpone the payment of tax on spirits produced. In other words he secured an
extension of eight years in which to make such payment. It is but natural that the
Government in extending this grace to the distiller, should insist upon a provision
in the warehouse bond that would absolutely remove all doubt as to the payment of
the tax within the period mentioned. Common observation and experience teach us
that during the perfod mentioned unforeseen contingencies are liable to arise which
might render it impossible for the Government to realize the tax by the sale of the
spirits. Therefore, it is obvious that it was the purpose of the Government, in requir-
ing the distiller to execute a bond of this character, to provide against any contingency
that might arise which would prevent the Government from collecting its tax. If this
had been a distiller's bond and the spirits had been stolen before the entry of decree
of forfeiture, there would be no controversy here as to the liability of the surety, that
question having been definitely settled in the cases of United States v, Mullins (119
Fed., 335), United States v. Guest (143 Fed., 456), United States v. Sisk (176 Fed.,
885).
The case at bar is clearly analogous, and the fact that the spirits in this instance
had been forfeited by a decree of the District Court before they were stolen could
in no wise affect the status of the obligors, it being clearly provided in the bond in
question that the tax on the spirits produced should be paid before the same were
removed from the warehouse. This unconditional and continuing obligation was
required by the Government in view of the many contingencies which might arise
wherein it would be impossible for the Government to realize the tax due by the
sale of the spirits.
There is nothing in the bond to warrant the contention that the remedies of the
Government are alternative. Such rights are cumulative. Therefore, the pursuit
by one remedy could in no wise affect the right of the Government, as in this in-
stance, to resort to another for the purpose of collecting its tax. In the case of United
States V, Witten (143 U. S., 76), distilled spirits were stolen from a warehouse where
the internal-revenue officer had failed to provide sufficient locks on the doors. The
court held that such actbn on the part of the Government official could not be pleaded
as a defense to an action to recover on the distiller's bond the taxes due on spirits
before their removal from the warehouse. Among other things, the court in that
case said:
The only duty which the revenue officers owed in regard to the security of the
warehouse and safekeeping of the spirits therein was to the Government and not
to the defendants; and any negligence of those officers gave the defendants no rights
against the Government and afforded them no excuse for not performing their obli-
gation according to its term. This is too w^ll settled by previous decisions of thid
court to require more extended discussions. Hart v. United States (95 U. S., 316)
and cases cited; Mintum v. United States (106 U. S., 437).
In view of what we have said it follows that the judgment of the lower court should
be affirmed.
Affirmed.
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(T. D. 2104.)
Emergency revenue law — Tooffi and movih wash.
Instructiaiis in regard to tax payment and stamping of tooth and mouth washes under
Scrhedule B of the act of Congress approved October 22 1914.
TbEASUBY DEPABTMEin?,
Office of Commissioner of Internal Revenue,
WasTvington, D, (7., December 26, 1914,
To collectors of internal reveime:
T. D, 2095 requires tax payment and stamping of such portions of
antiseptic and antacid preparations as are sold under appropriate
labels as tooth and mouth washes and exempts those portions sold
under appropriate labels for other purposes than tooth and mouth
washes, thus recognizing* the double use of same. Many such prepa-
rations are sold in different sized bottles or containers and manufac-
turers and others are hereby authorized to blot out or otherwise
eradicate the words 'Hooth wash," ''mouth wash/' or ''tooth and
mouth wash," as the case may be, from the labels and other printed
matter for those bottles or containers to be sold for other purposes,
and thus exempt same from taxation.
It may be stated that some such preparations may have been
exempted on incomplete information supplied, and if such be a fact
the attention of this office should be called to the matter.
It will be understood that there are many others of these washes
than the ones enumerated in T. D. 2095 and all are equally liable to
taxation.
These instructions apply to tooth or mouth washes and are not
authority for changing labels on dentrifices and other taxable man-
ufactures to avoid taxation.
W. H. OSBORN,
Commissioner of Internal Revenue,
(T. D. 2105.)
Emergency revenue law — Brolcers' notes or memoranda.
Further definition of brokers' notes or memoranda.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December 24, 1914,
Sir: Referring to your personal visit to this office, you are advised
that it is apparent, from correspondence received, that the subject
of what constitutes a taxable broker's note or memorandum is not
yet clearly understood, notwithstanding the definition given in T. D.
2088.
Digitized by VjOOQIC
299
In that decision the instrument taxed under the head ''Contract:
Broker's note or memorandum" was defined as ''any instrument or
writing given by the seller, when a broker or person acting as such,
to the buyer of any goods or merchandise, stocks, bonds, exchange,
notes of hand, real estate, or property of any kind or description,
evidencing or confirming the sale."
By this language it was intended to convey the meaning that the
note or memorandum must establish a contractural relation between
the broker or person acting as such and the purchaser; that is, it
must evidence a broker's contract, executed or executory, issued to
the purchaser.
No mere advice or order for the delivery of the goods not delivered
to the purchaser nor statement of accoimt can be construed as a
contract of sale. ,
As stated in T. D. 2088, except in the cases w^iere a broker's note
or memorandum is otherwise provided for at a different rate of tax,
and therefore not subject to tax at 10 cents, there is no requirement
in the law that such a contract or note shall be issued, but if it is
issued it is taxable at 10 cents.
Respectfully,
W. H. OSBORX,
Commissioner of Internal Revenue.
Mr. .
(T. D. 2106.)
Emergency revenue law — Marine insurance — Open policies.
Law and instructioiis relative to the tax imposed on marine-insurance policies by the
act of October 22, 1914, effective December 1, 1914.
Treasury Department,
Office of Commissioner of Internal Revenue,
WasJiington, D. 0., December 29, 1914-
The following provisions, effective December 1, 1914, relating to
marine and other kinds of insurance, are contained in Schedide A of
the act "To increase the internal revenue, and for other purposes,^^
approved October 22, 1914:
Insurance: Each policy of insurance or other instrument, by whatever name the
same shall be called, by which insurance ehall be made or renewed upon property of
any description (including rents or profits), whether against peril by sea or on inland
waters, or by fire or lightning, or other peril, made by any person, association, or cor-
poration, upon the amount of premium charged, one-half of 1 cent on each dollar or
fractional part thereof: Provided ^ That purely cooperative or mutual fire insurance
companies or associations carried on by the members thereof solely for the protection
of their own property and not for profit ehajl be exempted from the tax herein pro-
vided: And provided further, That policies of reinsurance shall be exempt from the
tax herein imposed by this paragraph.
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300
Upon satisfactory representations made to this office that a literal
compliance with the forgoing provisions of law in the matter of
affixing the required stamps is impracticable in cases where insurance
is effected or renewed xmder ^*<ypen policies,'^ upon which the pre-
miums charged in respect of risks attaching thereunder are not and
can not be entered, collectors of internal revenue are authorized and
directed to permit the following procedure:
(1) Such insurance companies and underwriters as are engaged in
the business of marine or transportation insurance in the United
States and who have filed with the collector of the district in which
the principal office of said insurers in the United States is located,
or in a collection district designated by the company and where one
of its marine agencies is situated, the bond hereafter prescribed, may
(in lieu of affixing stamps to said open policies or other instruments
used in connection therewith) affix, at the principal office of the
company in the United States or at one or more of its marine agencies
in the United States, authorized as hereafter prescribed by the com-
pany, the required stamps to the books in which the amounts of
premiums charged under such open policies are entered, said stamps
to be affixed against the| monthly totals of premiums so charged and
to be certified to by the proper officer or agent of the underwriters
on the first day of the following month or within twenty (20) days
thereafter. Provided, That nothing herein contained shall require a
company to file more than one bond.
When a company elects to designate a collection district other
than the district in which the principal office of the company in the
United States is located as the place for the filing of the required
bond, it shall designate such other collection district in writing to
the Commissioner of Internal Revenue at Washington and send a
copy of such written designation to the collector of the district in
which the principal office of the company in the United States is
located and another copy to the collector of the designated district.
When a company desires to authorize one or more of its marine
agencies in the United States to affix stamps in their books, as here-
inbefore provided in the case of premiums charged under open
poUcies, authority for so doing shall be given in writing by the com-
pany to such agent or agents and a copy of such authority shall be
sent by the company to the Commissioner of Internal Revenue and
another copy to the collector of the district or districts in which the
agent or agents so authorized conduct the business of such agencies.
No company or any of its agents shall affix stamps to the premium
books of the company or of any agency imtil the aforesaid bond shall
have been filed, as herein provided, and no agent shall affix stamps
to said books until he shall have been duly authorized so to do by
the company or companies he represents, as hereinbefore provided.
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In the case of companies organized under the laws of a foreign
country and authorized to transact business in the United States,
the terms "company'' and "principal office" of said company shall
for the purposes of this regulation be taken to refer to the office of
its principal marine agency in the United States.
(2) The bond to be given by the insurance company, or by an
approved surety company, shall be in the following form and in the
penal sum of ten thousand dollars ($10,000) :
Know all men by these presents: That the , a corporation of , and
having its principal office at , in the State of , is held and firmly bound
unto the United States of America, in the full and just sum of ten thousand dollars
($10,000), lawful money of the United States, to which payment well and truly to be
made the said company binds itself, its successors and assigns, firmly by these presents.
Sealed with its corporate seal, and dated this day of , 191-.
Whereas, the (above bounden*) — is engaged in the business of insuring against
loss or damage (here state character of risks and class -of property on which such risk
is assumed), and whereas the premiums charged by the said company under its open
policies of insurance are subject to a stamp tax under the provisions of an act of Con-
gre^ approved October 22, 1914; and whereas the premiums so chaiged can not, in
the usual and ordinary course of its business, be chaiged or entered by the said com-
pany on the said open policies of Insurance;
Now, therefore, the condition of this obligation is such that if the said com-
pany shall, as to all premiums charged under the said open policies of insurance,
on and after the 1st day of December, 1914, cause the same to be entered on the
premium books of the said company or its duly authorized stents in the United States
and shall pay the full amount of tax imposed by the act of Congress aforesaid on all
premiums so chaiged on or after said date and prior to December 31, 1915, and
shall affix to the said books, against the monthly totals of said premiums the re-
quired stamps denoting the payment of said tax; and shall, on the first day of each
month, or within twenty (20) days thereafter, render or ca ase to be rendered to the
collector of internal revenue for the district of — a full and accurate state-
ment of all premiums so chaiged, and the amount of tax paid thereon as aforesaid, then
this obligation to be void, otherwise to remain in full force and virtue.
As conditioned in the foregoing bond, the company shall, not
later than the 20th day of each month, render a statement of the
amount of premiums so charged during the preceding month, as also
the amount of tax thereon paid. The required statement should
be made on Form 429 (revised), in duplicate, one copy of which
will be retained by the collector and one copy forwarded to the
Commissioner of Internal Revenue.
3. Upon certificates and other docimients used in connection with
open policies of marine or transportation insurance, there may be
indorsed by rubber stamp or otherwise the following:
Payment of internal-revenue stamp tax guaranteed by the (insert name of insurance
company) under T. D. 2106
No such indorsement shall be made upon any such certificate or
other document unless there shall have been filed by the company
t Omit if bond Is given by a surety company. In such case the corporate name and principal ofBce of
the company on whose behalf the bond is given should be stated in full.
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302
therein described the bond prescribed by this regulation: Provided,
That this prohibition shall not apply to such indorsements heretofore
made where the company shall, on or before January 31, 1915, file the
bond herein prescribed.
(4) The tax is due only upon premiums charged under such open
pohcies on or after December 1, 1914, and before December 31, 1915,
notwithstanding that such open pohcies may have been outstanding
prior to December 1, 1914.
The gross premiums charged by underwriters must be reported by
them and the tax thereon paid as required by law, without deduction
for commissions allowed agents from the premiums charged.
Attention is especially called to the fact that the foregoing regular
tions have reference only to open policies of insurance, and not to
pohcies or other instruments under which insiu^ance is eflPected, or
renewed, where the premiums charged are, or, in the ordinary course of
business, can be noted thereon.
BLANKET CONTRACTS FOR FIDELITY AND OTHER INSURANCE.
Where a contract for fidehty and other insurance covers a given
period at a specified sum, irrespective of the number of bonds, ete.,
written under it, stamps covering an amount of the premium charged
proportionate to the taxable period covered must be affixed to the
contract and each bond or policy written during the taxable period
will have written or stamped thereon the following: '* Issued under
contract dated , which contract has been duly stamped,"
or words to that eflPect.
SCHEDULE INSURANCE.
Where bonds or other pohcies of insurance are written covering a
number of risks enumerated in schedules attached to the bonds or
policies, changes being made from time to time in the schedules by
the substitution or addition of employees or other risks, such bonds
or policies will be stamped on the premiums charged at the time of
issuance, and any additional charges increasing the total premium
will be stamped on the premium receipt. Where it is impracticable,
for bookkeeping reasons, to ascertain until the close of the period
whether there has been an increase in the premium charged, stamps
covering increased premium will be attached to the bond or policy
when the fact is ascertained.
W. H. OSBOBN,
Qmimissioner of Internal Revenue.
Approved :
Byron R. Newton,
Actmg Secretary of the Treasury.
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(T. D. 2107.)
Eniergency revenue law — Commercial hroTcerSj etc.
Special tax as commercial broker or commission merchant under the emergency
revenue act.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December ^8, 1914.
To collectors of internal revenue, revenue agents, and otliers concerned.
This office is in receipt of numerous inquiries regarding sales of
products on commission basis by local agents, sales representatives,
and others.
With regard to such matter, you are advised that n person who
negotiates purchases or sales on commission, exclusively for certain
persons or firms with whom he is under contract, is regarded as an
agent of such persons or firms and does not incur special tax liability
as commercial broker.
However, if he is engaged in the business of negotiating on a com-
mission basis purchases or sales of goods, wares, produce, or merchan-
dise for any and all applicants then special tax liability as commer-
cial broker is incurred.
The principle involved in the above applies with equal force to the
doing of business as commission merchant.
W. H. Osborn,
Commissioner of Internal Revenue.
(T. D. 2108.)
Emergency revenue law — Schedule B.
Modification of regulations contained in T. D. 2063, relative to tax payment and stamp-
ing bulk packages, etc.
Treasury Department,
Office of Commissioner of Internal Revenue,
Washington, D. C, December SO, 1914-
Regulations contained in T. D. 2063, in regard to manufactures
taxed under Schedule B of the act of Congress approved October 22,
1914, are amplified and modified as follows:
All petrolatum and vaseline and similar substances used in the arts
and trades, such as the manufacture of lubricants, inks, transparent
envelope windows, shoe polish, waterproofing, etc., may be removed
from the factory or refinery without payment of tax or affixing the
stamps to the containers. All finished or refined petrolatum and
vaseline or similar substances removed from the factory and sold to
consumers in jars, bottles, or cans, including white, blue label, per-
fumed, etc., or for sale at retail for toilet purposes, must be tax paid.
The tax must be paid in all cases by the manufacturer or refiner,
except as hereinfifter provided.
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304
All manufactures of any character subject to the tax under Schedule
B, such as petrolatum, bay rum, toilet waters, chewing gum, talcum
powder, etc., removed from the factory in any quantity, in a finished
condition — that is, bottled or otherwise packed for the consumer— or
for sale at retail, must be tax paid by the manufacturer and have the
necessary stamps afiSxed to the container. Manufactures which are
shipped in bulk by the manufacturer in an unfinished condition — that
is, those which require to be repacked, labeled, and otherwise put in
salable condition by others, but which are otherwise in condition for
ultimate consumption, and sold under their own or other names — may
be removed from the factory or customhouse without payment of the
tax or having the stamps affixed to the container. In case of manu-
factures which are used only for toilet purposes, the following label or
caution notice must be affixed to the container:
These goods are removed in an unfinished condition and need to be drawn off into
smaller containers, labeled, wrapped, and otherwise put in a salable condition at
retail. Notice is hereby given to the person thus drawing same off, labeling, packing,
and placing them in a salable condition at retail, that the tax must be paid by the
person thus putting same in salable condition at retail, and the necessary stamps to
be affixed to the bottles or other containers into which same are drawn.
The following label should be used on bulk containers of petro-
latum, vaseline, and other products which have double uses:
These goods are removed in an unfinished condition and need to be drawn off into
smaller bottles or containers, labeled and wrapped, and otherwise put in a salable
condition. Notice is hereby given to the person thus drawing same off, labeling,
packing, and placing them in a salable condition at retail that the tax must be paid on
such X)ortion as is sold for toilet purposes, and the necessary stamps be affixed to the
bottles or other containers into which same are drawn. The portion sold for use in
the arts and trades need not be tax paid and stamped.
These labels must be dated and signed.
Wholesale dealers, jobbers, and importers selling unfinished prod-
ucts must affix the appropriate previously described caution notice
or label. In this case they need not pay the tax and affix the stamps.
Wholesalers, jobbers, importers, or others who put goods in a salable
condition for consumers, or for sale at retail, will be regarded as
manufacturers thereof and be required to pay the tax and affix the
necessary stamps. Retail dealers may sell from stamped containers
for immediate delivery over the coimter without stamping the smaller
containers. Retail dealers who fill bottles or small containers from
stamped packages for future deUvery must stamp the bottles or
containers thus filled. Retail dealers are required to tax pay and
stamp all taxable goods which were in the hands of wholesale dealers,
importers, and retail dealers on December 1, 1914, when such arti-
cles are sold at retail.
The purpose of this regulation is to avoid double taxation and to
permit shipment of bulk packages by manufacturers, wholesalers,
jobbers, importers, and others without tax payment and stamping
Digitized by VjOOQIC
305
until the goods are put in salable condition in suitable containers for
sale at retail. It must be distinctly understood, however, that this
is not authority for shipment of finished products packed ready for
sale at retail by manufacturers and others without tax payment.
FORM OF DECLABATION.
The following form is prescribed for manufacturer's declaration at
the end of each month of manufactures renxoved during the month:
United States Internal Revenue.
DeclaraUon of manirfacturers for goods taaxible under Schedule B of ^ act of Congress
approved October iH, 1914,
DISTRICT OF ,
, 191-.
The undeisigned , manufacturer of , at No. , city of , county
of , collection district of , State of ^ in puiBuance of the requirements
of the act of Congress approved October 22, 1914, do — hereby expressly declare that
during the month of , 191-, no article or commodity has been removed or carried
or sent or caused or suffered or known to have been removed, carried, or sent from
the premises of such manufacturer or maker other than such as have been duly taken
account of and on which the stamp tax provided for in said act has been paid, as
required by law and regulations.
(Signed) .
(Hanufacturer's name and seal if corporation.)
By
(Foreman, agent, or superintendent, as the case may be.)
Regulations 2063 are hereby accordingly modified and amended.
W. H. OSBOEN,
Commissioner of Internal Reverme.
Approved :
Wm. p. Malburn,
Acting Secretary of the Treasury.
(T. D. 2109.)
Income tax — Nonresident aliens.
Amendment of article 8 of regulations 33, providing for the collection of tax on income
of nonresident ahens.
Treasury Department,
Oppicb of Commissioner of Internal Revenue,
Washinffton, D. C, December S8, 1914.
To collectors of internal revenue:
T. D. 2013 of August 12, 1914, amending article 8, income-tax
regulations No. 33, is amended to make article 8 read as follows,
the words in italics constituting the further amendments:
Abt. 8. The income of nonresident aliens subject to the normal tax of 1 per cent
shall consist of the total gains, profits, and income deriv^ from all property owned
27778'*— VOL 16—14 20
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306
and from every buainess, trade, or profession carried on -within the United States
(to be designated as gross income), less deductions (1 to 8, inclusive) specifically
enumerated in paragraph B of the act (see art. 6), in so far as said deductions relate
to said gains, profits, etc.
The specific exemption in paragraph of the act can not be allowed as a deduction
in computing the normal tax of nonresident aliens.
Nonresident aliens are subject to additional or surtax the same as prescribed in the
case of citizens of the United States or persons residing in the United States.
The responsible heads, agents, or representatives of said nonresident aliens who are
in charge of the property owned or business carried on shall make full and complete
return of the income therefrom on Form I040 and shall pay any and all tax, nonrnl
and additioruil, assessed upon the said income of swck nonresident aliens.
The person, firm, company, copartnership, corporation, joint-stock company or
association, and insiirance company in the United States, citizen or resident alien,
in whatever capacity acting, having the control, receipt, disposal, or payment of fixed
or determinable annual or periodical gains, profits, and income, of whatever kind,
to a nonresident alien, iinder any contract or otherwise, which payment shall represent
income of a nonresident alien from the exercise of any trade or profession within the
United States shall deduct and withhold from such annual gains, profits, and income,
regardless of amount, and pay to the officer of the United States Government authorized to
receive the same, su^h tax as will he sufficient to pay the normal tax of 1 per cent imposed
thereon by law, and shall make an annual return on Form 1042.
Form 1008, revised, claiming the benefit of deductions and refund of excess tax vrUhheld,
as provided by paragraphs B and E of the Federal income-tax law may be filed by the non-
resident alien with the withholding agent or collector of internal revenue for the district in
which the return is made or is to be made. ,
W. H. OSBORN, •
Commissioner of internal Revenue,
Approved:
Wm. p. Malbubn,
Acting Secretary of tke Treasury,
(T. D. 2110.)
Emergen^cy revenue law — Bonds.
Treasury Department,
Office of Commissioner of Internal Revenue,
Wa^sJiington, D, C, January 4, 1915.
To collectors of internal revenue and others conx^med:
This office has received a number of inquiries indicating that a con-
struction not intended by this office has occasionally been placed
upon T. D. 2060, dealing with the subject of bonds, and especially
bonds accompanying mortgages.
In order to make plain the meaning of said Treasury decision it may
be stated that taxable bonds, imder the revenue act of October 22,
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307
1914, are divided into two distinct classes, having neither in form,
purpose, nor law any resemblance whatever to each other. They
are —
First. Bonds issued as certificates or evidence of indebtedness,
generally based upon mortgages or some other character of security
founded upon real or personal property.
Second. Bonds of indemnity for loss, to secure the performance of
the duties of any office or position, or for the doing of any other thing
therein specified.
The first class is taxed under the law at 5 cents on each $100 of
face value or fraction thereof when issued by any association, com-
pany, or corporation. If, however, they are issued simply by an
individual, and based either upon his individual credit or property
and obligating him to pay a certain sum or siuns of money at a
specific time or times, with or without coupons, simply marking and
indicating interest due thereon and whether or not based upon a
mortgage of either personal or real property, they fall within the
taxation imposed upon promissory notes; that is to say, 2 cents
when promising to pay a sum not exceeding $100, and 2 cents for
each additional $100 or fractional part thereof.
The second class — bonds or obhgations of the nature of indemnity
for loss, security, or guaranteeing official obhgations — are accom-
panied usually by sureties, either personal or corporate. When such
bonds are executed only by persons without charge therefor in the
nature of premium, they fall under the subdivision of class 2, which
the law designates as '^ bonds of any description * * * not
otherwise provided for in this schedule, 50 cents." Such personal
indemnity bonds, therefore, without premium, are the only character
of bonds within the revenue act subject to a 50-cent tax. Indemnity
bonds issued by any person, association, or corporation transacting
the business of indenmity insurance are taxable in all cases and for all
purposes at the rate of one-half of 1 cent on each dollar or fractional
part thereof upon the total amount of premium charged.
The first class of bonds are almost uniformly based upon mortgages
of either personal property or real property, whereas the second class
would rarely be issued in connection with a mortgage or other property
used as security or collateral for the payment of a debt. The nature
and purpose of the two bonds would fix their status for taxation, and
not the extraneous facts as to whether they were issued with or
without mortgages. Any inconsistent ruling heretofore made is
modified in fine with the foregoing.
W. H. OSBORN,
Commiemrier of Internal Revenue.
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308
(T. D. 2111.)
Emergency revenue law — Bonds.
Bonds given by officials of a State, township, county, or village for the faithful per
formance of duties not subject to stamp tax.
Treasury Department,
Office of Commissioner of Internal Revenue,
WasUngton, D. (7., December 28, 1914,
Sirs: This office is in receipt of your letter of the 23d instant,
calling attention to T. D. 2072, and especially to the third question
which was raised and answered therein, relatiTe to bonds given by
State, township, comity, and village officials.
In reply, you are advised it is held by this office that bonds given
by officials of a State, township, county, or village for the faithful
performance of duties, and any bonds given to the same political
subdivisions covering contracts for governmental purposes or the
protection of the State, township, county^ village, or municipality,
in any respect, are held to be free from Federal taxation on the
broad groimd that the sovereign States and subdivisions thereof are
constitutionaUy free from taxation by the Federal Government.
You wiU note that this ruling does not apply to bonds otherwise
taxable given to the Federal Government for any purposes.
Respectfully,
W. H. OSBORN,
Oommissioner of Iniem<d Revenue,
(T. D. 2112.)
Emergency revenue law — Building and loan associations.
Transfers of stock of building and loan associations not subject to tax. Notes given
by or to such associations taxable.
Treasury Department,
Office of Cobcmissioner of Internal Revenue,
Washington, D, (7., December SI, 1914.
Sir: Replying to your letter of the 23d instant, inclosing a com-
munication from the Summit Building & Ijoan Association imder
date of the 21st idem, you are informed that in the opinion of this
office transfers of stock of a building and loan association which
makes loans only to its members are not subject to tax under the act
of October 22, 1914. Notes, however, given to or by such associa-
tion are taxable the same as notes issued by any other person or
organization not specially exempted.
Respectfully, G. E. Fletcher,
Acting Commissioner of Internal Revenue,
Collector, Fifth District, NewarJc, N. J,
Digitized by VjOOQIC
INDEX.
Bept. No.
Acceptance of certified checks for intemal-reveiiue taxes 1963
Accounts and reports, assistant treasurer, etc., stamp tax 2080
Act of October 22, 1914; emer^ncy revenue law 2033
Additional forms; annual net income; income tax 1928
Additional tax; fermented liquors 2026, 2031
Adhesive stamps, receipt for 2089
Adulterated butter, marking and branding 1970
Advance payment of tax withheld by agents, etc. ; income tax 1965
Affents, real estate; emergency revenue law 2083
Alcohol, rectified, use of; manufactures for export ' ♦ . . . 1968
Alcohol for scientific purposes 1969, 1971
Alcoholic medicinal preparations, revised list of; special tax 1994
Aliens, nonresident* income tax 2109
Annual inventories by cigar and tobacco manufacturer 2057
Annual net income:
Additional forms; income tax 1928
Corporations; fiscal year; income tax 2001
Corporations, returns of 2029
Aqueous extract of opium 19^2
Articles and occupations subject to tax, schedule of 2036
Assessed taxes* notice and demand. Form 17 1995
Assessments; demand and notice. Form 17 2003
Assignment to duty of income-tax appointees : 1932
Assistant treasurer, etc. ; accounts and reports; stamp tax 2080
B.
Bankers:
Special lists: emergency revenue law 2p45
'fiuc on undivided profits 2064
Berths or seats in palace, parlor, or sleeping cars 2041
Bills of lading: emergency revenue law 2059, 2065, 2074, 2092
Blank forms of certificates, etc. ; income tax 1939
Bonded spirits, equalizln&; losses of 2008
Bonds and certificates in legal proceedings 2091
Bonds and other instruments; insurance companies 2072
Bonds and policies of insurance; emergency revenue law 2062
Bonds; emergency revenue law 2110, 2111
Export 2100
Foreign corporations; incometax 1992
Bottles and other containers of wines, etc., stamping 2078
Brandy:
Distillers of; certain exemptions 1984
Fortification, use of tank cars to transfer 2019
Broker or commission merchant ; emergency revenue law 2107
Brokers' notes or memoranda; emergency revenue law 2088, 2105
Bromine absorption number; denatured alcohol 1978
Building and loan associations :
Corporation tax (Herold v. Park View Building & Loan Association) . . 1941
Emeigeticy revenue law 2044, 2112
Bulk packages, etc.; T. D. 2063 modified 2108
C.
Cancellation of stamps; emergency revenue law 2098
Capital assets, gain or loss from sale of; income tax 2077
Case and strip stamps for spirits bottled in bond 2034
(309)
Digitized by VjOOQIC
310
Certificates: Dept.No,
Exemption; firms, oiganizations, etc. ; income tax 1998, 2049
Schedule A, emei^gency revenue law 2087
Deposit 2032,2054
Issued by State officers 2071
Certificates of ownership :
Bonds; nonresident alien 1988
Executed by foreign banks, etc.; income tax 1977
Income tax; changes of regulations 1974
Supplemental regulations; income tax 1976
Use of old forms of. 2020
Certified checks:
Acceptance of, for internal-revenue taxes 1963
Commerciid exchanj^ 1990
Chan^ of regulations; income tax; certificates of ownership 1974
Chewinff gum:
Broken packages 2076
Perfumery, cosmetics, etc., ScheduleB 2063
Stamptaxon; emergency revenue law 2052
Cigar and tobacco manufacturers, annual inventories by 2057
Cigar manufacturer's book. Form 73 revised 1930
Cigars, tobacco, playing cards, etc., by registered mail 1931
Circular letters:
Adhesive stamps, receipt for 2089
Adulterated butter, marking and branding 1970
Alcohol for scientific purposes; T. D. 1757 amended 1969
Assessed taxes; notice and demand, Form 17 1995
Assignment to duty of income-tax appointees 1932
Case and strip stamps for spirits bottled in bond 2034
Certificates of deposit Farms 49. 51B, and 79, and Record 9 2032
Certificates of ownership, use of old forms of 2020
Chewing gum in broken packages 2076
Cij^ manufacturer's book, Form 73 revised 1930
Diary reports rendered trimonthly on Form 629 1952
Distillers of brandy; certain exemptions 1984
Domestic and imported wines, liqueurs, etc.; tax stamps 2027
Emergency revenue law effective Dec. 1, 1914 2038
Equauzinfi; losses of bonded spirits 2008
Fermented liquors; additional tax 2026
(jraugine instruments; evidence of breakage, etc 1980
Leaf toBacco dealers to report in Book 59 factory numbers, etc 2025
Mash fit for distillation; artificial wines 1949
Medicinal i>reparation8, list of, amended 2010
Oleomargarine; regulations No. 9 amended 2004
Oleomargarine returned, destruction of 2021
Raisin wine; application of T. D. 1949 2002
Records 29 and 32 abolished 1951
Report on Form 22; collection of additional taxes 2031
Substitution; modification of T. D. 1872 2007
Tank cars, use of, to transfer brandy for fortification 2019
Tobacco, cipars, playing cards, etc., by registered mail 1931
Wholesale hquor dealers; special tax 2014
Wines, tax on, act of October 22, 1914 2037
Citizens living abroad, extension of time for filing returns; income tax 1953
Claims (Fort Pitt Gas Co. v. United States) 1979
Coca leaves or opium 2102
Collectors not to retain copies of income-tax returns; amending article 192,
Regulations 33 2024
Collectors to answer inquiries relative to income tax 1956
Commercial exchange; certified checks 1990
Commission merchants; emergency revenue law 208-(, 2107
CommiaHJons on renewal premiums on insurance, taxability of 2011
Consi^;nment of newspapers, act of October 22, 1914 2036
Contamers of wines, etc., stamps on; emergency revenue law 2053
Cooperative dairies, etc., not exempted; income tax 1996
Corporation tax; building and loan associations (Tlcrold v. Park Vi6w
Building & Loan Association) 1941
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311
D«pt. No.
GoiporatioiiB, annual net income; fiscal year; income tax 2001
Corporations not to deduct from gross or net income for year 1913; income
tax 1937
Corporations, returns of annual net income 2001, 2029
Cosmetics, perfumery, chewing gum, etc.; Schedide B 2063
Coupons or interest notes; emergency revenue law 2101
Courts, decision of:
Claims (Fort Pitt Gas Co. v. United States) 1979
Corporation tax; building and loan associations (Herold v. Park View
Building & Loan Association) 1941
Distilled spirits; distillery warehouses (Taney, trustee, i;. Penn National
Bank) .' 1959
Distilled spirits* warehousing bond (United States Fidelity &
Guaranty Co., Baltimore, Md., v, Unit^ States) 2103
Income tax (Dodge v, Osbom) 1983
Searches and seizures (Fr^nont Weeks v. United States) .1964
Special excise tax on corporations (Eliot National Bank v. Gill). 1936
Special excise tax on corporations; leased railroads (Dayton & Western
Traction Co. v, Gilligan et al.) 2000
Special excise tax on corporations; leased railroad (New York Central
Railroad et al. v. Gill) 1999
Special excise tax on corporations (National Bank of Commerce v.
Allen) 1991
Stamp tax on marine insurance policies (Thames & Mersey Marine In-
surance Co. V. United States). 2009
D.
Dairies:
Cooperative, etc., not exempted; income tax 1996
Monthly, special employees 1958
Deduction for loss; income tax 1993, 2005
Deduction of interest; income tax 1960, 1993
Deeds and mortgages; emergency revenue law '. . . 2042, 2060
Delayed payments, 5 per cent penalty and interest on 2028
Demand and notice, Form 17; assessments ^ . 2&03
Denatured alcohol:
Bromine absorption number 1978
Modification of special formula No. 4 1975
Pyroxylin plastics 1954
Smoking and chewing tobacco 1981
Diary reports rendered tnmonthly on Form 629 1952
Digest of rulings:
Emergency revenue law 2051
Income tax 2090
War-revenue act of June 13, 1898 2046
Discount on purchases of documentary stamps, etc 2055, 2070
Display containers, stamping; emergency revenue law 2082
Distilled spirits:
Distillery warehouses (Taney, trustee, v. Penn National Bank) 1959
Warehousing bond (United States Fidelity & Guaranty Co., Baltimore,
^ Md., V. United States) 2103
Withdrawal of, for export 2018
Distillers of brandy; certain exemptions 1984
Dividends or net earnings; exclusion of income from; income tax 1945
Dividends:
Tax on; exemption certificate 2030
Taxable status; income tax/. 2048
Documentary stamps and taxes; Schedule A 2067
Documentary stamps, discount on purchases of j 2070
Domestic and imported wines, liqueurs, etc.; tax stamps 2027
E.
Emergency revenue law:
Accounts and reports, assistant treasurer, etc. ; stamps 2080
Act of October 22, 1914 2033
Adhesive stamps, receipt for 2089
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312
EmeaifsoDcy revenue law — Oontinaed. ^•p*- No.
BuikerB' lists, special 2045
BillsofladLog 2059,2065,2092
Bonds 2110,2111
Bonds and certificates in legaA proceedings 2091
Bonds and policies of insurance 2062
Broker or commission merchant 2107
Brokers' notes or memoranda 2088, 2105
Building and loan associations 2044, 2112
Cancellation of stamps 2098
Certificates issued by State officers 2071
Certificates of deposit not taxable 2054
Certificates; Schedule A...... 2087
Chewing gum, stamp tax on 2052
Commission merchants 2084
Containers of wines, etc., stamps on 2042,2053
Coupons or interest notes 2101
• Deeds and mortgages 2042,2060
Digest of rulings; mcome tax 2046,2051,2090
Digest of rulings under act of Oct. 22, 1914 2051
Digest of rulings under war-revenue act of June 13, 1898 2046
Discount on purchases of documentary stamps, etc 2055, 2070
Display containers, stamping 2082
Documentary stamps ana taxes; Schedule A « 2067
Effective December 1, 1914 2038
Export bonds 2100
Fermented liquors^ additional tax on 2047
Fire-insurance policies 2043
Foreign bills of lading 2074
Hair oils, jwmades, etc 2096
Income-tax certifi cates 2049
Insurance companies; bonds and other instruments 2072
Insurance policies, tax on 2068
Judgment notes , . , 2081
Liqueurs, cordials, etc.^ classification of '. 2050
Marine jjisurance policies 2106
Marking tax stamps 2069
Modifying T. D. 2080; forms and records 2093
Moving-picture theaters 2040
Newspapers, bundles of 2075
Packer^s tar soap 2099
Perfumery, cosmetics, chewing gum, etc.; Schedule B 2063
Policies of fire insurance 2043
Policy loan agreeiiients 2097
Powers of attorney for transfer of stock, etc 2056, 2085
Real estate agents; real estate, etc 2083
Seats or berths in palace, parlor, or sleeping cars 2041
Soaps 2094
Special-tax returns, act of October 22, 1914 '. 2039
Stamping bottles and other containers of wines, etc 2078
T. D. 2063 modified; bulk packages, etc 2108
Talcum powders, etc 2066
Tel^;raph and telephone messages 2058
Tobacco dealers and manufacturers 2061
Tooth and mouth washes 2095, 2104
Transfer of stock certificates, etc 2073
Undivided profits; tax on bankers 2064
Witch-hazel for medicinal use 2086
Equalizing losses of bonded spirits 2008
Exclusion of income from dividends or net earnings; income tax 1945, 1947
Executive order; inspection of income-tax returns 2016
Exemption certificate; tax on dividends 2030
Exemption certificates; firms, organizations, etc.; income tax 1998
Export bonds; emergency revenue law 2100
Extending exemption certificate 1063 to nonresident aliens 2012
Extension of time for filing returns; income tax 1927, 1938, 1953, 1955, 1985
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313
F
Dept. No.
Pennented liquors; additional tax 2026, 2047
Fiduciaries:
Extending T. D. 1945 to cover returns made by; income tax 1947
'Forms 1015 and 1019, revised; income tax 1987
Income tax .' 1961
Returns to be made on Form 1041; income tax 1943
Fire insurance policies; emergency revenue law 2043
Fiscal agents; foreign corporations; income tax 2006
Fiscal year; annual net income of corporations; income tax 2001
Five per cent penalty and interest on delayed payments 2028
Foreign biUs oi lading; emergency revenue law 2074
Foreign corporations:
Bonds of; income tax 1992
Fiscal agents; income tax 2006
Form of certificate to be attached to interest coupons; income tax 1929
Form 17, demand and notice; assessments 2003
Form 22, report on; collection of additional taxes 2031
Form 73 revised; cigar manufacturer's book 1930
Form 1040, return on, when exemption is not claimed at the source; in-
come tax : 1942
Forms 1015 and 1019, revised; fiduciaries; income tax 1987
Forms 1058 and 1059; substitute certificates, execution of 1986
G.
Gain or loss from sale of capital assets; income tax 2077
Gauging instrumenta; evidence of breakage, etc 1980
Gross or net income for year of 1913, corporations not to deduct from; in-
come tax 1937
H.
Hair oils, pomades, etc. ; emergency revenue law 2096
I.
Income tax:
Additional forms; annual net income 1928
Advance payment of tax withheld by agents, etc 1965
Amending Article 58, regulations 33; indorsement or stamp on foreign
coupons, etc 2023
Amending Article 192, regulations 33; collectors shoiild not retain
copies of returns 2024
Amendment of T. D. 1942 1948
Appointees, assignment to duty of . 1932
Blank forms of certificates, etc 1939
Bonds of foreign corporations 1992
Certificate of ownersnip of bonds; nonresident alien 1988
Certificates; emergency revenue law 2049
Certified checks and other forms of commercial exchange 1990
Changes of regulations; certificates of ownership 1974
Cooperative oairies, etc., not exempted 1996
Corporations, annual net income; fiscal year 2001
Corporations not to deduct from gross or net income for year 1913 1937
Corporations' returns of aimual net income 2029
Deduction for loss 2005
Deduction of interest actually accrued. 1960
Dividends, taxable status' 20^8
Dodge V. Osbom 1983
Exclusion of income from dividends or net earnings 1945
Exemption certificate; tax on dividends 2034>
Exemption certificates, firms, organizations, etc 1998
Extending exemption certificate 1063 to nonresident aliens 2012
Extending T. D. 1945 to cover returns by fiduciaries 1947
Extension of time for filing monthly list returns 1927
Extension of time for filing returns by citizens living abroad 1953
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314
Income tax-r-Continued. I>«P*- No.
Extension of time for filling in on certificates numbers of bonds, etc. . 1955
Extension of time for use of Forms 1001, 1003, and 1004 - 1938
Fiduciaries 1961
Fiduciaries and returns to be made by them on Form 1041 1943
Fiduciaries; Forms 1015 and 1019, revised 1987
Five per cent penalty and interest on delayed payments 2028
Foreign corporations, fiscal agents 2006
Form 1040, return on, when exemption is not claimed at the source. . 1942
Form of certificate to be attached to interest coupons 1929
Gain or loss from sale of capital assets 2077
Inquiries relative to, answered by collectors 1956
Inspection of returns; Executive order 2016
Interest paid on indebtedness; deduction 1993
Liability; quarters, heat and light, and mileage, etc 2079
Losses deductible nrom gross income 1989
Monthly list returns not to be made imder oath 1997
Mutual telephone companies, mutual insurance companies, etc 1933
Net income from Mar. 1 to Dec. 31, 1913 1934
Nonresident aliens 2013,2109
Nontaxibility of interest from bonds and dividends; nonresident aliens 2017
Offers in compromise 2015
Organizations, etc.; withholding agents 1967
Ownership certificate executed by foreign banks, etc 1977
Partnerships 1957
Regulation 33 (Supplement to Treasury Decisions) 1944
Returns to be treated inviolably confidential 1962
Revision of Form 1044; monthly list return 1973
Special assessment districts; political subdivisions of a State 1946
Substitute certificates 1058 and 1059, execution of 1986
Supplemental r^ulations ; certificates of ownership ; : 1976
Synopsis of rulings 2090
Taxaoility of commissions on renewal premiums on insurance : . . 2011
Time for filing returns; penalties 1950
Waiver of r^ulations ; extension to October 31, 1914 1985
Waiver of regulations; filling in on certificates, etc 2022
Indebtedness, interest paid on; deduction; income tax 1993
Indorsement or stamp on foreign coupons, etc.; amending article 58, reg-
ulations 33 2023
Inquiries relative to income tax answered by coUectcnrs 1956
Inspection of returns; Executive order; income tax 1016
Insurance, bonds and policies of; emergency revenue law '. 2062
Insurance compjanies; oonds and other instruments 2072
Insurance policies:
Marine; emergency revenue law 2106
Tdx on; emergency revenue law 2068
Interest actually accrued, deduction of; income tax 1960
Interest coupons, form of certificate to be attached to; income tax 1929
Interest notes or coupons; emergency revenue law 2101
Interest paid on indebtedness; deduction; income tax 1993
Internal revenue law, emergency, effective December 1, 1914 2038
Internal-revenue act of October 22, 1914 2033
Inventories, annual, by cigar and tobacco manufacturers 2057
Inviolably confidential, returns to be treated ; income tax 1962
J.
Judgment notes; emergency revenue law , 2081
L.
Leaf tobacco dealers to report in Book 59 factory numbers, etc
Leased railroad; special excise tax on corporations:
Dayton & Western Traction Co. v. Gillicanetal 2000
New York Central Railroad et al. v. Gill 1999
Liability tax; (quarters, heat and light, and mileage, etc 2079
Liqueurs, cordials, etc., classification of; emergency revenue law 2050
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315
Dept. No.
Liquors, f ennented ; additional tax ; emeigency revenue law w 2047
Losses aeductible from gross income; income tax 1989
Losses of bonded spirits, equalizing 2008
Manufactures for export; use of rectified alcohol 1968
Marine insurance ixuicies:
Emeigency revenue law 2106
Stamp tax on (Thames & Mersey Marine Insurance Co. v. United States). 2009
Marking and branding adulteiated butter 1970
Marking tax stamps^ emeigency revenue law 2069
Mash fit for distillation; artificial wines : 1949
Medicinal preparations, alcoholic, revised list; special tax 1994, 2010
Memoranda or brokers' notes 2088
Modification:
Special Formula No. 4; denatured alcohol 1975
T. D. 1731; alcohol for scientific purposes 1971
T. D. 1872; substitution : 2007
T. D. 2063; bulk packages, etc 2108
T. D. 2080; forms and records 2093
Monthly list returns:
Extension of time for filing 1927
Incometax; revision of Form 10441 1973
Monthly list returns not to be made under oath; income tax 1997
Mortgages and deeds; emergency revenue law 2060
Movmg-picture theaters; emer^ncy revenue law 2040
Mutual telephone and mutual insurance companies, etc. ; income tax 1933
N.
Net income from, March 1 to December 31, 1913; income tax * . . 1934
Newroapers:
Bimdles of; emergency revenue law 2075
Consignment of , act of October 22, 1914 2036
Nonresident aliens:
Certificate of ownership of bonds 1988
Extending exemption certificate 1063 to 2012
Incometax 2013,2109
Nontaxibility of interest from bonds and dividends 2017
Notice and demand. Form 17; assessed taxes : 1995
O.
Occupations and articles subject to tax, schedule of 2035
Offers in compromise; income tax 2015
Oleomargarine:
R^ulations No. 9 amended 2004
Returned, destruction of 2021
Opium:
Aqueous extract of 1982
Smoking, manufacture of ; act of January 17, 1914 1940
Opium or coca leaves 2102
Organizations, etc.; withholding agents^ income tax 1967
Ownership certificate executed oy foreign banks, etc. ; income tax. 1977
P.
Packer's tar soap; emergency revenue law 2099
Partaershipe ; income tax 1957
Penalties; time for filing returns; income tax 1950
Perfumery, cosmetics, chewing gum, etc.; Schedules 2063
Policies:
Insurance; emeigency revenue law - 2043, 2062
Loan agreements; emeigency revenue law 2097
Open; marine insurance; emergency revenue law 2106
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316
Dept. No.
Political subdivudons of a State; special assefleanent dutricts; income tax. . 1946
Pomace and raisin wine 1966,1972
Pomades, hair oils, etc.; emergency revenue law 2096
Powers of attorney for transfer of stock, etc 2056, 2085
Profits, undivided; tax on bankers 2064
Pyroxylin plastics; denatured alcohol 1954
Q.
Quarters, heat and light, and mileage, etc.; tax liability 2079
R.
Raisin and pomace wined 1966, 1972
Raisin wine; application of T. D. 1949 2002
Real estate agents; emergency revenue law 2083
Receipt for adhefdve stamps 2089
Records 29 and 32 abolished 1951
Rectified alcohol, use of ; manufactures for export 1968
Rectifier; spurious or imitation liquors 1935
Registered mail; tobacco, cigars, playing cards, etc 1931
Regulations No. 9 amended; oleomarganne 2004
R^ulations 33 (Supplement to Treasury Decisions); income tax 1944
Report on Form 22; collection of additional.taxes 2031
Returns to be treated inviolably confidential; income tax 1962
Revision of Form 1044; monthly list return; income tax 1973
Ruling:
Digest of, imder war-revenue act of June 13, 1898 2046
Emergency revenue law 2051
Income tax 2090
S.
Schedules of articles and occupations subject to tax - 2035
Searches and seizures (Fremont Weeks v. United States) 1964
Sleeping cars, seats^ or berths in palace, parlor, or 2041
SmoKing and chewing tobacco; denatured alcohol '. 1981
Soaps ; emergency revenue law 2094
Special assessment districts; political subdivisions of a State; income tax. 1946
Special bankers' lists; emeigenc^ revenue law 2045
Special employees' monthly diaries 1958
Special excise tax on corporations:
Eliot National Bank v. Gill 1936
Leased raihoad (New York Central Raibroad et al. v. Gill) 1999
Leased raihoads ^Dayton & Western Traction Co. v, Gilligan et al.) 2000
National Bank ot Commerce v. Allen 1991
Special tax:
Alcoholic medicinal preparations, revised list of . : 1994
Marine insurance policies (Thames & Mersey Marine Insurance Co. v.
United States) 2009
Returns, act of October 22, 1914.1 2039
Rectifier; spurious or imitation liquors 1935
Wholesale hquor dealers ; 2014
Stamping bottles and other containers of wines, etc 2078
Stamping display containers; emergency revenue law 2082
Stamps:
Case and strip, for spirits bottled in bond 2034
Documentary; Schedule A * 2067
Wine, documentary or proprietary ; accoimts and reports 2080
State officers*, certificates issuea by i 2071
Spurious or imitation liquors; rectifier 1936
Stock certificates, etc., transfer of; Schedule A 2073
Substitute certificates 1058 and 1059, execution of 1986
Substitution; modification of T. D. 1872 2007
Supplemental regulations; certificates of ownership ; income tax 1976
Synopsis of rulings; income tax 2090
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317
T.
Dept.No.
Talcum powders, etc.; emergency revenue law 2066
Tank cars, use of. t» transfer brandy for fortification 2019
Tax stamps, marking; emergency revenue law 2069
Tax withheld by agents, etc., advance payment of; income tax 1965
Taxability of commissions on renewal premiums on insurance 2011
Telegraph and telephone messages 2058
Telephone, mutual, and mutual insurance companies, etc. ; income tax. . . 1933
Theaters, moving-picture; emergency revenue law 2040
Time for filing returns; penalties; income tax 1950
Tobacco:
Leaf dealers to report in Book 59 factory numbers, etc 2025
Smoking and chewing; denatured alcohol 1981
Dealers and manufacturers; emergency revenue law 2061
Cigars, playing cards, etc., by registered mail 1931
Tooth and mouth washes; emergency revenue law. . .: 2095, 2104
Transferof stock certificates, etc.; Schedule A : 2073
Transfer stock, power of attorney to 2056
U.
Undivided profits; tax on bankers 2064
Waiver of regulations:
Extension to October 31, 1914; income tax 1985
Filling in on certificates, etc 2022
Wholesale liquor dealers; special tax 2014
Wines:
Artificial; mash fit for distillation 1949
Containers of, stamps on; emergency revenue law 2053
Raisin and pomace 1966,1972
Tax on, under act of October 22, 1914 2037
Liqueurs, etc., domestic and imported; tax stamps 2027
Witch-hazel for medicinal use; emergency revenue law 2086
Withdrawal of distilled spirits for exxx>rt 2018
Withholding agents; orgsmizations, etc.; income tax 1967
o
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